MISRILAL JAIN vs COMMISSIONER OF Income Tax, BIHAR AND ORISSA.

In this case the assessee, Misrilal Jain, is the partner of a firm called Messrs. Jain Petrol Supply Company, Hazaribagh. The assessee has eight annas share in this firm and the other partner, Kanhaiya Lal Jain, has the remaining eight annas share. In the present case we are concerned with the assessment year 1952-53. It appears that for the assessment year 1949-50 there was an assessment of Income Tax upon Jain Petrol Supply Company in the status of unregistered firm. This assessment was made on the 30th of September, 1950.

The assessments of the partners, namely, the assessee and Kanhaiyalal Jain, for the same assessment year were also completed on the same date. For the assessment year 1950-51 the partnership was treated as an unregistered firm. The assessment of Jain Petrol Supply Company was made for this assessment year in the status of an unregistered firm u/s 23(4) of the Income Tax Act on the 28th of April, 1951. On the 23rd of July, 1951, a notice was issued against the assessee u/s 18A(1) of the Income Tax Act for advance payment of Income Tax on the basis of the assessment order dated the 30th September, 1950, for the assessment year 1949-50. It was contended on behalf of the assessee before the Income Tax Appellate Tribunal that the issue of the notice u/s 18A(1) of the Income Tax Act ought to have been made on the basis of the assessment of the unregistered firm on the 28th of April, 1951, for the assessment year 1950-51. It was submitted on behalf of the assessee that the issue of the notice u/s 18A(1) on the basis of the assessments order dated the 30th September, 1950, for the assessment year 1949-50 was legally invalid. The argument was rejected by the Income Tax Appellate Tribunal and the appeal of the assessee was dismissed. u/s 66(1) of the Income Tax Act of the Income Tax Appellate Tribunal has stated a case on the following question of law for the opinion of the High Court.

"1. Whether on the facts of the case, the notice issued by the Income Tax Officer u/s 18A(1) calling upon the applicant to pay advance tax for the assessment year 1952-53 on the basis of his income for the assessment year 1949-50 was a valid notice ?

If the above question is answered in the negative, whether the penalty on the basis of an invalid notice is maintainable in law ?"

With regard to the first question the argument put forward by learned counsel on behalf of the assessee is that the assessment of Income Tax for the assessment year 1950-51 of the unregistered firm on the 28th of April, 1951, should be treated to be the latest assessment of Income Tax upon the assessee within the meaning of section 18A(1) of the Income Tax Act, and the view taken by the Income Tax Appellate Tribunal on this point is erroneous. In our opinion there is no warrant for this argument. Section 18A(1), the interpretation of which is a controversy in this case, reads as follows :

"18A. Advance payment of tax. - (1) (a) In the case of income in respect of which provision is not made u/s 18 for deduction of Income Tax at the time of payment, the Income Tax Officer may, on or after the 1st day of April in any financial year, by order in writing, require an assessee to pay quarterly to the credit of the Central Government on the 15th day of June, 15th day of September, 15th day of December and 15th day of March in that year, respectively, an amount equal to one-quarter of the Income Tax and super-tax payable on so much of such income as is included in his total income of the latest previous year in respect of which he has been assessed, if that total income exceeded the maximum amount not chargeable to tax in his case by two thousand five hundred rupees. Such Income Tax and super-tax shall be calculated at the rates in force for the financial year in which he is required to pay the tax, and shall bear to the total amount of Income Tax and super-tax so calculated on the said total income the same proportion as the amount of such inclusion bears to his total income or, in cases where under the provisions of sub-section (1) of section 17 both Income Tax and super-tax or super-tax are chargeable with reference to the total world income, shall bear to the total amount of Income Tax an super-tax which would have been payable on his total world income of the said previous year had it been his total income the same proportion as the amount of such inclusions bears to his total world income :...."

The questions for determination in this case is whether u/s 18A(1) the last assessment of the assessee should be treated to be the assessment made by the Income Tax Officer for the year 1949-50 on the 30th of September, 1950, or whether the assessment of the unregistered firm for the assessment year 1950-51 made on the 28th of April, 1951, should be treated as the assessment within the meaning of the section. It is manifest that section 18A(1) empowers the Income Tax Officer to require advance payment of tax from the assessee of an amount equal to one quarter of the Income Tax and super-tax payable "on so much of such income as is included in his total income of the latest previous year in respect of which he has been assessed". On behalf of the assessee it was pointed out that u/s 14(2) of the Income Tax Act the tax is not liable to be paid by an assessee if he is a partner of an unregistered firm, in respect of any portions of his share in the profits and gains of the firm on which tax has already been paid by his firm. In our opinion the provisions of section 14(2) (a) have no bearing on the questions presented for determination in the present case. It is well established that under the law of Income Tax a partnership firm is different from members composing it and is a separate assessable entity. It is true that under the Partnership Act a partnership firm is not a legal person. But for the purpose of Income Tax a firm is regarded as a separate entity having a separate status and existence apart from individual partners who carry on the business of the firm. This view is borne out by the decisions of the Supreme Court in Commissioner of Income Tax v. Figgies and Company and also of the Andhra Pradesh High Court in Meka Venkatappaiah v. Additional Income Tax Officer, Bapatla. It is therefore manifest that the firm is a separate assessable entity under the Income Tax Act and there is no distinction in this respect between a registered firm and an unregistered firm. We are of opinion in the present case that the assessments of the unregistered firm for the year 1950-51 made on the 28th April, 1951, cannot be treated as assessment of the partner, Misrilal Jain, within the meaning of section 18A(1) of the Income Tax Act.

For the reasons given above we hold that in the facts and circumstances of the case the notice issued by the Income Tax Officer u/s 18A(1) of the Income Tax Act calling upon the assessee to pay advance tax for the assessment year 1952-53 on the basis of his income for the assessment year 1949-50 was a legally valid notice.

We accordingly answer the first question referred by the Income Tax Appellate Tribunal against the assessee and in favour of the Income Tax department. In view of our answer to the first question, it follows that the second question of law does not arise in this case. The assessee must pay the costs of this reference. Hearing fee Rs. 250.

Questions answered accordingly.