TaxTMI 
TaxTMI 
1960 (9) TMI 6
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....as the appellant) sought also to impugn the legality of the order of assessment to excess profits tax. The learned judges held, however, that such a contention was not germane to the writ of prohibition for which he had prayed, adding also that there were no merits in the grounds urged. To avoid any technical objection, the appellant has filed in this court Petition No. 130 of 1958 under article 32 of the Constitution in which the prayer is for the grant of a writ of certiorari or other appropriate writ to quash the order of assessment to excess profits tax, and the appeal and the petition being thus interrelated have been heard together. We shall first take up for consideration the matters urged in the writ petition, as logically having precedence over the challenge to the legality of the proceedings for the recovery of the tax. The facts necessary to appreciate the points urged are briefly these : The appellant and Thyagrajan Chettiar (impleaded as the second respondent in Civil Appeal No. 107 of 1956) were partners in a firm named Muthappa & Co. started in November, 1940, and the firm was the managing agent of a textile mill called Saroja Mills Ltd. in the Coimbatore district.....
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....sessment of the managing agency business to excess profits tax was properly and legally effected by notice to Thyagrajan Chettiar. The facts to which we have made reference are these : Prior to the assessment year 1943-44, Thyagrajan Chettiar, as the managing partner of Muthappa & Co., was submitting returns for income-tax and was conducting the assessment proceedings on behalf of the firm. Thyagrajan Chettiar published in the newspaper, The Hindu, a notice announcing the dissolution of the firm as and from March 4, 1943, and followed it up by informing the Income-tax Officer of this circumstance. Thereafter the Income-tax Officer wrote to the appellant enquiring whether the firm of Muthappa & Co. had been dissolved and if so from what date. By letter dated February 1, 1945, the appellant replied : " I wish to inform you that Messrs. Muthappa & Co. has been formed as per the deed of partnership dated November 4, 1940, and the rights of the partners are also restricted therein. But Mr. Thyagrajan Chettiar, my partner, has acted deliberately beyond the scope of the partnership deed in issuing a notice of dissolution of partnership on me on March 4, 1943, and a suit has been filed a....
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....ssolution of the firm on March 4, 1943, or on March 10, 1949---which was the date fixed by the High Court by its judgment of 1953---has to be rejected as wholly inconsistent with the contentions urged by the appellant in the civil suit and the appeal therefrom. In the circumstances, the Income-tax Officer could not be blamed for treating the firm as in existence and similarly the Excess Profits Tax Officer also. It was common ground that at the date the Excess Profits Tax Officer started proceedings for assessment, the appellant had filed an appeal against the judgment of the Subordinate Judge in O. S. No. 50 of 1946 and the same was pending in the High Court and that it was only in 1953 that the appeal was disposed of the contention now urged before us was, that as the High Court had held that the firm should be treated as having been dissolved as and from March 10, 1949, the issue of any notice to Thyagrajan Chettiar as the managing partner of the firm was invalid and the assessment proceedings completed on that basis would also be illegal. If the contention of the appellant were to prevail it would mean that the validity or otherwise of the assessment order would be retrospectiv....
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....rs, but proceedings for the recovery of the tax were taken against them on the strength of the notices served on Gannu Rao. These two partners moved the High Court under article 226 of the Constitution for the issue of writs of certiorari to quash the orders of assessment to excess profits tax and the proceedings for recovery of the tax due thereunder. The order of assessment was impugned on the ground that by virtue of the decree in the suit, there had been a dissolution of the firm and that Gannu Rao having ceased to have authority to represent the firm or the other partners, the assessment could have been legally completed only by notices under section 13 of the Excess Profits Tax Act being served individually on the other partners, and that the tax could be recovered only after notices to each of them under section 29 of the Income-tax Act. The learned judges repelled these objections by reference to the provisions of sections 8 and 13 of the Excess Profits Tax Act under which it is the " business " producing the income which is the unit of assessment for excess profits tax as contrasted with the provisions of the Indian Income-tax Act under which the unit of assessment is eith....
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.... a firm or a Hindu undivided family, be addressed to any member of the firm or to the manager, or any adult male member of the family and, in the case of any other association of persons, be addressed to the principal officer thereof ' So far as the assessment in the present case is concerned, even assuming that by the date notice under section 13 was issued, the firm became dissolved, the machinery provided under the Act for the service of notice under section 63 can be availed of by serving notice on the partner. Notice, therefore, to a partner is treated as notice to all. " As observed by Chakravartti, C. J., in Bose v. Manindra Lal Goswami : " It will thus be seen that in the case of excess profits tax, there is no difference in the method of assessment prescribed for the assessment of the profits of a running business and that prescribed for the assessment of the past profits of a business carried on by a firm, since dissolved. In the case of a running business too, the assessment is to be made on the persons, carrying on the business, jointly. In the case of the business of a firm which has been dissolved, it is to be made on the partners jointly and severally ; and sin....
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....ssment for the corresponding period, Thyagrajan Chettiar---who as the managing partner of the firm participated in these proceedings---had urged the contention that as the mills had withheld remuneration to the extent of Rs. 89 thousand odd and had not credited that amount to the managing agents, the sum could not be treated as the income of the firm for the assessment year. This objection was over-ruled on the ground that the mills had never disputed that the entire amount of Rs. one lakh odd was due by them to the firm and in fact had claimed to deduct that entire sum as part of their business expenditure. The sum of Rs. one lakh odd was, therefore, held to have accrued to the firm as its income and that this remained unaffected by the existence of the cross claim. The contention which was repelled by the Income-tax Officer was addressed to us as a ground for disputing the inclusion of the Rs. 89 thousand odd as the income of the firm in its excess profits tax assessment. We see no substance in the point urged. Learned counsel referred us to the decision of this court in Commissioner of Income-tax v. K. R. M. T. T. Thiagaraja Chetty & Co. and to the observations at page 529. We c....
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....s " and " assessees in default " and did not apply to the class of " other persons liable to pay the tax " as against whom the filing of a suit for the recovery of the tax and the execution of decrees in such suits was the only machinery through which the tax liability of this class could be enforced. For the purposes of this case we do not consider it necessary to deal with the larger second question as to whether the expression " assessee " and " assessee in default " in sections 45 and 46 of the Income-tax Act, 1922, should be held to be confined to " assessees " as distinguished from " other persons liable to pay such tax " as these expressions occur in section 29 of the Act, or whether the expression " assessee " when it occurs in sections 45 to 47 should be understood as defined in section 2(2) as including " every person by whom income-tax ...... is payable ", since we are clearly of the opinion that the appellant was an " assessee ". Section 21 of the Excess Profits Tax Act carries a proviso which reads : " Provided that references in the said provisions to the assessee shall be construed as references to a person to whose business this Act applies. " In view of this pr....