SAHU RAJESHWAR NATH vs. INCOME-TAX OFFICER

CIVIL APPEAL No. 1768/1967Supreme Court[1969] 1 S.C.R. 99904 September 1968Bench: 3 JudgesAuthor: J.C. SHAH, V. RAMASWAMI, A.N. GROVER A B7 pages
AI SummaryDismissed

What were the facts?

The appellant, a partner in an unregistered firm, was assessed to income tax for assessment year 1945-46. He claimed to have sold his share before the assessment. No notice of assessment proceedings or demand under Section 29 of the Indian Income-tax Act, 1922, was served on him. He learned of the tax liability only when recovery proceedings under Section 46(2) were initiated against him. He filed a writ petition challenging the recovery, which was dismissed by the High Court and subsequently by a Division Bench. The appellant appealed to the Supreme Court, conceding he was a partner for the relevant year and liable for the firm's tax, but argued that a separate notice under Section 29 was mandatory before recovery proceedings under Section 46.

What did the Supreme Court hold?

The Supreme Court held that a notice under Section 29 of the Income-tax Act, 1922, is not necessary to be served upon a partner of an unregistered firm before proceedings are taken for recovery of tax under Section 46(2). The phrase 'other person liable to pay' in Section 29 does not include a partner of an unregistered firm, as their liability is not imposed by a specific provision of the Income-tax Act itself, but rather by the Partnership Act. The Court also held that the proceedings taken for recovery of tax by the respondents against the appellant were legally valid. The proviso to Section 46(2) grants the Collector the powers of a Civil Court under the Code of Civil Procedure, 1908, for recovery. Order 21, Rule 50(2) of the CPC, which allows execution against a partner, applies mutatis mutandis. Since the appellant admitted to being a partner for the relevant accounting year, the Collector could lawfully proceed to execute the certificate under Section 46(2) against him and recover the income-tax arrears. The appeal was dismissed.

What were the issues?

1. Whether a separate notice under Section 29 of the Indian Income-tax Act, 1922, is necessary to be served upon a partner of an unregistered firm before initiating recovery proceedings under Section 46(2) of the Act for tax due from the firm. 2. Whether the Collector, upon receiving a certificate under Section 46(2), can lawfully recover tax due from an unregistered partnership from a partner of that firm. Assessee's Arguments: - A separate notice under Section 29 of the Act is mandatory before recovery proceedings under Section 46 can be initiated against a partner. - The Collector cannot recover tax due from the unregistered partnership from the appellant under Section 46(2) proceedings. Revenue's Arguments: - Not explicitly recorded, but impliedly, that the recovery proceedings were legally valid and no separate notice under Section 29 was required for a partner. - The proviso to Section 46(2) empowers the Collector to recover tax from partners, and Order 21, Rule 50(2) of the Civil Procedure Code applies.

Which sections of the Income-tax Act were involved?

Section 29,Section 46(2),Section 25A,Section 26(1),Section 24B,Section 23A(3),Section 18(7)

AI-generated summary — verify with the full judgment below

' A B c D E F SAHU RAJESHWAR NATH v. INCOME-TAX OFFICER September 4, 1968 • (J.C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.] Indian Income-tax Act (11 of 1922), ss. 29 and 4~Ta.t due from an unregistered firm-Recovery proceedings against a partner-Whether a separate notice to the partner necessary, The appellant was a partner in an unregistered firm under the Income- tax Act, 1922. The firm was assessed to mcome·tax. No notice of the assessment proceedings was given to the appellant, nor was any notice of demaod issued under s. 29 of the Income-ta.< Act. The appellant learnt of the proceedings for the first time when recovery proceedings were started against him for the recovery of the tax. The appellant filed a writ petition in the High Court challenging the iecovery of the tax from him.

The High Court dismissed the petition, which order was upheld in appeal unde'r the Letters Patent. In appeal to this Court, the appellaot contended tlaat (i) a separate notice under s. 29 of the Act was necessary and unless such a notice was given, proceedings could not be initiated against the appellant under s. 46 of the Income-tax Act for recovery of the tax; and (li)

The order continues below.

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