1. The assessee petitioner has prayed in this petition for issue of a writ of prohibition or a direction in the nature of a write of prohibition, prohibiting the respondent (the Third Income-Tax Officer, City Circle II, Bangalore) from continuing with the collection proceedings under section 46 of the Indian Income-tax Act, to be referred to hereinafter as the Act, in the firm's case (of which he was the quondam partner) for the assessment year 1953-54 in pursuance of the notice of demand dated December 10, 1958, issued by the respondent to him. He has also sought a writ of certiorari or a direction in the nature of a writ of certiorari, quashing the collection proceedings before the respondent initiated under section 46 of the Act in the firm's case for the assessment year 1953-54. Then, there is the omnibus prayer asking the court to issue such other writ or writs or orders or directions as the circumstances of the case may necessitate.
2. Before considering the points urged by Sri K. Srinivasan, the learned counsel for the petitioner, it is necessary to set out the relevant facts. The petitioner was a partner of a firm known as 'Unni & Co'. For the assessment year 1953-54 that firm was assessed to an income-tax of Rs. 70,206-10-0. The order of assessment is dated March 15, 1954. The firm appears to have discontinued its business very soon after the assessment order in question was made. Thereafter, the income-tax officer issued a certificate under section 46(2) of the Act and requested the Deputy Commissioner to initiate proceedings to realise the tax due from the partners of the firm. When the Deputy Commissioner was about to move in the matter, one of the partners of the firm, namely, T. Govindaswamy, came up to this court by means of an application under article 226 of the Constitution seeking to restrain the Deputy Commissioner from collecting the arrears of tax due. In that petition (T. Govindaswamy v. Income-tax Officer, Special Survey Circle, Bangalore), this court held that proceedings for the recovery of tax could be initiated under section 46(2) only against an assessee in default. It further held that although by virtue of section 44 the petitioner therein was liable to pay the tax assessed on the firm before its discontinuance, as no notice of demand under section 29 was served on him, he could not be said to have failed to pay the amount demanded in the notice and, therefore, was not an assessee in default. Hence there was no jurisdiction to initiate recovery proceedings against him under section 46. In the course of the judgment in that case, Narayana Pai J., who delivered the judgment of the court, observed :
'The learned counsel on behalf of the petitioner contends that the section (section 44) imposes on the partners only a single liability to assessment and that the liability for payment of tax is solely a liability which follows upon such assessment. In other words, his interpretation of the section is that a partner of a firm, which has discontinued business, will be liable to pay only if the assessment is also made on him, but that if the assessment had been made on the firm itself before the discontinuance, he is not liable to pay the tax assessed on the firm. The learned Government Pleader has relied upon a decision of the Madras High Court in Chengalvaroya Chettiar v. Commissioner of Income-tax in which their Lordships of the Madras High Court say that the term 'tax payable' under the section means 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 future. The learned counsel for the petitioner, however, states that the Madras case was decided before the amendment in 1939 when section 44 was differently worded.....
The argument before the Madras High Court in that case was that the term 'tax payable' meant 'payable as a result of an assessment already made upon the firm' and that after discontinuance an assessment cannot for the first time be made on the partners. Subsequently, section 44 was amended so as to state expressly the liability of the partners to assessment after discontinuance. In our opinion, the clear intention behind the amendment was to give effect to the opinion expressed by the Full Bench of the Madras High Court by clarifying the wording of the section and it is too much to expect, as the learned counsel for the petitioner wants us to do, that the legislature intended to take away from the department a privilege which according to the ruling of the Madras High Court it undoubtedly had under the unamended section.
We, therefore, hold that by virtue of section 44 the petitioner, who was undoubtedly a partner of Unni & Co. at the time of the discontinuance of its business, is liable under section 44 to pay the tax assessed on the firm before discontinuance.'
3. Despite the above conclusion, this court issued the writ prayed for in that case as no notice under section 29 of the Act had been served on the partners. The judgment of this court was rendered on December 5, 1958. Very few days thereafter, the Income-tax Officer issued notices to all the partners under section 29 of the Act requiring them to pay up the tax due from the discontinued firm, 'Unni & Co.' It is as against that notice the petitioner, who was one of the partners of that firm, has come up to this court.
4. Sri K. Srinivasan, the learned counsel for the petitioner, formulated four legal contentions in support of his petition. They are - (1) the notice issued on his client under section 29 is not based on any order passed by the Income-tax Officer and, therefore, that notice is invalid; (2) the notice of demand was issued about four years after the assessment order was made; that being so, that notice cannot be considered as a valid notice; (3) the notice of demand is not in proper form; and (4) the liability of the partners being joint and several, the notice should have been issued jointly in the name of all the partners and not severally in the name of the individual partners.
5. We do not think that there is any force in any of the contentions advanced by Sri K. Srinivasan. The petitioner is asked to pay up the arrears of tax due not because there is any order of assessment against him as such. His liability to pay the arrears of tax arises as a consequence of section 44 of the Act, which says :
'Where any business, profession or vocation carried on by a firm... has been discontinued... every person who was at the time of such discontinuance... 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.'
6. Under section 44, the partners are made liable for the payment of the tax due from the firm which has discontinued its business. In such a case, there need not be any separate assessment as against the partners. It is a vicarious liability that is cast on the partners. What is being collected is the tax due from the partners of the firm. The notice of demand is based on the order of assessment made against the firm. Before issuing a notice under section 29 there need not be necessary an order of assessment on the person against whom the notice is issued. Section 29 says :
'When any tax, penalty or interest is due in consequence of any order passed under or in pursuance of this Act, the Income-tax Officer shall serve upon the assessee or other person liable to pay such tax, penalty or interest a notice of demand in the prescribed form specifying the sum so payable.'
7. This section lays down three requirements. They are - (1) the tax must be due in consequence of any order passed under or in pursuance of the Act; (2) a notice must be served on the assessee or other person liable to pay such tax; and (3) the notice of demand must be in the prescribed form. 'Assessee' is defined under section 2(2) of the Act which says :
'Assessee 'means' person by whom income-tax or any other sum of money is payable under this Act, and includes every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the loss sustained by him or of the amount of refund due to him'.'
8. A person against whom proceedings are taken in pursuance of section 44 is also an 'assessee' within the meaning of the definition of that world found in section 2(2). That position is not disputed before us. For the reasons mentioned above, we do not think that there is any force in the contention that the notice of demand served on the petitioner is not based on any order passed by the Income-tax Officer.
9. In support of the above contention of Sri Srinivasan, he cited before us the decision in N. N. Kotak v. Commissioner of Income-tax. We fail to see how this decision helps the contention of Sri Srinivasan. It is laid down in that decision that a notice of demand can only be served under section 29 of the Indian Income-tax Act, 1922, provided tax, penalty or interest is due in consequence of an order passed under the Act. Therefore, the conditions precedent to the issue of a notice of demand under section 29 is the existence of an order passed under the Act. By the notice in question, a demand is made on the assessee to pay the arrears of tax. If there is no order under the Act then no notice can be issued under section 29. In the instant case, the notice of demand was issued on the basis of an order of assessment passed on the firm, which is enforceable against its quondam partners. In Kotak's case the penalty imposed was tried to be collected by coercive steps under section 46(1). But the quantum of penalty had not been determined by the Income-tax Officer. He had merely noted on the order sheet 'Tax not paid. Issue penalty notice.' Such an order was clearly illegal. Under section 46(1) it was the duty of the Income-tax officer to determine the penalty. We do not think that the decision in question bears on the point under consideration.
10. We may now proceed to consider the second contention of Sri Srinivasan. He strenuously urged that a notice of demand issued four years after the assessment was made is clearly illegal. Section 29 does not prescribed any period of limitation for issuing a notice. Wherever the legislature thought it necessary, it has prescribed periods of limitation in the Act. No support for the contention of Sri Srinivasan can be gathered from the language of section 29. But he bases his contention on some decided cases which have taken the view that a notice of demand under section 29 should be issued within a reasonable time. The first decision cited is the one decided by the Patna High Court, In the matter of Narayan Bhanja Deo. Delivering the judgment of the court, Dawson-Miller, Chief Justice, repelled the contention of the learned counsel appearing for the assessee that a notice of demand should be issued in the year of assessment. This is what the learned Chief Justice observed :
'I cannot believe, however, that it was intended by prescribing a form of notice of this sort to create a limitation period within which such notice must be given. If it had been the intention of the legislature to prescribe a period of limitation for such notices I think that such an important provision would have found place in the body of the Act itself indicating that intention. In other sections of the Act we do find that where certain notices have to be given the period within which they have to be given is prescribed. But so far as section 29 is concerned no period at all is prescribed in the Act. Again it is quite possible that in certain cases no demand could be made within the actual year for which the tax is payable. Provision is made for disputes which may arise as to the acceptance or rejection of the assessee's return. If his return is not accepted then an enquiry takes place, evidence may be demanded of him and much time may be expended in carrying on the enquiry, and it is quite possible that such enquiry would not terminate until after the year of assessment and I do not think it can be suggested that because the ordinary form prescribed for such a demand contemplates that it will be issued during the current year of assessment, it is tantamount to an enactment that it can not be issued afterwards. If any part of the form should not be applicable to the particular facts of the case then I presume it can be altered in the ordinary course before the form is sent out, but the mere fact that forms are prescribed under the Act does not seem to me to carry with it the result that unless everything is done exactly as provided by the form it is of no force and effect.'
11. The above observations are undoubtedly of no assistance to Sri Srinivasan's client. On the other hand, they repel the contention advanced by Sri Srinivasan. But Sri Srinivasan wants us to rely on the further observation :
'Although no time is prescribed for issuing the notice in question I suppose it may be said that such a notice must be issued within a reasonable time. What would be a reasonable time might vary according to circumstances.'
12. This observation of the learned Chief Justice is clearly obiter. If the legislature did not choose to prescribe any period of limitation, we very much doubt whether the court could step in and prescribe its own period of limitation by bringing in the idea of 'reasonable time'. It would not be correct to assume that every claim, to be valid, must be made within some period and that if no period of limitation is prescribed by the statute, then it should be done within a reasonable time. Unless a period of limitation is prescribed, the courts are not justified in prescribing any period in the nature of limitation. We do not think that the observation of the learned Chief Justice can be taken advantage of for contending that the period taken in the instant case is an unreasonable period. If the decision above referred to had stood by itself Sri Srinivasan's contentions would have been extremely weak. But fortunately for him a Bench of the Sind Judicial Commissioner's Court in Firm Khemchand Ramdas v. Commissioner of Income-tax held that the form of notice of demand under section 29, Income-tax Act, 1922, provided by the Income-tax Rules shows a simultaneous demand both for income-tax and super-tax; that in order to be valid a demand for super-tax should be made within a reasonable time of the assessment for income-tax. The Bench further held that two years and four months or thereabouts was a wholly unreasonable time. For this proposition they placed reliance on the decision in Rajendra Narayan's case. which we have already considered. With respect, we dissent from the view expressed in the above case as in our view that decision does not lay down the law correctly. When that case, Khemchand's case, was taken up in appeal to the Judicial Committee, the Judicial Committee observed in Commissioner of Income-tax v. Khemchand Ramdas thus :
'Aston, A. J. C., considered that the demand for super-tax should be made within a reasonable time of the assessment for income-tax, meaning no doubt, by assessment the service of the notice of demand for income-tax which normally completes the assessment. Rupchand Bilaram, A. J. C., was of opinion, that the demand for super-tax should be made within a reasonable time, and therefore, almost simultaneously with the demand for income-tax. Both of them held for this reason (amongst others) that the service of the notice of demand of May 4, 1929, was illegal and inoperative to impose liability upon the respondents. Their Lordships do not find it necessary to express any opinion upon this point inasmuch as in their view and for the reasons which they will now proceed to give it does not call for determination in the present case.'
13. Even if we had agreed with the contention that a notice under section 29 should be issued within a reasonable time, we are of the opinion that in the circumstances of this case the notice issued to the assessee petitioner was within a reasonable time. The notice was issued very soon after the decision of this court in Govindaswamy's case, referred to above was rendered.
14. The contention that the notice of demand is vitiated because of the fact that status of the assessee was not mentioned therein is not only a highly technical one but is also devoid of merit. In the form in which the notices are issued there is a column requiring the Income-tax Officer to mention the status of the person from whom the tax due is demanded. The usual printed form is used even when a demand is made on the partners under section 44. In the generality of cases assessment is made under section 3, read with section 23, i.e., on individuals, Hindu undivided families, companies, local authorities, firms, other association of persons or the partners of the firm or the members of the association individually. In those cases the status of the assessee is important. In the instant case, notice of demand was issued on the partners not because there was any assessment under section 3, read with section 23, but because they were liable to pay the tax due from the firm of which they were partners. The covering letter sent along with the notice of demand made the position clear. We do not see any infirmity in the notice of demand.
15. The last contention urged by Sri Srinivasan, the learned counsel for the petitioner, is that a joint notice should have been served on all the partners and that the Income-tax Officer erred in issuing separate notices on the individual partners. The liability under section 44 is joint and several, which means that the tax due can be collected either from joint assets of the partners, if there are any, or from the partners individually. If the Income-tax Officer thought fit to proceed against the partners severally the partners can not raise any valid objection.
16. Sri Srinivasan says that some High Courts had taken the view - after the filing of this petition this High Court and Supreme Court have differed from that view - that a person against whom action is taken under section 44 is not an assessee; it is because of those decisions his client field the present petition; therefore, we should give the petitioner an opportunity to file an appeal against the order of assessment passed on the firm. This is not a matter which is within our jurisdiction. It is a matter that has to be considered by the Appellate Assistance Commissioner and we are sure that the Appellate Assistance Commissioner will consider the same if and when the matter is taken to him in appeal.
17. For the reasons mentioned above, the petition is rejected. No costs.
18. Petition dismissed.