Appeal No 107 of 1956
Appeal by special leave from the judgment and order dated January 21 1954 of the Madras High Court in W P No 498 of 1952
With Petition No 130 of 1958
Petition under article 32 of the Constitution of India for the enforcement of Fundamental Rights
MR M Abdul Karim and K R Choudhri for the appellant in C A No 107156 and Petitioner In Petn
13058
KN Rajagopala Sastri and D Gupta for the respondents in both the appeal and petition
September 21
The Judgment of the Court was delivered by AYYANGAR J
Muthappa Chettiar the appellant in Civil Appeal 107 of 1956 was sought to be proceeded against for the recovery from him of Excess Profits Tax assessed in respect of the business of Muthappa  Co of which he was a partner
He disputed the legality of the recovery proceedings and filed Writ Petition 498 of 1952 before the High Court of Madras for the issue of a writ of prohibition for directing the Income Tax Officer E P T Circle Madras not to take coercive steps against him for the recovery of the tax assessed
This petition was dismissed and Civil Appeal 107 of 1956 has been filed on special leave obtained from this Court
During the hearing by the High Court of Writ Petition 498 of 1952 Muthappa Chettiar referred to hereafter as the appellant sought also to impugn the legality of the order of assessment to Excess lox 790 Profits Tax
The learned Judges held however that such a contention was not germane to the writ of prohibition for which he had prayed adding also that there were no merits in the grounds urged
To avoid any technical objection the appellant has filed in this Court Petition 130 of 1958 under article 32 of the Constitution in which the prayer is for the grant of a writ of certiorari or other appropriate writ to quash the order of assessment to Excess Profits Tax and the Appeal and the Petition being thus interrelated have been heard together
We shall first take up for consideration the matters urged in the Writ Petition as logically having precedence over the challenge to the legality of the proceedings for the recovery of the tax
The facts necessary to appreciate the points urged are briefly these The appellant and Thyagrajan Chettiar impleaded as the second respondent in Civil Appeal 107 of 1956 were partners in a firm named Muthappa  Co started in November 1940 and the firm was the managing agent of a textile Mill called Saroja Mills Ltd in the Coimbatore district
The assessment which is under challenge is for the Excess Profits Tax liability of this managing agency business and the relevant chargeable accounting periods are the calendar year 1942 and the broken period January 1 1943 to March 4 1943
The liability of the firm to Income Tax for the same periods was assessed by the Income Tax Officer by his orders dated March 15 1948 by applying the provisions of section 235b of the Income tax Act 1922 arid the appellant paid when demanded his share of the tax and there is now no dispute about the propriety of that assessment
The income of the managing agency business was computed for Excess Profits Tax at the same figure as for assessment to Income Tax and the assessment for the two chargeable accounting periods was completed by the Excess Profits Tax Officer by his order dated March 31 1951 and it is the validity of this order of assessment that is challenged in Petition 130 of 1958
The first matter urged in support of the petition may be set out thus Ail assessment to be valid must 791 be after notice to the assessee
In the present case the assessment was admittedly completed by serving the prescribed notices on Thyagrajan Chettiar alone who according to the terms of the partnership between the parties was the managing partner
But it was urged that there had been a dissolution of the firm as and from March 4 1943 that thereafter the partnership ceased to exist and with it the mutual agency between the partners with the result that Thyagrajan Chettiar could not represent the firm which had ceased to exist nor the appellant
On these premises it was submitted that the assessment of the business to Excess Profits Tax after notices only to Thyagrajan Chettiar could not bind the firm nor at any rate bind the appellant
In our opinion there are two answers to this submission either of which would suffice to reject the appellant s plea 1 That on the facts of the present case the appellant is precluded from pleading that the firm had been dissolved at the date of the assessment in 1951 and from raising any objection to the representative character of Thyagrajan Chettiar 2 That on a proper construction of the provisions of the Excess Profits Tax Act 1940 even if the firm of Muthappa  Co should be held to have been dissolved before 1951 when the order of assessment was passed the assessment of the managing agency business to Excess Profits Tax was properly and legally effected by notice to Thyagrajan Chettiar
The facts to which we have made reference are these Prior to the assessment year 1943 44 Thyagrajan Chettiar as the managing partner of Muthappa  Co was submitting returns for Income tax and was conducting the assessment proceedings on behalf of the firm
Thyagrajan Chettiar published in the newspaper  Hindu  a notice announcing the dissolution of the firm as and from March 4 1943 and followed it up by informing the Income Tax Officer of this circumstance
Thereafter the Income Tax Officer wrote to the appellant enquiring whether the firm of Muthappa  Co had been dissolved and if so from what date
By letter dated February 1 1945 the appellant 792 replied  I wish to inform you that Messrs Muthappa  Co has been formed as per the deed of partnership dated November 4 1940 and the rights of the partners are also retracted therein
But Mr Thyagrajan Chettiar my partner has acted deliberately beyond the scope of the partnership deed in issuing a notice of dissolution of partnership on me on March 4 1943 and a suit has been filed against him in the Coimbatore Sub Court and is pending
Pending disposal of the said suit regret I am unable to accept the alleged dissolution or to give the date of dissolution of partnership called for in your letter 
Taking the appellant at his word the income tax assessment was completed after notice to Thyagrajan Chettiar as the continuing managing partner
In line with the position taken up by him disputing that the firm had been dissolved by the acts or conduct of Thyagrajan Chettiar the appellant filed a suit in the Sub Court at Coimbatore contesting the validity of Thyagrajan Chettiar s notice of dissolution dated March 4 1943 praying for a declaration that the purported dissolution of the firm by Thyagrajan Chettiar was invalid and inoperative himself seeking a decree for dissolution from a date to be specified by the Court and for rendition of accounts on foot of a subsisting partnership till the date so fixed
The Subordinate Judge upheld the validity of the dissolution by Thyagrajan Chettiar in 1943
From this judgment rendered in 1948 the appellant preferred an appeal to the High Court
This appeal was heard in 1953 when the High Court allowed the appeal and fixed the date of dissolution as on March 10 1949
It is stated that a further appeal from this judgment of the High Court is pending in this Court so that even now the precise date on which the firm should be held to be dissolved is a matter of uncertainty
From the above it would be seen that it has always been the case of the appellant that the firm had not been dissolved in 1943
At the date of the proceedings for the assessment to Excess Profits Tax in 1951 with which Petition 130 of 1958 is concerned the position therefore was as follows The assertion by the appellant that the partnership was undissolved 793 and continued its existence contained in his letter to the Income Tax Officer in February 1945 still held good and was backed up by the proceedings he took in the Civil Courts to maintain that stand
No doubt his claim had not been upheld by the Subordinate Judge but by the appeal that he filed he rendered the matter res sub judice and till the decision of the High Court in 1953 the appellant could not obviously suggest any particular date as the date of the dissolution
The submission of learned Counsel which proceeds on the assumption that there was a dissolution of the firm on March 4 1943  or on March 10 1949 which was the date fixed by the High Court by its judgment of 1953 has to be rejected as wholly inconsistent with the contentions urged by the appellant in the Civil suit and the appeal therefrom
In the circumstances the Income Tax Officer could not be blamed for treating the firm as in existence and similarly the Excess Profits Tax Officer also
It was common ground that at the date the Excess Profits Tax Officer started proceedings for assessment the appellant had filed an appeal against the judgment of the Subordinate Judge in O section 50 of 1946 and the same was pending in the High Court and that it was only in 1953 that the appeal was disposed of
The contention now urged before us was that as the High Court had held that the firm should be treated as having been dissolved as and from March 10 1949 the issue of any notice to Thyagrajan Chettiar as the managing partner of the firm was invalid and the assessment proceedings completed on that basis would also be illegal
If the contention of the appellant were to prevail it would mean that the validity or otherwise of the assessment order would be retrospectively determined by the result of the appellant s appeal which was pending before the High Court so that if the High Court had held that the firm should be treated as dissolved only on the date of its judgment in 1953 the assessment would be valid but that if the high Court bad fixed the date of dissolution on some date earlier than March 31 1951 the assessment would be deemed invalid
This argument has only to be stated to be rejected
When this 794 aspect of the matter was put to learned Counsel for the appellant he fairly conceded that he could not on the facts of this case maintain the position that the order of assessment to Excess Profits Tax was vitiated because of the alleged disruption of the firm of Muthappa  Co before the date of that order
The other answer to the submission is that even assuming that the firm of Muthappa  Co had been in fact dissolved on some date anterior to the assessment of the managing agency business to Excess Profits Tax that would not affect the validity of an assessment order passed after notice to the person in management of the business during the chargeable accounting periods since it was not the firm but  the business  that was the unit of assessment
In this connection learned Counsel for the appellant drew our attention to a decision of the Madras High Court in A O Pandu Rao vs Collector of Madras 1 and stated that it was against him and directly covered the point and if correct would leave no scope for any further argument
In that case a firm consisting of three partners carried on business under the name of P Nagoji Rao  Son with one of them Gannu Rao as managing partner
The chargeable accounting periods concerned were the years from April 1 1944 to March 31 1946
There were quarrels among the partners which led to the filing of a suit on February 26 1947 for dissolution and accounts by two of the partners against the managing partner
The suit was decreed on November 14 1947 declaring the firm dissolved as and from the institution of the suit February 26 1947
The assessment of the business to Excess Profits Tax was completed by notices issued subsequent to that date to Gannu Rao as managing partner and the order of assessment was passed on December 31 1949 and a notice of demand under section 29 of the Income Tax Act was served on him
No demand notices were served on the other two partners but proceedings for the recovery of the tax were taken against them on the strength of the notices served on Gannu Rao
These two partners moved the High Court 1 1954 26 IT 99 795 under article 226 of the Constitution for the issue of writs of Certiorari to quash the orders of assessment to Excess Profits Tax and the proceedings for recovery of the tax due thereunder
The order of assessment was impugned on the around that by virtue of the decree in the suit there had been a dissolution of the firm and that Gannu Rao having ceased to have authority to represent the firm or the other partners the assessment could have been legally completed only by notices under section 13 of the Excess Profits Tax Act being served individually on the other partners and that the tax could be recovered only after notices to each of them under section 29 of the Income Tax Act
The learned Judges repelled these objections by reference to the provisions of sections 8 and 13 of the Excess Profits Tax Act under which it is the  business  producing the income which is the unit of assessment for Excess Profits Tax as contrasted with the provisions of the Indian Income tax Act under which the unit of assessment is either the individual Hindu undivided family firm company or association of persons carrying on the income earning activity vide section 3 of the Income Tax Act which has not been made applicable to the Excess Profits Tax Act under section 21 of the latter Act
Under the provisions of the Excess Profits Tax Act where a partnership carrying on a business becomes disrupted and the Excess Profits earned by the business before its dissolution have to be assessed the assessment has to be made under section 44 of the Income tax Act as modified by the Central Board of Revenue under the power vested in that behalf by section 21 of the Act and as so modified section 44 runs  Where any business carried on by a firm or association of persons has been discontinued every person who was at the time of such discontinuance a partner of such firm or a member of such association shall in respect of the profits of the firm or association be jointly and severally liable to assessment under section 14 of the Excess Profits Tax Act 1940 and for the amount of tax payable and all the provisions of the said Act shall so far as may be apply to any such assessment
 796 The effect of this and other cognate provisions was thus explained by the learned Judges of the Madras High Court  The result of section 44 as amended by the Central Board of Revenue is to attract the procedure applicable to an undissolved firm to a dissolved firm and therefore if two or three persons carry on business as a firm the assessment could be made on the partnership in the partnership name and the persons who carried on the business during the chargeable accounting period will be liable to pay the tax as provided by sub section
2 of section 14 read with section 44 Income tax Act as modified by the Central Board of Revenue
As section 63 Income tax Act is also made applicable to proceedings under the Excess Profits Tax Act if during the chargeable accounting period the firm carried on business as an undissolved firm and even if it became subsequently dissolved by virtue of the provisions of section 44 the assessment could be made as if it were an undissolved firm
Under the provisions of section 63 Income tax Act notice under section 13 may be issued to and served on a partner of a firm
Section 632 says that  Any such notice or requisition may in the case of a firm or a Hindu undivided family be addressed to any member of the firm or to the manager or any adult male member of the family and in the case if any other association of persons be addressed to the principal officer thereof So far as the assessment in the present case is concerned even assuming that by the date notice under section 13 was issued the firm became dissolved the machinery provided under the Act for the service of notice under section 63 can be availed of by serving notice on the partner
Notice therefore to a partner is treated as notice to all
 As observed by Chakravartti C J in Bose vs Manindra Lal Goswami 1  It will thus be seen that in the case of excess profits tax there is no difference in the method of assessment prescribed for the assessment of the profits of a running business and that prescribed for 1  447
797 the assessment of the past profits of a business carried on by a firm since dissolved
In the case of a running business too the assessment is to be made on the persons carrying on the business jointly
In the case of the business of a firm which has been dissolved it is to be made on the partners jointly and severally and since section 44 of the Act is made applicable to the assessment of pre dissolution profits of the business of a dissolved firm such assessment can obviously be made in the partnership name
It was obviously in view of these provisions that the learned Judge in the Madras case stated that even assuming that the firm had been dissolved by the date of the issue of the notice under section 13 still the machinery provided for by sections 13 and 14 of the Act could be availed of and the partners would continue to be jointly and severally liable to assessment under section 14 of the Act and for the amount of tax payable after determination
 In our opinion the passages extracted correctly express the legal position resulting from the relevant provisions of the Excess Profits Tax Act 1940
We therefore hold that the notice served on Thyagrajan Chettiar was valid and was binding on the appellant and that there is no basis for challenging the legality of the assessment to Excess Profits Tax
Before leaving the question of the validity of this order of assessment dated March 31 1951 a minor point was made to which it is necessary to advert
The business income of the managing agency of Muthappa  Co was computed at Rs 102219 for the 1st chargeable accounting period viz the calender year 1942 and at Rs 6387 for the broken period January 1 1943 to March 4 1943
These figurers which were the same as those in the assessment for income tax were based on the remuneration to which the firm became entitled on its managing agency agreement with the Saroja Mills Ltd and with which amount the latter debited itself in its accounts
The company however did not disburse this remuneration in cash but this would make no difference to the tax liability of the firm since the firm s accounts were 102 798 made on the mercantile basis
The Mills raised a dispute that the managing agents had not fulfilled certain of the obligations undertaken by them in regard to the extension of the mills by increasing the spindle age by reason of which default they claimed to have suffered a loss of income and for
that reason carried the amount of their cross claim for damages to a suspense account instead of crediting the entire amount of managing agency remuneration to the firm
The sum of which immediate payment was thus withheld was Rs 89137
At the time of the Income Tax assessment for the corresponding period Thyagrajan Chettiar who as the managing partner of the firm participated in these proceedings had urged the contention that as the Mills had withheld remuneration to the extent of Rs 89 thousand odd and had not credited that amount to the managing agents the sum could not be treated as the income of the firm for the assessment year
This objection was overruled on the ground that the Mills had never disputed that the entire amount of Rs one lakh odd was due by them to the firm and in fact had claimed to deduct that entire sum as part of their business expenditure
The sum of Rs one lakh odd was due by them to the firm and in fact had claimed to deduct that entire sum as part of their business expenditure
The sum of Rs one lakh odd was therefore held to have accrued to the firm as its income and that this remained unaffected by the existence of the cross claim
The contention which was repelled by the Income Tax Officer was addressed to us as a ground for disputing the inclusion of the Rs 89 thousand odd as the income of the firm in its Excess Profits Tax assessment
We see no substance in the point urged
Learned Counsel referred us to the decision of this Court in Commissioner of Income tax Madras vs K R M T T Thiagaraja Chetty  Co 1 and to the observations at p 261
We consider that the decision far from supporting the appellant is really against him
There are therefore no legal grounds for impugning 1  799 the validity of the order of assessment to Excess Pro
fits Tax dated March 15 195 1 and we consider that
the same is binding on the business and on the owners of that business including the appellant
As a result Writ Petition 130 of 1958 fails and has to be dismiss
The point that next calls for consideration is the subject matter of Civil Appeal 107 of 1956 and this is whether the Excess Profits Tax assessed could be validly recovered from the appellant by resort to the machinery for collection provided by section 46 of the Income Tax Act
The argument of learned Counsel for the appellant in regard to this point as on the following lines Sections 45 to 47 of the Income Tax Act 1922 which provide for the recovery of Income tax by coercive process no doubt apply for the recovery of Excess Profits Tax by virtue of their inclusion in section 21 of the Excess Profits Tax Act as provisions applicable to the latter Act and by reason of the assessment on the firm of Muthappa  Co the appellant became liable to pay the Excess Profits Tax assessed
It wag nevertheless urged that the coercive process for reco very of his tax liability under section 462 of the Income Tax Act could not be invoked against the appellant the submission being rested on two propositions  1 That the appellant was not an  assessee  but only a  person liable to pay the tax  within section 29 of the Income Tax Act which runs When any tax penalty or interest is due in consequence of any order passed under or in pursuance of this Act the Income tax Officer shall serve upon the assessee or other person liable to pay such tax penalty or interest a notice of demand in the prescribed form specifying the sum so payable
 It was further urged that as in the present case there had been no notice of demand under section 29 of the Income Tax Act specifically addressed to and served on theappellant he could not become an  assessee in default neither would the tax payable by him become an arrear  as to permit the invocation of the coercive process under section 462 for recovery
2 800 That the procedure for recovery enacted in sections 45 to 47 including section 462 were confined in their application to  assessees  and  assessees in default  and did not apply to the class of  other persons liable to pay the tax  as against whom the filing of a suit for the recovery of the tax and the execution of decrees in such Suits was the only machinery through which the tax liability of this class could be enforced
For the purposes of this case we do not consider it necessary to deal with the larger second question as to whether the expression  assessee  and  assessee in default  in sections 45  46 of the Income Tax Act 1922 should be held to be confined to  assessees  as distinguished from  other persons liable to pay such tax  as these expressions occur in section 29 of the Act or whether the expression  assessee  when it occurs in sections 45 to 47 should be understood as defined in section 22 as including  every person by whom income tax   is payable  since we are clearly of the Opinion that the appellant was an  assessee 
Section 21 of the Excess Profits Tax Act carries a proviso which reads  Provided that references in the said provisions to the assessee shall be construed references to a person to whose business this Act applies 
In view of this provision the appellant as the partner of the  business  to which  this Act applies  would be  an assessee and not merely an other person liable to pay the tax
He would also be an assessee in default and the amount due from him would be an arrear since the notice of demand under section 29 of the Income Tax Act was served on the managing partner Thyagrajan Chettiar and such service would be tantamount to a notice served on the appellant himself by reason of section 63 of the Income Tax Act
Indeed the entire basis on which the assessment proceedings completed after notice to Thyagrajan Chettiar as the managing partner of Muthappa  Co have been held by us to be binding on the appellant would preclude any argument of the type advanced to challenge the binding character of the notices served
The appellant was clearly an  assessee in default  within 801 s461 of the Income tax Act and the amount of tax and penalty due from him would be  an arrear within section 462
We therefore hold that the proceedings for the recovery of the Excess Profits Tax could properly be taken and that the order of the High Court dismissing the appellant s petition for the issue of a writ of prohibition was correct
The appeal fails and is dismissed with costs
The petition is also dismissed but as these two have been heard together there will be no order as to costs in the petition
Both the Appeal and the Petition dismissed


Summary:
The respondent was Siem of Mylliem siemship in United Khasi and jaintia Hills District in the Tribal Areas of Assam having been elected as such by the Myntri electors according to custom in 1951
In June 1952 a District Council was constituted for the District under the Sixth Schedule to the Constitution and the siemship was brought under it
The rules in the Sixth Schedule empowered the District Council to make laws with respect to various matters regarding the administration of the District including the appointment or succession of Chiefs and Headmen
No law was made regulating the appointment and succession of Chiefs and Headmen
The Chief Executive Member of the Executive Committee of the District Council served on the respondent a notice to show cause why he should not be removed from his office and suspended him
The respondent challenged the action on the grounds i that he could not be removed by administrative orders but only by making a law ii that the Executive Committee could not take any action in this case and iii that the order of suspension was ultra vires
Held that the District Council had the power to appoint or remove administrative personnel under the general power of administration vested in it by the Sixth Schedule
The District Council was both an administration well as a legislative body
After a law was made with respect to the appointment or removal of administrative personnel the authority would be bound to follow it but until then it could exercise its administrative powers
Since the United Khasi jaintia Hills Autonomous District Appointment and Succession of Chiefs and Headmen Act 1959 had now come into force further action should be taken in accordance with that Act
The Executive Committee could under r 3oa of the Assam Autonomous Districts Constitution of District Councils Rules 1951 act on behalf of the District Council in cases of emergency and it was not for the courts to go into the question whether there was an emergency or not
In these circumstances the action taken by the Executive Committee could not be challenged
An order of interim suspension could be passed against the 751 respondent while inquiry was pending into his conduct even though there was no specific provision to that effect in his terms of appointment
But he was entitled to his remuneration for the period of his interim suspension as there was no statute or rule existing under which it could be withheld
The Management of Hotel Imperial vs Hotel Workers  Union   applied
Per Subba Rao J It is very doubtful whether when the Constitution confers on an authority power to make laws in respect of a specific subject matter that authority can deal with the same subject matter without making such a law in its administrative capacity