Govinda Bhat, J.
1. In this writ petition preferred under article 226 of the Constitution of India, the petitioner has prayed for the issue of a writ of mandamus or a direction in the nature of a writ of mandamus directing the Income-tax Officer, Circle I, Bangalore respondent to issue to the petitioner a tax clearance certificate under section 230(1) of the Income-tax Act, 1961.
2. The petitioner is the widow of J. Sattler, who died on June 8, 1963. She applied for a tax clearance certificate in order to enable to leave this country and go to New Zealand where her daughter is residing. The respondent by his order dated May 23, 1969, has refused to grant the tax clearance certificate on the ground that a sum of Rs. 48,715 is recoverable from the petitioner as legal representative of her deceased husband and that, unless the said amount of tax with interest is paid, the petitioner is not entitled to a tax clearance certificate. The petitioner's contention is that no tax is recoverable from the estate of Mr. Sattler.
3. The petitioner's husband, Mr. Sattler, and one Mr. K.S. Gandhi were partners of an unregistered firm named 'INKA Corporation', since about the year 1947. In Insolvency No. 23 of 1953 on the file of the Bombay High Court, the said 'INKA Corporation' and its partners were adjudged by an order dated February 17, 1953, as insolvents and the assets of the said firm and of the individual partners were ordered to vest in the official assignee of the Bombay High Court. On January 21, 1955, the Bombay High Court made an order discharging Mr. Sattler. In respect of the assessment years 1948-49 to 1952-53, the Income-tax Officer, Bombay, assessed the firm 'INKA Corporation' to income-tax aggregating to Rs. 48,715. The assessment orders were made on the firm of 'Inka Corporation'. Notice of the assessment was given to Mr. K. S. Gandhi but not to Mr. Sattler. Sattler owned a one-half share in a house at No. 5, Ulsoor Road, Bangalore, which had been mortgaged with the Indian Bank, Bangalore. The official assignee did not take possession of the house in the insolvency proceedings. The petitioner discharged the mortgage loan and redeemed the property devolved on the petitioner and her daughter as heirs. The case of the respondent is that, since the petitioner as heir to her deceased husband has succeeded to the deceased's property, she is liable to discharge the tax liability of her deceased husband. The contention of the petitioner is that on the insolvency adjudication of Mr. Sattler and K.S. Gandhi, the firm of 'Inka Corporation' became dissolved with effect from February 17, 1953, and after dissolution of the firm, the firm as such could not have been assessed and the proper procedure was to assess the partners jointly and severally and then issue demand notices under section 29 of the Indian Income-tax Act, 1922 (hereinafter called 'the Act'), to the quondam partners and that, in the absence of any assessment made on Mr. Sattler, the petitioner as his legal representative is not liable to discharge the tax assessed on the dissolved firm. The petitioner had preferred Writ Petition No. 1747 of 1963 in this court when on the basis of a certificate issued by the Income-tax Officer, under section 46 of the Act, recovery proceedings were initiated against the petitioner. When the said writ petition came up for hearing the petitioner and the Income-tax Officer filed a joint memo. This court on September 10, 1965, quashed the recovery proceedings reserving liberty to the Income-tax Officer to issue an appropriate demand notice and, thereafter, to take recovery proceedings in accordance with law. Liberty was also reserved to the petitioner to raise such contentions that are open to her in law. After the disposal of the said writ petition, a notice of demand dated June 16, 1965, was served on the petitioner on November 9, 1965, but no recovery proceedings were started before March 31, 1967. Therefore recovery proceedings on the basis of the demand notice issued to the petitioner is barred by time under section 231 of the Income-tax Act, 1961.
4. On the arguments presented before us, the question for decision is whether the petitioner has no tax liabilities so as to entitle her for tax clearance certificate under section 230 of the Income-tax Act, 1961.
5. The firm of 'Inka Corporation' was dissolved on the adjudication made in the insolvency proceedings in the High Court of Bombay on February 17, 1953. The income-tax assessment orders were made on March 31, 1956, on the firm of 'Inka Corporation' and notices of demand were served on one of the quondam partners, Mr. K.S. Gandhi. The notices of demand were not served on the petitioner's husband, Mr. Sattler.
6. Section 44 of the Act, as it stood before its amendment in 1958, provided that where any business carried on by a firm has been discontinued, every partner of such a firm who was at the time of the 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. By the amendment made in 1958 and also under the Income-tax Act, 1961, assessment can be made on a dissolved firm but in the instant case we are concerned with section 44 of the Act prior to its amendment.
7. In Manindra Lal Goswami v. Income-tax Officer ( 30 I. T.R. 550, 558-59.), the Calcutta High Court has held that after the discontinuance of a firm, the firm as such cannot be assessed and the proper procedure is to assess the partners jointly or severally. In the course of the judgment, Sinha J. (as he then was) stated thus :
'I do not think there is any escape from the position that after discontinuance or dissolution of the firm, the partners will have to be assessed either jointly or individually, but that the firm as a unit can no longer be assessed. In the judgment of the learned Commissioner he has stated that since notice under section 25(2) has not been given, notice cannot be taken of the dissolution. But section 25(2) merely says that if notice has not been given, the partners would be liable to a penalty. I do not see how that authorises the income-tax authorities to ignore the discontinuance and assess a firm which has ceased to exist. Attention may also be drawn to the fact of the amendment of section 44. Whereas before the amendment it was a question of liability, after the amendment the partners are 'liable to assessment'. Where however the firm is discontinued after assessment, section 44 clearly makes the partners individually or jointly liable to pay the dues. But if the assessment is to take place after discontinuance, it is the partners who are to be assessed, and not the firm, although the tax due would be calculated as if there was no discontinuance.
8. We are in agreement with the view of the law as stated by Sinha J. in the said case. Section 29 of the Act provides that where any tax is due in consequence of any order passed under the Act, the Income-tax Officer shall serve upon the assessee or other persons liable to pay such tax a notice of demand in the prescribed form specifying the sum so payable. The assessees in the case of a firm whose business has been discontinued are the partners who are liable to be assessed. It was not disputed before us that the petitioner's husband as ex-partner of the dissolved unregistered firm of 'Inka Corporation' was not assessed to tax nor any notice of demand was served on him. On the basis of assessment made on the dissolved firm of 'Inka Corporation', notices of which were given only to Mr. K.S. Gandhi, the petitioner's husband could not be held liable. When there is no tax liability fixed on the petitioner's husband, the petitioner on whom her husband's estate has devolved after his death, is also not liable to pay the tax assessed on the dissolved firm. In that view, the respondent was not justified in refusing to grant the tax clearance certificate to the petitioner.
9. For the above reasons, we allow this writ petition and direct the respondent to issue the tax clearance certificate prayed for. It was submitted by Sri. K. Srinivasan, the learned counsel for the petitioner, that the entry permit held by the petitioner to migrate to New Zealand expires on 31st of January, 1970, and unless the tax clearance certificate is granted expeditiously, the petitioner will not be able to leave this country. Therefore, we direct the respondent to grant the tax clearance certificate as expeditiously as possible and at any rate within three weeks from this day. In the circumstances, there will be no order as to costs.
10. Let a copy of this order be given to the respondent's counsel by tomorrow evening.
11. Writ Petition allowed.