LexNAGARMAL BAIJNATH versus COMMISSIONER OF INCOME TAX
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r' , ___,.,._ NAGARMAL BAUNATH A v. COMMISSIONER OF INCOME TAX MARCH 26, 1993 -,.. B ""' (B.P. JEEVAN REDDY AND N. VENKATACHALA, JJ.) Income tax Ac4 1922: Section 44 (prior to amendment by Finance Act, 1958)-Scope of-Dissolution of jinn and discontinuance of business-As- sessment on dissolved firm-Correctness of c The appellant-assessee, a Rrm which did business during the ac- --"ff-- - counting years relevant to assessment years 1946-47 and 1947-48, was dissolved by a deed or dissolution dated December 2, 11146, and Its business discontinued. Notices were Issued In the name or the partnership firm and assessments were completed under the Income-tax Act 1922 and Excess D Profits Tax Act, 1948. Indeed, the returns were filed in the name or the firm. During the course or the assessment proceedings under both the - )< enactments viz. Income-tax and Excess Profit Tax Act, no objection was E '1. taken as to the validity or the proceedings. Against the orders or assess- ment, appeals were preferred to the ApP!'llate Assistant Commissioner. In these appeals also the validity or the assessment order was not chal- lenged. Even In the further appeals before the Tribunal, no oljjectlon was taken to the validity or the assessments. Subsequently, however, pennis- F sion was sought for raising additional grounds questioning the validity or , the assessment proceedings. Though, Revenue opposed the same, the '_.. Tribunal permitted the said new ground to be raised on the ground that the Income-tax Offieer was aware that the business of the Rrm was dosed. Ultimately, the Tribunal dismissed the appeals. ·Thereupon the assessee G obtained the reference and since It could not succeed even before the High Court, the assessee filed the present appeals. /If.~ • It was contended on behalf or the appellant-assessee that under the nnamended Section 44, no assessment could have been made upon a firm which was dissolved by the time the assessment was made. H 645 646 SUPREME CbURT REPORTS (1993] 2 S.C.R. A Dismissing the appeals, this Court, HELD: 1.1. Section 44 of the Income-tax Act, 1922 (before its Amend· ment by Finance Act, 1958) covered two situations: (1) where any business, profession or vocation carried on by a firm or association of persons was discontinued and (2) where an association of persons was dissolved •. In B either of these situations, every person who at the time of such discon· tinuance or dissolution was a partner of such firm or member of such a'ssociation was made jointly and severally liable to assessment 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 · C the payment of the tax. [650 C·D] 1.2. The instant case is one where the dissolution of the firm resulted in discontinuance of its business. This Court is not concerned with the situation where the firm was dissolved but its business was not discon· tinned, a distinction which has to be borne in mind. In the case of ' D dissolution resulting in discontinuance of business S.44 of the Income-tax Act, 1922 enabled the Income-tax Officer to make an assessment on the dissolved firm. Indeed this aspect is no longer res integra in view of the settled law. [650 E-H] E CA. Abraham v. Income Tax Officer, Kottayam & Anr., 41 I.T.R. 425 and Shivram Poddar v. Income Tax Officer, Central Circle II, Calcutta & Anr., 51 I.T.R. 823, relied on. C.I.T., Bombay v. Devidayal, 68 I.T.R. 425, Laxmidas v. C.I.T. Bomaby, 12 I.T.R. 88 and Nagarmal Baijnath v. C.I. T., 114 I.T.R. 133, F referred to. CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 156· 5711979. From the Judgment and Order dated 5.11.1977 of the Bombay High G Court in Incoine Tax Reference No. 44 of 1968. U. Rajagopi~ and Ashok Mathur for the Appellant. A Raghubir and Ms. A Subhasbini for the Respondent H The Judgment of the Court was delivered by NAGARMALBAIJNAIB v. C.l.T. (JEEVANREDDY,J.] 647 ~ ~. ~- B.P. JEEV AN REDDY, J. These appeals are preferred against the A judgment of the Bombay High Court in Income Tax Reference No.44/68. The question referred under Section 66(1) of the Indian Income Tax Act, 1922 and Section 21 of the Excess Profits Tax Act, 1948 for the opinion of the High Court reads thus: .__,._ "Whether, on the facts and in the circumstances of the B -· case, the Income-Tax assessments for the years 1946-47 and 1
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