Tax liability after firm dissolution requires valid assessment and demand on the deceased partner before proceeding against the estate.

After dissolution of a firm under the pre-amendment Indian Income-tax Act, 1922, the firm could not be assessed as a continuing taxable entity; liability had to be fastened on the partners jointly or severally under section 44. A notice of demand under section 29 was necessary against the assessee or other person liable to pay the tax. Because the deceased partner had not been validly assessed and no notice of demand had been served on him, no enforceable tax liability could be created against his estate. On that basis, the legal representative was not liable for the tax assessed on the dissolved firm and refusal of the tax clearance certificate was unjustified.

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Issues: Whether a legal representative of a deceased partner of a dissolved firm could be treated as liable for tax assessed on the dissolved firm so as to justify refusal of a tax clearance certificate.

Analysis: The relevant liability arose under section 44 of the Indian Income-tax Act, 1922, as it stood before the 1958 amendment, under which, upon discontinuance or dissolution of a firm, the partners were to be assessed jointly or severally and the firm as such could not be assessed after dissolution. Section 29 of the Indian Income-tax Act, 1922 required a notice of demand to be served on the assessee or other person liable to pay the tax. Here, the deceased partner had not been assessed and no notice of demand had been served on him. The assessment and demand made only on the dissolved firm, with notice to another partner, could not create liability against the deceased partner or his estate. In the absence of a valid tax liability fastened on the deceased, the petitioner as legal representative could not be treated as liable, and refusal of the tax clearance certificate was unjustified.

Conclusion: The issue was decided in favour of the assessee. The petitioner was not liable to discharge the tax assessed on the dissolved firm and was entitled to the tax clearance certificate.

Final Conclusion: The writ petition succeeded because no enforceable tax liability was established against the petitioner through her deceased husband's estate, and the taxing authority was directed to issue the clearance certificate.

Ratio Decidendi: After dissolution of a firm under the pre-amendment Indian Income-tax Act, 1922, assessment must be made on the partners and not on the non-existent firm, and liability cannot be enforced against a legal representative unless the deceased partner was validly assessed and served with notice of demand.

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