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of <h1>Dissolved firm can't be assessed without statutory provision under Punjab GST Act. Court stresses legal existence loss upon dissolution.</h1> <h3>Khushi Ram Behari Lal & Co. Versus The Assessing Authority, Sangrur and Another</h3> Khushi Ram Behari Lal & Co. Versus The Assessing Authority, Sangrur and Another - [1967] 19 STC 381 (SC) Issues:- Assessment of sales tax after the dissolution of a firm under the Punjab General Sales Tax Act.- Validity of assessment order passed after the dissolution of the firm.- Interpretation of legal entity status of a firm for tax law purposes.- Requirement of statutory provision for assessing a dissolved firm.Analysis:The judgment by the Supreme Court of India dealt with the issue of assessing sales tax after the dissolution of a firm under the Punjab General Sales Tax Act. The appellant-firm, engaged in commission agent business, became liable for sales tax for the year 1959-60. The appellant claimed dissolution of the firm in August 1961, before the assessment order on 12th March 1962. The High Court dismissed the petition challenging the assessment order, citing the firm's alleged dissolution after the initiation of assessment proceedings. However, the Supreme Court referred to a previous decision emphasizing that a dissolved firm ceases to be a legal entity, and no valid assessment can be made post-dissolution without a statutory provision allowing it.The Supreme Court highlighted the legal entity status of a firm for tax law purposes, stating that a dissolved firm loses its legal existence and cannot be assessed unless permitted by law. The Court referenced a case where it was held that assessment of a dissolved firm is invalid if the dissolution occurred before the assessment order. The Court rejected the High Court's reasoning that the assessment could proceed due to the firm's dissolution post-initiation of proceedings, emphasizing the lack of legal basis for such an assessment without a specific statutory provision.The Court noted that the High Court did not definitively establish the actual dissolution date of the firm, referring to it as 'alleged' dissolution. As a result, the Court allowed the appeal, set aside the High Court's order, and directed the High Court to reevaluate the case, instructing to determine conclusively whether the firm was dissolved before the assessment order. The judgment underscored the necessity for a clear finding on the dissolution date in light of the legal principles outlined by the Supreme Court.In conclusion, the Supreme Court's judgment clarified that assessing a dissolved firm without a statutory provision is impermissible under the Punjab General Sales Tax Act. The decision emphasized the legal entity status of a firm for tax purposes and mandated a definitive finding on the dissolution date for accurate assessment proceedings.
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