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Issues: (i) Whether tax assessed on an unregistered firm could, after the firm's dissolution, be recovered from the partners without a fresh assessment and fresh demand notice under the Income-tax Act. (ii) Whether the certificate authorities could proceed against the partners as certificate-debtors and restore the certificate proceeding after the certificate case had been cancelled.
Issue (i): Whether tax assessed on an unregistered firm could, after the firm's dissolution, be recovered from the partners without a fresh assessment and fresh demand notice under the Income-tax Act.
Analysis: The assessment had been completed and demand had been issued against the firm while it was still in existence. Once the tax became due from the firm, subsequent dissolution did not extinguish the debt. The Court distinguished liability for assessment from liability for recovery, holding that after dissolution the partners' liability arose under the partnership law governing distribution of liabilities on dissolution, and not by way of a fresh assessment under the Income-tax Act. Section 44 was held inapplicable because the firm had not dissolved before completion of assessment.
Conclusion: The tax could be recovered from the partners after dissolution, and no fresh assessment or fresh demand notice was required on these facts.
Issue (ii): Whether the certificate authorities could proceed against the partners as certificate-debtors and restore the certificate proceeding after the certificate case had been cancelled.
Analysis: The certificate proceeding was directed against the firm, and the authorities were entitled to proceed in the manner required for recovery once the partners' liability had devolved upon dissolution. The Court held that the Board of Revenue's order restored the certificate proceeding, not a void certificate, and that the certificate officer had jurisdiction to continue the proceeding. The partners could be brought on record as certificate-debtors in accordance with the recovery procedure, with objections available to them at the appropriate stage.
Conclusion: The certificate proceeding could lawfully be continued against the partners, and the Board's restoration of the proceeding was valid.
Final Conclusion: All objections to the recovery proceedings failed, and the writ petition was dismissed with costs.
Ratio Decidendi: Once tax has been validly assessed and demanded against a firm, dissolution of the firm does not require a fresh assessment of the same liability before recovery can proceed against the partners, because their liability to satisfy the debt on dissolution is governed by the partnership law while the recovery machinery may treat them as proper certificate-debtors.
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