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Issues: Whether an erstwhile partner remains liable for the tax arrears of a firm relating to the period when he was a partner.
Analysis: The liability to meet the tax dues of a firm does not arise from the firm being treated as a separate juristic person, but from the nature of partnership under the Partnership Act, under which every partner is jointly and severally liable for acts of the firm done while he was a partner. The absence of an express provision in the Income-tax Act, 1961 corresponding to the proviso to section 46(2) of the Indian Income-tax Act, 1922 did not alter that basic position. The statutory scheme for assessment and recovery of firm dues, together with the principle that a partnership firm is not distinct from its partners, supported recovery from a person who had been a partner during the relevant previous year, notwithstanding his later retirement.
Conclusion: An erstwhile partner is liable for the tax arrears of the firm pertaining to the period when he was a partner.
Ratio Decidendi: A partner who was a member of the firm during the period to which the tax demand relates remains jointly and severally liable for the firm's tax arrears even after retirement, because such liability flows from the legal character of partnership and not from any special recovery provision.
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