TaxTMI 
TaxTMI 
1967 (4) TMI 15
X X X X Extracts X X X X
X X X X Extracts X X X X
.... registered under section 26A of the Indian Income-tax Act, 1922, and tax was assessed on the income of the firm in accordance with section 23(5)(a) of the Act. The partnership was, according to the Income-tax Officer, dissolved on October 23, 1946. This appeal relates to the tax liability of Jawahar Lal in respect of the income from the firm for the assessment years 1944-45, 1945-46, 1946-47 and 1947-48. The tax attributable to the share of Jawahar Lal, which it is claimed could not be recovered from him, is sought to be recovered from his erstwhile partner Radha Krishan. The following table sets out the share of the income of Jawahar Lal and the tax liability not satisfied by him in respect of the four years of assessment : Year of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....writ of certiorari quashing the notices of demand and for an order directing the Income-tax Officer to withdraw the notices. Manchanda J. allowed the petition filed by Radha Krishan and the order passed by Manchanda J. was confirmed in appeal by a Division Bench of the High Court. With special leave, the Income-tax Officer, Agra, has appealed to this court. Section 23(5) of the Income-tax Act, as it stood at the material time, read as follows : "(5) Notwithstanding anything contained in the foregoing sub-sections, when the assessee is a firm and the total income of the firm has been assessed under sub-section (1), sub-section (3), or sub-section (4), as the case may be,-- (a) in the case of a registered firm, the sum payable by the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for tax is made on the firm itself. The result is that, if the firm is registered, tax is collected from the partners individually and there is no levy of tax against the firm. If the firm is unregistered, the tax may, unless otherwise directed, be levied against the firm. In either case, the machinery set up by section 23(5) is for assessment of tax payable on the income of the firm. The income of the firm is computed, but tax is assessed on that income on the partners or the firm, according as the income is of a firm registered or unregistered. Counsel for the Income-tax Officer contended that even though by section 23(5)(a) a provision was made for assessment to tax of the total income of each member of a registered firm by adding to his....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... IV and for the amount of tax payable and all the provisions of Chapter IV shall, so far as may be, apply to any such assessment." Section 44 is enacted with a view to prevent evasion of tax by discontinuance of the business of a firm or dissolution of an association of persons. On discontinuance of the business of a firm or dissolution of the association of persons, it is declared that every person who was, at the time of such discontinuance or dissolution, a partner of such firm or a member of such association shall, in respect of the income, profits and gains of the firm or association be jointly and severally liable to assessment and for the amount of tax payable. This court has, in Commissioner of Income-tax v. S. V. Angidi Chett....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... income of the firm is joint and several. Counsel relied upon the clause " determining the tax payable by registered and unregistered firms respectively " in the judgment of this court in Commissioner of Income-tax v. Amritial Bhogilal & Company at page 136 : " It is true that the Income-tax Officer is empowered to follow the two methods specified in section 23(5)(a) and (b) in determining the tax payable by registered and unregistered firms respectively and making the demand for the tax so found due ; but this does not affect the computation of taxable income ", and contended that the tax determined to be payable under section 23(5) is payable by the firm, and, hence, by all the partners jointly and severally. But in Amritlal Bhogilal'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....irm even after dissolution of the firm. There is nothing in the observations relied upon which indicates that under section 23(5)(a) when the income of a registered firm is computed, and the tax liability is imposed by the machinery provided thereunder, the tax is imposed upon the firm or is recoverable jointly and severally from the partners of the firm. A recent case was also relied upon : Shivram Poddar v. Income-tax Officer, Central Circle II, Calcutta. In that case it was held that the firm, by the discontinuance of its business, does not cease to be liable to pay tax on the income earned by it ; nor can a procedure different from the one prescribed under Chapter IV of the Income-tax Act, 1922, apply for assessment of the income of ....