Law:

Section:

Section 189, read with section 148 of the Income-tax Act, 1961 [Corresponding to section 44, read with section 34 of the Indian Income-tax Act, 1922] - Firm - Assessment after dissolution - Whether even before amendment of section 44 of 1922 Act, it was possible to proceed against partners of firm which had been dissolved and had completely stopped doing business - Held, yes - Whether, therefore, where a notice under section 34 of 1922 Act was issued to petitioner, a partner in firm which had already been dissolved, said notice was quite legal - Held, yes FACTS The petitioner, was a partner of a firm. The said firm was dissolved in February, 1950, and that the notice of dissolution of the firm was duly given to the Income-tax Officer. Later on, the Income-tax Officer issued a notice under section 34 read with section 22(2) of 1922 Act to the petitioner, which was challenged in the instant application on the ground that under section 44 of the 1922 Act before the amendment, in the case of the dissolution of a firm, not only was it impossible to assess the firm as such, but also the partners of the firm which had been dissolved. HELD The essential feature of a partnership firm is that it must carry on a business. It may be, that a firm temporarily discontinue its business. That involves no consequences. But where the business has been permanently discontinued as was the case here, the firm must be taken to have been dissolved and discontinued. That, it had been dissolved was also the petitioner's own case. Therefore, it could not be said that a firm which had been dissolved, and had ceased to exist, could be said to have been not discontinued. Discontinuance must relate either to the relationship of the partners or the business and in the case of dissolution, both are in fact discontinued. The dissolution of a firm is dealt with in section 39 of the Indian Partnership Act and means the dissolution of partnership between all the partners of a firm. In this particular case it was admitted that it was dissolved. It followed therefore that the business was discontinued. It was nobody's case that it did not. It seems to be highly improbable that section 44 of 1922 Act…

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