1981 (4) TMI 136 - AT - Income Tax

Summary

Issues:
1. Dismissal of appeals by AAC for two years under consideration.
2. Rectification orders passed by ITO for share income.
3. Delay in serving demand notices on the assessee.
4. Legal validity of demands created by Revenue authorities.
5. Application of legal principles from Supreme Court and Privy Council decisions.

Analysis:
1. The appeals were filed by the assessee against the AAC's order dismissing the appeals for two years. The ITO rectified the share income of the assessee from a firm, resulting in enhanced share income. Demand notices were issued but were not served on the assessee until a later date, leading to the dismissal of the appeals by the AAC.

2. Upon hearing both sides, the Tribunal found that the original demand notice was not served on the assessee but on another individual. The Tribunal noted the undue delay of about five years in serving the demand notices after the completion of the original assessments. The Tribunal agreed with the assessee's counsel that the delay was unjustified, rendering the demands legally invalid from both equity and legal perspectives.

3. Citing decisions from the Supreme Court and Privy Council, the Tribunal highlighted the importance of serving notices of demand within a reasonable time. Referring to specific legal principles outlined in the judgments, the Tribunal emphasized the necessity of timely service of demand notices to impose tax liability effectively. The Tribunal concluded that the demands created by the Revenue authorities were not valid due to the delay in serving the notices on the assessee.

4. Consequently, the Tribunal canceled the demands made by the ITO, as no notices were served on the assessee within a reasonable time. As a result, both appeals filed by the assessee were allowed, overturning the AAC's dismissal and addressing the issues related to the rectification orders and the delay in serving demand notices effectively.