N. N. Subramaniam v. State of Tamil Nadu — 1991 DIGILAW 793 (MAD)

Judgment :- KANAKARAJ, J. M/s. Ramakrishna and Company, a partnership. Firm comprising of three partners, were dealers in peas, fried peas and puffed rice. For the assessment year 1973-74, the firm reported a total and taxable turnover of Rs. 2, 85, 928.37 and Rs. 44, 480.93. The assessing authority issued summons for the production of the records. But the assessee failed to respond. After issuing a notice the assessing authority proceeded to assess the firm for the year 1973-74 on a total and taxable turnover of Rs. 12, 43, 713.48, taxable at 3 1/2 per cent. For the assessment year 1974-75 they had reported a total and taxable turnover of Rs. 39, 833.23 and Rs. 19, 144.25, respectively. However, when summons was issued for the production of the accounts the assessee did not produce the accounts. Due to certain irregularities the returns were rejected as incorrect and incomplete and the assessing authority proceeded to resort to best judgment assessment. The proposal notice was served on two partners, but they did not respond. The assessing authority therefore assessed the firm on a total and taxable turnover of Rs. 88, 568.21 and Rs. 73, 132.46 for the assessment year 1974-75, which order was passed on July, 16, 1976. A penalty of Rs. 639 was imposed under section12(3) of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as "the Act"). 2. Against the said two orders of assessments the petitioner herein namely, N. N. Subramaniam filed two appeals before the Appellate Assistant Commissioner. There was a delay of 2, 428 days in firing the appeal against the assessment order dated February 21, 1975 (1973-74) and a delay of 1883 days in filing the appeal against the assessment order dated July 15, 1976 (1974-75). The petitioner filed two petitions, M.P. Nos. 262 and 263 of 1981, for condonation of the delay in filing the appeals. The appellate authority dismissed these petitions and rejected the appeals as time barred. Second appeals were therefore filed before the Tamil Nadu Sales Tax Appellate Tribunal and they were dismissed by the Tribunal on September 4, 1982. These two tax revision cases are against the said common order of the Tribunal. 3. Mr. C. Natarajan, learned counsel appearing for the petitioner, contends that the partnership firm was dissolved on December 10, 1974 and thereafter there was no relationship of agency between erstwhile partners. Argues, Mr. These two tax revision cases are against the said common order of the Tribunal. 3. Mr. C. Natarajan, learned counsel appearing for the petitioner, contends that the partnership firm was dissolved on December 10, 1974 and thereafter there was no relationship of agency between erstwhile partners. Argues, Mr. Natarajan that a proper compliance with the provisions of the Act, requires that each of quondam partners should have been individually served with notice and also served with the assessment orders. According to him neither section 19A of the Act, nor rule 52 of the Tamil Nadu General Sales Tax Rules (hereinafter called "the TNGST Rules" detract from the necessity of serving each of the erstwhile partners. Inasmuch as the petitioner had not been served with the assessment orders, the contention is that he is entitled to file an appeal and the alleged delay reckoned from the date of the service on the other partners cannot be held against him. To elaborate the point Mr. Natarajan says that the fiction contemplated in section19-A of the Act can he extended only to a logical end and not beyond. The Legislature did mean to extend the fiction to the extent of holding that service on one erstwhile partner should he equated with the service on the other erstwhile partners and that limitation will start running from the date of service on one of the erstwhile partners even against the partners not served with the assessment orders. It is also contended that against an order of assessment made against a firm, every partner had a right to file an appeal. In any event a construction of the statute which avoids manifest injustice should be adopted and at least one appeal against the order of assessment should be allowed. Therefore it is contended that the orders of the Tribunal and the Appellate Assistant Commissioner are liable to be set aside and the appeals heard on merits. 4. Before we deal with the arguments of the learned counsel for the petitioner we must, refer to section19A of the Act and rule 52(3) of the TNGST Rules. Therefore it is contended that the orders of the Tribunal and the Appellate Assistant Commissioner are liable to be set aside and the appeals heard on merits. 4. Before we deal with the arguments of the learned counsel for the petitioner we must, refer to section19A of the Act and rule 52(3) of the TNGST Rules. Section 19A(a) of the Act says that even after a dissolution of a firm the tax payable under the Act by the firm for the period up to the date of such dissolution shall be assessed as if no such dissolution had taken place and all the provisions of the Act shall apply accordingly. Section 19A(b) of the Act provides that every person who was a partner of a firm at the time of the dissolution, shall notwithstanding such dissolution, be jointly and severally liable for the payment of tax, penalty or other amount payable under the Act by the firm, whether the assessment was made prior to or after such dissolution. Rule 52(1) of the TNGST Rules provides for manner of service of any notice, summons or order under the Act. Rule 52(2) of the TNGST Rules with which we are concerned is as follows : "Where any Hindu undivided family, firm or other association of persons is partitioned, dissolved or discontinued, notice, summons or orders issued under the Act or these Rules may be served on any member of the Hindu undivided family, any person who was a partner (not being a minor) or member of the association, as the case may be, immediately before such partition, dissolution or discontinuance." * 5. We will now turn to the factual findings regarding service of notice on the firm and/or on the erstwhile partners of the firm. The firm, M/s. Ramakrishna and Company, had three partners, namely, the petitioner N. N. Subramaniam, one R. Angamuthu and one K. Jayaraman. It was dissolved on December 10, 1974. For the assessment year 1973-74 notice had been served on Angamuthu for the production of document and account books. But pre-assessment notice dated January 21, 1975 was served on the petitioner himself on January 30, 1975. It also transpires that notices were served on the other partners as well. The assessment order was made on July 21, 1975. The assessment order was served by registered post and the said Angamuthu had acknowledged the same on March 12, 1975. But pre-assessment notice dated January 21, 1975 was served on the petitioner himself on January 30, 1975. It also transpires that notices were served on the other partners as well. The assessment order was made on July 21, 1975. The assessment order was served by registered post and the said Angamuthu had acknowledged the same on March 12, 1975. The receipt of the notice by Angamuthu is not disputed and his evidence by postal acknowledgment is available in the file. Coming to the year 1974-75 the notice sent to the firm at its address 90, Nehru Street had been returned because the shop had been vacated. However notices were served on Angamuthu on June 7, 1976 and Jayaraman on June 8, 1976. The notice sent to the petitioner was returned unserved. The other two partners sent replies which were not of any assistance to the assessing authority. The assessment order was made on July 15, 1976 in the name of the partnership. The assessment order was served on Angamuthu on July 19, 1976 and on K. Jayaraman on July 18, 1976. The order was also sought to be served on the petitioner, but the postal cover was returned unserved. Any person objecting to an order passed by the appropriate authority may within a period of 30 days from the date on which the order was served on him in the manner prescribed appeal to the Appellate Assistant Commissioner. In this case the assessment is on the registered firm and any one of the partners could file an appeal on behalf of the firm. Therefore a plain reading of rule 52(2) of the TNGST rules, 1959, shows that the order made against the firm could be served on any person who was a partner immediately before the dissolution. Inasmuch as for both the assessment years the assessment orders have been served on one of the partners on March 12, 1975 for the assessment year 1973-74 and on August 18, 1976 for the assessment year 1974-75, it follows that the period of limitation starts running from those dates. The contention of the petitioner is contrary to the very teeth of the rule. 6. The contention of the petitioner is contrary to the very teeth of the rule. 6. Since most of the decisions relied on by the learned counsel for the petitioner arise under the Income-tax Act, 1922, it would do well to refer to the relevant provisions of the Income-tax Act as it stood at the relevant time, before dealing with the decision. Section 2(2) of the Act defines the assessee as a person by whom income-tax is payable. Section 30(1) provides for the appeal to the Appellate Assistant Commissioner against an order of assessment. The proviso to section30(1) of the Act is as follows : "Provided further that where the partners of a firm are individually assessable on their shares in the total income of the firm, any such partner may appeal to the Appellate Assistant Commissioner against any order of an Income-tax Officer determining the amount of the total income or the loss of the firm or the apportionment thereof between the several partners, but in respect of matters which are determined by such order may not appeal against the assessment of his own total income." * Section 44 of the Act provides for assessment of the erstwhile partners after dissolution and their joint and several liability for the tax payable under the Act. Section 25(6) equivalent to the present section 284 is more or less akin to rule 52(2) of the present Tamil Nadu General Sales Tax Rules. Section 247 of the Income-tax Act, 1961, equivalent to second proviso to section30(1) of the Income-tax Act, 1922, is a provision which requires special attention and we have already extracted the same. With this background, we will now refer to the decisions cited at the Bar. Commissioner of Income-tax v. S. K. Bose 1969 AIR(Cal) 4 is relied on for the proposition that the words "any such partner" in the proviso to section30 of the Income-tax Act, 1922, meant "any of such partners" and not the partner who was the first to prefer an appeal on behalf of the firm. In that case five separate appeals were filed by five ex-partners against the order of assessment on the firm. In that case five separate appeals were filed by five ex-partners against the order of assessment on the firm. The question was when an appeal had already been heard and decided by the Tribunal on behalf of one of the partners whether another appeal by another partner on behalf of firm was or was not maintainable and whether the latter appeal was barred by the principles of constructive res judicata. The Tribunal held that there was no bar against each partner filing an appeal and the question of res judicata will not also apply. The High Court of Calcutta on a reference from the decision of the Tribunal held that the appeal was maintainable, but held that the second proviso to section30 of the Income-tax Act, 1922, was not applicable to the facts of that case. The High Court of Calcutta also held that in respect of an appeal by a second partner the principles of res judicata or estoppel will not apply on the basis of the findings given in the earlier appeal filed by another partner. We are of the view that the peculiar provisions of law noticed by us under the Income-tax Act impelled the High Court of Calcutta to render those findings. The position of a partner under the Income-tax Act is totally different from the position of a partner in respect of an assessment under the sales tax law. Rule 27 of the TNGST Rules, which is also relied on by the learned counsel for the petitioner for the purpose of contending that any person aggrieved by an original order of the appropriate authority may file an appeal to the Appellate Assistant Commissioner, does not help the petitioner in this case. This is because we are concerned with an order of assessment made against a partnership firm. There can be only one appeal against such an order and since an appeal can be feed by any of the partners under rule 27 of the TNGST Rules. There is no provision equal to the second proviso to section30 of the Income-tax Act, 1922 or section247 of the Income-tax Act, 1961, in the TNGST Act. There can be only one appeal against such an order and since an appeal can be feed by any of the partners under rule 27 of the TNGST Rules. There is no provision equal to the second proviso to section30 of the Income-tax Act, 1922 or section247 of the Income-tax Act, 1961, in the TNGST Act. On the facts of the present case it is not even necessary to go to that extent because, admittedly, no other partner had filed an appeal and the only appeal against the assessment of the firm had been preferred by the petitioner herein. The only question before us is whether this appeal is barred by limitation or not. 7. In Chief Inspector of Mines v. Karam Chand Thapar 1961 AIR(SC) 838; 1962 (1) SCR 9 the question related to the prosecution of the directors of a company for offences under section73 and 74 of the Mines Act, 1952 8. Section 19A of the Act was introduced apparently, after the decision of the Supreme Court in Additional Tahsildar v. Gendalal1968 (21) STC 263, 1968 MahLJ 250, 1968 MPLJ 165, 1968 MhLJ 250. It was held in that case that on the dissolution of a firm, it ceased to he a legal entity and unless there is a statutory provision permitting the assessment on a dissolved firm there was no scope of assessing a firm which had ceased to have any legal existence. Now that section19A of the Act has been introduced there is nothing illegal about the assessment having been made after the dissolution of the firm. Mr. C. Natarajan, with his usual fairness, cites before us two decisions, arising under the Income-tax Act on the liability of quondam member of a dissolved firm which are against the petitioner. In Commissioner of Income-tax v. Raja Reddy Mallaram 1964 AIR(SC) 825, 1964 (51) ITR 285, 1964 (1) SCJ 256, 1964 (5) SCR 508 (SC); 1964 ITJ 180, the Income-tax Officer issued notice calling upon one of the members to file a return for the association for and on behalf of the assessment. Since there was no response, the Officer made an exparte assessment. The amount was sought to be recovered from another quondam member of the assessee. Since there was no response, the Officer made an exparte assessment. The amount was sought to be recovered from another quondam member of the assessee. The matter having come up to the Supreme Court of India, it was held that the assessment made on the association after its dissolution was valid under section44 of the Indian Income-tax Act, 1922. It was also held that the regular procedure for the purpose of assessment was applicable in respect of a dissolved association also, as if it had continued. What is more, the Apex Court laid down that a notice to the appropriate person under the Act would be sufficient to enable the authority to assess the dissolved association. The plea of the other member who had not been served personally that he could not be held to be liable to pay the tax assessed, failed. In a K. L. Parvathamma v. Income-tax Officer 1974 (93) ITR 138(Mys) an assessment was made on a dissolved firm after notice to one of the quondam partners. It was argued that the words "any person" found in sub-section(2) of section283 of the Income-tax Act, 1961, should be construed to mean "all persons" who were the partners of the firm. It was held that the notice in such a case could he served on any one member of the firm. The contention that it should be served on all the members was rejected. In Indira Chemical Agency v. Commissioner of Income-tax 1979 (119) ITR 569 (Mad.) the very same section 283(2) of the Income-tax Act, 1961, was interpreted to mean that service on one of the members of the dissolved firm would he binding on all the partners of the firm, which had been dissolved. It was also held that section 283(2) did not restrict itself either to assessment or to penalty and is wide enough in its amplitude to cover all the proceedings under the Act and hence the service of notice with reference to penalty proceedings on one of the partners was held to be enough compliance with the provisions of the Act. 9. 9. The judgment of a Division Bench of this Court in K. Balarama Naidu v. State of Tamil Nadu (Writ Appeal No. 851 of 1988 dated November 12, 1990) (See 1992 (86) STC 284 (Mad.) supra) needs to be noticed while interpreting section 19A of the Act and rule 52(2) of the TNGST Rules. The Division Bench not only upheld the said provisions as being intra vires the Constitution of India but proceeded to say that a bare reading of the rule unmistakably shows that service of notice, summons or orders issued under the Act on any member of the Hindu undivided family, any partner (not being a minor) and any member of the association would be deemed to be proper service in accordance with law provided the service is on any such person or partner who had that status before the partition or dissolution." 10. The last mentioned, three decisions relating to service of notice under the provisions of the Income-tax Act will apply so far as the service of the notice under the provisions of rule 52(2) of the TNGST Rules are concerned. To this extent, we have already noticed that the provisions of the Income-tax Act and the Sales Tax Act and Rules are in pari materia. We therefore reject the argument of the learned counsel for the petitioner, that the appeals filed by him to the Appellate Assistant Commissioner against the orders of assessment were not barred by limitation. Therefore, service on one of the quondam partners should be deemed to be service on all the quondam partners. The period of limitation runs from the date of service on any one of the quondam partners of a dissolved firm. We have already noticed that for both the assessment years 1973-74 and 1974-75, one of the quondam partners had been served long before and reckoned from that date, the appeals were hopelessly barred by limitation. The tax revision cases therefore fail and they are accordingly dismissed. There will, however, be no order as to costs.