TaxTMI 
TaxTMI 
1975 (9) TMI 155
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....ion No. 564 of 1965 is filed by M/s. Murarilal Mahabirprasad, petitioner No. 1, a dissolved firm, and its former partners, petitioners Nos. 2 to 5. The firm was constituted under a deed of partnership dated 3rd December, 1953. It carried on business as importers, commission agents, indenting agents, del credere agents and financiers at 30, Commercial Chambers, Masjid Bunder Road, Bombay-3, and also as wholesale dealers in colours, chemicals, dyes, spices, condiments and as general merchants. The petitioners alleged that the firm was dissolved under a deed of dissolution dated 20th May, 1962. Petitioners Nos. 2 to 5 and one Sultanchand Lala Sardarimal Jain (who died on 10th March, 1965) were the partners of the firm. It was registered as a dealer both under the Bombay Sales Tax Act, 1959, and the Bombay Sales Tax Act, 1953. According to the petitioners, the firm discontinued its business from May, 1961, and the winding up of the business was done by petitioner No. 5 with the assistance of petitioners Nos. 2 to 4, who were ordinarily residing in Delhi. The said turnovers of the said firm were assessed by the sales tax authorities for the periods from July, 1953, to 31st March, 195....
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....y through their Advocate contending that all transactions were not of the firm but many of them were on behalf of the constituents for whom the firm was acting as commission agents. On 8th December, 1964, however, a further show-cause notice was served on the firm to explain several discrepancies in the books of account of the firm. A reply to that notice was sent by the firm on 21st December, 1964, stating that the transactions were old, their employees had left their service, they had explained most of the transactions and that they would explain the remaining entries at the final hearing after taking full extracts thereof. It is further alleged in the petition that as Sultanchand Lala died suddenly in Delhi due to heart attack on 10th March, 1965, the partners of the firm had to go to Delhi, and hence on 3rd April, 1965, a letter was addressed to respondent No. 1, the Sales Tax Officer (VIII), Enforcement Branch, requesting him to fix up the matter for hearing in May, 1965, that respondent No. 1 issued a notice thereafter on 26th May, 1965, addressed to petitioner No. 1-firm intimating that the case would be taken up for hearing from day to day from 14th June, 1965, and the p....
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....le to pay the total tax of Rs. 1,02,083.70 and was directed to pay the balance after deducting Rs. 12,283.29, which the firm had paid along with the returns. Thus, under these five assessment orders, a total sum of Rs. 6,56,365.47 was found due on the sales and purchases suppressed by petitioner No. 1-firm from the sales tax authorities as against Rs. 32,908.85, which was paid by them with the returns, and petitioner No. 1-firm was held liable to pay the balance of tax of Rs. 6,70,969.96 including the balance of proper taxes payable on the sales which were shown in their returns by petitioner No. 1-firm. The petitioners alleged in the petition that the said five assessment orders with their respective demand notices in respect of the respective periods were sent by registered post to petitioner No. 1-firm's office address on 6th October, 1965, but they were not received by petitioner No. 1-firm. On 22nd October, 1965, the notices were affixed by a Sales Tax Inspector to the former office of the dissolved petitioner No. 1-firm. As petitioner No. 5 was out of India from 2nd October, 1965, till 7th November, 1965, petitioner No. 4 was informed by a trunk-call by the firm of Messrs.....
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....tiorari or any other appropriate writ under article 226 of the Constitution may be issued against the respondents quashing and setting aside the aforesaid five orders dated 31st August, 1965, and the corresponding demand notices dated 30th September, 1965, and also for an injunction or direction against the respondents from enforcing the said orders. The petition was resisted by the respondents who rely on an affidavit in reply filed by respondent No. 1. In his affidavit, he contends that the assessment orders and demand notices were issued in exercise of the powers vested in him under the provisions of the Bombay Sales Tax Act, 1953, and the Bombay Sales Tax Act, 1959, and he had passed the assessment orders and issued the demand notices after duly following the procedure prescribed under the said Acts. Although in the affidavit, he stated that the fact of the dissolution of petitioner No. 1-firm was not brought to his notice and no intimation about the dissolution of the said firm was given to the sales tax department as required by the said Sales Tax Acts, it is not disputed on behalf of the respondents now before us that the deed of dissolution was produced before the Sales ....
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....t at this stage to decide the second and third questions involved in the petition. The only question, therefore, which survives is with regard to the right of the sales tax authorities to assess or reassess a dissolved firm in respect of its pre-dissolution turnovers under the Bombay Sales Tax Act, 1953, and the Bombay Sales Tax Act, 1959. It is a question which goes to the root of the proceedings against the petitioners under the said Acts. In Special Civil Application No. 2050 of 1969, the four petitioners are four out of the six partners of a dissolved firm, Messrs. Ramchand Motichand Phade. The firm was constituted under a deed of partnership dated 14th April, 1959, and was carrying on business in sugar, oil and oil-seeds at Akluj, Taluka Malshiras, District Sholapur. The firm was dissolved with effect from 28th October, 1962, under a deed of dissolution dated 1st November, 1962, and discontinued its business. Prior to its dissolution, it was registered as a dealer under the Bombay Sales Tax Act and had filed returns and paid the taxes and was also assessed in respect of the periods from 1st April, 1955, to 31st March, 1956, 1st April, 1956, to 31st March, 1957, and 1st Apri....
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....self as a partner of Messrs. Ramchand Motichand Phade, has filed three appeals on 22nd June, 1966, before the Deputy Commissioner of Sales Tax, Central Division, Poona, respondent No. 2, and the said appeals are pending before the Deputy Commissioner since that date. The petitioners have moved this court under article 226 contending that the assessment orders were passed without jurisdiction by respondent No. 1, inasmuch as, there was no specific provisions under the Bombay Sales Tax Act, 1953, authorising the sales tax authorities to assess a partnership-firm after its dissolution, and that after the dissolution of the partnership-firm, no action whatsoever could be validly initiated in the name of the firm, and in spite of this, respondent No. 2 was prolonging the passing of the orders on the appeals even after hearing the appeals as far back as 20th February, 1967, and once again more exhaustively, on 12th December, 1968. The petitioners further contended that in any event the case being one which could be reassessed under section 15, respondent No. 2 could not exercise his powers of revision under section 31 of the Bombay Sales Tax Act, 1953, and hence respondent No. 2 ought to....
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....s is that there is no provision authorising the sales tax authorities for assessing a dissolved firm under the pro- visions of the Bombay Sales Tax Act, 1953, and the Bombay Sales Tax Act, 1959. There is no dispute that the firms in the respective petitions were in fact dissolved by deeds of dissolution long before the impugned orders of assessment, reassessment and orders of penalty were respectively passed against them by the Sales Tax Officer. But what is contended on behalf of the respondents is that the dissolved firms continued to be assessable units in respect of their liability to pay the taxes under the Bombay Sales Tax Act, 1953, and the Bombay Sales Tax Act, 1959, on the turnovers of the firms prior to the dissolution. It is, therefore, necessary to consider the provisions in the two Acts, if any, on the subject of assessment of a dissolved firm. The material provisions of the Bombay Sales Tax Act, 1953, referred to in the course of the arguments as relevant, are the following: Section 2(6) defines a "dealer". It reads: "'Dealer' means any person who carries on the business of selling or buying goods in the pre-reorganisation State of Bombay excluding the transferr....
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....r shall, after considering such evidence as the dealer may produce and such other evidence as the Collector may require on specified points, assess the amount of the tax due from the dealer .................." Then section 15 is as follows: "(1) If in consequence of any information which has come into his possession the Collector is satisfied that any turnover in respect of sales or purchases of any goods chargeable to the tax has escaped assessment in any year or has been under-assessed or assessed at a lower rate or any deductions have been wrongly made therefrom, the Collector may, in any case where such turnover has escaped assessment or has been under-assessed or assessed at a lower rate for the reason that the provisions of sub-section (1) of section 2 of the Bombay Sales Tax (Validating Provisions) Act, 1957, were not then enacted, at any time, within eight years, and in any case where he has reason to believe that the dealer has concealed the particulars of such sales or purchases or has knowingly furnished incorrect returns, at any time within eight years and in any other case at any time within five years, of the end of that year, serve on the dealer liable to pay t....
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....riod, or (ii) the amount of the penalty payable under sub-section (4), shall be paid by the dealer into a Government treasury by such date as may be specified in a notice issued by the Collector for this purpose and the date to be so specified shall be not less than thirty days from the date of service of such notice: Provided that the Collector may, in respect of any particular dealer and for reasons to be recorded in writing, extend the date of such payment or allow such dealer to pay the tax due and the penalty, if any, by instalments. (6) Any amount of the tax together with the penalty, if any, which remains unpaid after the date specified in the notice issued under sub- section (5) shall be recoverable as an arrear of land revenue." Section 26, so far as is relevant, is as follows: "(3)(i) When a firm liable to pay the tax is dissolved, or (ii) where an undivided Hindu family liable to pay the tax is partitioned, such firm or family, as the case may be, shall be liable to pay the tax on the goods allotted to any partner or member thereof as if the goods had been sold to such partner or member unless he holds a certificate of registration or obtains it within ....
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....d levy of tax on purchases", and section 13 therein requires every registered dealer and any other dealer who is called upon by the Collector to furnish such returns by such dates and to such authority as may be prescribed. So far as' the facts of these petitions are concerned, it is not in dispute that the two firms had filed their returns in respect of the relevant periods even prior to their dissolution under section 13. Section 13 requires the returns to be filed at the end of every quarter. Section 14 of the Act deals with the assessment of taxes payable by the dealers either accepting the returns filed by the dealers or after further verification. It seems to us that the "registered dealer" referred to in this section must be understood to mean a dealer who is liable to pay the taxes. Section 15 again refers to the reassessment of a dealer in respect of sales or purchases of any goods chargeable to the tax which escaped assessment in any year or has been under-assessed or assessed at a lower rate, or any deductions have been wrongly made therefrom. It empowers the Collector to assess or reassess the turnovers at any time within eight years in respect of certain turnovers whic....
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....ber thereof as if the goods had been sold to such member unless he holds a certificate of registration. Similarly, even after the dissolution of a firm, the firm is made liable to pay the tax on the goods allotted to any partner notwithstanding its dissolution. In our judgment, this clause in section 26 is a clear indication of the intention of the legislature to keep alive, notwithstanding its dissolution, the personality of the firm for the purposes of its liability to pay tax incurred by it prior to its dissolution or any other liability incidental or consequential to that liability under the provisions of the Act. The personality of the firm is preserved in spite of its dissolution by laying down that the firm will be liable to pay tax on the goods allotted to any partner. We do not think that it would be straining the language of the provisions of this Act to say that the entire machinery of enforcing the liability to pay the tax set up under the Bombay Sales Tax Act, 1953, indicates that once a dealer incurs a liability to pay tax, that dealer whether a firm or individual or corporation continues to be regarded as separate assessable unit for all purposes of the Act. Once the....
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....rtners cannot put an end to the liability of the firm and its existence as an assessable unit under the provisions of the Act. The liability of the firm is to file returns for payment of taxes, to be assessed and reassessed if certain turnovers have escaped assessment, to pay taxes or penalties imposed by the authorities on the firm under the provisions of the Act and to furnish information called for by the authorities. There is even the liability to be prosecuted in case of certain defaults by the partners. All these liabilities necessarily imply that the law keeps the firm alive as a legal entity or an assessable unit, notwithstanding its dissolution, for all the purposes of the Act in respect of its pre-dissolution liability to pay taxes and all matters incidental and consequential to the making of that liability effective. This is clearly indicated as stated above by the words of section 26(3). It is, however, contended on behalf of the petitioners that such an interpretation would be contrary to the well-known strict rules of interpretation of a taxing statute. Reliance was placed on the said rules as enunciated and followed in several cases. The first case relied upon ....
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....or recovering payment from, the estate of a deceased person........." He further observed: "In my judgment, in construing a taxing Act the court is not justified in straining the language in order to hold a subject liable to tax. If the legislature intends to assess the estate of a deceased person to tax charged on the deceased in his lifetime, the legislature must provide proper machinery and not leave it to the court to endeavour to extract the appropriate machinery out of the very unsuitable language of the statute ..........." Strong reliance is placed on the last quoted observation of the learned Chief Justice by the learned counsel for the petitioners who contend that one has to extract the appropriate machinery for enforcing the liability of a dissolved firm in respect of its pre-dissolution turnovers, even in the present cases. In our opinion, there is no merit in this contention and the above case decided by the learned Beaumont, C.J., and Barlee, J., can be easily distinguished. In that case also, with respect, the court considered the provisions of the Act and found no reference to the estate of the person on whom the tax had been originally charged. That is not....
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..... 326 (S.C.); A.I.R. 1966 S.C. 1295., in which the Supreme Court laid down as follows: "It is a settled rule of construction that in interpreting a fiscal statute the court cannot proceed to make good the deficiencies, if there be any, in the statute; it shall interpret the statute as it stands and in case of doubt, it shall interpret it in a manner favourable to the taxpayer: See C.A. Abraham v. Income-tax Officer, Kottayam[1961] 41 I.T.R. 425 at 431 (S.C.). ............" Applying this rule of construction, the Supreme Court examined the East Punjab General Sales Tax Act, 1948, and the Rules made thereunder, and came to the conclusion that the Act and the Rules did not make any provision for assessment of a firm after its dissolution. It was in view of that conclusion that Subba Rao, J., as he then was, speaking for the court, held that the impugned assessment order on the dissolved firm could not be supported under the provisions of the Act, and confirmed the order of the High Court of Punjab quashing the assessment order. But the judgment in that very case shows that the Supreme Court observed that section 16 of the East Punjab General Sales Tax Act, 1948, which was relied....
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....retation of even taxing statutes, so far as the machinery sections of the statutes are concerned, are more liberal and must be reasonably applied (see Commissioner of Income-tax v. Mahaliram Ramjidas [1940] 8 I.T.R. 442 (P.C.); A.I.R. 1940 P.C. 124., and Gursahai Saigal v. Commissioner of Income-tax, Punjab[1963] 48 I.T.R. 1 (S.C.); [1963] 3 S.C.R. 893 at 900.). In the latter case [1963] 48 I.T.R. 1 (S.C.); [1963] 3 S.C.R. 893 at 900. the Supreme Court approved the following observations of Lord Dunedin in Whitney v. Commissioners of Inland Revenue (1925) 10 Tax Cas. 88 at 110. "My Lords, I shall now permit myself a general observation. Once that it is fixed that there is liability, it is antecedently highly improbable that the statute should not go on to make that liability effective. A statute is designed to be workable and the interpretation thereof by a court should be to secure that object, unless crucial omission or clear direction makes that end unattainable. Now, there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the ....
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....irm amongst partners on dissolution was ultra vires the State Legislature, because in enacting that section what the legislature did was not to enact an ancillary or subsidiary provision intended to ensure the proper and effective functioning of the main legislation under entry 54 of List 11 of the Seventh Schedule to the Constitution, but to directly and expressly bring to tax a transaction which was not a sale within the meaning of the Indian Sale of Goods Act by fictionally treating it as such sale. This decision was substantially based on the decision of the Supreme Court in State of Madras v. Gannon Dunkerley and Co.[1958] 9 S.T.C. 353 (S.C.); A.I.R. 1958 S.C. 560. It is also true that in Commissioner of Income-tax, Madhya Pradesh, Nagpur and Bhandara v. Dewas Cine Corporation [1968] 68 I.T.R. 240 (S.C.)., in the context of the Indian Income-tax Act also, the Supreme Court was of the view that the expressions "sale" and "sold" had to be interpreted according to the ordinary meaning of the said words; and that "sale" was a transfer of property for a price, and adjustment of the rights of the partners in a dissolved firm by allotment of its assets was not a transfer, nor was it ....
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....ombay Sales Tax Act, 1953, is completely set at rest by the same legislature while enacting the Bombay Sales Tax Act, 1959, in which express provision, to which presently we shall refer, was made by enacting that a firm was liable to be assessed even after its dissolution. The relevant provisions of the Bombay Sales Tax Act, 1959, which came into force on 1st January, 1960, may now be considered. The material portions of the relevant sections referred to in the course of the arguments are as follows: Section 2(11) defines a "dealer". It reads: "'Dealer' means any person who whether for commission, remuneration or otherwise carries on the business of buying or selling goods in the State, and includes the Central Government, or any State Government, which carries on such business, and also any society, club or other association of persons, which buys goods from, or sells goods to, its members............." Section 2(19) defines a "person": "'Person' includes any company or association or body of individuals, whether incorporated or not, and also a Hindu undivided family, a firm and a local authority." Section 15(1), as far as is material, states: "(1) Where a dea....
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....r the payment thereof under section 19, all the relevant provisions of this Act or, as the case may be, of the earlier law, shall in respect of such liability apply to such person also, as if he were the dealer himself." Section 35 empowers the sales tax authorities to reassess a dealer in respect of escaped turnovers or suppressed transactions. It is not necessary to refer to any other provisions of the Act for the purposes of the disposal of these petitions except sections 76 and 77 under which the Bombay Sales Tax Act, 1953, was repealed but was kept in force for the purposes of the levy, assessment, reassessment, collection, refund or set-off of any tax or the granting of a drawback in respect thereof, or the imposition of any penalty, which levy, assessment, reassessment, collection, refund, set-off, drawback or penalty related to any period before the appointed day on which the Bombay Sales Tax Act, 1959, came into force. It is patent that in using the words in section 19(3), viz., "whether such tax (including any penalty) has been assessed before such dissolution but has remained unpaid or is assessed after dissolution", the legislature has clearly expressed its mind to p....
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....s liable to pay tax under this Act, the firm and each of the partners of the firm shall be jointly and severally liable for such payment The extent referred to in section 19(3) is only the extent referred to in the proviso to section 18, which lays down: "Provided that, where any such partner retires from the firm, he shall be liable to pay the tax and the penalty (if any) remaining unpaid at the time of his retirement, and any tax due up to the date of retirement though unassessed at that date." Otherwise, the liability of a partner is coextensive with the liability of the firm although the partner himself was not liable individually as a dealer. This provision is further clarified by the provisions contained in section 34 which is already quoted above. Thus, the legislature made it abundantly clear that for the dues of the firm, both under the earlier law and under the provisions of the Bombay Sales Tax Act, 1959, the firm as well as its partners were liable to be assessed and, in certain circumstances, reassessed. Furthermore, the words "including any penalty" in section 19(3) shows that even after the assessment if the tax assessed is not paid by the firm, it was liabl....
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....aler is a firm the firm or the dealer will continue to be liable to be assessed in respect of the firm's liabilities as a separate legal entity, and there is no lacuna in these Acts as found by the Supreme Court in the case of State of Punjab v. Jullundur Vegetables Syndicate [1966] 17 S.T.C. 326 (S.C.); A.I.R. 1966 S.C. 1295. On the contrary that very decision refers to the two earlier decisions of the Supreme Court in C.A. Abraham v. Income-tax Officer, Kottayam [1961] 41 I.T.R. 425 (S.C.); A.I.R. 1961 S.C. 609., and Commissioner of Income-tax v. Angidi Chettiar [1962] 44 I.T.R. 739 (S.C.); A.I.R. 1962 S.C. 970., and distinguished those cases on the ground that section 44 of the Income-tax Act set up a machinery for assessing the tax liability of firms which had discontinued their business, because the said provision was an express provision for assessing a dissolved firm. In C.A. Abraham v. Income-tax Officer, Kottayam [1961] 41 I.T.R. 425 (S.C.); A.I.R. 1961 S.C. 609., the Supreme Court had to construe the effect of section 44 of the Income-tax Act, 1922, prior to its amendment by Act 11 of 1958, which read as follows: "Where any business, profession or vocation carrie....
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....e think is the only proper construction, will lead to an absurd result, because if a firm had only two partners, and both of them die, it would be impossible to assess the firm which continued to be liable. We do not find any substance in this contention because section 34 makes a partner as if he were a dealer himself and section 19(1) makes the legal representatives of dealers liable only in certain circumstances. Perhaps, the legislature did not intend to make the legal representatives of the partners of a firm to be liable to the dues of the firm except in the circumstances mentioned in section 19(1). However, we do not wish to pronounce any final opinion on the point, as we have to deal in the present cases with partners, the majority of whom are living and available for being proceeded against by the sales tax authorities. It was lastly urged that when the bill in respect of the Bombay Sales Tax Act, 1959, was published, section 44 of the Indian Income-tax Act was already amended by Act 11 of 1958, and as amended, section 44 clearly stated that the Income-tax Officer shall make assessment of the total income of the firm as if no dissolution had taken place, and if the legisla....
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....r the appellants. M.C. Bhandare, Senior Advocate (Vazir Singh and M.N. Shroff, Advocates, with him), for the respondents. JUDGMENT The judgment of CHANDRACHUD and SARKARIA, JJ., was delivered by CHANDRACHUD, J. GUPTA, J., delivered a separate judgment. CHANDRACHUD, J.-The question which arises for decision in this appeal is whether under the Bombay Sales Tax Act, 1953, and the Bombay Sales Tax Act, 1959, a dissolved firm can be assessed or reassessed to sales tax in respect of its pre-dissolution turnover. The first appellant-M/s. Murarilal Mahabirprasad-was a partnership firm constituted under a deed of partnership dated December 3, 1953. It was doing business at 30, Commercial Chambers, Masjid Bunder Road, Bombay, as importers, commission agents, indenting agents, del credere agents and financiers and also as wholesale dealers in colours, chemicals, dyes, etc. The firm consisted of 5 partners: appellants 2 to 5 and one other who died in 1965. The firm was registered as a dealer under the Acts of 1953 and 1959. Under diverse orders of assessment passed prior to its dissolution, the firm was assessed to sales tax for the period July, 1953, to March 31, 1958. O....
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....ner of the firm that demand notices were so pasted. By the revised assessment order, respondent 1 held that for the period April 1, 1957, to January 31, 1958, the turnover of suppressed sales which had escaped assessment was Rs. 41,47,090. He assessed on this turnover an additional tax of Rs. 1,95,582.47. Respondent 1 found that for subsequent periods also a large part of the turnover was suppressed by the firm. On that footing, he assessed the sales tax for the period April 1, 1958, to March 31, 1961, breaking up the period in four assessments. By the demand notices, the firm was called upon to pay a total tax of Rs. 6,70,969.96, inclusive of the sales tax quantified in the revised assessment. The notices apprised the firm of its liability to pay penalty if the tax was not paid within the stated period. The assessment for the period April 1, 1957, to December 31, 1959, was made under the Act of 1953. The tax due for this period comes to Rs. 5,63,900 and odd. The assessment for the period January 1, 1960, to March 31, 1961, was made under the Act of 1959. The tax due for this period comes to Rs. 92,300 and odd. The firm has filed appeals against the aforesaid orders, which ar....
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....lution of the firm. The notice under which those proceedings were started is dated November 20, 1963, while the firm was dissolved on May 20, 1962. We may mention that in a judgment to which we must immediately turn, this court has taken the view that if under a statute a dissolved firm cannot be assessed to sales tax, it does not make any difference whether the proceeding was initiated before or after the dissolution. Thus, the true question for decision is whether a dissolved firm can be assessed or reassessed under the Bombay Sales Tax Act, 1953, and the Bombay Sales Tax Act, 1959. A similar question came up for decision before this court in State of Punjab v. Jullundur Vegetables Syndicate[1966] 17 S.T.C. 326 (S.C.); [1966] 2 S.C.R. 457., That was a case under the East Punjab General Sales Tax Act, 1948. The respondent-firm therein was assessed to sales tax in 1953 but that order was set aside for want of jurisdiction. Fresh proceedings were then started for assessment but the firm was dissolved before the commencement of those proceedings. The firm was thereafter assessed and the order of the Sales Tax Officer was confirmed in further proceedings with some modificatio....
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....les tax unless the statute under which the assessment is made authorises the assessment either expressly or by necessary implication; (2) If, by definition, a firm is a dealer under an Act, it becomes a legal entity or an independent assessable unit for the purposes of that Act. If that be so, the firm ceases to be a legal entity on dissolution and, thereafter, on principle it cannot be assess- ed to sales tax unless the statute so authorises expressly or by necessary implication; (3) Neither a provision requiring a dealer to inform the authorities if it discontinues its business, nor a provision imposing a joint and several liability on the dealer and its partners for the payment of tax, penalty or any other amount due under the Act or Rules can be interpreted as conferring jurisdiction to assess a dissolved firm; (4) In interpreting a fiscal statute the court cannot proceed to make good the deficiencies, if any, in the statute: it shall interpret the statute as it stands and, in case of doubt, it shall interpret it in a manner favourable to the taxpayer. The language of a taxing Act cannot be strained in order to hold a subject liable to tax. The decision in the Jullu....
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....pugnant in the subject or context of the Act under review. There is no such repugnancy and therefore the word "person" in section 2(6) of the Act of 1953 must be taken to include a "body of individuals" that a firm is. Not only is there nothing in the Act of 1953 which is repugnant to the notion that the firm could be a dealer, but section 24 of that Act furnishes a strong indication for saying that the framers of the Act intended to recognise firms as a legal entity. That section provides that every dealer who is liable to pay the tax and who is an undivided Hindu family, an association or a club, society, firm or company, shall send to the prescribed authority a declaration stating the name of the person who shall be deemed to be the manager of such dealer's business. Section 24 would be meaningless in its reference to a "firm", unless the fundamental assumption of the provision was that a firm as distinct from its partners is an independent assessable entity. That assumption is made good by the combined operation of section 2(6) of the Act of 1953 and section 3(35) of the Bombay General Clauses Act. Since the Act of 1953 considers a partnership firm to be a legal entity, o....
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.... or contemplates the assessment of a firm after its dissolution. If not, the general rule would apply that a dead person cannot be assessed. It is plausible that a distinction ought to be made between the death of an individual and the dissolution of a firm. Human beings, as assessees, are not generally known to court death to evade taxes. Death, normally, is not volitional and it is understandable that on the death of an individual, his liability to be assessed to tax should come to an end unless the statute provides to the contrary. With firms it is different, because a firm which incurs during its existence a liability to pay sales tax may, with a little ingenuity, evade its liability by the voluntary act of dissolution. The dissolution of a firm could therefore be viewed differently from the death of an individual and the partners could be denied the advantage of their own wrong. But we do not want to strike this new path because the Jullundur case [1966] 17 S.T.C. 326 (S.C.); [1966] 2 S.C.R. 457., and the two cases which follow it have likened the dissolution of a firm to the death of an individual. Let us therefore proceed to examine the other provisions of the 1953 Act. ....
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....knowingly furnished incorrect returns, at any time within eight years and, in any other case, at any time within five years of the end of that year, serve on the dealer liable to pay the tax in respect of such turnover a notice containing all or any of the requirements which may be included in a notice under sub-section (3) of section 14 and may proceed to assess or reassess the amount of the tax due from such dealer and the provisions of this Act shall apply accordingly as if the notice were a notice served under that sub-section: Provided that the amount of the tax shall be assessed after making the deductions permitted from time to time under the Bombay Sales Tax Act, 1948, the Bombay Sales Tax (No. 2) Ordinance, 1952, and this Act, as the case may be, at the rates at which it would have been assessed had the turnover not escaped assessment or full assessment as the case may be: Provided further that where in respect of such turnover or deduction, as the case may be, an order has already been passed under section 30 or section 31, the Collector shall make a report to the appropriate appellate or revising authority, as the case may be, which shall thereupon after giving the....
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.... a special jurisdiction to assess or reassess an escaped turnover, the legislature permitted that salutary jurisdiction to be defeated by the device of dissolution. The argument of the appellants really comes to this: suppress the turnover, evade the sales tax, dissolve the firm and earn your freedom from taxation. Importantly, the notice dated November 21, 1963, for reopening the assessment for the period April 1, 1957, to March 31, 1958, was served on the firm under section 15. On reassessment, the firm was assessed to a sales tax of Rs. 1,95,582.47 on sales suppressed during that period. Section 15A confers on the Collector analogous powers to assess or reassess a dealer for taxes due prior to November 21, 1956, when the States were reorganised, if either no assessment was made for the prior period or if any turnover had escaped assessment. This provision, like the one contained in section 15, is of general application and makes no exception in favour of dissolved firms. Therefore, if a firm was not assessed prior to the reorganisation of States or if any part of its turnover had escaped assessment, it is competent to the Collector to assess or reassess the firm notwithsta....
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.... by the dissolved firm to that partner. The fiction cannot be extended further than the sub-section warrants but there is no fiction in regard to the liability of the dissolved firm to be assessed to sales tax in respect of the goods thus deemed to be sold. The imposition of such a liability is in keeping with the general scheme of the Act, the various provisions of which show that the assessment of a dissolved firm is within the clear intendment of the statute. The construction which we have placed on these provisions of the 1953 Act does no violence to the familiar principle, which, in Cape Brandy Syndicate v. Commissioners of Inland Revenue (1921) 12 Tax Cas. 358 at 366., was expressed thus by Rowlatt, J.: "In a taxing statute one has to look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." The principle was approved and adopted by this court in several decisions: A.V. Fernandez v. State of Kerala [1957] 8 S.T.C. 561 (S.C.); [1957] S.C.R. 837., Commissioner of Income-tax, Bombay v. Provident....
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....vocally required by Act of Parliament to be made, probably meant little more than this, that, inasmuch as there was not any a priori liability in a subject to pay any particular tax, nor any antecedent relationship between the taxpayer and the taxing authority, no reasoning founded upon any supposed relationship of the taxpayer and the taxing authority could be brought to bear upon the construction of the Act and, therefore, the taxpayer had a right to stand upon a literal construction of the words used, whatever might be the consequences. The true implication of the principle that a taxing statute must be construed strictly is often misunderstood and the principle is unjustifiably extended beyond the legitimate field of its operation. Indeed, the more well-expressed the principle as in the Cape Brandy case[1921] 12 Tax Cas. 358., greater the reluctance to see its limitations. In that famous passage marked by a happy turn of phrase, Rowlatt, J., said, "there is no equity about a tax. There is no presumption as to a tax". There is no equity about a tax in the sense that a provision by which a tax is imposed has to be construed strictly, regardless of the hardship that such a cons....
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....nt, when it was found that the relief granted was in excess of what the law allowed. One of the sections under which relief could be granted was section 26(3). This court held that section 15 must be so interpreted as to confer a power on the Excess Profits Tax Officer to revise the assessment when relief had been erroneously granted under section 26(3). In Gursahai Saigal v. Commissioner of Income-tax, Punjab [1963] 48 I.T.R. 1 at 5 (S.C.); [1963] 3 S.C.R. 893 at 899., an assessee was called upon to pay interest under section 18A(8) of the Income-tax Act, 1922, for failure to make an estimate of his income and pay tax according to that estimate under section 18A(3). The assessee relied on the rule of construction formulated by Rowlatt, J., in the Cape Brandy case (1921) 12 Tax Cas. 358., and contended that he could not be charged with interest as it was not possible to calculate interest in accordance with sub- section (6) by reason of his not having paid tax at all. This court approved the ratio of the Privy Council in Mahaliram Ramjidas's case [1940] 8 I.T.R. 442 (P.C.); 67 I.A. 239., and held that it was well-recognised that the rule of construction on which the assessee rel....
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....s a dealer to mean "any person who carries on the business of buying or selling goods..." Under section 2(19), "person" includes, inter alia, a firm. There is therefore no doubt that a firm is a distinct assessable entity under the 1959 Act also. Section 19(3) of the 1959 Act puts the matter under inquiry beyond all doubt by providing: "Where a dealer, liable to pay tax under this Act, is a firm, and the firm is dissolved, then every person who was a partner shall be jointly and severally liable to pay to the extent to which he is liable under section 18, the tax (including any penalty) due from the firm under this Act or under any earlier law, up to the time of dissolution, whether such tax (including any penalty) has been assessed before such dissolution but has remained unpaid or is assessed after dissolution." This provision in terms envisages the assessment of a dissolved firm by providing that erstwhile partners of a dissolved firm shall be liable jointly and severally to pay the tax and penalty due from the firm whether the tax, including any penalty, has been assessed before or after the dissolution. The assessment which the sub-section speaks of is assessment of t....
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....19(3) of the 1959 Act, though such a course is unnecessary, is for saying that it serves to throw some light on the Act of 1953, in case the argument is that the Act of 1953 is ambiguous. Section 19(3) being quite clear and explicit, it is unnecessary to dwell on the other provisions of the Act of 1959 in order to show that a dissolved firm can be assessed under it. We may only point out that the Act of 1959 contains provisions similar to those in sections 15, 15A and 35 of the Act of 1953 on which we have dwelt at some length. Those provisions can be found in sections 35, 35A and 62 of the Act. The view taken by a Full Bench of the Madras High Court in Sales Tax Officer (XIX), Enforcement Branch, Bombay v. K.M.S. Mari Chettiar [1975] 35 S.T.C. 148. that a dissolved firm can be assessed under the Act of 1959 is, in our opinion, correct though it was wholly unnecessary to say that the words "is assessed after dissolution" occurring in section 19(3) should be read as "is assessed after dissolution as if the firm exists". Such an addition is superfluous and serves to make the meaning of the sub-section no clearer than it is. For these reasons, we uphold the judgment of the Bomba....
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....ers for subsequent years covering the period from April 1, 1958, to March 31, 1961. On these five orders a total sum of Rs. 5,56,365.47 was found due from the firm. On October 22, 1965, the demand notices issued upon these assessment orders, all in the name of the dissolved firm, were affixed to the premises in which the firm had its office before it was dissolved. The partners of the defunct firm filed a writ petition in the Bombay High Court challenging as invalid the assessment orders and the demand notices issued in the name of the dissolved firm which was dismissed. In this appeal the appellants question the correctness of the order of the High Court dismissing the writ petition. The point that was urged before the High Court and also canvassed in this appeal is that there is no provision either in the 1953 Act or in the 1959 Act which permits the sales tax authorities to assess or reassess a dissolved firm. The dates mentioned above disclose that the impugned orders of the Sales Tax Officer were all made after the firm was dissolved. The respondents' contention is that firm in the context of the 1953 Act or the 1959 Act mean only the partners of the firm, and that the f....
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....of the dealer if he has discontinued or transferred his business, or if during any year his turnover does not exceed the limits specified in section 5(1). Section 13 requires every registered dealer to furnish return of his turnover. Section 14 provides, inter alia, that the amount of the tax due from a registered dealer shall be assessed separately for each year. Section 15 empowers the Collector to serve on the dealer within the period specified in the section a notice in case his turnover had escaped assessment and to assess or reassess the amount of tax due from such dealer. Section 16 contains provisions for the payment and recovery of tax. None of these sections appears to be repugnant to the firm being a dealer as defined in section 2(6). It was however argued on behalf of the respondents that the definition of "dealer" in section 2(6), which includes an association that sells goods to or buys goods from its members, by implication excludes an association of persons, that a firm is, which does not sell goods to or buy goods from its members, and admittedly the firm concerned in this case did not. This contention is similar to that raised on behalf of the revenue before th....
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....as if the goods had been sold to such partner or member unless he holds a certificate of registration or obtains it within the prescribed period". This section clearly indicates that a firm as such may be a dealer under the Act. Section 36A appears to put the issue beyond doubt. It is in Chapter VIII which deals with offences and penalties. The section provides that where an offence under this Act has been committed by a company, every person who at the time the offence was committed was in-charge of, and was responsible to, the company, as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. The section includes an explanation which states that for the purpose of this section,- (a) "company" means a body corporate, and includes a firm or other association of individuals; and (b) "director" in relation to a firm means a partner in the firm. This section making the persons in-charge of the business of the firm when the offence was committed, and the firm as such, both guilty of the offence, is clearest indication that a firm as distinct from its partners could be a dealer under the 1953 Act.....
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....en dissolved before the expiry of that time. This argument overlooks that the foundation of the Collector's jurisdiction is the notice which must be served on the dealer before the Collector proceeds against him, and "dealer" has been defined in the Act as a person who carries on the business of selling or buying goods. In a case, as the one before us, where the dealer was a firm dissolved before the notice was issued, there is no person carrying on the business of selling or buying goods on whom the notice can be served. If the section admits of a construction as suggested on behalf of the respondents, then a notice under the section in the name of a dead man who used to be a dealer when alive, would also be effective if issued within the specified period. I do not think that position can be maintained. The question here is not how and against whom the dues of a dissolved firm can be realised, but whether the firm as such can be proceeded against after it has been dissolved. Section 35 of the 1959 Act is in terms similar to section 15 of the 1953 Act. Section 18 of the 1959 Act makes the firm as well as each of its partners jointly and severally liable for the tax payable by....
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....d as 'is assessed after dissolution as if the firm exists'. No other construction appears to us to be reasonable. The object of the legislature being clear, namely, that where the joint and several liability of the partners of a firm has been declared, it is followed by a provision to quantify it by laying down the procedure therefor and the provision so laid down provides both for assessment and collection of tax from a defunct firm." I do not think section 19(3) can bear such a construction. It allows the dues of a firm to be assessed or collected even after its dissolution, but in my opinion it is not permissible to read in this provision the additional words "as if the firm exists". To provide that the tax due from a firm may be assessed or collected after its dissolution is not the same thing as allowing the assessment or recovery proceeding to be started or continued against the dissolved firm. As Subba Rao, J., pointed out in State of Punjab v. M/s. Jullundur Vegetables Syndicate [1966] 17 S.T.C. 326 (S.C.); [1966] 2 S.C.R. 457., to which I shall presently refer in more detail, "the question of the statutory power of assessing a dissolved firm" is not to be "mixed up" wit....
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....s defined as "any person, firm or Hindu joint family, engaged in the business of selling or supplying goods in East Punjab.....". Rule 40 of the the East Punjab General Sales Tax Rules, 1949, provided that "a dealer and his partner or partners shall be jointly and severally responsible for payment of the tax, penalty, or any amount due under the Act or these Rules". It was held that though under the partnership law a firm was not a legal entity but consisted of individual partners for the time being, under the East Punjab General Sales Tax Act, 1948, it was a legal entity and, that being so, on dissolution the firm ceased to exist. It was observed that unless there was a statutory provision permitting the assessment of a dissolved firm there was no scope for assessing the firm which ceased to have a legal existence. Referring to rule 40 of the East Punjab General Sales Tax Rules, 1949, it was held that this only imposed a joint and several liability on the dealer and its partners for the payment of tax, penalty or any amount due under the Act or the Rules and that it did not "provide for a case of the dissolution of the firm and the assessment of the dissolved firm ". This court he....
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....sahai Saigal v. Commissioner of Income-tax, Punjab [1963] 48 I.T.R. 1 (S.C.)., observed referring to A.V. Fernandez v. State of Kerala [1957] 8 S.T.C. 561 (S.C.); [1957] S.C.R. 837., and Commissioner of Income-tax v. Provident Investment Company Ltd. [1957] 32 I.T.R. 190 (S.C.)., that the rule of construction stated in these two cases "applies only to a taxing provision and has no application to all provisions in a taxing statute. It does not, for example, apply to a provision not creating a charge for the tax but laying down the machinery for its calculation or procedure for its calculation. The provisions in a taxing statute dealing with machinery for assessment have to be construed by the ordinary rules of construction, that is to say, in accordance with the clear intention of the legislature which is to make a charge levied effective". Gursahai's case [1963] 48 I.T.R. 1 (S.C.)., refers to the judgment of the Privy Council in Commissioner of Income- tax v. Mahaliram Ramjidas [1940] 8 I.T.R. 442 (P.C.); A.I.R. 1940 P.C. 124., where a similar principle has been stated, and the following observation of Lord Dunedin in Whitney v. Commissioners of Inland Revenue (1925) 10 Tax Cas. 88....