LexY. NARAYANA CHETTY & ANOTHER versus THE INCOME-TAX OFFICER, NELLORE AND OTHERS
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
(1) S,C.R. SUPREME COURT H.EPOl{iTS
189
In the result, this appeal is allowed, tho order of
the Court below is set aside and the reference is
answered in the affirm<\tive.
'fhe respondent will
pay the costs of the appellant here and in the Court
below.
The Con1111issim1er
of luconw-Tax.
/11har and Orissa
'"
Appeal allowed.
Shri Uuniakrisll'na
lJ<'O
Y. NAP.AYANA CHETTY & ANOTHER
v.
THE INCOME-TAX Ol!'F'ICER, NI!~LLORE
AND OTHERS
(VENKATARAMA AIYAR, GAJENDRAGADKAlt and
A. K. SARKAR, JJ.)
Income-tax-Rule empowering Income-tax Officer to cancel
r.:gistration of firm found not he genuine-Validity of-Registered
firm, if an assessee-Service of notice on firm through partner, if
valid a11d proper-Writ P.ctition, ijlies 11gai11st illegal assessment-
Indian Income-tax Act, z922 (XI of z922), ss. 23, 34-:-Income-tax
Rules, r. 6B-Constitution of India, Art. 226.
Two persons, B ai;id C, formed a partnership firm on April
20, i936, and the firm was dissolved on March 31, i948. B ancl .c
aloug with R formed a second firm on July 3'>. HJ41, an<! it was
dissolved on March 31, 1949· B and C along with five others
formed a third firm on December l, 1941, and it was dissolved on
January I, 1949· All the three firms were carrying on business in
yarn and cloth and all of them were registered under s. 26-A of
the Income-tax Act. For the years 1943-44 and 1944-45 the
said firms were treated as separate entities and separate assess-
ment orders were passed in respect of the income of each one of
them for the said years. Subsequently, the Income-tax Officer
served notices under s. 34 of the Act on C on behalf of the firms
and after hearing the parties he held that the firms were ficti-'
tious and so cancelled their registration under r. 68 of
tl1t~
income-tax Rules and passed fresh orders of assessment against
them on the basis that they were unregistered firms.
One Y
who was a partner in the third firm and C filed four writ peti-
tions under Art. 226 of the Constitution in the High Court chal-
knging the validity of the orders passed. The High Court di~
missed the petitions but granted certificates of fitness to appeal
Vfokularatna
Aiyur ].
October 15.
190
SUPREME COURT REPORTS
[1959] Supp.
1958
under Art. 133· The appellants contended that r. 6B was
inconsistent with s. 23(4) of the Act and was ultra vires, that con-
Y. N•••y.na
sequently the cancellation of registration of the firms was with-
Chelly & Anoth" out jurisdiction and was void and that the proceedings taken
v.
under s. 34 of the Act were invalid as the required notice was
The Income-Tax not issued against the individual partners who were the asses-
Officer. Nello,·e
sees.
and Othe"
Held, that r. 6B of the Income-tax Rules was not inconsis-
tent with s. 23(4) of the Act and was not ultra vires.
Rule 6B
dealt with cancellation of registration in cases where the certifi-
cate of registration had been granted without there being a
genuine firm in existence, while s. 23(4) dealt with cancellation
of registration on account of failure to comply with the require-
ments of law, though the registered firm was genuine.
Rule 6ll
was obviously intended to carry out the purpose of the ·Act and
was valid.. The fact that no appeal had been provided against
an order made under r. 6B was no ground for challenging its
validity. It was also not open to the appellants to contend that
the orders passed under s. 6B were invalid on the ground that
the rule did not require the giving of any notice before the can-
cellation of registration as in the present case notice had actually
been given and th~ appellants had been afforded an opportunity
of being heard.
H cld, further, that iri the cases of registered firms, the fir1ns
themselves were the assessees and as such the notices issued
under s. 34 against the firms and served upon C were valid and
proper notices, ;and it was not necessary to serve notices upon
the individual partners of the firms.
The notice prescribed by
s. 34 was not a mere procedural requirement. If no notice was
issued or if the notice issued was shown to be invalid then the
proceedings taken by the Income-tax Officer would be illegal and
void.
Commissioner of Income-tax, Bombay City v. Ramsukh Motilal,
[1955] 27 I.T.R. 54 and R. K. Das 0- Co. v. Commissioner of
Income-tax, West Bengal, [1956] 30 I.T.R. 439, approved.
.
The contention that the assessments were completely illogical
'
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