Partner liability under Section 44: partners remain jointly liable, but tax recovery requires a prior notice under Section 29.

A partner of an unregistered firm that has discontinued business is liable jointly and severally for tax assessed on the firm because discontinuance attracts partner liability; the court treats the factual cessation as discontinuance and applies the statutory rule making partners liable. However, recovery proceedings against an individual partner under the recovery provision cannot be validly initiated without first serving the prescribed notice of demand on that partner; absence of such notice means no assessee in default and invalidates recovery under the recovery provision. Writ relief restrains the certificate-based recovery but does not extinguish the partner's statutory liability or other compliant recovery steps.

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Issues: (i) Whether a partner of an unregistered firm which has discontinued business is liable under section 44 of the Income-tax Act to pay tax assessed on the firm; (ii) Whether recovery proceedings under section 46(2) of the Income-tax Act can be validly initiated against an individual partner where no notice of demand under section 29 was served on that partner.

Issue (i): Whether a partner of an unregistered firm which has discontinued business is liable under section 44 of the Income-tax Act to pay tax assessed on the firm.

Analysis: Section 44 addresses liability where a firm's business has been discontinued and speaks of partners being jointly and severally liable in respect of the income, profits and gains of the firm, and that provisions of Chapter IV shall, so far as may be, apply to such assessment. The statutory amendment introducing express liability to assessment after discontinuance clarifies that partners can be made liable notwithstanding prior assessment on the firm. The factual finding that the firm had ceased business amounts to discontinuance within the meaning of section 44.

Conclusion: Section 44 renders the partner liable to pay the tax assessed on the firm.

Issue (ii): Whether recovery proceedings under section 46(2) of the Income-tax Act can be validly initiated against an individual partner where no notice of demand under section 29 was served on that partner.

Analysis: Section 29 requires service of a notice of demand in the prescribed form upon the assessee or other person liable to pay the tax, and section 45 defines when a person becomes an assessee in default by failing to pay an amount specified in such a notice. An individual partner becomes an assessee by virtue of liability under section 44, but, absent service of a notice of demand on that individual, there is no failure to pay the sum specified in a notice to him and hence no assessee in default as contemplated by sections 45 and 46. Constructional aids concerning workable machinery for collection do not dispense with the statutory prerequisite of issuing the notice of demand.

Conclusion: Recovery under section 46(2) against an individual partner is not validly initiable in the absence of a notice of demand under section 29 served on that partner; accordingly, recovery proceedings commenced against the petitioner on the strength of a certificate issued in respect of the firm are not valid.

Final Conclusion: The writ petition is allowed to restrain recovery from the petitioner under the certificate issued against the firm; this restraint does not extinguish the petitioner's statutory liability under section 44 nor prevent other lawful steps for recovery that comply with the statutory requirements.

Ratio Decidendi: Where a firm has discontinued business within the meaning of section 44, partners are jointly and severally liable for tax assessed on the firm, but recovery under section 46(2) requires prior compliance with the statutory prerequisite of issuing a notice of demand under section 29 to the person sought to be made an assessee in default.

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