1961 (2) TMI 74 - HC - Income Tax

Summary

Issues Involved:
1. Maintainability of the writ petition under Article 226 of the Constitution.
2. Validity of the notice of demand issued under Section 29 of the Indian Income-tax Act.
3. Existence and necessity of an assessment order for issuing a notice of demand.
4. Delay in filing the writ petition.

Issue-wise Detailed Analysis:

1. Maintainability of the writ petition under Article 226 of the Constitution:

The first respondent contended that the petitioner is not entitled to maintain a writ application under Article 226 of the Constitution because he has the remedy by way of an appeal available to him under the Income-tax Act. However, the court held that the remedy of appeal cannot be regarded as an effective and efficacious remedy if the reasons for passing the order to be appealed from are not supplied to the party. In this case, the petitioner had not been supplied with the assessment order which would contain the main reasons. Therefore, the court rejected the contention that the petition is not maintainable on the ground of an alternative remedy being available by way of an appeal.

2. Validity of the notice of demand issued under Section 29 of the Indian Income-tax Act:

The petitioner argued that the notice of demand under Section 29 can only be issued when tax is due in consequence of any order passed under or in pursuance of the Act. The petitioner averred that no assessment order was passed by the Income-tax Officer, and consequently, he had no jurisdiction to issue a notice of demand or to institute recovery proceedings on the basis of the said notice of demand. The court agreed with the petitioner, stating that it is clear beyond doubt on a plain reading of Section 29 itself that no notice of demand can be issued in the absence of an order passed under or in pursuance of the Act.

3. Existence and necessity of an assessment order for issuing a notice of demand:

The court examined whether an assessment order was passed in the present case before the notice of demand was issued to the petitioner on March 29, 1956. The first respondent's affidavit did not provide personal knowledge as to whether such an order was made by his predecessor. The court noted that although the petitioner had applied for a copy of the order shortly after receiving the notice of demand, he was not supplied with a copy, and three years later, he was informed that the order was not traceable. The court held that the presumption relating to the due performance of official acts cannot be availed of in the manner suggested by the respondents. The issuing of the notice of demand along with the assessment form in the prescribed manner does not suffice to raise a presumption that the assessment order was duly and properly made. The court concluded that the existence of an exact copy of the assessment form signed by the officer does not raise a presumption as to the existence of the assessment order prior to the sending of the demand notice.

4. Delay in filing the writ petition:

The respondents argued that the petition is liable to be dismissed on the ground of delay, as the notice of demand was served on the petitioner on March 29, 1956, and the present application was filed more than four years thereafter. The court rejected this contention, noting that the petitioner was not supplied with the assessment order despite repeated requests and was only informed in May 1959 that the order of assessment was not traceable. The court held that the petitioner was not affected by the notice of demand until the prohibitory orders were issued in the recovery proceedings. The present application was filed without unnecessary delay after the prohibitory orders were served on the petitioner, and his interest was seriously and effectively affected. Therefore, the court concluded that the petition is not capable of being rejected on the ground of delay.

Conclusion:

The court upheld the petitioner's case, stating that the notice of demand issued on March 29, 1956, is not in conformity with the provisions of Section 29 of the Indian Income-tax Act and is, therefore, illegal and without jurisdiction. Consequently, the recovery proceedings must also be held to be without jurisdiction. The court ordered that the notice of demand and the consequent recovery proceedings be quashed and restrained the respondents from taking any action in pursuance of the said notice of demand and the recovery proceedings. The rule was made absolute, and the petitioner was awarded costs from respondents Nos. 1 and 2. The petition was allowed, and the rule was made absolute.