The liability of the partners of a registered firm to pay tax attributable to the share of each partner in the income of the firm is not joint and several.

Judgement

SHAH, J.:- A business of manufacture and sale of tents was commenced in 1940 in the name and style of Messrs Jawahar Tent Factory, Agra, in partnership. There were four partners in the firm-Jawahar Lal, Shiam Lal, Radha Raman and Radha Krishan. Jawahar Lal represented his Hindu undivided family and his share in the profit and loss was 8 (eight annas) in a rupee. The share of other partners was 2-8 (two annas eight pies) each. The firm was registered under Section 26A of the Indian Income-tax Act, 1922, and tax was assessed on the income of the firm in accordance with Section 23 (5) (a) of the Act. The partnership was, according to the Income-tax Officer dissolved on October 23, 1946.

2. This appeal relates to the tax liability of Jawahar Lal in respect of the income from the firm for the assessment years 1944-45, 1945-46, 1946-47 and 1947-48. The tax attributable to the share of Jawahar Lal which it is claimed could not be recovered from him, is sought to be recovered from his erstwhile partner Radha Krishan. The following table sets out the share of the income of Jawahar Lal and the tax liability not satisfied by him in respect of the four years of assessment:

Year of assessment Share of income of Jawahar Lal from the firm Tax liability not satisfied

1944-45 47.717 8,623-56

1945-46 53,864 39,416-23

1946-47 35,167 16,092-59

1947-48 19,466 15,163-87

79,296-25

The manner in which the tax liability is determined requires some elucidation. The Hindu undivided family of Jawahar Lal had considerable other income. In accordance with the provisions of Section 25 (3) (a) of the Indian income-tax Act, the share of Jawahar Lal from the income of the partnership was added to the other income of the family, and the family was assessed to tax on the total income. For the purpose of computing "the tax liability not satisfied" as shown in the last column of the statement set out hereinbefore, the Income-tax Officer determined the average rate of tax on the total income of the Hindu undivided family and then applied that rate to the share of Jawahar Lal from the firm to determine the tax liability attributable to that share. Tax collected from Jawahar Lal was credited proportionately to the income under the two heads towards the tax liability so determined, and the tax liability of Jawahar Lal attributable to his share in the income was computed.

3. The Income-tax Officer served Radha Krishan respondent in this appeal on October 3, l962 with demand notices for the tax remaining unpaid by Jawahar Lal. Radha Krishan thereupon moved the High Court of Judicature at Allahabad for a writ of certiorari quashing the notices of demand and for an order directing the Income-tax Officer to withdraw the notices. Manchanda, J., allowed the petition filed by Radha Krishan and the order passed by Manchanda, J., was confirmed in appeal by a Division Bench of the High Court. With special leave the Income-tax Officer, Agra has appealed to this Court.

4. Section 23 (5) of the Income-tax Act, as it stood at the material time read as follows :

"(5) Notwithstanding anything contained in the foregoing sub-sections, when the assessee is a firm and the total income of the firm has been assessed under sub-section.(1), sub-section (3), or sub-section (4) as the case may be :-

(a) in the case of a registered firm, the sum payable by the firm itself shall not be determined but the total income of each partner of the firm, including therein his share of its income, profits and gains of the previous year, shall be assessed and the sum payable by him on the basis of such assessment shall be determined :

Provided * * * *

Provided further * * * *

Provided also * * * *

(b) in the case of an unregistered firm, the Income-tax Officer may instead of determining the sum payable by the firm itself proceed in the manner laid down in Clause (a) applicable to a registered firm, if in his opinion, the aggregate amount of the tax including super-tax, if any, payable by the partners under s