Law: Income Tax Act, 1961

Section: 222

Section 222, read with section 2(31), of the Income-tax Act, 1961 - Collection and recovery of tax - Certificate proceedings - Assessment years 1965-66 to 1971-72 - Whether in absence of any provision in Act which enables Tax Recovery Officer to recover amount of tax due by assessee-firm from its partners so long as firm was carrying on its business and was not dissolved, partners could not be made liable Held, yes FACTS The petitioners were partners of the assessee firm. For the assessment years 1965-66 to 1971-72, the firm was in arrears of income-tax to the tune of Rs. 70,763. As a result, recovery certificate under section 222(2) was issued to the firm. The ITO on the basis of the said recovery certificate issued notice to the petitioners for recovering the tax dues of the firm from the petitioners. On writ: HELD The admitted fact is that under section 2(31), read with section 4, the firm as well as its individual partners are separate assessable entities and both are chargeable to tax in respect of the income earned by the partners carrying on business under the partnership. It is also an accepted proposition that though, in common law, the firm is not a legal entity, but only a compendious expression for representing the partners collectively, by virtue of the provisions contained in section 2(31) by means of a legal fiction, the firm is treated to be a person. The question for consideration, in the instant case was as to whether in the Income-tax Act which is a self-contained code there is machinery provided for recovery of the amount due by the assessee-firm in default from its partners so long as the firm was continuing to carry on its business and was not dissolved. After giving consideration to the provisions of the Act, it was concluded that the Act has made no provision enabling the Tax Recovery Officer to proceed against the partners of a firm, while the assessee in default in terms of section 2(7)(c) was the firm assessed to tax separately. In the result, the writ petition was to be allowed and the ITO was to be directed not to proceed to recover the tax dues from the partners of the assessee-firm. Note: The case was decided in favour of…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492