1964 PTD 617 (PLP)

Partnership‑Registration‑Application‑Rejection of appli cation on the ground that the partnership had no real existence Assessment of one applicant on the basis of return submitted by another‑Validity‑Indian Income‑tax Act, 1922), S. 26‑A Constitution of India, Art.

226. The petitioner and two other individuals, A and B, applied to the Income‑tax Officer to have a firm of which they claimed to be partners registered under section 26‑A of the Indian Income‑tax Act, 1922. That application was rejected on the ground that the alleged firm had no real existence. The Income‑tax Officer then proceeded to assess the petitioner on the basis of a return submitted by B purporting to act on behalf of the alleged firm. But the petitioner was not required to submit a return and had not submitted any return: Held, that as the Income‑tax Officer had come to a positive conclusion that the firm in question had no real existence, the act of B in submitting a return could not be considered the act of the petitioner, and the petitioner could not be assessed without giving him notice and without giving him an opportunity to put forward his case. The petitioner was, in effect, assessed on the basis of a return submitted by a stranger, though the stranger claimed to be a partner with the petitioner. The assessment was, therefore, liable to be quashed. D. M. Chandrasekhar (Government Pleader) for Res pondents. JUDGMENT K. S. HEGDE, J.‑

On the admitted facts, the impugned order is clearly illegal. The petitioner and respondents Nos. 3 and 4 applied to the first respondent to register the firm known as "Messrs Porwal Silk House" claiming that they were the partners of that firm. Their application under section 26‑A of the Indian Income‑tax Act, 1922, was rejected on the ground that the alleged firm had no real existence. After holding that the firm did not exist, the first respondent proceeded to assess the petitioner on the basis of a return submitted by the fourth respondent purporting to act on behalf of the alleged firm. Admittedly, the petitioner had not submitted any return nor was the petitioner asked to submit any return. The return submitted by one partner of a firm could be considered as a return submitted by the other partners if the firm really exists. But, as mentioned earlier, the first respondent has come to a positive conclusion that the firm in question has no real existence. Therefore, the act of the fourth respondent in submitting the return cannot be considered as the act of the petitioner. The petitioner could not have been assessed without giving notice to him and giving him an opportunity to put forward his case. In truth, what has happened in this case is that the petitioner has been assessed on the basis of a return submitted by a stranger, though that stranger claimed to be a partner of the petitioner. For the reasons mentioned above the impugned order of assessment and the consequent demand notice, in so far as it relates to the petitioner cannot be sustained, and the same is hereby quashed. It will be open to the authorities to take fresh steps against the petitioner according to law. The first respondent should pay the costs of the petitioner. Advocate's fee Rs.

100. Sri Javali, the learned counsel for the petitioner, submits that in pursuance of the order of this Court, the petitioner has deposited half the tax amount. If any amount has been deposited by the petitioner in pursuance of the order of assessment, the same will be refunded to the petitioner and the security bond executed by him for the balance amount will stand cancelled. Petition allowed.