Discontinued business and effective service under the Income-tax Act, 1922 sustain reassessment despite firm dissolution.

Where a firm's business has discontinued, section 44 of the Income-tax Act, 1922 permits assessment or reassessment to proceed despite dissolution, because the assessment machinery continues to operate against the firm. The notice under section 34 was therefore treated as valid. Service was also held effective where the notice was received in substance by the accounts officer managing the assessee's affairs and a return was filed pursuant to it; section 63 was applied pragmatically, and actual receipt on behalf of the assessee was sufficient.

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Issues: (i) Whether notice issued under section 34 of the Income-tax Act, 1922 was valid against a dissolved firm; (ii) Whether service of that notice was valid in law.

Issue (i): Whether notice issued under section 34 of the Income-tax Act, 1922 was valid against a dissolved firm.

Analysis: The notice was issued before the High Court's amalgamation order, but the decisive question was whether, on the facts, the firm had discontinued business so as to attract section 44. On the authorities considered, section 44 applies where the business of a firm is discontinued, including where dissolution results in cessation of business. In such a case, the machinery for assessment survives, and assessment or reassessment can proceed against the firm notwithstanding dissolution.

Conclusion: The notice under section 34 was valid. The finding is in favour of the Revenue and against the assessee.

Issue (ii): Whether service of that notice was valid in law.

Analysis: Section 63 of the Income-tax Act, 1922 permits service by prescribed modes, and the service provisions are not exhaustive where the notice is in substance received on behalf of the assessee. The notice was received by the accounts officer who was managing the affairs of the assessee and of the partner-companies, and a return was filed pursuant to the notice. On that footing, the service was treated as effective.

Conclusion: Service of the notice was valid. The finding is in favour of the Revenue and against the assessee.

Final Conclusion: The reference was answered against the assessee on both questions, and the reassessment proceedings were held sustainable.

Ratio Decidendi: Where a firm's business has discontinued, section 44 of the Income-tax Act, 1922 permits assessment or reassessment despite dissolution, and service of notice is valid if it is in substance received and acted upon on behalf of the assessee.

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