1. This is an application for revision against the order of the Additional Collector of Sales Tax dated 21st February, 1959.
2. The applicant received a notice in Form XLI from the Sales Tax Officer demanding a sum of Rs. 2,348 being the tax and the penalty due on assessment for the period from 1st April, 1953, to 31st March, 1954, of the business called Messrs R. Maganlal & Co. Against this order an appeal was filed with the Assistant Collector of Sales Tax (Appeals), Range II, Ahmedabad, who dismissed the same. The Additional, Collector of Sales Tax who heard the revision application against the said dismissal order also confirmed the order of the Assistant Collector.
The facts of the case are as under:- 3. One Maganlal Talakshi was carrying on a business in the name of R.Maganlal & Co. The business was of selling bidis and Messrs R. Maganlal & Co. had the sole agency to sell bidis manufactured by Messrs Thakur Savendekar & Co. The firm of Messrs R. Maganlal & Co. was registered as a dealer under registration certificate No. 10K 447. At the time when this application was made, Maganlal Talakshi was carrying on business with one Kantilal Maganlal as his partner, but it is understood that Kantilal Maganlal left the partnership soon after the firm was registered and Maganlal Talakshi had been thereafter carrying on the business as a sole proprietor. On 29th March, 1956, Maganlal Talakshi wrote to the Sales Tax Officer of his division informing him that the address of the firm was changed and that there was a change in the ownership of the business. He further gave him the names of the three partners of the firm, as Maganlal Talakshi, Natwarlal Chandulal and Ramlal Chunilal. With this letter, the registration certificate and a copy of the partnership deed dated 19th January, 1956, were also enclosed. This action was taken by him under Section 25 of the Bombay Sales Tax Act, 1953. The Additional Collector of Sales Tax stated in his order that no action seems to have been taken on the said letter dated 29th March, 1956, by the Sales Tax Officer.
4. The business of Messrs R. Maganlal & Co. was assessed under Section 14 of the Act on 11th July, 1956, for the period from 1st April, 1953, to 31st March, 1954 and Rs. 2,348 were found due. This amount included penalty. The Additional Collector of Sales Tax states in his order that as this amount was not paid by the above dealer, the Sales Tax Officer in due course issued notice to the applicant and also to Ramlal Chunilal who was the third partner with effect from 19th January, 1956, for the recovery of the amount. It may be noted here that no notice appears to have been served on the firm of Messrs R. Maganlal & Co.
5. Various objections have been advanced against the service of the notice of demand against the applicant. It is urged that the amount was due from the firm, when it was a proprietary concern of Maganlal Talakshi and the applicant is not liable for its debts on any account either under the Partnership Act or the Sales Tax Act.
6. It may be that the liability of a partner for the debts of a firm is confined to the time while he is a partner under the Indian Partnership Act, but it is not so under the Sales Tax Act. If, therefore, liability can be fastened under the Sales Tax Act, reference to the Partnership Act becomes irrelevant. It is also stated that Section 25, under which the information was given to the Sales Tax Officer, about the change in the partnership, was merely procedural and that section does not fasten any liability on the new partners. There is no dispute about this.
7. It was further argued that the change in the ownership of the business effected on 19th January, 1956, could not be treated as a transfer under Section 26(1), because there was no sale or transfer of entire business. The main question, therefore, that has to be decided, is whether there was an entire transfer of business of the old firm.
8. It is seen from the copy of the transfer deed that in para. 1 of the said deed, Maganlal Talakshi transfers the goodwill, the office, goods, furniture, etc., for the amount of Rs. 13,501 to the firm consisting of three partners who were to carry on the business in the same name with effect from that date. Maganlal Talakshi does not appear to have kept any stock or other items of business. In paragraph 5 of the transfer deed it is stated that the new partnership will not be responsible for any debts of the sole proprietary business of Maganlal. This appears to be the only reservation made in the partnership deed. At the end of paragraph 1 in the partnership deed it is stated among other things* that everything pertaining to the sole agency, furniture, etc., has been handed over, i.e., transferred to the firm of the three partners and the ownership of all these things from that date rests with the partnership firm.
9. On the facts, therefore, there seems to be no doubt that there has been an entire transfer of the ownership of the business of a dealer to a new partnership under Section 26(1) and the transferee, therefore, becomes liable to pay the tax in respect of such business remaining unpaid at the time of the transfer as if he were the dealer liable to pay such tax. The fact that in this matter the Sales Tax Officer did not take any action on the information supplied under Section 25 cannot affect the legal liability created by the Sales Tax Act in the circumstances of the case.
10. In support of his argument, Mr. Patel has cited the case of Rameshwar Dass v. Excise and Taxation Commissioner, Pepsu, Patiala and Ors.  10 S.T.C. 218. In that case there was a syndicate which was registered as a dealer. The syndicate had some associations as its members. These associations paid commission to the syndicate on the supplies of cloth made to them. The entire profits earned by the syndicate in the shape of this commission were not shared by other associations. It was held that the assessee syndicate was a dealer and the associations could not be deemed to be partners of the syndicate, but as distinct entities for all purposes except for only one, namely, that the syndicate could supply cloth only to the associations, which were its members and not to any one else. The decision in this case will not help us in deciding the issue raised in the present petition as the fact about partnership is not in doubt. The partnership of the association was in dispute which is not the case in the present petition.
11. Mr. Patel also pointed out to us the case of B.M. Desai v. V.Ramamurthy, I Income-tax Officer, A-III, Bombay  34 I.T.R. 409, in which it was held that any provision in a taxing statute imposing a vicarious liability must be strictly construed in favour of the assessee. In the present case there is no doubt about the construction of Section 26(1). Once it is proved that there is an entire transfer of business the section will apply. We have arrived at a definite conclusion that the business in the case was entirely transferred to the new partnership on 19th January, 1956. Therefore, the partnership firm consisting of three partners, according to us, is liable for any tax remaining unpaid at the time of the transfer. There is no liability under the said section regarding penalty. This was conceded by Mr.
12. Now the only point that remains to be considered is whether a partner is liable for the tax dues of the firm. In suport of his argument that a partner is not liable for the tax liability of the firm Mr. Patel has cited the case of Lalji v. The Assistant Commissioner, Sales Tax, Raipur  9 S.T.C. 571. In that case it was held that where the department only assessed the firm, the arrears of tax are, in the first instance, recoverable from its assets. Until the assets are realised or cannot be found, the action of the taxing authorities to try to realise the amounts of tax from the partners personally is premature. Their Lordships have further observed, "We leave undecided the question whether the partners would be personally liable for the balance, if any, remaining due".
13. The ratio of this case will apply to the facts in the present petition and we, therefore, hold that the recovery proceedings against a partner are premature. The department is, therefore, directed to realise the arrears of only tax and not penalty initially from the assets of the partnership. We further hold that the partners are individually liable for the debts of the firm since their liability is not limited as in the case of a limited company. Hence we order that if the tax dues only are not fully realised from the assets of the firm, the balance, if any, may be recovered from any of the partners. The application is, therefore, allowed to this extent.