Law:

Section:

Section 182, read with section 189 of the Income-tax Act, 1961 [Corresponding to section 23(5), read with section 44 of the Indian Income-tax Act, 1922] - Firm - Position prior to 1-4-1993 - Assessment year 1951-52 - Whether when partnership is registered, tax is collected from partners individually and if partnership is unregistered, tax may, unless otherwise directed, be levied against partnership - Held, yes - Whether when tax is assessed individually against each partner, and no tax is made payable by partnership, principle of joint and several liability under section 44 of 1922 Act can not be invoked - Held, yes FACTS For the assessment year 1951-52, the partners of the dissolved firm made an application for registration of the partnership to the respondent who granted the registration on 28-2-1953, and on that basis proceeded to assess the total income of the partnership. Later on the Commissioner in exercise of the revisional powers under section 33B held that the partnership had suppressed income by inflating the expenses under railway freight and by not accounting for the sale of old gunnies. The Commissioner accordingly directed that the assessment already made should be enhanced. The respondent ITO accordingly completed the assessment. Thereafter about six years the respondent issued a notice to the appellant under section 45 calling upon him to pay up the arrears on the footing that under the provisions of section 44 there was joint and several liability of each and every partner of the dissolved firm in respect of the arrears of tax. The appellant thereafter moved the High Court for grant of a writ to quash the notice. The writ petition was dismissed. On appeal to the Supreme Court : HELD Under the scheme of the Act a partnership is a unit of assessment and the income of the partnership is computed as that of the unit irrespective of whether the partnership is registered or unregistered. After the income of the partnership is computed in a case where the partnership is registered under section 26A the share of each partner in the income of the partnership is determined and is added to his other income and the total income so computed is brought to…

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