P. Kandappa Gounder vs Fifth Income Tax Officer and Others

Ramaprasada Rao, J.—The petitioner is aggrieved against an order of attachment of immovable/property passed by the 2nd respondent in

his proceedings dated August 31, 1965. He is seeking for a writ of prohibition against the respondents from giving further effect to the impugned

notice in the following circumstances,

The petitioner''s case is that he was admittedly a partner of an un-registered firm carrying on business under the name and style of Standard

Starch Products Company, Salem. It is not in dispute that this business was carried on in land No. 48 in Sandhiyur Village, Salem Taluk. The

petitioner was no doubt associated in partnership with N. Jagannathan, P. Kandasami Chettiar and M. Doraisami Chettiar. But the petitioner''s

case is that their trading style was different from the one adopted by the firm against which the revenue initiated proceedings to assess the firm for

the first time for the year 1946-47. What happened was that, during the year of assessment, the Standard Starch Manufacturing Company or the

Standard Starch Products Company doing business at the place, which is admittedly localised in this case, did not submit their returns in

accordance with law for being assessed under the provisions of the Income Tax Act. The revenue, however, discovered through its inspector that

business on a large scale had been conducted at the place by an unregistered firm and, therefore, action was initiated u/s 34 of the Indian Income

Tax Act, 1922, On August 19, 1952, notice u/s 34 was served on Mr. Jagannathan who was admittedly a partner of the unregistered firm. There

was, however, no response either from the partners who constituted the firm or the partnership firm as such. Therefore, the Income Tax Officer

finalised the assessment according to the best of his judgment on March 16, 1954. Pursuant to the completion of the assessment proceedings, a

demand notice was raised and the amount covered by the demand was sought to be recovered through the Tahsiklar, Salem. The above notice

apparently was served on the petitioner too. It is at this juncture that the petitioner conies into the picture and claims that he is not in any way

responsible to meet the demand, as he had nothing to do with the firm of Standard Starch Manufacturing Company, and that he did not do any

business under that trade name during the year 1946-47. The department, however, put the petitioner on notice that he and the three other persons

referred to above were in fact doing business at the place mentioned already, that the demand was raised u/s 44 of the Income Tax Act, and that

the petitioner could not escape liability. Ultimately, on October 18, 1962, a notice u/s 226(3) of the Income Tax Act, 1961, was issued to the

persons concerned, including the petitioner, calling upon them to pay Rs. 7,026.13 after deducting a sum of Rs. 7''7S alleged to have been

collected. The petitioner obviously resisted the claim. But, it is common ground that he appeared on summons being served on him u/s 131 of the

Income Tax Act and that the Income Tax Officer, who examined one of the partners of the unregistered firm by name, Mr. Jagannathan, gave an

opportunity to the petitioner to state his case and cross-examined Mr. Jagannathan as well. In the statement given by Mr. Jagannathan and also in

his deposition, he has stated that the trading style of the unregistered firm is Standard Starch Products Company and not Standard Starch

Manufacturing Company. Mr. Jagannathan was cross-examined and it was nowhere suggested that the petitioner was totally unconnected with the

business which was conducted at the place referred to by me earlier. Nor was it suggested that there was no partnership at any material point of

time between the petitioner and Mr. Jagannathan who was examined by the Income Tax Officer in the presence of the petitioner. The records

produced on the issue of rule nisi did disclose that the attempt of the petitioner was to disclaim responsibility on the ground that the company which

was assessed by the revenue was a totally different one with which he. had no business connection whatsoever at any point of time. After the

examination as above, the revenue raised the demand dated August 31, 1965, which is impugned in this case. In the notice the properties of the

petitioner are sought to be attached and he is restrained from transferring or charging the properties specified in the notice. It is as against this order

the present writ petition has been filed seeking for a writ of prohibition against the respondents from recovering the sum of Rs. 7,026.13 in

pursuance of the attachment order and declaring the petitioner as not liable to pay the said sum.

A writ of prohibition is issued only in cases where the court''s conscience is satisfied that there is a total absence of jurisdiction on the part of the

statutory tribunal whoever he is, functioning under a particular enactment, to exercise the power which he has assumed and pursuing the process

further by affecting the rights of third parties and acting to their prejudice. The essential pre-requisite, therefore, is the complete absence of

jurisdiction on the part of the Tribunal whose order is sought to be challenged under Article 226 of the Constitution. It should be found as a fact

and beyond doubt that, on the materials placed before the court, no reasonable person will assume that the statutory tribunal has ever the authority

to assume such power and act in the manner contemplated.

In the instant case, the undisputed facts are that the business was carried on by the petitioners along with three others, including Mr.

Jagannathan, under an oral partnership at No. 48 in Sandhiynr Village, Salem Taluk. Mr. Jagannathan was examined in 1963, long after the

assessment proceedings were over in the presence of the petitioner, and the petitioner was not able to suggest to Mr. Jagannathan or elicit from

him that the business at the localised place as above was in any way different from the commercial activity in which the petitioner, Mr. Jagannathan,

and others were involved during the assessment year in question at the place. Thus, there is absolute identity of the business place and the persons

who conducted the business during the assessment year in question. It is a case where the partners of the unregistered firm attempted to evade law

and never thought of submitting themselves to any assessment in the normal course under the Income Tax Act. It was this attitude of the

unregistered partnership which prompted the department to take action u/s 34. Everything was, therefore, based upon the genuine information

obtained by the department to set in motion the process u/s 34 of the Income Tax Act. When they gathered such information, apparently the

information disclosed that the unregistered firm was trading under the name and style of Standard Starch Manufacturing Company. It ultimately

transpires that a genuine mistake has crept in, because the trading style of the firm, as was found later on at the time when Mr. Jagannathan was

examined in the presence of the petitioner, was "" Standard Starch Products Company "". But for this clerical error, I am of the view that there is no

ambiguity in bringing home the order of assessment to the petitioner and his partners who did associate themselves in commercial activity in the

year in question and earned income. The oral partnership was recorded in writing, but not in proper form. It is evidenced by an improvised and

inchoate document which can only be looked into for the purpose of examining the bona fides and genuineness of the claim of the petitioner. This

record is dated January 19, 1945, and it categorically mentions the name of the petitioner as a partner of the Standard Starch Products Company.

I am, therefore, unable to agree with the learned counsel for the petitioner that the assessment proceedings followed up by the assessment are

against a person who is wrongly described, but whose identity is maintained by establishing nexus between the partners of the unregistered firm and

the commercial activity; such nexus having been proved and established, it follows that the petitioner cannot escape the consequences that flow

from the order of assessment and the recovery proceedings, including those arising under the order impugned.

These facts undoubtedly disclose that the respondent who issued the impugned order did have jurisdiction in law to act and exercise his power

in the manner he did. Such a power being available to the Tax Recovery Officer, no writ of prohibition can issue. In this view of the matter, the writ

petition is dismissed. There will be no order as to costs.

Petition dismissed.