Case: Kalva Suryanarayana Vs. Income Tax Officer, A-3 Ward, Hyderabad

2. The appellant had entered into a partnership with three others named D. Sayappa, Siddappa and M. Verraiah to out a "Gulmoha" contract for the yearThe firm was known as Messrs Kalva Suryanarayana. After completion of the contract the partnership came to an end. For the assessment yearthe partners of the dissolved firm made an application for registration of the partnership to the respondent who granted the registration on February 28, 1953, and on that basis proceeded to assess the total income of the partnership which he determined at Rs. 1,64,546/(O.S.), and the total income was apportioned among the four partners in proportion of their respective shares. Subsequently, the Commissioner of Income Tax in exercise of his revisional power under Section 33B of the Income Tax Act passed an order on February 26, 1955 holding that the partnership had suppressed income to the extent of Rs, 1,72,149 (I.C.) by inflating the expenses under railway height and by not accounting for the sale of old gunnies. The Commissioner of Income Tax accordingly directed that the assessment already made should be enhanced by a sum of Rs. 1,72,149. In pursuance of this order the respondent revised the assessment on March 11, 1955 and determined the total income of the partnership at Rs. 3,13,189/(I.G.) and apportioned it among the several partners in proportion to their shares and demand notices were issued accordingly against individual partners of the dissolved firm. It appears that the appellant and D. Sayappa paid their shares of the tax but M. Veeraiah and H. Siddappa failed to pay their shares which were Rs. 10,654,62 and Rs.5,640.62 respectively. After about six years the respondent issued a notice to the appellant under Section 45 of the Income Tax Act, 1922, hereinafter called the Act calling upon him to pay up the arrears on the footing that under the provisions of Section 44 of the Act 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 by the High Court by its Judgment dated December 21,1964.

Reasoning: 4. In support of this appeal, the argument was addressed that the appellant who was an individual assessee under Section 23 (5) could not be held liable for payment of the tax due from the ex partners of the partnership and there was no joint and several liability imposed under the provisions of the Act in such a case.In our opinion, the argument put forward on behalf of the appellant is well founded and must be accepted asIncome Tax Officer, Agra v. Radha Krishan, (1967) 66 ITR 590  = (AIR 1968 SC 46 ) it was argued that in the case of assessment made under Section 23 (5) (a) of the Act the tax liability was joint and several and the Income Tax Officer could recover from other partners the share of the tax attributable to one partner which cannot be recovered from him. The argument was rejected by this Court and it was pointed out that under the scheme of the Act tax is assessed individually against each partner and no tax is made payable by the partnership and therefore the principle of joint and several liability has no application. It was also held in that case that there is nothing in S. 44 of the Act which supports the contention that for payment of tax assessed against a partner of a registered partnership under Section 28 (5) (a) another partner becomes liable jointly and severally with the first partner to pay tax. In our opinion, the principle of this decision governs the present case also. It is true that in the present case we are dealing with the assessment of a partnership after its dissolution and S.44 of the Act is directly applicable but this circumstance makes no difference to the application of the principle laid down in (1967) 66 ITR 590 =(AIR 1968 SCis, however, nothing in the section which supports the argument of the respondent that for payment of tax assessed against the partners of a registered partnership individually under S. 23 (5) (a) of the Act another partner becomes liable jointly and severally with that first partner to pay tax. The entire scheme of taxing the income of a registered partnership in the hands of individual partners is inconsistent with any argument that for payment of tax assessed against a partner, other partners are liable.5. For these reasons we hold that the respondent had no jurisdiction to issue the impugned notice dated June 22, 1961 under Section 45 of the Act and the proceedings taken against the appellant in pursuance of that notice should be quashed by grant of a writ in the nature of certiorari under Article 226 of the Constitution.