Decided on April 08,1993

DINA NATH Appellant


R.P. Sethi, J. - (1.)ONE Som Nath was served with a notice in terms of Section 143(2) of the Income-tax Act, 1961, on March 31, 1979, for and on behalf of the petitioner. The date of hearing was fixed and the assessment order (annexure 'A') was passed on the same day holding the petitioner herein responsible to the addition of Rs. 35,839 in the income-tax return filed by him for the year 1976-77. The petitioner preferred an appeal before the Commissioner of Income-tax (Appeals) stating therein that he was not liable for the addition as determined by the Income-tax Officer as no assets were transferred by him to his wife or minor children and the provisions of Section 64(vi) could not be invoked. The point raised by the petitioner was found to be correct but it was observed that Section 64(iii) was applicable in his case and a sum of Rs. 35,839 was required to be added to his income under the said sub-section. It was further submitted that as no valid notice in terms of Section 143(2) was served upon the assessee, the order passed by the Income-tax Officer was liable to be set aside. The Appellate Commissioner dismissed the appeal of the assessee which forced him to approach the Income-tax Appellate Tribunal who, Vide their order dated December 20, 1980, also dismissed his appeal but in terms of order dated July 20, 1991, referred the following question for the opinion of this court :
"Whether, on the facts and in the circumstances of the case, the service of notice under Section 143(2) was valid ?"

(2.)WE have heard learned counsel for the parties and perused the record.
Mr. Thakur, learned counsel appearing for the Revenue, has submitted that the reference being misconceived was liable to be rejected without giving any opinion as, according to him, the point raised by the assessee was based upon a pure question of fact. It has, however, been contended on behalf of the assessee that as the service of notice was not effected in accordance with the provisions of law as incorporated in Section 143(2) of the Income-tax Act (hereinafter referred to as "the Act"), the whole of the proceedings initiated thereafter are liable to be quashed.

The admitted facts of the case are : that, on the last day when the assessment was to be made, a notice was served upon one Som Nath, who is neither a member of the family of the assessee nor his duly authorised agent having specifically been authorised to accept the notice on behalf of the assessee. It is also established that Som Nath had been accepting the notice earlier for and on behalf of the assessee and prosecuting the cases on his behalf before the income-tax authorities. In order to appreciate the rival contentions of learned counsel for the parties, a reference is required to be made to the provisions of Sub-section (2) of Section 143 of the Act, which provides :

"143. Assessment.--. . . .

(2) Where a return has been made under Section 139, or in response to a notice under Sub-section (1) of Section 142, the Assessing Officer shall, if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return :

Provided that no notice under this sub-section shall be served on the assessee after the expiry of the financial year in which the return is furnished or the expiry of six months from the end of the month in which the return is furnished, whichever is later."

(3.)A notice is required to be served upon the assessee in terms of the aforesaid provision requiring him to attend the office or produce any evidence on which the assessee relied in support of his return where the Assessing Officer considers it necessary or expedient to ensure that the assessee has not understated the income or not computed excessive loss or has not underpaid the income-tax. Notice was required to be served in terms of Section 282 of the Act which provides that a notice or requisition under the Act may be served upon the person therein named either by post or as if it were a summons issued by a court under the Code of Civil Procedure. A notice can be addressed in the case of a person not being an individual to the person who manages or controls his affairs. Service of summons is regulated by the provisions of Order V, Civil Procedure Code. Under Rule 9 of Order V, summons can be served upon the defendant if he resides within the jurisdiction of the court issuing summons or upon his agent residing within that jurisdiction provided such an agent is empowered to accept the service of the summons. Where, in any proceedings, the person summoned cannot be found and has no agent empowered to accept the service of the summons, the same may be served on any adult male member of the family who is residing with him. Under Rule 18, the serving officer is obliged in all cases in which summons have been served to endorse or annex or cause to be endorsed or annexed, on or to the original summons, a return stating the time when and the manner in which the summonses were served and the name and address of the person, identifying the person served and witnessing the delivery or tender of the summons. Substituted service is authorised under the circumstances and in the manner specified under Order V, Rule 20, Civil Procedure Code. The object of issuing the notice of summons is to intimate the concerned to appear and answer the queries or the questions sought to be clarified by any court or authority. As serious consequences are likely to follow, a notice or summons must necessarily be issued and served in the form and the manner prescribed by law. The authority issuing the notice cannot be permitted to substitute its own procedure for the service of the notice. Relying upon Y. Narayana Chetty v. ITO [1959] 35 ITR 388 (SC), a Division Bench of the Mysore High Court in C.N. Nataraj v. ITO (Fifth) [1965] 56 ITR 250, held that a notice under the Income-tax Act for initiating reassessment proceedings was not a mere procedural requirement but a condition precedent to the validity of any reassessment made under the Act. In that case, one Nagappa was assessed to income-tax and that assessment was set aside by the High Court whereafter the Income-tax Officer issued notice to the sons of the assessee under Section 148 of the Act. Notices were issued in the individual names of the sons of the assessee, some of them being minors. The notices issued were, however, served upon the clerk of the assessee. The Income-tax Officer held the sons of the assessee to be not assessable but he held the assessee to be liable to pay tax on the income in question and assessed him for the same. It was argued on behalf of the assessee that the notice served on the clerk not being in conformity with the provisions contained in Section 282 of the Act, no further action could be taken in pursuance of those notices. While disposing of the plea regarding the non-service of the notice in that case, the court held (at page 251) :
"But before examining the points formulated Sri K. Srinivasan, it is necessary to mention that, while issuing notices under Section 148, the Income-tax Officer is not acting judicially or quasi-judicially and, consequently, no writ of certiorari or prohibition can be issued. But it is well-settled that this court has power to issue in a fit case an order prohibiting the executive authority from acting without jurisdiction, particularly where such an act subjects or is likely to subject any citizen to lengthy proceedings and unnecessary harassment : See the decision of the Supreme Court in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 :

There is no doubt that a notice prescribed under Section 148 of the Act for initiating reassessment proceedings is not a mere procedural requirement ; the service of the prescribed notice on the assessee is a condition precedent to the validity of any reassessment made under Section 147. If no notice is issued or if the notice issued is shown to be invalid, then the proceedings taken by the Income-tax Officer without a notice or in pursuance of an invalid notice would be illegal and void. . . ."

A Division Bench of this court in the case of B. Johar Forest Co. v. CIT [1973] J and K LR 412, held that even the acquisition of knowledge in regard to the issuance of notice under the Act cannot be considered to be equivalent to or a substitute for the service of the notice on the assessee. The notice or requisition must be served in one of the modes mentioned in the Section before an assessee can be considered to be in default. In that ease, one D.B. Thappa was held to be the manager of the assessee-firm during the relevant period and service of notice on him was held to be not a service on the assessee.

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