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Judgment
Ramaprasada Rao, J.—Before dealing with the contentions raised by the petitioner in this writ petition, a short history of the prior litigation
under which the petitioner secured the sole proprietorship of the Madras Type Foundry, whose dealings are in question before me, may be traced.
In application No. 740/66 in O. P. No. 278/31, this court held that the Madras Type Foundry shall become the sole and absolute property of the
petitioner as and from 11th May, 1965. Ramamurti, J., observed:
The result is that Ambiganathan has become solely and absolutely entitled to all the assets of the Madras Type Foundry, stock-in-trade, etc., as on
11th May, 1965...Ambiganathan shall therefore take over the Madras Type Foundry, its assets, stock-in-trade, cash, bank deposits and bank
accounts and everything pertaining to the foundry as the sole proprietor thereof and he shall be entitled to operate upon the bank accounts in his
own right and deal with the assets of the Madras Type Foundry as the sole proprietor thereof.
In the above light, the facts as stated in the affidavit by the petitioner can now be scrutinised. After the petitioner became the sole proprietor of
the Madras Type Foundry which was being managed by a Board of Trustees on or before that date, he filed his regular returns for the year 1965-
66 and claimed certain exemptions. The assessing authority would not concede that the petitioner was entitled to the exemptions as claimed. The
immediate reaction of the petitioner was to invite the attention of the assessing authority to the various orders passed by the authorities during the
years commencing from 1960-61 to 1964-65 and maintained that he was entitled to such exemption. But his request was negatived and it appears
that the petitioner has preferred an appeal against the assessment order for the assessment year 1965-66 before the appropriate authority and the
said appeal is still pending. The respondent, after having had information from the records and during the hearing of the assessment proceedings for
the year 1965-66 having noticed that certain claims in the nature of exemptions were granted to the petitioner for the earlier years, expressed by
notice dated 23rd January, 1967, that the claim for such exemption granted earlier was to be rescrutinised and called upon the petitioner to furnish
him with details of the transactions wherein sales of new types included under the head of claim for recasting charges during the earlier years. The
petitioner replied as follows by his letter dated 9th February, 1967 :
We submit that our claims for exemption relating to recasting charges have been carefully examined and checked up by the then assessing
authorities before passing the relevant orders. We, therefore, submit that there can be no basis either in law or in equity for examining the
assessments afresh.
It is to be noted that at the earliest point of time the petitioner never gave an impression that there was any discontinuity in the business of the
Madras Type Foundry and that as he took over the same as sole proprietor by virtue of the orders of court, he cannot be called upon to answer
any mistakes, discrepancies or changes which could be attributed to the quondam firm run by the board of trustees. On the other hand, he
emphasised the position that the claims for exemption were carefully examined by the prior assessing authorities and there was no basis for
reopening the same. This itself provides sufficient indicia that there has been continuity in the firm and what was taken over by the petitioner was
the quondam firm of the Madras Type Foundry which was run by necessity by a board of trustees under the will of the late owner. But, the
petitioner within a few days thereafter changed his mind and contended that no such continuity can be implied in the circumstance and that when he
became the sole proprietor of the foundry on and from 11th May, 1965, he was not answerable for any misgivings in the conduct of the affairs of
the foundry prior to that date. This is obviously an after-thought and this has to be rejected straightaway.
The petitioner has however come up to this court stating that the notice issued by the respondent calling upon him to produce the necessary
accounts to satisfy him that exemption was lawful is an act without jurisdiction and, therefore, has to be intercepted at the threshold and he seeks
for a writ of prohibition.
I have already set out the necessary facts attendant upon this case and I have no hesitation in holding that the petitioner took over the Madras
Type Foundry as a running concern. In fact, Ramamurti, J., in his order has made it so clear that the matter is beyond controversy. The learned
Judge said that the petitioner was taking over its assets, stock-in-trade, cash, bank deposits and bank accounts and everything pertaining to the
foundry as the sole proprietor. It cannot be said that in such circumstances, the petitioner took over the assets but he cannot be deemed to have
taken over the liabilities of the quondam, firm. It is elementary that in cases where a person steps into the shoes of another person or body of
persons in charge or management of any undertaking he should justifiably make himself responsible for all the prior conduct of such administration
as well and necessarily has to be made responsible for any evasions in tax if such an event has occurred in the course of such administration. It is
this thing which is said to have happened in the instant case.
The assessing authority, after reviewing the facts which were examined by him for the assessment year 1965-66, was satisfied that the claim for
exemption made by the petitioner was baseless and allowances given on prior occasions by the assessing authorities under similar circumstances
were equally untenable. It was at this stage that he wanted to have information presumably u/s 16 of the Madras General Sales Tax Act and he
called upon the petitioner by the notice which is impugned in this case to explain the circumstance under which the exemption was granted. No
sooner such a notice was received by the petitioner, he has come up to this court to interdict further proceedings pursuant to the challenged notice.
It cannot be said that the petitioner has no jurisdiction to enquire into the matter. Even u/s 27 of the Act, where the ownership of the business of a
dealer liable to pay tax or other amount is transferred, any tax or other amount payable under this Act in respect of such business and remaining
unpaid at the time of the transfer ...may without prejudice to any action that may be taken for its recovery from the transferor, be recovered from
the transferee as if he were the dealer liable to pay such tax. This is but a follow up of ordinary notions of civil law. The word ""transfer"" in Section
27 cannot be limited to voluntary transfers only. But it includes involuntary transfers also, in the sense that if a person on account of certain
necessitous circumstances acquires a quondam business and thus secures a transfer of the business as is popularly understood, then such a
transferee shall be notion ally characterised as a dealer u/s 27 thereto and under the other relevant provisions of the Act. Thus, therefore, the
petitioner, by reason of the order of court exercised an option and as he was the erstwhile trustee also, he cannot escape the misgivings of the
earlier administration or business by merely contending that he became the sole proprietor only from 11th May, 1965, and he is not, therefore,
liable for any unpaid taxes as and before that date. The transfer has been effected in the instant case by an overt act on the part of the petitioner
who, by paying some consideration to the trustees, secured the business, its assets and everything connected with it. He is therefore a transferee
within the meaning of Section 27 of the Act. If he is a transferee under the above section and if he is notionally a dealer under the statute, then the
respondent has the necessary jurisdiction to call upon him to explain as to the circumstances under which he got the exemption, in prior years. It is
within this compass that the respondent was acting when he issued the challenged notice. He has the necessary jurisdiction to do so and it is the
petitioner''s duty to explain, all objections in law on the merits which are still available to the petitioner. He cannot, however, seek to intercept the
proceedings undertaken by the respondent in exercise of the power vested in him by law. This writ petition fails and is dismissed. No costs.