STATE OF U. P. & ANR. versus RAZA BULAND SUGAR CO. LTD., RAMPUR

Citation: [1979] 3 S.C.R. 419 · Decided: 27-02-1979 · Supreme Court of India · Bench: R.S. SARKARIA · Disposal: Appeal(s) allowed

Judgment (excerpt)

• 
' 
• 
STATE OF U. P. & ANR. 
v. 
RAZA BULAND SUGAR CO. LTD., RAMPUR 
February 27, 1979 
419 
A 
(R. S. SARKARIA, P. S. KAILASAM AND 0. CmNNAPPA REDDY, JJ.) 
B 
U.P. Agricultural Income-tax 
Act (1948)-S. 18 Assessment of tax-If 
•could be made against partners of a firm without issuing notice to the 
firm. 
Plea not taken at the first instance-If could be raised later. 
Two joint stock companies entered into agreements with a former Princely 
State for the grant of agricultural land on payment of fu1r and equitable land 
C 
reYenue. 
Later the two companies formed into a partnership. firm. 
On the 
merger of the State with the Union of India, the Assessing Authority under the 
U.P. Agricultural Income-tax Act issued notices to the two companies to submit 
their returns of agricultural income, which the companies did. 
In writ petitions filed by the companies cho.llenging the assessment orders 1 
the High Court accepted the contention that since the lands were neither assess-
ed to land revenue nor were they assessed to any local rate or cess as requir~d 
by s. 2(a) of the Act, they were not assessabl'e to agricultural income-tax and 
remanded the cases to the Assessing Authority for determination of this ques-
tion. 
Before the Assessing Authority, on remand the companies raised for the 
D 
-first time the contention that since no notice had been issued to the firm of 
which they were partners, the assessment was invalid. The Assessing Authority 
E 
rejected this contention. He also held that the ]ands satisfied the requirements 
of s. 2(a). 
In writ petitions filed by the two companies a single Judge of the High 
Court upheld the contention that the Assessing . .<\uthority committed an error 
of lb
1w in assessing the two' partners without assessing the firm. This \'iew V>'as 
affirmed by a Division Bench on appeal. 
F' 
On further appeal to this Court it was contended that in the absence of a 
prohibition in the Act, the two companies could be validly assessed to tax 
without assessing the firm . 
Allowing the appeal, 
HELO : 1. The Assessing Authority was not in error in assessing tax on 
the returns submitted by the two companies and therefore the argument 
that 
assessment of the companies, without assessing the firm, was not legal, is with-
out sub&tance. 
[ 425 H-426 A] 
2. "Person" defined in the section means an individual and includes a firm 
or a company. [ 423 G] 
G 
3. There is nothing in the Act prohibiting the Assessing Authority frcm 
H 
proceeding against individuals forming a partnership. Section 18 enables the 
authorities, 
v;1hile proceeding with assessment of a firm or a company, not to 
r 
' 
420 
SUPREME COURT REPORTS 
[1979] 3 s.c.R. 
A 
determine the tax payable by the firm or the company but to 
proceed 
to 
determine the agricultural income of each member of the firrn. 
Tho provisions 
do not apply to a case \Vhere the returns were submitted by the partners and 
the assessment made on that basis. The section would be applicable if assess· 
ment proceedings against a firm are stopped and the share of the individual is 
to be determined under the provisions of s. 18. 
[ 424 F] 
B 
c 
D 
E 
F 
G 
.H 
4. The well established position under the Income·tax 1\.ct (Central Act) 
\Vith regard to assessment of firms is that where a firm has not made a return 
it is op'en to the department to assess a. partner directly in H~pect of his share 
of the firm's income without resorting to the machinery provided under the 
Act and without making an assessment on the firm, the only prohibition hi!ing 
against double taxation. [424 HJ 
C.I.T. v. Murlidhar Jhawar & l'urna Ginning & Pressing Factory, 60 lTR 
95 SC; referred to. 
5. Secondly, the plea that assessment proceedings ought to have been taken 
e·gainst the firm, was not taken by them in the first instance either before the 
Assessing Authority or before the High Court. This plea cannot be 
allowed 
to be taken at a later stage. The assessees submitted their returns on the basis 
of their respective incomes. 
[425 F-426 A] 
6. The Assessing Authority has oorr'ectly come to the conclusion that the 
agreement between the parties provided for payment of land revenue. 
r426 
F-GJ 
CIVIL APPELLATE JURJSDICTION : Civil Appeal 
No. 
2281 
of 
1969 
Appeal by Special Leave from the Judgment and 
Order dated 
6th December, 1965 ·of the Allahabad High Court in Special Appeal 
No. 978/62. 
Shiv Pujan Singh and M. V. Goswami for the Appellant. 
B. P. Maheshwar

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