JUDGMENT

Satish Chandra, J. - The petition under article 226 of the Constitution of India prays for the quashing of a notice of attachment issued by the ITO on 22-4-1972, u/s 226 of the income tax Act, 1961 ('the Act') and for the refund of the sum of money attached thereunder. L.K. Ahuja & Co. was a partnership firm. It was constituted in February 1969. The accounting period of the firm was from 1st February to 31st January of the next year. It had five partners, Kanhaiya Lal, petitioner No. 2, being one of them. Four minors, including Kum. Ashu and Shankar Lal, whose guardians are petitioner Nos. 3 and 4, had been admitted to the benefits of the partnership. This firm was reconstituted on 1-9-1970. Some of the partners retired and some new persons, including Manohar Lal Ahuja, petitioner No. 1 became partners in this firm. The petitioners allege that soon after its constitution, the firm took several contracts with the railway department for construction of buildings. When the firm was reconstituted in September 1970, the work under these contracts was going on. The reconstituted firm took over the assets and liabilities of the previous firm, including the existing contracts.

2. For the assessment year 1971-72 (accounting period ending on 31-1-1971), the firm filed a return on 22-2-1972, showing a total income of Rs. 78,648. The firm was assessed for this year on an income of Rs. 1,09,602, on 22-3-1972. It was also granted registration by a separate order of the same date. The assessment order shows that petitioner Nos. 1 and 2 were recognised as the partners of the firm, while petitioner Nos. 3 and 4 were recognised as having been admitted to its benefits.

3. The petitioners' case is that in April 1971 differences arose amongst the partners. The four petitioners formed one group, while the remaining partners, headed by Shri L.K. Ahuja, formed another group. The partnership firm is alleged to have been dissolved on 30-4-1971. Shri L.K. Ahuja formed a fresh firm with effect from 1-5-1971, from which the four petitioners were excluded. The remaining partners of the old firm, along with six new persons became partners of the new firm, which also bore the name L.K. Ahuja & Co.

4. On 21-4-1972, a letter addressed on behalf of L.K. Ahuja & Co. was sent to the ITO, stating that a sum of Rs. 2 lakhs is to be received by the firm from the Northern Railways, Allahabad, towards their bills. The ITO was requested to recover the advance tax for the financial year 1972-73 and the demand for 1971-72 against the firm and the partners. In the details mentioned in this letter, the income tax demand for the year 1971-72 against the firm was shown at Rs. 13,000, while another sum of about Rs. 15,000 was mentioned as tax demand due from the various then existing partners, excluding the four petitioners. In addition, it was mentioned that a sum of Rs. 16,519 was payable by the firm as advance tax for the year 1972-73, while a sum of Rs. 1,50,000 was payable as advance tax for that year by the partners of this firm. The very next day, namely, on 22-4-1972, the ITO issued a notice u/s 226(3) stating that a sum of Rs. 2 lakhs is due from L.K. Ahuja & Co. and its partners on account of income tax/ super tax/penalty/interest/fine, and requiring the Engineer-in-Chief to pay any amount due from him to the said L.K. Ahuja & Co. and its partners up to a sum of Rs. 2 lakhs mentioned above immediately. As a result, a sum of Rs. 1,91,362 was paid by the Engineer-in-Chief, Allahabad, to the ITO. In June and August 1972, the firm addressed communications to the ITO requiring him to adjust the amount received by him from the railway authorities against the demands of income tax and advance tax due from the firm and its then existing partners. In the letter, dated 24-8-1972, it was mentioned that the tax demand of Rs. 7,244 was payable by the firm for the year 1971-72 and that the firm was liable to pay an advance tax of Rs. 7,500. The balance was requested to be ad