Law:

Section:

Section 184 of the Income-tax Act, 1961 [Corresponding to section 26A of the Indian Income-tax Act, 1922] - Firm - Position prior to 1-4-1993 - Assessment years 1953-54 to 1956-57 - Whether in case of unregistered partnership firm liability of each partner towards firm's tax due being co-extensive ITO has no power to apportion tax liability among partners - Held, yes - Whether, therefore, entire amount of tax due from partnership firm can be collected from one of partners of firm - Held, yes FACTS The petitioner was one of the two partners of an unregistered firm. In respect of tax due of firm demand for entire amount was raised against the petitioner. Upon representation, the ITO apportioned the amount between two partners and wrote to the District Collection Officer that 60 per cent of amount would be collected from the petitioner. Later on TRO sought to recover entire dues from the petitioner. The petitioner filed instant writ petition contending that his liability was limited to the extent of 60 per cent of the tax liability. HELD The liability of a partnership firm with respect to its dues and the liability of any one of the partners for these dues cannot be distinguished. It is a feature of a partnership that the partners are jointly and severally liable for debts due to the partnership. It is only in the case of a registered partnership that the income of the partnership firm is divided among the partners so that the liability of the individual partner is limited only to that partner's individual share in the income. This being not a registered partnership, the liability of each partner was co-extensive. As the ITO had no power to apportion and delimit the liability of the petitioner, the letter written by the ITO had no legal effect. It is possible for a creditor of a partnership firm to tell any one of the partners that his liability will be limited. There was no such suggestion in the letter written by the ITO. Even if there was such a suggestion, it would not be binding on the Union of India because the ITO has no power to write off any tax demand. The ITO merely apportioned the demand between the two partners for the sake of convenience. He did not…

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