Principal-agent distinction bars recovery of proprietor's tax dues from agent's personal bank account absent proof of sham arrangement.

Tax liability of a proprietor cannot be recovered from the personal bank account of a power of attorney holder or agent merely because he represented the principal. The Karnataka HC noted that principal and agent remain legally distinct, and personal recovery is impermissible unless the authorities first conduct an enquiry showing that the supposed principal is fictitious, dummy, or that the arrangement is a sham. As no such enquiry was undertaken, direct recovery under Section 14 of the Karnataka Sales Tax Act against the agent's account was unsustainable. The recovery was set aside and the amount already recovered was required to be refunded.

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Issues: Whether the tax authorities could recover the dues of the proprietor from the bank account of the power of attorney holder and agent in the absence of any enquiry showing that the agent was the real owner or that the business was a dummy or fictitious arrangement.

Analysis: The petitioner was acting only as the general power of attorney holder of his mother, who was the proprietor and principal of the defaulting firm. Under agency law, the principal and the agent retain separate legal identities, and liability for the principal's dues cannot ordinarily be fastened on the agent's personal assets unless there is a specific legal basis or an enquiry establishes that the supposed principal is fictitious, dummy, or merely projected. No such enquiry had been conducted, and the authorities proceeded directly against the petitioner's individual bank account under Section 14 of the Karnataka Sales Tax Act.

Conclusion: The recovery action against the petitioner's bank account could not be sustained and was liable to be set aside, in favour of the assessee.

Final Conclusion: The assessment dues could not be enforced against the agent's personal account merely because he had represented the proprietor under a power of attorney, and the amount recovered was required to be refunded.

Ratio Decidendi: A tax liability of the principal cannot be recovered from the personal assets of an agent or power of attorney holder unless the authority first establishes, through enquiry, that the principal-agent distinction is a sham or that the business is fictitious or dummy.

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