The assessment of a dissolved firm to Excess Profits Tax is valid if the assessment is made in accordance with the provisions of the Excess Profits Tax Act.

Judgment

AYYANGAR, J. : Muthappa Chettiar, the appellant in Civil Appeal 107 of 1956 was sought to be proceeded against for the recovery from him of Excess Profits Tax assessed in respect of the business of Muthappa & Co. of which he was a partner. He disputed the legality of the recovery proceedings and filed Writ Petition 498 of 1952 before the High Court of Madras for the issue of a writ of prohibition for directing the Income-Tax Officer, E.P.T. Circle Madras not to take coercive steps against him for the recovery of the tax assessed. This petition was dismissed & Civil Appeal 107 of 1956 has been filed on special leave obtained from this Court. During the hearing by the High Court, of Writ Petition 496 of 1952. Muthappa Chettiar (referred to hereafter as the appellant) sought also to impugn the legality of the order of assessment to Excess Profits Tax. The learned Judges held however that such a contention was not germane to the writ to prohibition for which he had prayed, adding also that there were no merits in the grounds urged. To avoid any technical objection, the appellant has filed in this Court Petition 130 of 1958 under Art. 32 of the Constitution in which the prayer is for the grant of a writ of certiorari or other appropriate writ to quash the order of assessment to Excess Profits Tax, and the Appeal and the petition being thus inter-related have been heard together.

2. We shall first take up consideration the matters urged in the Writ Petition, as logically having precedence over the challenge to the legality of the proceedings for the recovery of the tax. The facts necessary to appreciate the points urged are briefly these : The appellant and Thyagrajan Chettiar (impleaded as the second respondent in Civil Appeal 107 of 1956) were partners in a firm named Muthappa & Co. started in November 1940 and the firm was the managing agent of a textile Mill called Saroja Mills Ltd. in the Coimbatore district. The assessment which is under challenge is for the Excess Profits tax liability of this managing agency business & the relevant chargeable accounting periods are the calender year 1942 and the broken period January 1, 1943 to March 4, 1943. The liability of the firm to Income-Tax for the same periods was assessed by the Income-tax Officer by his orders dated March 15, 1948, by applying the provisions of S. 23(5)(b) of the Income-tax Act. 1922, and the appellant paid when demanded his share of the tax and there is now no dispute about the propriety of that assessment. The income of the managing agency business was computed for Excess Profits Tax at the same figure as for assessment to Income-tax and the assessment for the two chargeable accounting periods was completed by the Excess Profits Tax Officer by his order dated March 31, 1951, and it is the validity of this order of assessment that is challenged in Petition 130 of 1958.

3. The first matter urged in support of the petition may beset out thus : An assessment to be valid must be after notice to the assessee. In the present case, the assessment was admittedly completed by serving the prescribed notices on Thyagrajan Chettiar alone, who according to the terms of the partnership between the parties was the managing partner. But it was urged that there had been a dissolution of the firm as and from March 4, 1943, that thereafter the partnership ceased to exist, and with it the mutual agency between the partners, with the result that Thyagrajan Cheittiar could not represent the firm which had ceased to exist nor the appellant. On there premises it was submitted that the assessment of the business to Excess Profits Tax after notices only to Thyagrajan Chettiar could not bind the firm nor at any rate bind the appellant.

4. In our opinion there are two answers to this submission, either of which would suffice to reject the appellant s plea : (1) That on the facts of the present case the appellant is precluded from pleading that the firm had been dissolved at the date of