Unregistered Firm as Separate Assessable Entity justifies advance-tax interest, no notice of demand required, and rectification upheld.

An unregistered firm was treated as a separate assessable entity for income-tax purposes, so a partner could be regarded as a person not previously assessed for advance-tax liability and interest under section 18A of the Income-tax Act, 1922; the statutory interest was therefore sustained. A separate notice of demand under section 29 was not a precondition for adding interest under section 18A(8) because the liability arose directly under the statute. No waiver of interest could be inferred where the officer lacked waiver power at the relevant time. The omission to charge mandatory interest was an apparent mistake on the record and was capable of rectification under section 35.

---

---

Issues: (i) whether an unregistered firm is a distinct assessable entity so that a partner of such firm can be treated as a person who had not hitherto been assessed for purposes of advance tax and interest under section 18A of the Income-tax Act, 1922; (ii) whether interest under section 18A(8) could be added without a notice of demand under section 29; (iii) whether the Revenue had waived its right to collect the interest; and (iv) whether the omission to charge interest was a mistake apparent from the record capable of rectification under section 35.

Issue (i): whether an unregistered firm is a distinct assessable entity so that a partner of such firm can be treated as a person who had not hitherto been assessed for purposes of advance tax and interest under section 18A of the Income-tax Act, 1922.

Analysis: The statutory scheme treated an unregistered firm as a separate assessable unit for income-tax purposes. The provisions governing assessment, set-off of losses, super-tax, and liability of partners showed a clear distinction between the firm and the individual partners. The earlier authorities relied upon by the assessee did not prevail in view of later binding authority and the amendment to the Act.

Conclusion: The unregistered firm was a distinct assessable entity, and the assessee, though a partner, was a person who had not hitherto been assessed within section 18A(3). The liability to interest was upheld.

Issue (ii): whether interest under section 18A(8) could be added without a notice of demand under section 29.

Analysis: Section 29 operated where tax, penalty, or interest became due in consequence of an order passed under or in pursuance of the Act. The obligation under section 18A(3) to estimate and pay advance tax was cast directly on the assessee, and the statute did not require a separate notice of demand before the statutory interest could be charged and added in assessment.

Conclusion: A notice of demand under section 29 was not a condition precedent, and the addition of interest was valid.

Issue (iii): whether the Revenue had waived its right to collect the interest.

Analysis: At the relevant time the Income-tax Officer had no power to waive the interest; that power was introduced later with retrospective effect. In the absence of an existing authority to waive, no waiver could be inferred from mere inaction in earlier proceedings.

Conclusion: There was no waiver of the right to recover interest.

Issue (iv): whether the omission to charge interest was a mistake apparent from the record capable of rectification under section 35.

Analysis: The Act made the addition of interest mandatory where advance tax had not been paid in accordance with section 18A. The omission to include such interest in the original assessment was therefore an obvious error on the face of the assessment record, and the rectification was made within the statutory time limit.

Conclusion: The omission was a mistake apparent from the record, and rectification under section 35 was permissible.

Final Conclusion: The statutory liability to interest was sustained, the procedural objections failed, and the challenge to the rectification order was not accepted.

Ratio Decidendi: For income-tax purposes an unregistered firm is a separate assessable entity from its partners, and where advance tax interest is mandatorily chargeable by statute, omission to levy it is a rectifiable mistake apparent from the record.

---