Chhangani, J. - (1.) THIS is an application by Naseer Mohd. and 8 others under Art. 226 of the Constitution of India against the Income Tax Officer 'b' Ward, Jaipur, the Collector, Tonk and the Tehsildar, Tonk, praying for the issue of a writ of certiorari to quash the proceedings taken by the respondents for realising the amount of the tax assessed on the dissolved firm known as Transport Motor Association, Motor Garage, Tonk, for the years 1950-51, 1951-52 and 1952-53 as also a writ of prohibition directing the respondents not to proceed to realise any amount of tax assessed by respondent No. 1 on the dissolved firm from the petitioners or to take any proceeding for realising the said amount.
(2.) THE petitioners set-forth the following facts in their writ application. On 6. 4. 1949 the petitioners entered into a partnership and formed an association known as the Transport Motor Association, Motor Garage, Tonk, for running transport business. At a later stage, the Association had 16 members including His Highness the Nawab of Tonk. The petitioners had not given necessary details in this connection. The Association carried on business upto June, 1952 and thereafter it was dissolved. The entire assets of the Association remained with His Highness the Nawab of Tonk barring some exceptions. The Income Tax Officer 'b' Ward, Jaipur, respondent No. 1, issued notices to the Association for submitting returns of income for the years 1950-51, 1951-52 and 1952-53. They were received by some body in the office of the Comptroller of House-hold of the Nawab of Tonk. One Munshi Mohd. Atique, who was mentioned as the President of the Association, submitted returns for the assessment years 1950-51 and 1951-52 on 3. 7. 51. These returns showed that the firm had sustained a loss of Rs. 9552/ for the year 1950-51 and had earned an income of Rs. 9351/ for the year 1951-52. No return was, however, submitted for the year 1952-53. Respondent No. 1 in order to complete the assessments for two years i. e. 1950-51 and 1951-52, sent notices under sec. 22 (4), 23 (2) and 23 (3) of the Indian Income Tax Act, 1922 (hereinafter referred to as the Act), on various occasions to His Highness the Nawab of Tonk, but these notices were returned undelivered to respondent No. 1. Respondent No. 1 again sent notices on 7. 8. 54 in connection with the assessments of the firm for the years 1950-51 and 1951-52 to His Highness the Nawab of Tonk which were received by the Comptroller of Household of Nawab of Tonk on 12. 8. 54. No one appeared on the date fixed in the aforesaid notices under sec. 23 (2) of the Act. The petitioners' case is that the Income Tax Officer 'b' Ward, had some discussions with the Nawab on 25. 8. 54 at Tonk and that the Nawab later on by his letter dated 30. 8. 54 informed the Income Tax Officer that the firm had been dissolved in 1952 and, therefore, under sec. 44 of the Act, Munshi Mohd. Atique along with other partners of the firm was jointly and severally liable for the assessment to be made by the Income Tax Officer. Respondent No. 1 in spite of the information conveyed in the Nawab's letter Completed the assessment of the unregistered firm for the years 1950-51 and 1951-52 on 22. 9. 54 and issued necessary orders which are Exs. P3 and P4. He assessed the firm at Rs. 2921. 87 np for the year 1950-51 and at Rs. 8711. 87 np. for the year 1951-52. It may be mentioned here that the firm had made an application on 4. 7. 51 under sec. 26a of the Act for its registration. This application was also rejected by the Income Tax Officer vide his letter dated 22. 9. 54. His Highness the Nawab of Tonk challenged the three orders, namely, the two assessment orders for the years 1950-51 and 1951-52 and the order refusing to register the firm before the Appellate Assistant Commissioner who by his order dated 31. 1. 57 dismissed the appeal in the matter of the registration, of the firm and partially allowed the appeals in respect of the assessment orders and reduced the tax to Rs. 559-/ for the assessment year 1950-51 and Rs. 3544/- for the assessment year 1951-52. As regards the assessment year 1952-53 respondent No. 1 issued a notice under sec. 34 of the Act after obtaining the approval of the Commissioner of the Income Tax and a notice under sec. 22 (2) read with sec. 34 of the Act was served on the Hubban whose identity could not be traced out by the petitioners. These notices required the firm to submit the returns of income. A notice issued by respondent No. 1 against His Highness the Nawab of Tonk was simply affixed at the residence of the Nawab. The respondent thereafter proceeded ex parte and assessed the firm as an unregistered firm and determined the tax at Rs. 14637. 87 np. The petitioners' case is that the respondent No. 1 had knowledge of the dissolution of the firm before the completion of the assessment for the year 1951-52 on 22. 9. 54 and that he had also appended a note while making the assessments. The petitioners allege that the respondent No. 1 had moved the Collector of Tonk for realising the amount of tax for the assessment years 1950-51, 1951-52 and 1952-53 from the individual partners of the firm and had issued a certificate of recovery under sec. 46 (2) of the Act taking each partner to be a defaulter. The Tehsildar, Tonk, served notices upon individual partners requiring each one of them to deposit the income-tax assessed on the firm. The petitioners took various grounds in the writ application to challenge the validity of the proceedings taken for the recovery of the tax amount from them. , but we need only refer to the following grounds as they were only pressed at the time of the hearing, (i) That the firm was dissolved in June, 1952 and the Income Tax Officer had notice of the dissolution before he passed the assessment orders for the years 1950-51 and 1951-52. Under sec. 44 of the Act after the dissolution of the firm the Income Tax Officer had no jurisdiction to assess the firm as such. He ought to have started fresh proceedings for assessment against the partners as the partners could only be liable to assessment jointly and severally. (ii) That after the assessment no notice of demand was served upon the petitioner and, therefore they never became defaulters and no proceedings for the recovery of the tax can be taken against them under sec. 46 of the Act, and (iii) As regards the year 1952-53, in addition to the above grounds, the petitioners also contended that even the proceedings for the assessment were commenced by the respondent after notice of dissolution and that there was absolutely no valid service of notice it having been served on one Hubban only. Respondent No. 2 submitted a written statement traversing the allegations made by the petitioners. The respondent referred to the various conflicting versions of the petitioners regarding the number of the members of the Association and pleaded that the contention of the petitioners that the total number of partners was at one time 16 does not appear to be correct. The respondent admitted that the Association was dissolved sometime in June 1952 but pleaded absence of knowledge of the allegation that the entire assets of the Association were kept by the Nawab and disposed of by him. Giving the details of the service of the various notices issued under sec. 22 (2) of the Act in para 3 of the reply, the respondent pleaded that the notices for all the three years were validly served. The respondent also contended that notices under sec. 22 (4), 23 (2) and 23 (3) of the Act were also validly served on the Association and maintained that the assessment orders were passed properly after notice to the petitioners. As for the year 1952-53 the respondent pleaded that it was wrong on the part of the petitioners to say that they have not been able to trace out the identity of the persons who received the notice dated 4. 5. 55 under sec. 22 (2) read with sec. 34 of the Act. Reference was also made to the substituted service on the Nawab and thus the assessment for the year 1952-53 was also justified. The answers of the respondents to the various grounds challenging the validity of the recovery proceedings may be summed up as follows - (i) Provisions of sec. 44 of the Act have not been violated. The result of sec. 44 is to attract the procedure applicable to undissolved firm and therefore if two or three persons carry on the business of the firm, the assessment can be made in the partner's name and the persons who carry on business during the chargeable accounting year will be liable to pay the tax. (ii) Challenging the contention that in the absence of service of notice on individual partners no liability can be fastened on them, it was stated that the machinery provided in the Income Tax Act for the service of notice under sec. 63 can be availed of by serving notice on the partner even if the firm had been dissolved. Notice to a partner would, therefore, be treated as valid and good notice to all, as regards demand notices. In this manner, the validity of the various notices including the demand notices was justified. As there are obvious differences in the assessment proceedings for the years 1950-51 and 1951-52 on the one hand and for the year 1952-53 on the other;, we propose to examine them separately. For the first two years, there is no dispute that notices under sec. 22 of the Act were received before the dissolution of the firm and that the firm as an undissolved firm submitted the returns on 3. 7. 1951. The proceedings for assessment were thus validly commenced. Mr. S. M. Mehta appearing for the petitioners had strongly contended that the Income Tax Officer 'b' Ward having been informed by the Nawab of Tonk vide his letter dated 30. 8. 54 that the firm was dissolved, he had no jurisdiction to continue the proceedings and assess the firm as such. The argument is that after dissolution of the firm on the language of sec. 44 of the Act, as it was during the relevant period, the firm as such could not be assessed and only the partners could be assessed to tax jointly and severally. Reliance was placed by him on the following cases - 1. Manindra L. Goswami Vs. R. N. Bose, Income Tax Officer (l), 2. R. N. Bose Vs. Manindra Lal Goswami (2) and 3. Rajareddy Mallaram Vs. Commissioner of Income Tax, Hyderabad (3) The last mentioned case merely followed the view as adopted by the other two cases preceding it. In order to appreciate the reasoning of the various cases, it will be proper to reproduce here section 44 as it stood during the re!evant period. "section 44.- - Where any business, profession or vocation carried on by a firm or association of persons has been discontinued, or where an association of persons is dissolved, every person who was at the time of such discontinuance or dissolution a partner of such firm or a member of such association shall, in respect of the income, profits and gains of the firm or association, be jointly and severally liable to assessment under Chapter IV and for the amount of tax payable and all the provisions of Chapter IV, shall, so far as may be, apply to any such assessment. " The two Calcutta cases arise out of the same matter. The first case is a decision of a single Judge disposing of an application under Article 226 of the Constitution, while the decision in the second case was given on appeal against the decision in the first case. The facts in that case were that respondent Manindra Lal Goswami was one of three partners of an unregistered firm, carrying on business at 12 Dalhousie Square, Calcutta. The firm did business from 1. 4. 1940 to 31. 3. 1941 and a notice of its dissolution was given to the Income-tax Department on or about 14. 1. 1947. Towards the end of 1944 the Income-tax Officer District III (l), Calcutta, came to be of opinion that the firm's income for the assessment year 1943-44 had escaped assessment and consequently he issued a notice under sec. 34 of the Act on 25. 11. 1944 to the respondent. The respondent was described as "m. L. Goswami, Esqr. , Partner of Messrs. Dyes and Chemical Agency" and the income which had been discovered to have escaped assessment was described as "your income". The notice ended by requiring the respondent to deliver to the Income-tax Officer by a certain date a return of "your total income and total world income assessable for the said year ending 31st March, 1944". A similar notice was addressed to another partner of the firm, named B. R. Das Gupta, in similar terms, but no notice was issued to the third partner, P. C. Mukherji. The notice was received by the respondent on 30. 11. 44 but he paid no attention to it. B. R. Das Gupta, on the other hand, complied with the notice served on him and filed a return of the firm's income for the year concerned, showing however, a loss of Rs. 1189/ -. The Income-tax Officer did not believe that the firm had suffered loss and he determined the total income at Rs. 45101/ -. He made an assessment on the firm Dyes and Chemical Agency, and computed the tax at Rs. 13264/1/ -. A demand notice was issued but it was not clear from the record in what manner it was served. As no payment was made, the Income-tax Officer on 30. 3. 49 forwarded the certificate under sec. 46 (2) of the Act to the Collector, 24-Parganas. The certificate was a certificate against the firm. The firm being untraceable and the fact having been brought to the notice of the Income-tax Officer, he supplied the names of the three partners to the Certificate Officer who added these names in the certificate and directed notices under sec. 7 of the Public Demands Recovery Act to be served on the partners. On receipt of these notices under sec. 71, the respondent and P. C. Mukherji filed objections under sec. 9 of the Act, but those objections were rejected by the Certificate Officer on 30. 11. 53. Thereafter, the respondent preferred an appeal to the Commissioner of the Presidency Division and when that appeal was pending, moved the High Court under Art. 226 of the Constitution and obtained a rule. Before the rule came up for hearing, the respondent's appeal to the Commissioner of the Presidency Division had already been heard and allowed. Thus, though the respondent did not require to be relieved of any certificate proceedings but as the assessment order was subsisting, the learned Single Judge, dealing with the writ application, considered two questions whether on the assessment as made the respondent could be proceeded against for the recovery of the tax due under it at all and secondly, whether after the dissolution of the firm any assessment of the firm as a firm for the income earned by it before the date of the dissolution was payable in law and answered these questions in the negative. On appeal a Bench of the Calcutta High Court consisting of Chakravartti C. J. and K. C. Das Gupta, J. affirmed the decision of the single Judge and dismissed the appeal. After pointing out that the firm is a distinct and separate entity from the partners and referring to the language of sec. 44 as it then stood, the learned Judges observed, - "it says, not that the firm shall be assessed as if it had not been dissolved, nor that tax shall be charged for the income of the firm in the name and in the hands of the firm in spite of the dissolution, but that "every person who was at the time of such discontinuance or dissolution a partner of such firm. . . . . . . . . shall, in respect of the income, profits and gains of the firm. . . . . . . . . be jointly and severally liable to assessment under Chapter IV and for the amount of tax payable and all the provisions of Chapter IV, shall, so far as may be, apply to any such assessment. " The direction of the section, therefore, is that not the firm but the partners of the firm, shall be "jointly and severally liable to assessment", and that they shall also be liable "for the tax payable. " Referring to the amendment of Sec. 44 introducing the liability of the partners to assessment brought by the amendment Act, 1939, the learned Chief Justice observed that : - "i can see no escape, in view of this language, from the conclusion that if the pre-dissolution income of a firm falls to be assessed after the dissolution, the assessment can be made only on the partners at the time of the dissolution, jointly and severally. " The learned Chief Justice thereafter compared the language of sec. 44 and sec. 25-A (2) and pointed out that while sec. 25-A (2) clearly provided that the assessment is to be made as if no partition of the family had taken place, there is no like provision in Sec. 44. He also referred to the provisions of Sec. 24-B (2) and eventually recorded the conclusion that after the dissolution of a firm, an assessment to income-tax of its pre-dissolution income can only be made, assuming sec. 44 applies, on the persons who were partners of the firm at the time of the dissolution jointly and severally and it cannot be made on the firm as a firm, and thus whether the firm was a registered or an unregistered one. Having regard to the manner in which the notice was issued by the Income-tax Officer in the Calcutta case, we entertain no doubt as to the correctness of the decision in the facts and circumstances of that case. But at the same time, with great respect, we find it difficult to agree with the observation of the learned Chief Justice that after the dissolution of the firm, assessment can be made only on the partners and not |on the firm. One of the main premises for the above conclusion was that the firm and the partners are entirely separate entities for purposes of income tax law. Sinha, J. disposing of the case on the original side had discussed the law on the point and referring to Talipatigala Estate Vs. Commissioner of Income-tax (4) and Commissioner of Income-tax Vs. Karuppiah Pillai (5) had held that for the purpose of income-tax a partnership is a separate entity and this conclusion was accepted by the Division Bench in appeal. Mr. Sagarmal further relied on The Commissioner of Income-tax, West Bengal Vs. Messrs A. W. Figgis & Co. (6) in support of this proposition. In that case a partnership concern was assessed to Income-tax under the Act of 1918. There were subsequent changes in the constitution of the firm resulting in a change in the shares of the partners. A fresh partnership deed was drawn up in the year 1945 when one partner was brought in and eventually the partnership was converted into a limited company. For the assessment year 1947-48, the assessee claimed that it was entitled to relief under sec. 25 (4) of the Act as the partnership firm had been succeeded by a private limited company. The Income-tax Officer disallowed the claim of the assessee on the aground that the partners in the firm in 1939 being different from the partners in 1947, no relief could be given to the applicant. Eventually the Appellate Tribunal granted the relief. The Income-tax Department unsuccessfully challenged the decision of the Tribunal before the Calcutta High Court and then went in appeal to the Supreme Court. In dismissing the appeal, Mahajan, J. observed as under: "it is true that under the law of partnership a firm has no legal existence apart from its partners and it is merely a compendious name to describe its partners. . . . . . . . . But under the Income Tax Act the position is somewhat different. A firm can be charged as a distinct assessable entity as distinct from its partners who can also be assessed individually. . . . . . . . . The partners of the firm are distinct assessable entities, while the firm as such is a separate and distinct unit for purposes of assessment. Secs. 26, 48 and 55 of the Act fully bear out this position. These provisions of the Act go to show that the technical view of the nature of a partnership under English Law or Indian Law, cannot be taken in applying the Law of Income-tax. " We may significantly point out here that Sec. 2 (6-B) of the Act states that the expressions "firm". , "partner" and "partnership" have the same meanings respectively as in the Indian Partnership Act, 1932 (IX of 1932) and thus the notion of the partnership under the general law has not been altogether abandoned. It is true that for the purposes of assessment the firm and partners have been considered as separate entities and it was to emphasise this aspect that the aboye observations were made by their Lordships of the Supreme Court. We do not think that these observations lay down a rigid and inflexible formula that the firm and the partners wherever used in the Act must be treated as distinct entities. Having regard to the object and purpose of sec. 44, we find it difficult to accept that in the construction of sec. 44 we should emphasise the fact that the firm and partners are separate and distinct entities. The object of sec. 44, as stated by a Special Bench of the Madras High Court in Commissioner of Income-tax, Madras vs. P. T. Chengalvaroya Chettiar (7), is to enable the tax on the profits of firm which has been discontinued to be got by the Income-tax authorities and to prevent the avoidance of taxation by the discontinuance of the firm. Sec. 44 as interpreted by the Special Bench reads as follows: - "where any business, profession or vocation carried on by a firm has been discontinued, every person who was at the time of such discontinu ance a member of such firm shall be jointly and severally liable for the amount of the tax payable in respect of the income, profits and gains of the firm. " Interpreting the words 'tax payable', their Lordships observed that : - ¦ 'tax payable' means 'tax that is due to be paid'; 'tax which the firm or partnership would be liable to pay if it had not been discontinued'; 'tax either found to be due already or that will be found to be due in the future. " In our opinion, sec. 44 seeks to achieve the same objects which are intended to be achieved by sec. 25-A. Amongst the various classes of assessees named in sec. 3, the only classes in which a practical difficulty is likely to arise on account of the disappearance of the assessee before the time comes for assessment are (1) Hindu undivided family being found to have been divided and (2) a firm or association of individuals being discovered to have become dissolved or discontinued. To meet the case of a dissolution in a Hindu Joint Family Sec. 25-A was introduced so as to empower the Income-tax Officer to compute profits as if the Hindu Family continued to exist at the time of the assessment (though the profits of the joint family would be computed only till the date of the actual partition) and the tax payable by the joint family is recovered from the members who composed the joint family either jointly or severally. Sec. 44 applies the same principle to cases in discontinuance of the firm or dissolution of the firm or association. It should be taken to enact that the firm or association can be assessed on its profits as if it were still in existence and that the tax may be recoverable from the partners of the firm or members of the association at the time of the discontinuance or dissolution jointly or severally. The learned Chief Justice of the Calcutta High Court in R. N. Bose Vs. Manindra Lal Goswami (2) emphasised the difference in the language of sec. 25-A and sec. 44 in taking a different view. With great respect to the learned Chief Justice, we feel that the difference in the language was not intended to apply different principles for these two different kinds of assessees and that the difference might very well have been due to the notions under the general law that the firm and the partners do not constitute separate entities. We also find it difficult to agree that by the amendment of sec. 44 in the year 1939 introducing the liability of the partners to assessment in addition to the liability to pay tax, the legislature intended to bring about drastic changes in the procedure of assessment. While under the law before 1939 the unregistered firm could be assessed to tax after dissolution, it could not be so assessed after the amendment in the year 1939. The introduction of liability to assessment was, in our opinion, more by way of caution than to bring about changes as indicated by the learned Chief Justice of the Calcutta High Court. It will be pertinent to observe here that the legislature by the Finance Act, 1958 (II of 1958) amended sec. 44 arid it reads as follows: Sec. 44 - (1) Where any business, profession or vocation carried on by a firm or other association of persons has been discontinued or where a firm or other association of persons is dissolved, the Income-tax Officer shall make an assessment of the total income of the firm or other association of persons as such as if no such discontinuance or dissolution had taken place. (2) If the Income-tax Officer, the appellate Assistant Commissioner or the Appellate Tribunal in the course of any proceedings under this Act in respect of any such firm or other associasition of tion of persons as is referred to in sub-sec. (1) is satisfied that the firm or other association is guilty of any of the acts specified in clause (a) or clause (b) or clause (c) of sub-sec. (1) of sec. 28, he or it may impose or direct the imposition of a penalty in accordance with the provision of that section. (3) Every person who was at the time of such discontinuance or dissolution a partner of the firm or a member of the association, as the case may be, shall be jointly and severally liable for the amount of tax or penalty payable and all the provisions of Chapter IV, so far as may be, shall apply to any such assessment or impo penalty. " The amended section clearly provides that the Income-tax Officer shall make assessment on the income of the firm or association of the persons as such as if no discontinuance or dissolution had taken place. In our opinion, the above amendment does not introduce a new principle, but is of a explanatory character and seeks to clear doubts entertained on the language of the earlier section. In this connection, we may refer to two Supreme Court cases referred to by Mr. Chand Mal appearing for the department. They are C. R. Abraham Vs. Income-tax Officer, Kottayam (8) and Income-tax Officer, V Circle Madras Vs. V. S. K. Habibullah (9) These two cases, of course, do not directly deal with the liability of the firm or partners to the assessment but with the question as to the liability of the firm to penalty under Sec. 28 of the Act. Sub-sec. (2) of the amended section has clearly provided for it. In the two Supreme Court cases it has been held that an order imposing penalty under sec. 28 can be made by virtue of sec. 44 as it was before the amendment. We may, however, refer to the following observations in C. A. Abraham's case which lend support to the view taken by us : - "sec. 44 sets up machinery for assessing the tax liability of firms which have discontinued their business and provides for three consequences,. . . . . . . . . The liability declared by sec. 44 is undoubtedly to assessment under Chapter IV, but the expression 'assessment' as has often been said is used in the Income-tax Act with different connotations. In Commissioner of Income-tax, Bombay Presidency and Aden Vs. Khem Chand Ram Das (AIR 1938 P. C. 175) the Judicial Committee of the Privy Council observed: One of the peculiarities of most Income-tax Acts is that the word 'assessment' is used as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act for imposing liability upon the tax-payer. The Indian Income-tax Act is no exception in this respect. . . . . . . . . " After a critical review of the various provisions of Chapter IV of the Act, it was further observed that "in effect" the Legislature has enacted by sec. 44 that the assessment proceedings may be commenced and continued against a firm of which business is discontinued as if discontinuance has not taken place. " The underlined portion of the observation, in our opinion, makes the position perfectly clear. The same view was reiterated in Income-tax Officer, V Circle, Madras Vs. S. K. Habibullah (9 ). In the light of the foregoing observations, we are not prepared to emphasise the distinction between the firm and the partners in construing sec. 44 and are not prepared to hold that an assessment completed in the name of the firm is invalid and ineffective in law and cannot be binding upon the partners who are not altogether separate from the firm. In our opinion, the correct and proper criterion to determine the validity of assessment is to look at the manner in which the notices were served on the firm or the partners. If the individual partners had notice of the assessment proceedings in the name of the firm and they allowed the proceedings to continue, they cannot be permitted to challenge the validity. On the other hand, if in a given case the assessment proceedings in the name of the firm can be shown to have been started after the dissolution of the firm without valid notice of knowledge to the partners of the dissolved firm they can challenge the assessment. Now, in the present case, the notices under sec. 22 of the Act were received by the firm at a time when the firm had not been dissolved. The firm had submitted returns for these two years before its dissolution. The assessment proceedings were thus validly commenced before the Income-tax Officer and the firm as also the various partners must be deemed to be the parties to the assessment proceedings. The petitioners did not choose to inform the Income-tax Officer of the dissolution of the firm and took no steps in connection with the assessment proceedings. They acquiesced in the Nawab of Tonk conducting the assessment proceedings. The Nawab of Tonk pursued the proceedings and even filed appeals and got substantial relief. The petitioners did nothing but slumber. We do not see how the petitioners can in these circumstances challenge the validity of the assessment and escape their liability. We must, therefore, hold that the assessment for the years 1950-51 and 1951-52 are valid and binding on the petitioners. There is no force thus in the first contention of Mr. Sagar Mal Mehta. Secondly, it was contended by Mr. Sagar Mal that even if the assessment was valid, the petitioners having received no notice of demand under Sec. 29 of the Act, they did not become defaulters and recovery proceedings could not be taken against them under Sec. 46 of the Act. It has been admitted by them that the demand notice was served on His Highness the Nawab of Tonk who was pursuing the assessment* proceedings validly commenced on behalf of the firm. In view of the conduct of the petitioners to which we have made a detailed reference earlier, we find no difficulty in accepting that the receipt of notice by the Nawab in the background indicated earlier was notice to the firm and the individual partners and we do not see any substance in the contention of Mr. Mehta. We may also observe that even if the view of law, as propounded by Mr. Mehta on the basis of the two Calcutta cases and one Andhra Pradesh case, as referred to above, be treated as equally sound or even preferable to the view adopted by us, still we would have no hesitation in refusing relief to the petitioners in respect of the assessment years 1950-51 and 1951-52 for two reasons. In the first instance, we consider that the following observations of Satyanarayana Raju, J. who was a party to the case relied upon by Mr. Mehta in an earlier case reported in XXXVI Income-tax Reports, 239 Murali Krishna Rice Mill Vs. Addl. Income-tax Officer Tenali should apply to the facts of the present case: "the petitioner has relied upon a decision of the Calcutta High Court in Commissioner of Income-tax Vs. Bhimchandra Gosh as supporting his construction of Sec. 44 of the Income-tax Act and has argued that if that decision was followed the assessment cannot stand. Counsel for the Department has however brought to my notice two decisions of the Madras High Court in Pandurso Vs. Collector of Madras and Mereddi Krishna Reddy Vs. Income-tax Officer, Tehsil. On a consideration of these decisions I find that there can be two possible views on the construction of Sec. 44 of the Income-tax Act. Therefore the want of jurisdiction, which according to learned counsel for the petitioners gives jurisdiction to this court to quash the assessment order itself at this stage, cannot be said to be so patent. " Secondly, the conduct of the petitioners in respect of the assessment proceedings for the year 1950-51 and 1951-52 shows complete indifference and laches and this disentitles them to any relief in the exercise of extraordinary jurisdiction. The case for the assessment year 1952-53 stands however, on a different footing. The Department had admitted the fact of dissolution of the firm in June 1952. The Department also had sufficient notice in Aug. & Sept. 1954 that the firm had been dissolved. The assessment proceedings for the assessment year 1952-53 were thus admittedly commenced after notice of the dissolution to the department. The department did not take proceedings to ascertain the partners of the undissolved firm and to serve notices on them. The Department's case is that a notice under Sec. 22 (2) read with Sec. 34 of the Act for the assessment year 1952-53 was issued by registered post on 4. 5. 1955 addressed to the assessee and it was received by some body on behalf of the association on 14. 5. 1955. This service is claimed to be valid by the department. The department also relied upon an application dated 26. 5. 55 submitted by Shri L. L. Sharma, counsel for the His Highness the Nawab of Tonk in which there was admission of the fact of notice. According to the department, a notice under Sec. 22 (4) for the assessment year 1952-53 was sent by registered post to the association on 9. 7. 55 and was returned with the remark "not known". Thereafter a notice under Sec. 22 (4) dated 26. 8. 1955 fixing the case for 9. 9. 1955 was sent to the association through. His Highness the Nawab of Tonk by registered post. This notice was served on 30. 5. 55 but it was not complied with. Again a notice under Sec. 22 (4) dated 10. 1. 57 informing the next date 24. 1. 57 was issued to the Nawab of Tonk and was served on 19. 1. 57 but this was also not responded to. Finally a notice dated 8. 3. 57 fixing the case on 21. 3. 57 was served upon the assessee by a substituted service viz. by affixing a notice at the place of the office of the association and thereafter assessment for the year 1952-53 was finalised on 30. 3. 57. The department, however has not chosen to bring on record the necessary documents in support of the above allegations. In this connection, we think it proper to observe that when the department had notice of the dissolution of the firm in August or September 1954 it was hardly proper and desirable for the department to send by registered post a notice to the association as it did on 4. 5. 55 and 9. 7. 55. We are also not prepared to hold that there was any valid service of the notice issued on 4. 5. 1955. The department merely says that it was received by somebody on behalf of the association on 14. 5. 55. We do not know who that somebody was. It is also evident that the Income-tax Officer himself did not rely upon this notice and sent a fresh notice on 9. 7. 1955. The firm having been dissolved the notice was rightly returned with the remark "not known". As regards the allegation in respect of the notice dated 8. 3. 1957, we consider that there was no valid service on the petitioners. The The department's case is that the substituted service was effected by affixing notice at the place of the office of the firm or association. The firm or association having been dissolved, it is not reasonably possible to conceive that it had any place of office. The department has not chosen to give details in this connection. A serious doubt is also thrown on account of the remark 'not known' on the notice dated 9. 7. 1955. The proceedings having been started two to three years after the dissolution of the firm or association, we have no hesitation in coming to the conclusion that the method adopted by the department in effecting service on the dissolved firm or association was not satisfactory. The Income-tax Officer did not take care to obtain the particulars of the members from the Registrar of the firm and to effect proper service. The service claimed by the department cannot be considered as service of the notice on the petitioners. It will be against the canons of justice and fair play to hold that the petitioners had been served in connection with the assessment proceedings for the year 1952-53 and could be bound by them. It may be that the Nawab of Tonk has been served bat there is nothing to show that he represented the firm or association at any stage during the continuance of the firm and that service on him could be treated as service on all, particularly two to three years after the dissolution of the firm. In our opinion, there is no valid and legal assessment for the year 1952-53 against the petitioners, though the assessment may be valid and binding against the Nawab. Incidentally, we may observe that it has not been clarified as to why the department did not recover the tax from the Nawab in the position in which he was and why he was not left to choose his own remedy against the other partners if he had any. Be that as it may, we cannot but hold that the assessment of Income-tax for the year 1952-53 is not valid assessment against the petitioners and they cannot be held liable to pay any tax under the assessment. The petitioners further denied the service of any notice of demand on them. The department does not dispute the absence of specific service of notice of demand on firm. It mainly relies upon the service of notice of demand on the Nawab of Tonk. No material has, however, been placed on record to show the manner in which the demand notice was issued against the Nawab and how it was served. The firm had been dissolved several years before the assessment for the year 1952-53 was made. In fact the assessment proceedings themselves were started after the dissolution of the firm. In these circumstances, we find it difficult to accept that there was any service of demand notice [which may be held binding on the petitioners. The petitioners are also justified in maintaining that they having not been served with the notice of demand could not take appropriate steps in time to get the assessment set aside either by an appeal or an application and thus they had no effective and efficacious alternative remedy. There is force in their further contention that they having not been served with the notice of demand did not become defaulters so as to justify proceedings for recovery under Sec. 46 of the Act. In this view of the matter, we hold that the recovery proceedings initiated against them by the respondents are without jurisdiction.
(3.) WE accordingly partially accept the application and issue a writ of certiorary, quashing the assessment for the year 1952-53 as against the petitioners. The respondents will be prohibited from taking any proceedings for the recovery of the tax from the petitioners under the above assessment. They are free to take fresh proceedings according to law. The application with regard to the assessment years 1950-51 and 1951-52 is dismissed. The parties are left to bear their own costs. .;