Partners of an unregistered firm are liable to pay tax assessed on the firm under Section 44, but recovery proceedings must adhere to the requirements of notice of demand under Section 29.

( 1 ) THIS petitioner, who is a partner of a firm called "unni and Co. ", prays for the issue of an appropriate writ to wash the proceedings initiated by the second respondent, the Deputy commissioner, Bangalore District, to recover from the petitioner income-tax due by the said firm on the strength of a certificate under Section 46 (2) of the Indian Income-tax Act issued by the first respondent, the Income-tax Officer. Special Survey Circle, Bangalore.

( 2 ) FOR the assessment year 1953-54 the said firm was assessed as an unregistered firm under an order of assessment dated March 15, 1954, made by the first respondent officer. A sum of Rs. 70,206-10-0 was determined as the income-tax payable by the firm, a notice of demand under section 29 of the Act was also served on the firm. Deducting a small sum said to have been paid by one of the partners, a balance of Rs. 67,923-1-3 remained unpaid. The first respondent thereupon issued to the second respondent a certificate under section 46 (2) of the Act specifying the amount of arrears due from the assessee firm, sometime later if stated that the first respondent gave certain details as to the constitution of the firm to the second respondent. But no separate notice of demand was issued to the petitioner, nor was he named in the certificate as the assessee from whom areas were due. The second respondent proceeded to attach and sell properties belonging to the petitioner was liable to pay 1/4 of Rs. 67,923-1-3.

( 3 ) THE petitioner contends that the assessee in the case was the unregistered firm of Unni and Co. , which was assessed as a separate entity distinct from its partners, that, therefore, he, one of the partners could not be said to be either an assessee or a person liable to pay the tax assessed on the firm, and that even not he assumption that he could be said to be either an assessee or a person liable to pay the tax, no notice of demand under section 29 having been served upon him, proceedings for recovery of the tax could not have been validly initiated against him and further. That the collector acting under the certificate issued under section 46 (2) could proceed to recover the tax only from the assessee named in the certificate and from no other.

( 4 ) IN the counter affidavit filed on behalf of the first respondent the allegations of fact made by the petitioner in his affidavit were accepted as substantially correct and true, but his legal contentions were described as untenable. A supplemental affidavit was subsequently filed on behalf of the first respondent in which it is stated that by virtue of a letter received by the department on January 9, 1956, from the auditor of the firm, the provisions of section 44 of the act were attracted to the circumstances of the case and that, therefore, it was open to the authorities of proceed against individual partners of the erstwhile firm to recover the tax levied on the firm. Neither the letter or the accuracy of its contents are denied on behalf of the petitioner, but it is argued that it does not have the legal effect contended for by the Department.

( 5 ) IT will be convenient first to decide what exactly is the legal effect of the letter mentioned above. In the said letter it is clearly stated "the firm has not done many business for the assessment year under review (1955-56) and the firm is not also having any idea of carrying on the business any further and that the same is not also having any idea of carrying on the business any further and that the same is going to be dissolved shortly ". It is clear, therefore, that it was not a mere suspension of business. The firm had no idea of continuing the business at all. In fact it was contemplating dissolution. There is no suggestion that the business is going to be taken over by some other person or firm. It was not, therefore, a case of succession to the business of the firm either. The conclusion is inevitable that the situation was one of total