Discontinuance liability and tax recovery: partner remained liable for firm tax, but recovery failed without personal notice of demand.

A partner of an unregistered firm that had totally discontinued business was jointly and severally liable under the discontinuance provision for tax assessed on the firm before cessation, because the provision treated partners at the time of discontinuance as answerable for the firm's liability. However, coercive recovery could not be initiated against the partner under the recovery provisions unless a notice of demand had been served on him and he had become an assessee in default. A certificate issued only against the firm was insufficient. The writ was therefore allowed on the ground that the statutory precondition for recovery against the partner had not been satisfied.

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Issues: (i) Whether a partner of an unregistered firm that had discontinued business was liable under section 44 to pay the tax assessed on the firm before discontinuance. (ii) Whether recovery proceedings under section 46(2) could be initiated against the partner without service of a notice of demand under section 29 and on the strength of a certificate issued only against the firm.

Issue (i): Whether a partner of an unregistered firm that had discontinued business was liable under section 44 to pay the tax assessed on the firm before discontinuance.

Analysis: The statutory scheme treated an unregistered firm as a distinct unit for assessment, but section 44 applied when the business had been discontinued and imposed joint and several liability on the partners present at the time of discontinuance. The discontinuance was held to be a total cessation of business, not a mere temporary suspension or succession by another concern. The amendment to section 44 was read as clarifying, not restricting, the liability of partners in such a situation.

Conclusion: The partner was liable under section 44 to pay the tax assessed on the firm before discontinuance.

Issue (ii): Whether recovery proceedings under section 46(2) could be initiated against the partner without service of a notice of demand under section 29 and on the strength of a certificate issued only against the firm.

Analysis: Recovery under sections 45 and 46 depended on an assessee being in default, and default arose only upon failure to comply with a notice of demand under section 29. The partner had not been served with any such notice, and the certificate was issued against the firm alone. The Act's recovery machinery could not be treated as having been set in motion against a person who had not been placed in default in the manner required by the statute.

Conclusion: Recovery proceedings under section 46(2) could not validly be initiated against the partner on the basis of the notice and certificate issued only to the firm.

Final Conclusion: The writ was allowed because, although the partner remained liable for the tax under the discontinuance provision, the statutory precondition for coercive recovery against him had not been satisfied.

Ratio Decidendi: Liability under the discontinuance provision does not by itself authorise recovery proceedings against a partner unless a notice of demand is served on him and he becomes an assessee in default under the Act.

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