1956 (3) TMI 40 - HC - Income Tax

Summary

Issues Involved:
1. Validity of service of notice under section 34 of the Indian Income-tax Act.
2. Limitation period for serving notice under section 34.
3. Jurisdiction of the Income-tax Officer to assess the petitioners.

Detailed Analysis:

1. Validity of Service of Notice under Section 34:
The respondent, the Income-tax Officer, issued two notices under section 34 of the Indian Income-tax Act on 31st March, 1955, to the petitioners. The notices were addressed to the petitioners via Messrs. Pushkar Mal Sagar Mal, Nai Bazar, Lakhimpur Kheri. One notice was delivered by post to a partner of the firm on 1st April, and another was delivered by a peon to Mahabir Prasad, son of one of the petitioners, on 31st March. The petitioners contended that this did not constitute valid service. The court agreed, noting that Mahabir Prasad was neither the principal officer nor had he been served with a notice of the Income-tax Officer's intention to treat him as such. Therefore, the service of notice on Mahabir Prasad did not constitute valid service on the petitioners.

2. Limitation Period for Serving Notice under Section 34:
The court examined whether the notice under section 34 needed to be served within the prescribed period or merely issued within that period. Section 34(1) allows the Income-tax Officer to serve notice within eight years for certain cases and four years for others. The court found that the term "serve" in sub-section (1) clearly meant that the notice must be served within the prescribed period, not merely issued. The court rejected the respondent's argument that the word "serve" should be interpreted as "issue," noting that the legislative history and wording of the section indicated that service within the prescribed period was required.

3. Jurisdiction of the Income-tax Officer:
The court held that the Income-tax Officer's jurisdiction to assess the petitioners under section 34 depended on the valid service of notice within the prescribed period. Since the notice was not served within the eight-year period, the Income-tax Officer had no jurisdiction to continue the proceedings against the petitioners. The court emphasized that the giving of notice is a condition precedent to the assumption of jurisdiction by the Income-tax Officer.

Conclusion:
The court concluded that the notice under section 34 was not served within the prescribed time, and therefore, the Income-tax Officer had no jurisdiction to continue proceedings against the petitioners. The court issued a writ in the nature of prohibition, directing the respondent to refrain from proceeding further with the assessment of the petitioners under section 34. The petitioners were awarded costs assessed at Rs. 200.

Judgment:
Petition allowed.