Running concern takeover includes prior tax liabilities; assessing authority may enquire into earlier exemptions after transfer.

A business taken over as a running concern carries the incidents of the undertaking, including liabilities and prior tax consequences, so the transferee steps into the shoes of the earlier management. On that basis, the transfer was treated as extending beyond assets alone, and Section 27 was read as permitting enquiry into the correctness of exemptions granted in earlier years. The assessing authority was therefore held to have jurisdiction to issue notice on the petitioner's earlier exemptions and tax liability after the takeover, and the challenge seeking prohibition failed.

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Issues: Whether the assessing authority had jurisdiction to issue notice to the petitioner in respect of earlier exemptions and tax liability after the business was taken over as a running concern.

Analysis: The petitioner had taken over the Madras Type Foundry as a running concern and stepped into the shoes of the earlier management. On that footing, the business transfer was not confined to assets alone but extended to the incidents of the business, including liabilities that could be pursued under the Act. Section 27 was treated as covering such transfer, and the authority was entitled to enquire into the correctness of exemptions granted in earlier years. The notice was therefore part of a lawful exercise of jurisdiction and not an action without authority.

Conclusion: The assessing authority had jurisdiction to issue the impugned notice, and the request for prohibition failed.

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