TMI Blog2003 (10) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... . Smt. Parkash Kaur one of the daughters of Shri Gurdial Singh and partner of M/s Hotel White instituted a civil suit No. 224-1 of 1983/34-1 of 1985 on 14th Nov., 1985, asking Shri Gurdial Singh to render accounts of the hotel business to her as a partner. The learned Civil Judge vide his order dt. 30th Oct., 1990, decreed the suit for rendition of accounts. It was further held that partnership was not validly dissolved on 31st March, 1981, as claimed by Shri Gurdial Singh. The appeal against above decision was dismissed by learned District Judge, Shimla vide his order dt. 12th Jan., 1995, in Civil Appeal No. 100-S/13 of 1990. 4. After taking into account above decisions of civil Courts, the AO issued notices under s. 148 of the Act to assessee registered firm for asst. yr. 1982-83 onwards. In the reasons recorded while issuing above notices, the AO held that the firm continued to remain in existence after 31st March, 1991 and claim of Shri Gurdial Singh that firm was dissolved and he was owner of Hotel White was wrong. No return was filed by the assessee in the status of registered firm. 5. In response to above notices, returns were filed with objection that proceedings take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome of the legal entity in question. 7. The assessee objected to the reassessment, challenged validity of notices issued under s. 148 and claimed that income assessed in the hands of Shri Gurdial Singh could not be again assessed in the hands of this concern. The assessee also objected to the status of AOP taken by the AO. It was further contended that same income has been twice assessed without giving benefit of tax paid on the same income by Shri Gurdial Singh. The learned CIT(A) did not find any substance in the submissions advanced on behalf of the assessee and confirmed the assessments with the following modifications: (i) He directed that the status of the assessee was wrongly taken as AOP. Instead it should be URF. (ii) The AO should take remedial action in the hands of Shri Gurdial Singh where income has been assessed as returned. This direction was issued under s. 151 of the Act in order dt. 11th Feb., 2000, disposing appeals for asst. yrs. 1986-87, 1988-89 to 1992-93. In the subsequent order dt. 22nd Feb., 2003, the second direction was explicitly stated by the learned CIT(A) what is implicitly stated above. He directed as under: "2.6 Vide Ground No. 7 it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein their Lordships have observed as under: "It is agreed that the notices did not specify the capacity in which it was issued to Sasikumar. The Appellate Tribunal proceeded only on the basis that the notices were issued only to the individual. It is settled law that the issue of a notice under s. 148 of the IT Act is a condition precedent or a matter of jurisdiction to the validity of any reassessment order to be passed under s. 147 of the Act. It is also settled law that if no such notice is issued or if the notice issued is invalid or not in accordance with the law or is not served on the proper person in accordance with law, the assessment would be illegal and without jurisdiction. The notice should specify the correct assessment year and should be issued to the particular assessee. Under s. 2(31), "person" includes an individual or a Hindu undivided family or company, firm, an association of persons or body of individuals, whether incorporated or not, etc. They are distinct and different assessees. The service of a prescribed notice, on a particular assessee, who is to be assessed, is a condition precedent to the validity of any assessment to be made under s. 147 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court. After considering the decision of Supreme Court in the case of Y. Narayana Chetty vs. ITO (1959) 35 ITR 388 (SC) and other decision of Calcutta High Court in the case of Shyam Sunder Bajaj vs. ITO Ors. (1973) 89 ITR 317 (Cal), their Lordships of the Calcutta High Court observed as under: "As I have already observed in the instant case the notice does not even mention AOP. On the basis of the aforesaid decisions I must, therefore, hold that the notice in the instant case is invalid and on the basis of the invalid notice the ITO does not acquire any jurisdiction to reopen the assessment and to proceed with the reassessment proceeding. The failure to issue a valid notice deprives the ITO of the jurisdiction conferred on him under the Act and the proceedings taken by the ITO in pursuance of an invalid notice must necessarily be illegal and void. In this view of the matter, I do not consider it necessary to decide the further question whether the sanction given by the CIT in the instant case was mechanical or not." As noted earlier, here also the AO did not mention in the notices as to in what status he wanted to assess the assessee which was earlier assessed both as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the introduction of s. 188A in the 1961 Act w.e.f. 1st April, 1989, does not make any difference to the position, since the liability of the partners to pay the dues of the firm does not arise by virtue of O. 21, r. 50, of the CPC, which is attracted by virtue of the said proviso, but on account of the basic nature and character of a partnership firm. Order 21, r. 50 merely reiterates the said basic premise; it does not create a new liability. Sec. 188A of the 1961 Act explicitly provides what was implicit hitherto. The respondent-assessee, a partner of a firm, retired from the firm on 19th April, 1963 and for the accounting years relevant to the asst. yrs. 1962-63 and 1963-64, the accounts were duly made up by the partners and the share of profits due to the respondent paid to him before his retirement, the firm continued with new partners until 1972 when it was dissolved. Held accordingly." The aforesaid proposition is fully applicable in this case. Shri Gurdial Singh was admittedly a partner of M/s Hotel White. He was jointly and severally liable for liability of the partnership inclusive of taxes. The IT Department could assess and recover 100 per cent of tax payable by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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