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Judgment
Rajasekhara Murthy, J.-The two petitioners are ex-partners of the firm run under the name and style of ''Sai Pharmaceuticals. The petitioners along with another partner entered into a partnership to carry on retail business in pharmaceuticals. The firm was registered as a dealer in the year 1974-75.
For the assessment year 1975-76 the firm did not file any return. A notice was issued in Form No. 31 against the firm and was served on Umashankar, the first petitioner. Since there was no return forthcoming, the Assessing Officer completed the assessment under Section 12(13) of the Karnataka Sales Tax Act (hereinafter referred to as the Act) on 15-3-77.
According to the Department, the assessment order at Annexure-A, is the assessment against the firm. A notice of demand was issued in Form-6 against the firm which was acknowledged by Umashankar. On the failure to pay the tax due under the assessment-order for the year 75-76, proceedings for recovery were taken against one of the partners of the firm, namely, second petitioner and this was served on 9-2-1987 on the second petitioner. A sum of Rs. 17,710/- is shown as due, including some arrears for the previous year is shown to be due from the firm.
Petitioners'' contention is that there is no assessment for the assessment year 75-76.
The assessment for the assessment year 1975-76 is made against M/s. Sai Pharmaceuticals, K.H. Road, Bangalore, in the status of an ''Individual''. The assessment-order is produced as Annexure-''A''. The notice in Form-41 was also issued against the second petitioner as a partner of the firm.
The contention of the learned Counsel for the petitioners is that the dealer-registered under the Act was the firm of M/s. Sai Pharmaceuticals and not in the status of an individual. It is not in dispute that the firm M/s. Sai Pharmaceuticals was registered as a dealer under the Act and the assessment for 1974-75 was done in the name of the firm.
The question now that arises for consideration is, whether the recovery proceedings taken against the second petitioner, K.S. Premnath, as a partner of the firm is in accordance with law?
It is argued by Sri Gandhi, learned Counsel for the petitioners, on the basis of these undisputed facts, that in the absence of any assessment against the firm, which is the dealer registered under the Act, no proceedings for recovery against the partner of the firm could be taken under the Act on the assumption that the assessment-order (Anx.-''A'') was an order made against the firm.
The further argument is that the recovery proceedings taken against the second-petitioner declaring him as a partner of the firm, are illegal and cannot be enforced. It is pointed out that none of the two petitioners can be construed as defaulters under the Act, as defined under Rule-38C-(b). The record of assessment produced by the Government Pleader shows the assessment is against an ''individual'' and the name of the assessee is M/s. Sai Pharmaceuticals.
But the recovery is now taken against one of the partners on the assumption that the assessment was made against the firm. A notice in Form-41 as required under Rule 38-E is issued against K.S. Premnath as a partner of M/s. Sai Pharmaceuticals. These recovery proceedings arc challenged in this writ petition as without authority of law.
Sri Dattu, HCGP, on the contrary, has argued justifying the recovery proceedings taken against the second petitioner, who, according to the learned-Government Pleader, is liable to pay the tax due from the firm. But it cannot be disputed that the assessment for the assessment-year 75-76 is against an individual and not against the firm. This mistake, it is not disputed, should have been rectified within five years from the date of the order.
This not having been done, the question is, whether it is open to the department now to proceed against one of the partners of the firm on the assumption that the assessment was against M/s. Sai Pharmaceutical, as a firm.
As already mentioned, the petitioners cannot be treated as defaulters under the Act* in the absence of an assessment in the status of a firm. The Department which is oblivious of this fatal defect, cannot retrieve from this and it is now too late to do anything.
Therefore, the recovery proceedings taken against the second-petitioner, as per Annexure-''B'', for the assessment-years 74-75 and 75-76 are liable to be quashed. It is ordered accordingly, and the notice, Annexure-''B'' is quashed.
Writ Petition Allowed.