2010 (9) TMI 798 - HC - Income Tax

Service of notice - service of notice on unserved respondent who is no other than the assessee in all these appeals by the Revenue which have already been admitted are being effected only through a paper publication even without having recourse to other possible modes of service of notice - Service of notice on the assessee by all modes of service is permitted including through hand summons if a request is filed in the Registry - public money is unnecessarily wasted by the IT Department by resorting to the paper publication method of service of notice on an assessee as a matter of routine incurring considerable avoidable and unnecessary expenditure towards the cost of advertisement in newspapers constrained to direct the appellant CIT to file a report before this Court furnishing information as to the amount of expenditure incurred by the IT Department for effecting service of notice on the respondent

Summary

Issues: Service of notice on unserved respondent, Tax liability of assessee, Ineffectiveness of service through paper publication, Defect in appeal presentation, Wastage of public money

In this judgment by the Karnataka High Court, the primary issue addressed is the service of notice on unserved respondent by the Revenue in income-tax appeals. The court notes that the Revenue has been effecting service only through paper publication without exploring other modes of service. The judges express concern about the effectiveness of this method, especially when the respondent assessee, in this case, a limited company, is not being properly served. The court questions the ability of the Commissioner of Income Tax (CIT) to recover taxes due to the State if proper notice is not served on the assessee.

Regarding the tax liability of the assessee, the court emphasizes that any income-tax appeal revolves around determining the tax liability of the assessee. The judgment highlights the importance of ensuring that the respondent assessee is properly served with notice to proceed with the appeal process. The court raises doubts about the CIT's competence in handling such matters effectively.

The judgment also addresses the ineffectiveness of service through paper publication. While paper publication may suffice for record purposes, the court finds it inadequate when the respondent, a company in this case, is not represented by any human agency during the appeal proceedings. The court stresses the need for proper service of notice to ensure fair proceedings and compliance with legal requirements.

Another issue highlighted is the defect in the presentation of the appeal. The court points out that the appeal filed against the company lacks representation, leading to confusion during court proceedings. The judges instruct the appellant CIT to rectify this defect within a specified timeframe and ensure proper steps are taken to serve notice on the respondent-assessee.

Furthermore, the judgment delves into the wastage of public money by the IT Department due to the routine use of paper publication for serving notices. The court directs the appellant CIT to provide a report detailing the expenditure incurred for serving notices on respondent-assessees over the past three years. This directive aims to address the unnecessary financial burden placed on the department and promote cost-effective practices in the future.

In conclusion, the Karnataka High Court's judgment underscores the significance of proper service of notice, the determination of tax liability, rectification of appeal presentation defects, and the prudent use of public funds in income-tax appeal processes.