Law:

Section:

Section 222, read with Rule 32 of Schedule II, of the Income-tax Act, 1961 - Collection and Recovery of tax - Certificate proceedings - Assessment year 1967-68 - Whether only when an assessee fails to pay too whether tax recovery certificate can be issued only against a defaulter who fails to pay tax - Held, yes - Whether rule 32 of Schedule II to Act can be invoked against a partner of firm only if he becomes a defaulter in respect of tax dues of firm and tax recovery certificate has already been issued in his name - Held, yes FACTS The petitioner was a partner of the assessee-firm 'H' and after 13-11-1966 and after 13-11-1966 the petitioner became a partner of a new firm 'D'. For the assessment year 1967-68, the firm was assessed as an unregistered firm. As per the assessment order the firm was liable to pay certain amount of tax. The petitioner unsuccessfully challenged the assessment order in appeal before the AAC and also on further appeal before the Tribunal. A tax recovery certificate under section 222 to recover the outstanding amount of tax and interest was issued in the name of the firm 'H'. When the tax was not deposited, the ITO issued a notice of attachment to the new firm 'D' attaching the amount standing to the petitioner's credit in the books of account of the new firm. The petitioner challenged the validity of the said recovery proceedings taken against him. On writ HELD There cannot be any dispute about the liability of a partner to pay tax assessed on the firm. Under the Act, the mere existence of liability to pay tax is not sufficient to recover the tax. Liability may be there when an assessment order is made. But there should be machinery provision to enforce that liability. That part, the contention that the word 'defaulter' in rule 32 of the Schedule II means and include a partner, would run counter to the entire scheme of the Act. When the assessee fails to pay tax, becomes a defaulter and, against the defaulter only, a tax recovery certificate may be issued. Therefore, rule 32 could be invoked against the partner who has become a defaulter and in whose name the certificate is issued. In this view, it must be held that the proceedings…

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