TaxTMI 
TaxTMI 
1993 (3) TMI 3
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....48, the previous years being the years ending November 4, 1945, and March 31, 1946, respectively. By a deed of dissolution dated December 2, 1946, the firm was dissolved and its business discontinued. Notice under section 22(2) of the Act relating to the assessment year 1946-47 was issued in the name of the partnership firm and served on one Satyanarayan who accepted it on behalf of the firm, on August 19, 1946, Subsequent notices under sections 22(4) and 23(2) were also issued in the name of the firm and assessment completed on March 23, 1951, on the firm. The same procedure was adopted with respect to the assessment year 1947-48 and assessment completed on the firm on March 10, 1952. So far as the assessments under the Excess Profits Tax Act were concerned, notices were issued again in the name of the firm and assessments completed in the name of the firm. Indeed, the returns were filed in the name of the firm signed by Baijnath Gajanand for and on behalf of the firm. During the course of the assessment proceedings under both the enactments, no objection was taken by anyone on behalf of the assessee to the validity of the proceedings. Against the orders of assessment, appeals w....
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....l for the appellant, that under the unamended section 44, no assessment could have been made upon a firm which was dissolved by the date of the assessment. Learned counsel laid emphasis on the language of the section. He pointed out that so far as the discontinuance is concerned, it referred both to association of persons as well as to the firm, but when it referred to dissolution, it only referred to an association of persons but not to the firm. This was a clear pointer, says counsel, to the fact that the section did not apply to dissolution of a firm though it may have applied to its discontinuation. He further submitted that the mere application of the provisions of Chapter IV for the purpose of assessment did not mean that an assessment could be made upon a non-existent entity. He contrasted the language of the unamended section 44 with the language employed in the amended section 44 and submitted that the very defect pointed out by him in the unamended provision was rectified by the amendment and the omission supplied. He emphasised the proposition that an assessment cannot be made upon a non-existent entity and that such an assessment is void in law unless, of course, the la....
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....under Chapter IV in respect of the income, profits and gains of the firm or association, as the case may be. The joint and several liability extended to the payment of the tax held payable. All the provisions of Chapter IV, so far as the case may be, were made applicable for such assessment. In this case, we are dealing with the situation where the dissolution of the firm resulted in discontinuation of its business. We are not concerned herein with the situation where the firm was dissolved but its business was not discontinued. It is necessary to bear this factual premise in mind. Indeed, on a pointed query from us, counsel for the appellant stated that this was a case where the dissolution resulted in discontinuance of business. The question is whether, in such a case, section 44 does not enable the Income-tax Officer to make an assessment on the dissolved firm. We are of the opinion that it does. Indeed, this aspect is no longer res integra in view of the decisions of this court in C. A. Abraham v. ITO [1961] 41 ITR 425 and Shivram Poddar v. ITO [964] 51 ITR 823. In Abraham's case [1961] 41 ITR 425 (SC), the firm stood dissolved on the death of partner and the penalty under sec....
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....sed the writ petition whereupon the matter was brought to this court. The question arising for consideration was stated by Shah J., speaking for the Bench, in the following words (at page 824 ) : " The question which falls to be determined in this appeal is whether the income earned by the firm in the year ending March, 1950, could be assessed to tax under section 44 of the Indian Income-tax Act, 1922, after the firm was dissolved. " The learned judge set out the unamended section 44 and its object as adumbrated in Abraham's case [1961] 41 ITR 425 (SC) and observed thus (at page 826 ) : " Section 44 operates in two classes of cases: where there is discontinuance of business, profession or vocation carried on by a firm or association, and where there is dissolution of an association. It follows that mere dissolution of a firm without discontinuance of the business will not attract the application of section 44 of the Act. It is only where there is discontinuance of business, whether as a result of dissolution or other cause, that the liability to assessment in respect of the income of the firm under section 44 arises. In the case of an association, discontinuance of business for ....