Personal recovery for dissolved firm tax dues requires assessees in default status, not mere partner liability.

Partners of a dissolved firm may be jointly and severally liable for the firm's tax dues, but that liability alone does not authorise coercive recovery against their personal assets or arrest unless they are themselves brought within the recovery framework as assessees in default. The text also notes that recovery was not invalid merely because no fresh demand notice was issued after appellate reduction of the demand. It further states that pendency of a suit over part of the property did not bar recovery of the firm's available property interest under lis pendens, though this did not justify personal recovery from the partners.

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Issues: (i) Whether the Tax Recovery Officer could proceed against the personal property of the partners of a dissolved firm and order their arrest for recovery of the firm's tax dues under the Income-tax Act, 1961. (ii) Whether a fresh demand notice was required after appellate reduction of the tax demand. (iii) Whether the pendency of a suit in respect of part of the firm's property barred recovery by sale of that property.

Issue (i): Whether the Tax Recovery Officer could proceed against the personal property of the partners of a dissolved firm and order their arrest for recovery of the firm's tax dues under the Income-tax Act, 1961.

Analysis: Section 189(3) of the Income-tax Act, 1961 makes partners of a dissolved firm jointly and severally liable for the tax payable by the firm, but that liability does not by itself authorise recovery from their personal assets. Recovery under the Second Schedule can be taken only against a person who is shown as an assessee in default and against whom the relevant assessment and recovery steps have been taken. The record showed the firm as the assessee, while the partners were not assessed or treated as assessees in default under sections 182 and 183. In that situation, proceedings under rule 73 and the order under rule 32 could not validly be enforced against the partners personally.

Conclusion: The personal recovery and arrest proceedings against the partners were unlawful and were quashed in favour of the assessee.

Issue (ii): Whether a fresh demand notice was required after appellate reduction of the tax demand.

Analysis: The demand had been reduced in appeal, but the governing validation provisions and the later recovery jurisprudence made it clear that recovery proceedings were not invalid merely because no fresh demand notice was issued after reduction of the assessed dues. The earlier objection based on want of a renewed demand notice therefore could not succeed.

Conclusion: No fresh demand notice was required, and this contention failed against the assessee.

Issue (iii): Whether the pendency of a suit in respect of part of the firm's property barred recovery by sale of that property.

Analysis: Section 52 of the Transfer of Property Act, 1882 was considered in relation to the suit pending over only a half share in the property. The pendency of that suit did not justify a blanket refusal to proceed against the entirety of the firm's property interest, and the doctrine of lis pendens could not defeat recovery beyond the disputed share. The proper course was to proceed against the firm's property to the extent legally available.

Conclusion: The objection based on lis pendens did not bar recovery of the firm's property to the extent available, and the Department's stand failed to justify personal recovery from the partners.

Final Conclusion: The writ petitions succeeded because the recovery machinery could not be used to attach or arrest the partners personally in the absence of proceedings treating them as assessees in default, though the objections regarding fresh demand and lis pendens did not alter the final relief granted.

Ratio Decidendi: Joint and several liability of partners for a dissolved firm's tax dues does not, by itself, permit coercive recovery against their personal property or person unless they are duly brought within the recovery framework as assessees in default under the Act.

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