Income-tax recovery against a partner fails unless the partner is the assessed defaulter served with a valid demand notice.

Recovery under the Income-tax Act can proceed only after assessment, service of a valid notice of demand under section 156, default in payment, and initiation of proceedings under section 222 and the Second Schedule. The Karnataka HC treated the term "defaulter" as referring to the assessee named in the recovery certificate, and held that a person who is only a partner cannot be proceeded against unless he was assessed and served with the statutory demand. As the certificate named the firm and the petitioner was not shown to have been served as the assessee in default, the recovery proceedings and notice of demand were without authority of law and liable to be quashed.

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Issues: Whether a recovery notice and certificate issued under the Income-tax Act, 1961 could be enforced against a partner who was not the assessee named in the certificate and against whom no notice of demand had been served.

Analysis: Recovery under the statutory scheme must follow assessment, service of a notice of demand on the assessee under section 156, default in payment under section 220, and only then initiation of recovery proceedings under section 222 and the Second Schedule. The term "defaulter" in the Second Schedule means the assessee mentioned in the certificate. A person who is merely a partner cannot be proceeded against unless he is the person assessed and served with the statutory demand. The certificate in question named the firm as the assessee, and the petitioner was not shown to have been served as the assessee in default.

Conclusion: The recovery proceedings against the petitioner were without authority of law and the notice of demand was liable to be quashed.

Ratio Decidendi: Recovery under section 222 of the Income-tax Act, 1961 can be initiated only against the assessee who has been served with a valid notice of demand and has become an assessee in default; a partner not so named or served cannot be proceeded against merely because of his association with the firm.

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