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Writ Petitions Nos. 245 and 246 of 1964, decided on 14th July 1964.

(a) Income‑tax Act (XI of 1922)

, S. 34‑A‑Order by Inspecting Assistant Commissioner holding a person partner of unregistered firm‑Remedy available by filing appeal and not writ.

(b) Income‑tax Act (XI of 1922)

, S. 23‑Unregistered firm --Determination of its partners‑Not necessarily to be made before or at time of making assessment.

Gokuldas v. Kikabhai Abdulali and others 33 I T R 94 ref.

(c) Income‑tax Act (XI of 1922)

, Ss. 46 (1) & 29 Penalty imposed on partner of unregistered firm for default of tax‑No notice of demand previously served ova him‑Recovery of tax and penalty unlawful.

Doorga Prasad v. Secretary of State A I R 1945 P C 62; Govindaswamy v. Income‑tax Officer 1960 P T D 526 and Monindra Lal Goswami v. Income‑tax Officer 30 I T R 550; B. Shah Mahmood v. Assistant Commissioner 47 I T R 55 ref.

(d) Sales Tax Act (II of 1948)

, S. 12‑Recovery of penalty or sales tax without service of demand notice on partner of unregistered firm‑Not legal.

Istiaque Ahmed for Petitioner.

A. F. M. Mesbahuddin with A. M. Khan Chowdhury for Respondents.

Dates of hearing: 1st, 4th and 5th May 1964.

JUDGEMENT

M. R. KHAN, J.

‑These two petitions under Article 98 of the Constitution by the same petitioner were heard together as they involve common questions of law and facts, and this judgment will dispose of both the petitions.

The Petition No. 245 of 1963 is directed against the proceedings commenced under the provision of section 46 (2) of the Income‑tax Act, 1922 for the recovery from the petitioner of a sum of Rs. 295 said to be due by way of income‑tax and penalty from the unregistered firm M/s. Syed Abdul Kaher & Co. for the assessment year 1949‑50.

The Petition No. 246 of 1963, on the other hand is directed against the proceedings commenced under the provisions of section 12 (2) of the Pakistan General Sales Tax‑ Act, 1948 to recover from the petitioner a sum of Rs. 2038‑12‑0 said to b e due by way of sales tax and penalty from the said firm for the folic quarters ending on 31‑3‑49.

The petitioner alleges that he was an employee of M/s. Syed Abdul Kaher & Co., a proprietory firm of which Syed Abdul Kaher was the proprietor. The firm carried on business as dealer of rice and paddy and other things for which it was assessed to income‑tax as unregistered firm under section 23(4) of the Income‑tax Act for the assessment year 1949‑50 on 28‑5‑51 and notice of demand under section 29 of the said Act was issued in the name of the firm on 1‑6‑51 for a slum of Rs. 267 being the tax payable by the firm. Subsequently, another notice dated 3‑7‑52 was issued in the name of the said‑firm demanding a penalty of Rs. 27 imposed under section 46 (1). Then on 27‑3‑53 the Income‑tax officer forwarded a certificate under section 46 (2) of the Income‑tax Act to the Collector certifying that a sum of Rs. 294 including penalty was' due from the assessee firm and asked for its recovery as a public demand Accordingly a certificate case for the recovery of the income‑tax and penalty, being Bakijai Case No. 361 of 1952‑53 (re‑numbered as Bakijai case No. 49 of 1959‑60), was started by, the Bakijai Officer (respondent No. 4) against the said firm. Another certificate case being Bakijai Case No. 408 of 1952‑53 (re‑numbered as Bakijai Case No. 50 of 1959‑60) was also started against the said firm for recovery of the sales tax‑ and penalty amounting to Rs. 2038‑12‑0. In order to evade his liability for the tax, Syed Abdul Kaher tried to add the petitioner in the recovery proceedings as a certificate debtor allegedly on the ground of the petitioner's being a partner of the assessee" firm. Coming to know of this, the petitioner filed a petition before the Bakijai Officer on 3‑12‑59 stating that he was merely stn employee of the firm and not a partner of it. A local enquiry was made in the matter by a Magistrate as the result 'of which' it was found that .the petitioner was only an employee of the firm. Even then, certain movables of the petitioner were attached by the Bakijai Officer on 24‑5‑61. Thereafter the petitioner made an application on 19‑8‑61 to the Income‑tax Officer (respondent No. 3) denying his liability for the' tax and prayed for stopping the certificate proceedings against him. The Income‑tax Officer, in his letter to the petitioner; dated 28-8‑6l, rejected the petitioner's contention that he was not a partner of the firm The petitioner then made a further representation to the Income‑tax Officer for reconsidera tion of the matter. The Income‑tax Officer, then heard both the petitioners and Syed Abdul Kaher in the matter and took the view that the petitioner did not carry on business with Syed Abdul Kaher as a partner and that Syed Abdul Kaher alone was liable for the tax due and reported to the Bakijai Officer accordingly. Thereupon the Bakijai Officer served a notice on Syed Abdul Kaher on 15‑11‑61 asking him to pay the tax as he was alone found to be liable for it. Subsequently, the petitioner received a notice on 9‑6‑1962 from the Bakijai Officer stating that the order of the Income‑tax Officer holding Syed Abdul Kaher alone liable for the tax was reversed by the inspecting Assistant Commissioner of Income‑tax (respondent No. 2) holding that the petitioner and Syed Abdul Kaher were jointly and severally liable for the tax payable by the firm. The petitioner then made a representation on 29‑6‑62 to the Commissioner of Income‑tax (respondent No. 1) challenging the correctness of the decision of the Inspecting Assistant Commissioner of Income‑tax, but it was turned down by the Commissioner. The petitioner considers himself aggrieved by the order of the Inspecting Assistant Commissioner and that of the Commissioner of Income‑tax as these were made behind his back without giving him an opportunity of being heard. As the petitioner failed to get any redress from the Income‑tax authorities, he presented the Petition No. 245 of 1963 challenging the validity of the certificate proceedings for the recovery of income‑tax and penalty and for quashing those proceedings.

On more or less, the same facts, the petitioner filed the next Petition No. 246 of 1963 for quashing the certificate proceedings for the recovery of sales tax and penalty from him on the ground of their being illegal.

On these two petitions two separate Rules were issued on the respondents. In the Rules the respondents were directed to show cause why the said certificate proceedings for the recovery of income‑tax and sales tax from the petitioner should not be quashed after declaring the same as having been initiated against the petitioner without lawful authority.

All the respondents except the Bakijai Officer (respondent No. 4) opposed both the Rules by filing an affidavit‑in‑opposition in each case. The respondents do not deny the substance of the facts as alleged in the petitions, but they contend that the petitioner was a partner of the firm M/s. Syed Abdul Kaher & Co. and that the demand notice for income‑tax and the notice assessment for sales tax having been issued in the name of that firm the petitioner' as a partner thereof is liable for the income‑tax and the sales tax assessed in the name of the firm.

Mr. Ishtiaq Ahmed, learned counsel for the petitioner has urged the following points in support of the Rules:

(1) That the petitioner was not a partner of the firm M/s. Syed Abdul Kaher & Co., and, as such, he is not liable to pay the income‑tax and the sales tax assessed in the name of the firm.

(2) The Income‑tax Officer should have determined at the time of the assessment as to who were the partners of the said firm and this not having been done, it was not competent to the Income‑tax authorities to hold the petitioner to be a partner of that firm, subsequent to the order of assessment.

(3) The petitioner was not served with any demand notice under section 29 of the Income‑tax, nor may notice of assessment of the sales tax was served on him under section 12 of the Sales Tax Act of 1948. In the absence of service of such a demand notice or a notice of assessment, no tax becomes payable and, as such the certificate proceedings for the recovery of the income‑tax and the sales tax, in so far as the petitioner is concerned, are illegal.

As regards the first point, the admitted fact is that the order of the Income‑tax Officer holding the petitioner not to be a partner of the firm was revised by the Inspecting Assistant Commissioner on 9‑6‑62. The competence of the Inspecting Assistant Com missioner to revise the order of the Income‑tax Officer is not disputed. It appears that the Inspecting Assistant Commissioner had power to revise the order of the Income‑tax Officer under section 34A (1) of the Income‑tax Act which runs thus:‑

"The Inspecting Assistant Commissioner may call for and examine the record of any proceeding under this Act and if he considers that any order passed therein by the Income‑tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving, the assessee an opportunity of being heard and after making, or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment to be made."

The order of the Inspecting Assistant Commissioner holding the petitioner and Syed Abdul Kaher jointly and severally liable for the tax as partners of the firm, though passed without giving any hearing to the petitioner, was appealable under section 33 of the Income‑tax Act within sixty days of the date of Communication of the order. The petitioner, instead of preferring an appeal to the Appellate Tribunal under section 33 against the said order, made a respresentation to the Commissioner of Income‑tax against that order on 29‑6‑62, that is, within the period of appeal. This representation, dated 29‑6‑62 appeared to have been entertained as a revisional application by the Commissioner of Income‑tax under section 33‑A, although no revisional application could lie within the period of appeal in view of the proviso (a) to sub section (1) of section 33‑A. Be that as it may, as the petitioner did not avail of the remedy in the proper form, namely, the appellate tribunal under section 33 against the order of the Inspecting Assistant Commissioner holding him to be a partner of the firm, he cannot now agitate the same question under Article 98 of the Constitution. Moreover, whether or not the petitioner was a partner of the firm being a question of fact cannot be investigated at this stage.

As regards the second point, Mr. Ishtiaq Ahmed submits that before making the assessment order, the Income‑tax officer should have determined as to who were the partners of the firm, if it was a partnership at all. In support of this contention, he has cited the case of Gokuldas v. Kikabhai Abdulali and others (33 I T R 94).

In the cited case, the learned Judges of the Bombay High Court, after examining various provisions of the Income‑tax Act, held that an Income‑tax Officer has an implied power to determine who the partners of an unregistered firm are. But, in that case, it does not appear to have been held that non‑determination of the partners of an unregistered firm before making the assessment in the name of the firm renders the assessment illegal. Mr. Ishtiaq Ahmed frankly concedes that the assessment in the name of an unregistered firm will not be invalid if the partners thereof are not determined by the Income‑tax Officer before or at the time of the assessment. It, therefore, follows that, even after the assessment has been made in the name of an unregistered firm, it shall be competent to the income‑tax authorities as in the present case, to determine as to who are the partners of that firm.

Coming now to the last point, it is admitted by the respondents that the demand notice under section 29 of the Income‑tax Act was issued in the name of the firm namely, M/s. Syed Abdul Kaher & Co. and that no notice under that section was issued to the petitioner as a partner of that firm. It is also‑admitted that notice of assessment of sales tax under section 12 of the Pakistan General Sales Tax Act, 1948, was issued in the name of the said firm and not in the name of the petitioner as a partner of that firm. Mr. Ishtiaq Ahmed strenuo usly urges that no notice of demand under section 29 of the Income‑tax Act and no notice of assessment of Sales Tax under section 12 of the Pakistan General Sales Tax Act having been issued to the petitioner, he cannot be said to have failed to pay the amount assessed as income‑tax and sales tax and cannot, therefore, be treated as an assessee in default with the result that the certificate proceedings initiated against the petitioner for the recovery of the income‑tax and Sales Tax are illegal. We think that there is much force in this contention. Section 29 of the Income‑tax Act runs thus:‑

"When any tax, penalty or interest is due in consequence of any order passed under or in pursuance of this Act, the Income tax Officer shall serve upon the assessee or other person liable to pay such tax, penalty or interest a notice of demand in the prescribed form specifying the sum so payable."

It appears from this section that the tax assessed under the Income‑tax Act including penalty and interest does not become payable until a notice of demand specifying the amount of the tax, penalty or interest is served on the assessee or other person liable to pay the same. This was the view taken by their Lordships of the Privy Council in the case of Doorga Prasad v. Secretary of State (A I R 1945 P C 6 2 p.64). In that case, their Lordships observed.

"In their Lordships' opinion, although income‑tax may be popularly described as due for a certain year, it is not in law so due. It is calculated and assessed by reference to the income of the assessee for a given year, but it is due when demand is made under section 29 and section 45. It then becomes a debt due to the Crown, but not for any particular period."

Mr. Ishtiaq Ahmed has cited the cases of Govindaswamy v. Income‑tax Officer (1960 P T D 526), Monindra Lal Goswami v. Income‑tax Officer. (30 I T R 550), B. Shah Mahmood v. Assistant Commissioner (47 I T R 55), in support of the same view. It is not necessary for us to discuss these cited cases, for, it is well settled that a tax or other sum of money payable under the Income‑tax Act does not fall due and become recoverable until a notice of demand has been served on the assessee or other person liable for it. In the present case, the notice of demand under Section 29 was served on the assessee firm but the income‑tax and penalty are sought to be recovered from the petitioner as a partner of that firm. No doubt, the petitioner having been found to be a partner of the assessee firm is liable to pay the tax and penalty as "other person" within the meaning of section 29. But, the amount o: tax and penalty, so far as the petitioner is concerned, has not yet fallen due and become recoverable from him for the simple reason that no notice of demand under section 29 has been served on him so far. Consequently, the certificate proceedings for the recovery of income‑tax and penalty, so far as they relate to the petitioner, are unauthorised and unlawful.

As regards sales tax, the petitioner's liability for it, if any, is to be decided having regard to the provision of section 12 of the Pakistan General Sales Tax Act, 1948 in spite of its repeal by the Sales Tax Act, 1951 (Central Act No. III of 1951). This is because of the saving provision of section 40 of the repealing Act.

Section 12 of the Sales Tax Act of 1948 reads as follows:

"12 (1) The Tax assessed under this Act shall be paid in such manner and in such instalments and within such time, not being less than fifteen days from the date of service of the notice of assessment, as may be specified in such notice.

(2) In default of such payment a penalty not exceeding the tax remaining unpaid may be imposed and the total amount due including the penalty, if any, may be recovered as if it were an arrear of land revenue:" Section 2 (2) of the said Act gives the definition of "assessee" as follows: "assessee" means a person by whom tax is payable under section 3 of this Act."

Section 12, read with the definition of "assessee" in section 2 (12) means that the amount of the sales tax assessed and penalty imposed under that Act falls due and become recoverable as a public demand only after a notice of assessment has been served on the person by whom the same is payable of course, no authority has been cited with regard to the effect of non‑service of notice of assessment of sales tax on the person liable to pay it, but it appears to us from a reading of section 12 that the effect of non‑service of such notice is the same as that of non‑service of a demand notice under section 29 of the Income‑tax Act. In the present case, the notice for assessment of sales tax, like the demand notice for income‑tax, was served on the assessee firm Syed Abdul Kaher & Co., but not on the petitioner as a partner of that firm. For want of such notice, the amount of sales tax and penalty can not be said to have fallen due and become recoverable from the petitioner. Hence the certificate proceedings for the recovery of the sales tax and penalty, so far as they relate to the petitioner, are equally unauthorised and unlawful.

Mr. Mesbahuddin, learned Advocate for the respondents contends that when the notice of demand for income‑tax and the notice of assessment of sales tax were issued in the name of the) assessee firm, the Collector, who has all the powers of a Civil Court for the purpose of recovery of the amounts due, can recover the same from the petitioner, a partner of the firm just as the Civil Court, can, in execution of a decree against a firm, realise the decretal amount from a partner individually. This argument is of no avail, because there is much difference between the D liability of the partners of a firm under the Partnership Act and that of the partners for income‑tax and sales tax. Under the Partnership Act, partners, in the absence of any agreement to the contrary, are also liable to contribute to the liabilities of the firm. Moreover, under Order XXX of the Code of Civil Procedure, a decree against a firm is really a decree against all its partners. But this is not the case in respect of liabilities for and sales tax, because the tax assessed under the Income‑tax Act or the Sales Tax Act does not become payable by a partner of a firm merely because he is a partner; the tax falls due and becomes payable by the partner only after the notice required under the relevant taxing statute has been served on him.

Mr. Mesbahuddin then submits that the petitioner could have objected to the attachment of his properties under the relevant provision of the Public Demands Recovery Act, but this remedy not having been availed of, the petitioner is not entitled to any relief in these petitioners. This argument does not appear to be sound inasmuch as the certificate proceedings themselves, so far as they relate to the petitioner, are without any foundation, there being no public demand falling due from him.

In the result, the petitions are allowed and the Rules made absolute. It is declared that the certificate proceedings in question, in so far as they relate to the petitioner, are illegal and of no legal effect. In the circumstances of the case, we do not make any order as to costs.

HASAN, J.

‑I agree.

M. N. Petitions allowed.

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