Jaganmohan Reddy, J.:— We had by our order directed the Income Tax Tribunal, at Bombay to state a case on the following questions viz.:
1. Whether the notice under Sections 30(2) and 30(4) of the Hyderabad Income Tax Act, 1357 F. were duly served on the assessee as required by the law.
2. Whether the absence of due and proper service of the notices under Ss. 30(2) and 30(4) of the said Act and/or the other circumstances of the case constituted sufficient cause for the assessee for not filing the return or producing the accounts.
3. Whether having regard to the facts and circumstances of the case the assessment under Section 31(4) of the said Act is illegal, unjustified and untenable and should be set aside.
4. Whether a valid assessment could be made in respect of the income of the year 1356F. (as in the present case) under the Hyderabad Income-tax Act which came into force on 1st Azur, 1357 F. and whether such an assessment is illegal and is to be set aside.
2. Learned advocate for the appellant states that he does not wish to press question No. 4 as it is concluded by our decision in Commissioner of Income-tax, Hyderabad v. Adilakshmi Devamma, AIR 1955 Hyd 225. In that case a similar question fell for determination, viz.
“assuming that the Hyderabad Income-tax Act is intra vires whether the income of the previous year, that is to say, the income of 1356 F. could be validly taxed in 1357 F.?”
3. Dealing with this question we had on the analogy of Section 3 of the Hyderabad Income-tax Act which is similar to Section 3 of the Indian Income-tax Act observed at page 227 as follows:—
“……This basis of assessing income was changed by the Indian Income-tax Act, 1922 when tax in the language of Lord Porter delivering the judgments of the Judicial Committee in the Indian Iron and Steel Co. Ltd. v. Commr. of Income-tax, Bengal, 1943-11 ITR 328 at p. 336 : (AIR 1943 PC 124 at p. 128), “is assessed and paid in the next succeeding year upon the result of the year before”. Therefore, our answer to the question referred to earlier in this paragraph is in the affirmative.”
4. Our answer to question No. 4 is therefore, in the affirmative. Before we deal with the remaining questions, it would be pertinent to state the facts in brief as appear from the statement of the case. One Haji Wali Mahomed was carrying on business in the then Hyderabad State under the name and style of Haji Wali Mahomed Haji Moosa Saya. He died leaving six sons and a widow of the seventh son. These seven persons carried on the business jointly after Hajee Wali Mahomed's deadi. Differences having arisen between the brothers a partition took place as from 12-11-1947, the business being divided into three groups. The Aurangabad business along with a few other businesses was taken over by the eldest son and his two brothers. The Hyderabad business was taken by Haji Razack and one of the other brothers and the third group was taken by Haji Habeeb. On 4-4-1948 a notice was issued under Section 39(2) of the Hyderabad Income-tax Act in the name of Haji Wali Mahomed Haji Moosa Saya, in respect of the assessment year 1357 F. which was served on 6-4-1948 at the premises of the former business of the association at Hyderabad. One A.S Ahmed received this notice and signed the slip for Haji Wali Mahomed Haji Moosa Saya. This A.S Ahmed has been admitted to be the power of attorney holder of Haji Razack as well as the manager of his business at that place and it was therefore contended that the said A.S Ahmed was not the agent of the defunct association. The original power of attorney was not produced and the case proceeded on the assumption that A.S Ahmed did not hold a power of attorney from the old firm, but only for Haji Razack. No return was filed in pursuance of this notice; but on 15-5-1948 A.S Ahmed wrote a letter No. 770 on the letter head of Haji Wali Mahomed Haji Moosa Saya acknowledging receipt of notice under S. 39(2) and seeking two months time which was granted. Further extension of time was allowed by the Income-tax Officer by his letter dated 22-5-1948 which letter was acknowledged by A.S Ahmed for Haji Wali Mahomed Haji Moosa Saya. Thereafter notice under Section 30(4) of the Hyderabad Income-tax Act was issued on 5-6-1948 and was acknowledged by one A. Sattar who is admitted to be the same person as A.S Ahmed. A further letter written by the Income-tax Officer dated 27-6-1948 was also acknowledged by the said A.S Ahmed, who also wrote the subsequent letters on the letter head of Haji Wali Mohamed Haji Moosa Saya. The notices which were issued to the assessee were by the Income-tax Officer, 4th circle, Hyderabad, as he was in charge of the area where the assessee firm was situated. Later, however, after reshuffling the jurisdiction of the assessee was given to the 1st Circle instead of the 4th Circle and consequently the Income-tax Officer of thff 1st Circle issued another notice under Section 30(2) of the Hyderabad Income-tax Act on 22-6-1951 which was served on 22-6-1951 on Nur Mahomed. Nur Mahomed wrote a letter on 26-7-1951 on the letter head of Haji Razack Haji Mahomed Saya and signed it as manager. In this letter the assessee stated that the account books were with the eldest brother Haji Yousuf, who lived at Aurangabad and therefore requested the Income-tax Officer to get in touch with the eldest brother at Aurangabad. The Income-tax Officer, however, by his letter dated 2-8-1951 required the association carrying on business at Nizamshahi Road to file a return; but no return was filed. On 13-8-1951 Haji Razack for the first tune wrote a letter denying that he has anything to do with the defunct firm of Haji Wali Mahomed Haji Moosa Saya; but requested for some time to enable him to submit the required return of income. The Income-tax Officer by his letter dated 17-8-1951 replied to this letter as follows:
“I am fully aware that the firm of Haji Wali Mahomed Haji Moosa Saya is no longer in existence but, nonetheless since two of the partners of your present firm were members of Haji Walimahomed Haji Moosa Saya together with the other two of their brothers, the notice under S. 30(2) read with S. 46 had been rightly and lawfully served on the firm of Messrs Haji Razack Haji Mohamed Saya which consists of Haji Valimahomed Haji Moosa Saya. The return of income is long over due in view of the fact that the notices were served on 22-6-1951 and you may note that the 35 days time has already expired. In these circumstances, please note that if the return is not filed on or before the 25th August, 1951, the assessment will be completed under Section 31(4) of the Hyderabad Income-tax Act.”
5. On 25-8-1951 the assessee raised certain contentions as follows:
“(a) the defunct business of Messrs Haji Valimahomed Haji Moosa Saya was controlled and managed with full responsibility by the senior son Yousuf all the time since the demise of the father Haji Vali. Mohamed Haji Moosa Saya, while the other sons were young and had to depend on the senior son for carrying on the business until 12-11-1947; (b) when the said business of Haji Vali Mahomed Haji Moosa Saya closed down on 12-11-47 the senior son Yousuf who was himself responsible for running the said old business, kept all the accounts and documents of the old firm etc. In his possession and custody at Aurangabad and started his business with the father's name at Aurangabad viz. Yousuf Haji Vali Mohamed Saya; (c) we also pray that since the said firm was wound up before the introduction of Hyderabad Income-tax Act, no tax liability attaches to us; (d) and we are also prevented by sufficient cause from filing the return of the old defunct business of Messrs Haji Vali Mohamed Moosa and comply with any of the lerms of the notices relating to that firm as we are not in possession of any of the old records; (e) we therefore request in the best interest of justice to drop the proceedings. The blank return form relating to the defunct firm of Haji Vali Mohamed Haji Moosa Saya is returned with full facts and explanations herewith.”
6. On the same date Messrs Raja Ram and Co., Auditors addressed a letter to the Income-tax Officea explaining the various contentions in detail. The Income-tax Officer, therefore, had to make a choice either of accepting the contentions or making an assessment under S. 31(4) which latter course he followed on 22-9-1951 by making a best-judgment assessment on a total income of Rs. 6,10,500/- rejecting the several contentions of the assessee and making a demand of O.S Rs. 2,70,807/- or I.G Rs. 2,32,172/-. Haji Razack thereafter filed an application under Section 39 of the Hyderabad Incom tax Act in which he stated
“though legally you can pick and choose an-one of the old members, the proper course, in our opinion, should have been that you should issu notices to the party who was the senior member of the firm who had the control of the business an also of the books of account”
and requested for the cancellation of the assessmen under S. 39 and to take immediate steps to initiate proceedings against Yousuf Haji Vali Mohamed of Aurangabad, senior member of the old firm. This was rejected by the Income-tax Officer. Against this order the assessee appealed to the Tribunal which held that the notices were properly served as they were served on a person holding a power of attorney from a member of the defunct association; that under Section 56 of the Hyderabad Income-tax Act all the members have a joint and several liability and that the Tribunal was not satisfied the there was sufficient cause for not filing the return or producing the account books, though he was given ample opportunities and time for complying with the formalities of law.
7. With respect to the validity of the notices there appears to be some controversy before the Tribunal whether the assessee urged this point before them.
8. The Tribunal in its statement of the case observed as follows:
“It is true that the assessee has objected to the validity of the notices issued in the grounds of appeal. The main contention which was urged at the time of the hearing was that the notices should he served on the eldest brother who used to be in charge of the business during the accounting year. At the reference stage however an entirely new plea was raised that in the case of an association of persons notices under S. 30(2) and S. 30(4) should have been issued to all the members of the association. This point in this form was not urged by the assessee's representative at any time before the Income-tax authorities or before the Tribunal. Mr. Engineer who appeared at the time of this reference stated that his contention has been that there was no proper service of notices as required by Section 78 of the Hyderabad Income-tax Act and that he objected to the validity of the notices. The Departmental Representative denies the statement made. As we do not find any reference to this section in our order in our notes it is very likely that the contention of the Department is correct.”
9. From the facts narrated above it is evident that a partition took place in the firm of Haji Wali Mahomed Haji Moosa Saya on 12-11-1947; that a notice under S. 30(2) was issued in the name of the firm and was received by A.S Ahmed, the power of attorney agent of Haji Razack and the manager of the business which was taken over by Hazi Razack, that the said A.S Ahmed acknowledged receipt of the notice purporting to be on behalf of Haji Wali Mahomed Haji Moosa Saya and asked for time; that subsequently similar notice under S. 30(2) was issued on 22-6-1951 and served on Noor Mahomed who acknowledged it on behalf of Haji Razack signing as its manager and on 13-8-1951 for the first time Hajj Razack denied that he has anything to do with the defunct firm and requested time for enabling him to file a return. The question is whether these notices under Ss. 30(2) and 30(4) were duly served on the assessee as required by law. This involves a further question whether after the firm was dissolved in the year of assessment, a notice served on any member of the firm or his power of attorney agent can be said to be duly served for the purposes of assessing the dissolved firm. The relevant provisions of the Hyderabad Income-tax Act which require consideration are as follows:
30(2) “In the case of any person other than a company whose total income is, in the Income-tax Officer's opinion, of such an amount as to render such person liable to income-tax, the Income-tax Officer shall serve a notice upon him requiring him of furnish, within such period, not being less than thirty days as may be specified in the notice, a return in the prescribed form and verified in the Prescribed manner setting forth (along with such other particulars as may be provided for in the notice), his total income and total world income during the previous year:
Provided that the Income-tax Officer may in his discretion extend the date for the delivery of the return.
(3) XXX
(4) The Income-tax Officer may serve on the principal officer of any company or on any person upon whom a notice has been served under sub-section (2) a notice requiring him, on a date to be therein specified, to produce, or cause to be produced such accounts or documents as the Income-tax Officer may require:
Provided that the Income-tax Officer shall not require the production of any accounts relating to a period more than three years prior to the previous year.
31(1) XXX
(2) XXX
(3) On the day specified in the notice issued under sub-section (2) or as soon afterwards as may be, the Income-tax Officer, after hearing such evidence as such person may produce and such other evidence as the Income-tax Officer may require, on specified points, shall, by an order in writing, ??? the total income of the assessee, and determine he sum payable by him on the basis of such assessment.
10. If the principal officer of any company or any other person fails to make a return under sub-section (1) or sub-section (2) of S. 30, as the case may be, or fails to comply with all the terms of a notice issued under sub-section (4) of the said ??? or having made a return, fails to comply with ??? the terms of a notice issued under sub-section (2) of this section, the Income-tax Officer shall, if of pinion that such person is chargeable with tax, after obtaining the previous approval of the Deputy Commissioner, make the assessment to the best of ??? judgment and, in the case of a firm, may refuse of register it or may cancel its registration if it is ??? registered:
Provided that the Registration of a firm shall of be cancelled until fourteen days have elapsed from the ssissue of a notice by the Income-tax Officer of the firm intimating his intention to cancel its ???.
35.(1) Where any business, profession or vocation is discontinued in any year, the Income Tax officer may assess the income, profits or gains of such ???, profession or vocation of the period between the end of the previous year and the date of ??? discontinuance at the rate in force in that year, ??? addition to the assessment if any, made on the basis of the income, profits and gains of the previous) year.
(2) Any person discontinuing business, profession or vocation in any year, shall give to the Income ax Officer notice of such discontinuance within fifteen days thereof.
(3) XXX
(4) Where an assessment is to be made under sub-s. (1), the Income-tax Officer may serve on the person whose income, profits and gains are to be assessed or in the case of a firm, on any person who was a member of such firm at the time of its discontinuance, cr, in the case of a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of S. 30 and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice-issued under that sub-section.
56. Where any business, profession or vocation carried on by a firm or association of persons has been discontinued, or where an association of persons is dissolved, every person who was at the time of such discontinuance or dissolution, a partner of such firm or a member of such association shall in respect of the income, profits and gains of the firm or association, be jointly and severally liable to assessment under Chapter V, and for the amount of tax payable and all the provisions of Chapter V shall, so far as may be, apply to any of such assessment.
78. All provisions of the Hyderabad Civil’ Procedure Code No. Ill of 1323 F. relating to the service of summons shall, as far as possible, be applicable in regard to the issue and service of notice or requisition to any person under this Act.”
11. From a reading of Ss. 35 and 56 the matter admits of no doubt that not only a dissolved firm or association of persons which is liable to be assessed in the year of assessment, but also each member of the firm or association is jointly and severally liable to tax in respect of the income, profits and gains of such firm or association and that any notice served on any member of the dissolved or discontinued firm under sub-s. (2) of S. 30 would be a valid notice for purposes of assessing the said firm or association.
12. The income from any business, profession or vocation which was discontinued in any year can be assessed under sub-s. (1) in the year of discontinuance on the profits of the period between the end of such period, as also on the profits of the previous year. In other words, in the case of a discontinued business of a firm, all the profits earned up to the date of discontinuance are liable to be assessed either in the year of discontinuance or in the normal course after the year comes to an end.
13. Sub-section (1) and sub-section (4) of Section 35 of the-Hyderabad Income-tax Act are analogous to sub-section (1) and sub-section (6) of Section 25 of the Indian Income-tax Act. Allowing for those provisions of S. 25 relating to the taxation of the period of transition under which tax is leviable under the Indian Income-tax Act of 1918 and 1922, the interpretation of the above referred provisions would be the same as that under sub-sections (1) and (4) of Section 35 of the Hyderabad Income-tax Act.
14. Further under S. 56, where any business, profession or vocation carried on by a firm or association of persons is discontinued, all the persons at the time of the dissolution are jointly liable to assessment and also are liable for the amount of tax payable where the assessment has been made on the firm or association, but the tax has not been recovered from it. The sectiqp is not confined to-the profits of only the year of discontinuance or dissolution but extends also to the profits of the preceding years, the principle being that when a unit of assessment breaks up, the liability to tax should devolve on the component members.
15. Learned advocate for the assessee sought to contend that as there was a difference between Section 78 of the Hyderabad Income-tax Act and Section 63 of the Indian Income-tax Act, the service of notice on any one individual partner is not sufficient service for assessing the partnership. This argument is not really relevant for the determination of the question under reference, because, when there is a specific section which authorises the service of notice on any member of a dissolved or discontinued firm for the purposes of imposing a tax liability upon such firm, it cannot be contended that there should be a special provision in S. 78 for service of a notice on any individual member before any liability to tax can be imposed.
16. The other argument of the learned advocate which need not be considered is the one which proceeds on the assumption that the notice is under Section 46 of the Hyderabad Income-tax Act. Several authorities have been cited in support of the proposition that as in the notice issued under S. 46, the Income-tax Officer has not given his reasons for believing that income, has escaped assessment, he has no jurisdiction to make an assessment. That proposition as we have already said does not arise in this case for the simple reason that the notices issued in 1948 were under Sec. 30(2) and Sec. 30(4) and the mere fact that after the transfer of the case to another circle the Income-tax Officer under a misapprehension that no previous notice was given, had issued a notice under S. 30(2) read with S. 46, does not affect the jurisdiction of me Income-tax Officer to assess.
17. Once a valid notice has been given, a subsequent notice which is superfluous cannot invalidate the proceedings already validly commenced. In this view we think it is not necessary to consider the several authorities cited before us. Therefore our answers to question No. 1 is in the affirmative and that to questions 2 and 3 is in the negative.
18. With particular reference to question No. 2, we are further of the view that the circumstances mentioned in the statement of the case do not in law warrant the conclusion that there was sufficient cause for not filing the return.
19. The assessee's power of attorney agent entered into a lengthy correspondence from 1948 to 1951 and on each occasion promised to submit returns and took time. It was only at a very late stage that he took up the plea that the service of the notice is not valid. He had in our view sufficiently long time to produce the accounts and submit them.
20. The reference is accordingly answered with costs to the respondent which we fix at Rs. 200/-.
V.R.B
21. Answer accordingly.