JUDGMENT R.M. Sahai, J.
1. Being of opinion that there was apparent conflict in Commissionef of Sales Tax v. Sampat Raj Jain [1971] 27 STC 307 and Moti Dal Mills, Agra v. Sales Tax Officer (printed at page 405 infra) 1978 UPTC 606 two Division Bench decisions of our Court, on construction of Section 3-C(1) of the U. P. Sales Tax Act, a learned single Judge directed papers to be laid before the Honourable the Chief Justice who in exercise of powers under Rule 6 of Chapter IV of Rules of the Court, directed these revisions to be listed before the Tax Bench. That is how these revisions came before us. After hearing the learned counsel for the parties, although there appears to be no conflict, in these decisions, to which we shall advert later, yet we are not persuaded, as suggested by the learned standing counsel, to refer back these revisions as what can be done by a single Judge can, Surely, be done by a Division Bench. Converse may not be true. Further, propriety restrains us from adopting this course as each Judge, whether exercising jurisdiction as single Judge or in a Division Bench, acts as High Court. And, a learned single Judge having expressed his opinion it would not be proper for us to ask him to decide the revision on merits as in our opinion there was no conflict.
2. Before examing the rival submissions it may not be out of place to mention the back ground in which this section was added. As far back as 1957 in Jagat Behari Tandon v. Sales Tax Officer, Etawah [1957] 8 STC 459, problem of assessment of a dissolved firm arose. And, a Division Bench following decisions rendered under the Income-tctx Act ruled :
In our judgment, as assessment order cannot be made under the U. P. Sales Tax Act on a firm after it has dissolved....
3. In order to overcome this difficulty and avoid any attempt by partners of a firm to evade payment of tax the legislature intervened and enacted this section by the U. P. Sales Tax (Second Amendment) Act (32 of 1957) with retrospective effect. Although it was amended in 1959 and 1961, but the amendments were nominal only and the principal section remained as it was. Its Sub-section (1), which is relevant for the controversy before us, is extracted below "3-C. (1) Where a dealer is a firm, or association of persons or a joint Hindu family and such firm, association or family has discontinued business,-
(a) tax including penalty, if any, payable under this Act by such firm, association or family up to the date of such discontinuance may be assessed and determined as if no such discontinuance had taken place ; and
(b) every person who was, at the time of such discontinuance, a partner of such firm or a member of such association or family shall, notwithstanding such discontinuance, be liable severally and jointly for the payment of the tax assessed and penalty imposed and payable by such firm, association or family whether such assessment is made or penalty is imposed prior to or after such discontinuance and, subject as aforesaid, the provisions of this Act shall apply as if every such person or partner were himself a dealer :
Provided that where it is found that a change has occurred in the constitution of the firm or association, the firm or association as reconstituted as well as partners or members of the firm or association, as it existed before reconstitution, shall jointly and severally be liable to pay tax including penalty, if any, due from such firm or association for any period before its reconstitution.
4. Sub-section (a) obviously created a fiction by providing that for purposes of assessment and determination of a tax a firm, despite its dissolution, shall be deemed to continue. Why so ? To avoid evasion. Would it, by itself have been sufficient ? No. Therefore, Clause (a) was connected with Clause (b) by use of the word "and" at the end which further provides that every person or partner, who was member of such firm or family at the time of discontinuance, shall be liable severally and jointly. To this extent there was no dispute, but according to the learned counsel for the assessee, the last part of Clause (b) "subject as aforesaid, the provisions of this Act shall apply as if every such person or partner was himself a dealer" makes it obligatory on an assessing authority to treat every partner or person as a dealer. It was emphasised that the use of the word "every" was significant. Said the learned counsel, it was expressive of the legislative intent permitting every partner, who thus became a dealer, to file appeal. Recovery also could not be made from a partner unless he was served with notice of demand. The learned counsel maintained, that the expression used by the legislature could not be considered either to be redundant or superfluous and if this be so, then the only reasonable construction that could be placed on this provision was that although for the purposes of assessment a firm may be deemed to continue but as the liability is fastened on every partner of the firm or person who is a member of family, it was necessary to safeguard his interest by providing that each person or partner should be deemed to be a dealer. The learned counsel urged that this was a safety measure provided by the legislature to check any arbitrary recovery or deprive a partner or a person, who is vitally interested in pursuing his remedy of challenging the order by way of appeal or revision. On the surface the argument is no doubt attractive, but if it is accepted it may frustrate the entire objective of the fiction created by the subsection and defeat the purpose for which it was enacted. True, it may entail hardship in some cases, but there is ample remedy for redress. When a fiction is created and the court is required to treat something as real, when in fact it does not exist, then it is implicit that the court has not only to ascertain the purpose for which the fiction was created, but also to imagine the possible consequences of it and construe the provision in a manner which may subserve the purpose for which it was created. In State of Bombay v. Pandurang Vinayak AIR 1953 SC 244 the principle laid down in Exparte Walton; In re Levy (1881) 17 ChD 746 that when a legal fiction is created by a legislature the court must ascertain for what purpose and between what persons it was to be resorted to, that full effect must be given to it and that it should be carried to logical conclusion was approved.
5. Was the section enacted as a beneficient piece of legislation for dealers or to curb the manoeuvring at escaping the tax by dissolving the firm. Answer is self-evident. Then the provision has to be construed so as to achieve the objective. Can it be done if for recovery or appeal every partner is taken to be a dealer. The answer has to be in the negative. Why ? Assessment having been done, how should the assessing authority proceed ? Serve the notice of demand on whom ? It could not be on the dissolved firm: see Moti Dal Mills' case (printed at page 405 infra) 1978 UPTC 606. Necessarily it had to be on partners of the firm who are severally and jointly liable. Apart from liability, each partner has been treated as dealer. If a partner has been served, then by fiction incorporated in the latter part of Sub-clause (b) the dealer has been served. And once the dealer has been served other provisions of the Act apply to it. The fiction of treating every partner as a dealer was created for this purpose and (not) for multiplying the number of dealers thereby rendering the task of recovery of tax or penalty on a dissolved firm more cumbersome, difficult, may be impossible in some cases.
6. Further it is not disputed and stands settled by series of decisions given by the Supreme Court and this Court that service on one partner is deemed to be sufficient both for purposes of assessment and recovery against a firm. Can a partner of a dissolved firm be treated on a better footing than a partner of a continuing and existing firm? If the argument of the learned counsel is accepted then service on one partner of an existing firm is sufficient whereas service on each partner is mandatory in the case of a dissolved firm. Such could not be the intention of the legislature nor the provision is susceptible of such construction. Expression "every such person" was used in Sub-section (3) of Section 44 of the Income-tax Act of 1922, a provision in pari materia with Section 3-C(1) of the Sales Tax Act. While explaining its meaning the Supreme Court in Commissioner of Income-tax v. Raja Reddy Mallaram [1964] 51 ITR 285 (SC) observed:
He urged that the expression 'every person' in Section 44 means all persons and that by enacting that such person shall be liable to assessment 'jointly and severally' it was intended that after the association is dissolved only the members on the date of dissolution can be assessed in respect of the income of the association. As a corollary to the argument it was submitted that all members who are sought to be assessed must be individually served with notice of assessment and those not served will not be bound by the assessment. The argument is plainly inconsistent with what was observed by this court in Abraham's case [1961] 41 ITR 425 (SC). If by Section 44 the continuity of the firm or association is for the purpose of assessment ensured, no question of assessing the individual members of the association can arise....
...The plea that the respondent not having been served personally with the notice of assessment is not liable to pay the tax assessed cannot therefore be sustained.
7. The decision is a complete answer to the argument raised that the word "every" used in Section 3 necessarily has to be read as each partner or person has to be served for recovery or for assessment. This would be inconsistent with the scheme visualised in the sub-section.
8. We may now examine the decision cited by the learned counsel for the assessee. Reliance was placed on a Division Bench decision of the Mysore High Court in Mrs. A. Sattler v. Income-tax Officer (Collection), Circle I, [1970] 76 ITR 306. In this case, one Mr. Sattler and K. S. Gandhi were partners of an unregistered firm, namely, Inka Corporation. The partners of this firm were adjudged insolvents and in 1955 the Bombay High Court made an order discharging Mr. Sattler in respect of assessment years 1948-49 to 1952-53. The Income-tax Officer assessed the firm Inka Corporation to income-tax. Notice of it was given to Sri K. S. Gandhi but not to Mr. Sattler. Mr. Sattler died and his house devolved on his wife and daughter against whom the Income-tax Officer proceeded. The case taken up by Mrs. Sattler was that the firm having been dissolved the firm as such could not have been assessed and the proper procedure was to assess the partners jointly and severally under Section 29 of the Indian Income-tax Act. It was held that as Section 44, before its amendment in 1958, did not provide for any assessment on a dissolved firm and only created liability of the partners no order of assessment could be passed on a dissolved firm. This decision cannot obviously be of any assistance as Sub-clause (a) of Section 3-C specifically provids for this contingency.
9. Reliance was also placed on Commissioner of Income-tax v. Babu Ram Chandra Bhan [1969] 74 ITR 143 and Mohanlal Khemka v. Commissioner of Income-tax [1971] 81 ITR 89, the two division Bench decisions of our Court, where while construing Section 30 of the Income-tax Act, it was held that merely because an appeal filed by one partner was decided, it did not render ineffective or infructuous another appeal filed by another partner. The decisions were given on the language of Section 30 which permitted the partners of a firm, who were individually assessable on their shares, to file an appeal against the order of the Income-tax Officer to the Appellate Assistant Commissioner. In view of the statutory provisions it was held that the Tribunal could not have dismissed the appeal of the other partner and rightly so. These decisions are not in any manner helpful in construing Section 3-C(1). In fact, reliance was placed on these decisions to demonstrate that if each partner was treated as dealer and each of them filed appeal under Section 9 then by virtue of statutory provisions each appeal was maintainable and the argument of the learned standing counsel of incongruity or chaos was not sustainable. The decisions were given on the peculiar language of Section 30 and the contingency contemplated by it. It related to individual assessment of a partner's share. It cannot be extended or applied to a situation like Section 3-C(1) read with Section 9. Here, the unit of assessment is not the partner but the firm. There could be one and only one appeal by the dealer whether it is filed by one partner or by the other partner. It cannot be accepted that by the fiction created in the second part of Clause (b), the number of dealers is multiplied and each partner becomes a dealer for the purposes of recovery and appeal. That would be, as observed earlier, plainly inconsistent with the scheme of the section. It is true that in Commissioner of Income-tax v. S. K. Basu [1970] 76 ITR 291, a Division Bench of the Calcutta High Court held that each partner of a dissolved firm, after its assessment under Section 44 of the Income-tax Act, becomes a dealer and each has a right of filing appeal. Similar view was taken by the Rajasthan High Court in Daya Ram v. Additional Collector, Jaipur [1966] 62 ITR 411. We are, however, not called upon to discuss these decisions, as in Nand Kishore Sita Ram v. Commissioner of Income-tax [1968] 67 ITR 349, a Division Bench of our Court held that it was not necessary to issue notice and serve every partner of a dissolved firm with notice of assessment. Then in C. A. Abraham v. Income-tax Officer [1961] 41 ITR 425 (SC), it was observed by the Supreme Court :
In effect, the legislature has enacted by Section 44 that the assessment proceedings may be commenced and continued against a firm of which business is discontiuned as if discontinuance has not taken place. It is enacted manifestly with a view to ensure continuity in the application of the machinery provided for assessment and imposition of tax liability notwithstanding discontinuance of the business of firm. By a fiction, the firm is deemed to continue after discontinuance for the purpose of assessment under chapter IV.
10. In Sampat Ram Jain's case [1971] 27 STC 307, in more or less similar circumstances, it was held by the Division Bench that the Judge (Revisions) has not properly understood the import of the legal fiction, according to which every partner shall be treated to be a dealer. It does not mean that every partner is to be treated to be a dealer distinct and apart from the firm which in fact is the dealer liable to pay the tax. The true intention behind Sub-clause (b) appears to be to treat every partner to be a dealer so that if the tax liability of a dissolved firm is not paid every partner shall be deemed to be in default and can be proceeded against them without any fresh notice to him.
11. In Moti Dal Mills' case (printed at page 405 infra) 1978 UPTC 606 recovery proceedings were challenged by the partners as they were being made without any service of notice of demand on them. The Division Bench found that the firm had dissolved and the notice was served by affixation on the last known place of business of the firm. It was held that as the firm had dissolved, the service, which could have been effective; should have been made on any of the partners of the firm and as this was not done, the recovery proceedings could not go on. The Division Bench was not concerned with the question whether service on one partner was sufficient or that service on each partner was necessary. The two decisions were dealing with different situations. In our opinion there is no conflict in them.
12. Yet another decision on which reliance was placed was Kanodia Brothers v. Sales Tax Officer (1965-69) Reports of Sales Tax Journal, page 41. At page 43 it was observed by Satish Chandra, J., (as he then was):
If each individual partner becomes a dealer then he will be liable to pay tax under Section 8. Thus a partner of a dissolved firm cannot be made responsible to pay tax assessed on the firm unless he is himself served with a notice of demand. If no such notice is served on him it is obvious that he will not be a defaulter and no proceedings for recovery can take place as against him.
13. The observations apparently support the learned counsel. But we may observe that the learned Judge having found that the firm did not dissolve and that it continued the occasion to consider the question of applicability of Section 3-C did not arise. In fact, the learned Judge held that by change of partners no dissolution took place and that, therefore, service on the firm enabled recovery to be made from the subsequently added partners. The petition was dismissed even though the subsequently added partner was not served. We do not think that the observations can be put forward as a decision advancing the dealer's plea.
14. Having cleared the legal controversy, it may now be seen if the decision by the revising authority suffers from any error of law. Admittedly, the firm Nawi Irshad Hussain had six partners. It was dissolved on 24th December, 1972, The assessment orders for both these years were served on Nawi Hussain, one of the partners, although he refused to accept the notice as according to him under an agreement between the erstwhile partners it was agreed that the aforesaid dissolved firm would be looked after by Irshad Hussain and Shamshad Hussain. Notice was consequently served on him by affixation. It is not said that the service of notice on Nawi Hussain was contrary to Rule 77. The Judge (Revisions), however, took the view that Mehandi Hussain, one of the partners, whose appeal was dismissed as barred by time, was entitled to prefer the appeal as a matter of right. It was held that as he was not served, which was necessary in view of Moti Dal Mills' case (printed at page 405 infra) 1978 UPTC 606, limitation could not be said to have started running against him. In our opinion the revising authority erroneously applied the ratio of Moti Dal Mills' case (printed at page 405 infra) 1978 UPTC 606. Nawi Hussain having been served, the dealer was served. And, limitation to file revision, etc., could be computed from the date on which the dealer was served.
15. But while construing Section 3-C, we cannot ignore the hardship which may arise in some cases. For instance, in this very case Nawi Hussain having refused to accept notice and service having been effected by affixation did not care to file an appeal obviously because the firm was dissolved. It may be that he was not possessed of any assets and therefore, he was not bothered. There may be cases where due to change of circumstances, one of the erstwhile partners of a dissolved firm, out of spite for others, with nothing to lose, may not take any steps despite service and thereby jeopardise the interest of others. In such cases, an application under Section 5 of the Limitation Act for condonation of delay should be construed liberally. Fairplay and justice demand hearing. No one should be denied this right unless he does not act bona fide. We also consider it necessary to clarify that the department, in the case of a dissolved firm, should make all possible effort to serve all the partners with notice of demand. Serving one or a few partners should be an exception rather than the rule.
16. In the result, both the revisions filed by the Commissioner of Sales Tax succeed and are allowed. The question of law raised is decided by saying that Nawi Hussain, one of the partners of the dissolved firm, having been served, the dealer was served and limitation for filing an appeal was to be counted from the date of service on Nawi Hussain. The appeal filed by Mehandi Hussain, the other partner, was barred by time. As the revising authority had not decided the application under Section 5 of the Limitation Act, it may be done while disposing of the revision under Section 11(8) of the Act. A copy of the order may be sent to the Tribunal. Parties shall bear their own costs.