2006 (3) TMI 128 - HC - Income Tax

Notice or requisition served on the person - No opportunity given to produce evidence - effect of non-service of notice on the proceedings or action taken in pursuance of such notice? - HELD THAT - In this case as pointed proper notice has not been served on the petitioner to enable him to effectively participate in the assessment proceedings and put forth its objections. In such circumstances it is not proper to ask the petitioner to take recourse to alternative remedy of appeal. When the facts of this case clearly shows that there is failure of principles of natural justice and the petitioner has made out a strong case I am of the considered view that this court should invoke the extraordinary jurisdiction under article 226 of the Constitution of India. Accordingly without going into the merits of the case on the sole ground that no proper notice has been served on the petitioner before passing the impugned proceedings and there is failure of the principles of natural justice the impugned proceedings of the respondent is quashed and the writ petition is allowed. The petitioner is directed to file its further objections if any before the first respondent within a period of four weeks from the date of receipt of a copy of this order and on receipt of such further objections the first respondent shall give an opportunity of hearing to the petitioner and pass orders of assessment in accordance with law and on the merits as expeditiously as possible. It is to be noted that this court has not expressed any opinion on the merits of this case and the first respondent is at liberty to pass orders without being in any way influenced by anything said in this order. Thus this writ petition is allowed.

Summary

Issues:
Challenge to assessment order based on improper notice and violation of principles of natural justice.

Analysis:
The writ petition sought to quash an assessment order dated March 31, 2003, primarily on the grounds of improper notice and violation of natural justice. The petitioner argued that the notice was not served personally, depriving them of the opportunity to present further evidence. The respondent, however, justified the affixture of notice under section 282 of the Income-tax Act, 1961, and Order 5, rule 20 of the Civil Procedure Code, stating it was a valid mode of service. The court noted that for substituted service to be valid, there must be a reason to believe the recipient is avoiding service, which was not established in this case. The respondent failed to follow the procedure for substituted service as required by law, leading to a violation of natural justice.

The court referred to the case law of Harbanslal Sahnia v. Indian Oil Corporation Ltd. [2003] 2 SCC 107, highlighting that the High Court can intervene in cases of fundamental rights enforcement, failure of natural justice, or lack of jurisdiction. In this instance, since proper notice was not served, preventing effective participation in the assessment proceedings, the court decided to exercise its writ jurisdiction under article 226 of the Constitution of India. The judgment emphasized the importance of upholding principles of natural justice and ensuring a fair opportunity for the petitioner to present objections.

The court directed the respondent to reassess the proceedings, allowing the petitioner to submit further objections within four weeks. It instructed the respondent to conduct the assessment afresh, considering the objections and passing orders in accordance with the law promptly. The judgment clarified that it did not express any opinion on the merits of the case, leaving the respondent free to make decisions without influence from the court's observations. Ultimately, the writ petition was allowed, with no costs imposed, and related motions were ordered to be closed.