Law: Income Tax Act, 1922

Section: 23(5)(a), 26-A, 44

(Appeal by special leave from the judgment and order of the Andhra Pradesh High Court, dated December 21, 1964, in Writ Petition No. 1294 of 1961). Income-tax-----Firm - Discontinuance of business-Registra tion and assessment of total income after discontinuance of business and dissolution of firm---Assessment of share of income in hands of partners-Failure of one partner to pay-Tax dues whether can be recovered from another partner-Indian Income-tax Act, 1922, Ss. 23(5)(a), 26-A & 44. The appellant entered into a partnership with three others, A, B and C, to carry out a Gulmoha contract for the year 1949 50. After completion of the contract the partnership came to an end. For the assessment year 1951-52 the partners of the dissolved firm applied for registration under section 26-A of the Income-tax Act, 1922, which was granted. The total income of the firm was determined and apportioned among the four partners. The total income was enhanced by the Commissioner in exercise of his revisional power under section 33-B and the total income was determined afresh and apportioned among the partners in proportion to their shares. B and C failed to pay the tax on their shares of the income of the firm and a notice was issued to the appellant under section 45 calling upon him to pay the tax assessed on B and C, on the footing that under section 44 there was a joint and several liability on every partner of the dissolved firm in respect of the arrears of tax. The appellant moved the High Court for a writ to quash the notice but the High Court dismissed his petition. On appeal to the Supreme Court: Held, applying the principle in Income-tax Officer, Agra v. Radha Krishan (1967) 66 I T R 590 (S C), that the Income-tax Officer had no jurisdiction to issue the notice and the proceedings taken against the appellant in pursuance of that notice were liable to be quashed. The principle in Income-tax Officer, Agra v. Radha Krishan (1967) 66 I T R 590 (S C) that the joint and several liability under section 44 cannot be invoked in the case of a registered firm, when under the scheme of the Act tax is assessed individually against each partner, is applicable also to a case where…