Joint and several liability of partners for dissolved firm tax arrears sustains recovery orders and defeats refund relief.
Where a firm has been discontinued or dissolved, the Income-tax Act fastens joint and several liability on every person who was a partner at the time of discontinuance or dissolution for the firm's tax or penalty dues. The Kerala High Court distinguished the Full Bench ruling relied on by the petitioner and held that this statutory liability is not displaced by the fact that the assessment stood in the firm's name or by later notices issued under the new Act for advance-tax demand. On that basis, prohibitory orders securing recovery of the firm's arrears were upheld and the request for refund relief under article 226 could not succeed.
Issues: Whether the petitioner, as a partner of dissolved or discontinued firms, was jointly and severally liable for the firms' income-tax arrears so as to justify the prohibitory orders and bar the refund claim under article 226.
Analysis: The liability for the firm's arrears arose under the provisions governing discontinued or dissolved firms. Under section 44 of the Indian Income-tax Act, 1922, and the corresponding section 189 of the Income-tax Act, 1961, every person who was a partner at the time of discontinuance or dissolution is jointly and severally liable for the tax or penalty payable. The court distinguished the earlier Full Bench decision relied on by the petitioner, holding that the principle there stated does not protect a partner where the Act itself imposes joint and several liability. The attempt to rely on the issuance of notices in the new Act for later advance-tax demand did not affect the existing liability for the earlier assessment years. Since the petitioner was legally liable for the firm's arrears, the prohibitory orders issued to protect recovery of the dues could not be faulted, and the request for mandamus to compel refund could not survive.
Conclusion: The challenge to the prohibitory orders failed, and the petitioner was not entitled to the refund relief or any other writ relief.
Final Conclusion: The writ petition was rejected because the statutory scheme fastened joint and several liability on the partner for the firm's tax arrears, making recovery from the amounts due to him lawful.
Ratio Decidendi: Where the Income-tax Act expressly imposes joint and several liability on a partner of a firm that has been discontinued or dissolved, recovery may be proceeded with against the partner notwithstanding that the assessment stood in the firm's name alone.
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