Appeal No 517 of 1958
Appeal from the judgment and order dated October 31 1957 of the Kerala High Court in O P No 215 of 1957
G B Pai and Sardar Bahadur for the appellant
Hardyal Hardy and D Gupta for the respondents
November 29
The Judgment of the Court was delivered by SHAH J
C A Abraham hereinafter referred to as the appellant and one M P Thomas carried on business in food grains in partnership in the name and style of M P Thomas  Company at Kottayam
M P Thomas died on October 11 1949
For the account years 1123 1124 and 1125 ME corresponding to August 1947 July 1948 August 1948 July 1949 and August 1949 July 1950 the appellant submitted as a partner returns of the income of the firm as an unregistered firm
In the course of the assessment proceedings it was discovered that the firm had carried on transactions in different commodities in fictitious names and had failed to disclose substantial income earned therein
By order dated November 29 1954 the Income Tax Officer assessed the suppressed income of the firm in respect of the assessment year 1124 ME under the Travancore Income Tax Act and in respect of assessment years 1949 50 and 1950 51 under the Indian Income Tax Act and on the same day issued notices under section 28 of the Indian Income Tax Act in respect of the years 1949 50 and 1950 51 and 767 under section 41 of the Travancore Income Tax Act for the year 1124 ME requiring the firm to show cause why penalty should not be imposed
These notices were served upon the appellant
The Income Tax Officer after considering the explanation of the appellant imposed penalty upon the firm of Rs 5000 in respect of the year 1124 M E Rs 2O00 in respect of the year 1950 51 and Rs 22000 in respect of the year 1951 52
Appeals against the orders passed by the Income Tax Officer were dismissed by the Appellate Assistant Commissioner
The appellant then applied to the High Court of Judicature of Kerala praying for a writ of certiorari quashing the orders of assessment and imposition of penalty
It was claimed by the appellant inter alia that after the dissolution of the firm by the death of M P Thomas in October 1949 no order imposing a penalty could be passed against the firm
The High Court rejected the application following the judgment of the Andhra Pradesh High Court in Mareddi Krishna Reddy vs Income Tax Officer Tenali 1
Against the order dismissing the petition this appeal is preferred with certificate of the High Court
In our view the petition filed by the appellant should not have been entertained
The Income Tax Act provides a complete machinery for assessment of tax and imposition of penalty and for obtaining relief in respect of any improper orders passed by the Income Tax authorities and the appellant could not be permitted to abandon resort to that machinery and to invoke the jurisdiction of the High Court under article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Tribunal
But the High Court did entertain the petition and has also granted leave to the appellant to appeal to this court
The petition having been entertained and leave having been granted we do not think that we will be justified at this stage in dismissing the appeal in limine
On the merits the appellant is not entitled to relief
The Income Tax Officer found that the appellant had with a view to evade payment of tax 1 768 deliberately concealed material particulars of his income
Even though the firm was carrying on transactions in food grains in diverse names no entries in respect of those transactions in the books of account were posted and false credit entries of loans alleged to have been borrowed from several persons were made
The conditions prescribed by section 281c for imposing penalty were therefore fulfilled
But says the appellant the assessee firm had ceased to exist on the death of M P Thomas and in the absence of a provision in the Indian Income Tax Act whereby liability to pay penalty may be imposed after dissolution against the firm under section 281c of the Act the order was illegal
Section 44 of the Act at the material time stood as follows Where any business carried on by a firm has been discontinued  every person who was at the time of such discontinuance  a partner of such firm shall in respect of the income profits and gain of the firm be jointly and severally liable to assessment under Chapter IV for the amount of tax payable and all the provisions of Chapter IV shall so far as may be apply to any such assessment
 That the business of the firm was discontinued because of the dissolution of the partnership is not disputed
It is urged however that a proceeding for imposition of penalty and a proceeding for assessment of income tax are matters distinct and section 44 may be resorted to for assessing tax due and payable by a firm business whereof has been discontinued but an order imposing penalty under section 28 of the Act cannot by virtue of section 44 be passed
Section 44 sets up machinery for assessing the tax liability of firms which have discontinued their business and provides for three consequences 1 that on the discontinuance of the business of a firm every person who was at the time of its discontinuance a partner is liable in respect of income profits and gains of the firm to be assessed jointly and severally 2 each partner is liable to pay the amount of tax payable by the firm and 3 that the provisions of Chapter so far as may be apply to such assessment
The liability declared by section 44 is 769 undoubtedly to assessment under Chapter IV but the expression assessment used therein does not merely mean computation of income
The expression assessment as has often been said is used in the Income Tax Act with different connotations
In Commissioner of Income Tax Bombay Presidency  Aden vs Khemchand Ramdas 1 the Judicial Committee of the Privy Council observed One of the peculiarities of most Income tax Acts is that the word assessment is used as meaning sometimes the computation of income sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act for imposing liability upon the tax payer
The Indian Income tax Act is no exception in this respect  
A review of the provisions of Chapter IV of the Act sufficiently discloses that the word assessment has been used in its widest connotation in that chapter
The title of the chapter is Deductions and Assessment
The section which deals with assessment merely as computation of income is section 23 but several sections deal not with computation of income but determination of liability machinery for imposing liability and the procedure in that behalf
Section 18A deals with advance payment of tax and imposition of penalties for failure to carry out the provisions there in
Section 23A deals with power to assess individual members of certain companies on the income deemed to have been distributed as dividend section 23B deals with assessment in case of departure from taxable territories section 24B deals with collection of tax out of the estate of deceased persons section 25 deals with assessment in case of discontinued business section 25A with assessment after partition of Hindu Undivided families and sections 29 31 33 and 35 deal with the issue of demand notices and the filing of appeals and for reviewing assessment and section 34 deals with assessment of incomes which have escaped assessment
The expression assessment used in these sections is not used merely in the sense of computation of income and there is in our judgment no ground for holding 1 770 that when by section 44 it is declared that the partners or members of the association shall be jointly and severally liable to assessment it is only intended to declare the liability to computation of income under section 23 and not to the application of the procedure for declaration and imposition of tax liability and the machinery for enforcement thereof
Nor has the expression all the provisions of Chapter IV shall so far as may be apply to such assessment a restricted content in terms it says that all the provisions of Chapter IV shall apply so far as may be to assessment of firms which have discontinued their business
By section 28 the liability to pay additional tax which is designated penalty is imposed in view of the dishonest contumacious conduct of the assessee
It is true that this liability arises only if the Income tax Officer is satisfied about the existence of the conditions which give him jurisdiction and the quantum thereof depends upon the circumstances of the case
The penalty is not uniform and its imposition depends upon the exercise of discretion by the Taxing authorities but it is imposed as a part of the machinery for assessment of tax liability
The use of the expression so far as may be in the last clause of section 44 also does not restrict the application of the provisions of Chapter IV only to those which provide for computation of income
By the use of the expression so far as may be it is merely intended to enact that the provisions in Ch
IV which from their nature have no application to firms will not apply thereto by virtue of section 44
In effect the Legislature has enacted by section 44 that the assessment proceedings may be commenced and continued against a firm of which business is discontinued as if discontinuance has not taken place
It is enacted manifestly with a view to ensure continuity in the application of the machinery provided for assessment and imposition of tax liability notwithstanding discontinuance of the business of firms
By a fiction the firm is deemed to continue after discontinuance for the purpose of assesment under Chapter IV
The Legislature has expressly enacted that the provisions of Chapter IV shall apply to the assessment of 771 a business carried on by a firm even after discontinuance of its business and if the process of assessment includes taking steps for imposing penalties the plea that the Legislature has inadvertently left a lacuna in the Act stands refuted
It is implicit in the contention of the appellant that it is open to the partners of a firm guilty of conduct exposing them to penalty under section 28 to evade penalty by the simple expedient of discontinuing the firm
This plea may be accepted only if the court is compelled in view of unambiguous language to hold that such was the intention of the Legislature
Here the language used does not even tend to such an interpretation
In interpreting a fiscal statute the court cannot proceed to make good deficiencies if there be any the court must interpret the statute as it stands and in case of doubt in a manner favourable to the tax payer
But where as in the present case by the use of words capable of comprehensive import provision is made for imposing liability for penalty upon tax payers guilty of fraud gross negligence or contumacious conduct an assumption that the words were used in a restricted sense so as to defeat the avowed object of the Legislature qua a certain class will not be lightly made
Counsel for the appellant relying upon Mahankali Subbarao vs Commissioner of Income Tax 1 in which it was held that an order imposing penalty under section 281c of the Indian Income Tax Act upon a Hindu Joint Family after it had disrupted and the disruption was accepted under section 25A1 is invalid because there is a lacuna in the Act submitted that a similar lacuna exists in the Act in relation to dissolved firms
But whether on the dissolution of a Hindu Joint Family the liability for penalty under section 28 which may be incurred during the subsistence of the family cannot be imposed does not fall for decision in this case it may be sufficient to observe that the provisions of section 25A and section 44 are not in pari materia
In the absence of any such phraseology in section 25A as is used in section 44 no real analogy between the content of that section and section 44 may be assumed
Undoubtedly 1 772 by section 44 the joint and several liability which is declared is liability to assessment in respect of income profits or gains of a firm which has discontinued its business but if in the process of assessment of income profits or gains any other liability such as payment of penalty or liability to pay penal interest as is provided under section 25 sub section
2 or under section 18A sub sections
4 6 7 8 and 9 is incurred it may also be imposed discontinuation of the business notwithstanding
In our view Chief Justice Subba Rao has correctly stated in Mareddi Krishna Reddy s case supra that Section 28 is one of the sections in Chapter IV
It imposes a penalty for the concealment of income or the improper distribution of profits
The defaults made in furnishing a return of the total income in complying with a notice under sub section
4 of section 22 or sub section
2 of section 23 and in concealing the particulars of income or deliberately furnishing inadequate particulars of such income are penalised under that section
The defaults enumerated therein relate to the process of assessment
Section 28 therefore is a provision enacted for facilitating the proper assessment of taxable income and can properly be said to apply to an assessment made under Chapter IV
We cannot say that there is a lacuna in section 44 such as that found in section 25A of the Act
We are unable to agree with the view expressed by the Andhra Pradesh High Court in the later Full Bench decision in Commissioner of Income Tax vs Rayalaseema Oil Mills 1 which purported to overrule the judgment in Mareddi Krishna Reddy s case supra
We are also unable to agree with the view expressed by the Madras High Court in section V Veerappan Chettiar vs Commissioner of Income Tax Madras 2
In the view taken by us the appeal fails and is dismissed with costs
1 Appeal dismissed


Summary:
The appellant who was carrying on business in food grains in partnership with another person submitted the returns of the income of the firm for the accounting years even after his partner s death
It was found that certain income of the firm was concealed and the Income tax Officer not only assessed the firm to tax for the suppressed income but also imposed penalties for concealing the said income
Appeals to the higher income tax authorities failed and the appellant then applied to the High Court for a writ of certiorari quashing the orders of assessment and imposition of penalty on the ground inter alia that the firm was dissolved by his partner s death and no penalty could be imposed after dissolution of the firm The High Court rejected the petition
On appeal with the certificate of the High Court Held that by virtue of section 44 and other provisions of the Income Tax Act a partner of a dissolved partnership firm may not only be made liable to assessment for income tax for the accounting years but despite dissolution of the firm he may be made liable to pay penalty for concealing the income of the firm under section 281c of the Act
The analogy of dissolution of a Hindu joint Family does not apply to dissolution of a partnership
Mareddi Krishna Reddy vs Income tax Officer Tenali  approved
Commissioner of Income tax vs Ravalaseema Oil Mills and section V Veerappan Chettiar vs Commissioner of Income tax Madras  disapproved
Mahankali Subbarao vs Commissioner of Income tax  distinguished
The Legislature intended that the provisions of Ch
IV of the Act shall apply to a firm even after discontinuance of its business
In interpreting a fiscal statute the Court cannot proceed to make good deficiencies if there be any
In case of doubt it should be interpreted in favour of the tax payer
The expression assessment has different connotations an has been used in its widest connotation in Ch
IV and section 44 97 766 he Act
It is not restricted only to computation of tax but includes imposition of penalty on tax payers found in the process of assessment guilty of concealing income
Commissioner of Income tax Bombay Presidency and Aden vs Khemchand Ramdas  referred to
The Income tax Act provided a complete machinery for obtaining relief against improper orders passed by the Income tax Authorities and the appellant could not be permitted to abandon that machinery and invoke the jurisdiction of the High Court under article 226 of the Constitution against the orders of the taxing authorities