Case: Sahu Rajeshwar Nath Vs. Income Tax Officer, C-Ward, Meerut, &amp; Another

being liable for the assessment of the joint Hindu family (S. 25A); (2) a firm being liable for the partners tax [second proviso to Section 26 (1) ] ; (3) the executor, administrator, or other legal representative being liable in respect of the tax payable by a deceased person (S. 24B); (4) a company in respect of the tax levied upon a shareholder [S. 28-A (3)] and (5) a person failing to deduct tax at source under Section 18 [S. 18(7)]. It is true that under the Partnership Act the liability of the partners of a firm is joint and several and it is open to a creditor of the firm to recover the debt of the firm from any one or more of the partners. But a partner of an unregistered firm does not fall within the language of Section 29 of the Act, for the liability of the partner is not imposed on account of any provision of the Income Tax Act itself.We are therefore of the opinion that a notice under Section 29 of the Act is not necessary to be served upon the partner of an unregistered firm before proceedings are taken for recovery of the tax under Section 46 (2) of the Act. We accordingly hold that Mr. Karkhanis is unable to make good his argument on this aspect of the case.5. Mr. Karkhanis then put forward the argument that it was not open to the Collector on receipt of a certificate under Section 46 (2) of the Act to recover from the appellant the amount of tax due from the unregistered partnership. It was pointed out that the certificate only mentioned the amount of arrears of tax due from the assessee i.e., the unregistered partnership and the Collector was empowered under that section to recover the amount specified in the certificate "from such assessee". It was however, conceded by Mr. Karkhanis that under S. 25 of the Partnership Act the partners are liable jointly and severally for satisfying all liabilities of the partnership firm and the appellant would have been liable for the income-tax dues of the partnership if proper proceedings, for instance a suit, had been brought in a Civil Court against him by the Income Tax authorities. The point taken by Mr. Karkhanis is that it was not open to the Collector in a proceeding under Section 46 (2) of the Act to recover from the appellant the income-tax dues from the partnership. We are unable to accede to this argument. The proviso to Section 46 (2) of the Act states that the Collector shall, without prejudice to any other powers in that behalf "for the purpose of recovering the said amount, have the powers which under the Code of Civil Procedure, 1908 (V of 1908), a Civil Court has for the purpose of the recovery of an amount due under a decree." Reference should be made in this context to Order 21, Rule 50 of the Civil Procedure Code which states:"50 (1) Where a decree has been passed against a firm execution may be granted"-(a) against any property of the partnership;(b) against any person who has appeared in is own name under Rule 6 or Rule 7 of Order XXX or who has admitted on the pleadings that he is, or who has been adjudged to be, a partner;(c) against any person who has been individually served as a partner with a summons and has failed to appear:Provided that nothing in this sub-rule shall be deemed to limit or otherwise affect the provisions of Section 247 of the Indian Contract Act, 1872.(2) Where the decree-holder claims to be entitled to cause the decree to be executed against any person other than such a person as is referred to in sub-rule (1). clauses (b) and (c) as being a partner in the firm, he may apply to the Court which passed the decree for leave, and where the liability is not disputed, such Court may grant such leave, or, where such liability is disputed, may order that the liability of such person be tried and determined in any manner in which any issue in a suit may be tried and determined.. . . . . .: . . . . . . ... .. ................"6. In the present case we see no real son why the Collector should not execute the certificate for demand of income-tax against the appellant who admits that he was a partner of the unregistered firm for the relevant accounting year.In the return filed by the unregistered firm on January 19, 1945 at page 33 of the Paper Book also the appellant is shown as one of the partners. It is maniest that the provisions of Order 21, Rule 50 (2) apply to the present case mutatis mutandis and since the appellant does not dispute that he was a partner of the unregistered firm for the relevant accounting year, the Collector could lawfully proceed to execute the certificate under Section 46 (2) of the Act against the appellant and recover the income-tax arrears from him. It follows therefore that the proceedings taken for recovery of the tax by the respondents against the appellant were legally valid and the appellant is not entitled to the grant of a writ under Article 226 of the Constitution.7. The view that we have expressed is borne out by the decisions of the Calcutta High Court in Union of India v. Satyanarayan Khan, 1961-42 ITR 42 (Cal) and in Ramgopal Khemka v. Union of India, 1966-60 ITR 659 (Cal). A contrary view has been taken by the Mysore High Court in T. Govindaswamy v. Income Tax Officer, Special Survey Circle, Bangalore, 1960-38 ITR 197 (Mys) and by the Allahabad High Court in Moti Lal Purshotam Das v. Income Tax Officer, Kanpur, (1960) 39 ITR 497 = (AIR 1961 All 133 ). But for the reasons already stated we hold that the latter two decisions do not correctly state the law on the point.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In our opinion, there is no warrant or justification or this argument.The phrase "other person liable to pay" in Section 29 should be construed as "other person liable to pay under the Income Tax Act" and the liability cannot therefore be construed with reference to the Partnership Act or any other statute. In the Income Tax Act it self the liability is imposed on other persons to pay the tax apart from the assessee by several sections. For example "the other person apart from the assessee" in the language of Section 29 of the Act would include: (1) a member of a divided family being liable for the assessment of the joint Hindu family (S. 25A); (2) a firm being liable for the partners tax [second proviso to Section 26 (1) ] ; (3) the executor, administrator, or other legal representative being liable in respect of the tax payable by a deceased person (S. 24B); (4) a company in respect of the tax levied upon a shareholder [S.(3)] and (5) a person failing to deduct tax at source under Section 18 [S. 18(7)]. It is true that under the Partnership Act the liability of the partners of a firm is joint and several and it is open to a creditor of the firm to recover the debt of the firm from any one or more of the partners. But a partner of an unregistered firm does not fall within the language of Section 29 of the Act, for the liability of the partner is not imposed on account of any provision of the Income Tax Act itself.We are therefore of the opinion that a notice under Section 29 of the Act is not necessary to be served upon the partner of an unregistered firm before proceedings are taken for recovery of the tax under Section 46 (2) of the Act. We accordingly hold that Mr. Karkhanis is unable to make good his argument on this aspect of theare unable to accede to this argument. The proviso to Section 46 (2) of the Act states that the Collector shall, without prejudice to any other powers in that behalf "for the purpose of recovering the said amount, have the powers which under the Code of Civil Procedure, 1908 (V of 1908), a Civil Court has for the purpose of the recovery of an amount due under a decree.In the present case we see no real son why the Collector should not execute the certificate for demand ofagainst the appellant who admits that he was a partner of the unregistered firm for the relevant accounting year.In the return filed by the unregistered firm on January 19, 1945 at page 33 of the Paper Book also the appellant is shown as one of the partners. It is maniest that the provisions of Order 21, Rule 50 (2) apply to the present case mutatis mutandis and since the appellant does not dispute that he was a partner of the unregistered firm for the relevant accounting year, the Collector could lawfully proceed to execute the certificate under Section 46 (2) of the Act against the appellant and recover thearrears from him. It follows therefore that the proceedings taken for recovery of the tax by the respondents against the appellant were legally valid and the appellant is not entitled to the grant of a writ under Article 226 of the Constitution.7. The view that we have expressed is borne out by the decisions of the Calcutta High Court in Union of India v. Satyanarayan Khan,ITR 42 (Cal) and in Ramgopal Khemka v. Union of India,ITR 659 (Cal). A contrary view has been taken by the Mysore High Court in T. Govindaswamy v. Income Tax Officer, Special Survey Circle, Bangalore,ITR 197 (Mys) and by the Allahabad High Court in Moti Lal Purshotam Das v. Income Tax Officer, Kanpur, (1960) 39 ITR 497   = (AIR 1961 All 133  ). But for the reasons already stated we hold that the latter two decisions do not correctly state the law on the point.