1968 (4) TMI 4 - HC - Income Tax

Whether the validity of the service of notices u/s 34 can be challenged in an appeal against an order u/s 23(4) when no proceedings u/s 27 were taken to have the order u/s 23(4) cancelled - Held, no

Summary

Issues:
Validity of service of notices under section 34 challenged in appeal against order under section 23(4) without proceedings under section 27.

Analysis:
The case involved a notice issued under section 34(1)(a) of the Indian Income-tax Act, 1922, to the assessee regarding bringing a sum of money from abroad. The notice was served by affixation on the outside of the assessee's house, and the assessee was required to file a return by a specified date. Subsequently, the Income-tax Officer made an assessment order against the assessee under section 23(4) of the Act, which was later appealed by the assessee.

The Appellate Assistant Commissioner of Income-tax accepted the appeal on the grounds that the service of notice was not properly effected and directed the Income-tax Officer to make a fresh assessment. However, the Income-tax Appellate Tribunal reversed this decision, stating that the validity of the assessment could not be challenged in an appeal under section 30 without resorting to proceedings under section 27 for cancellation of the order under section 23(4).

The Tribunal referred the question of challenging the validity of service of notices under section 34 in an appeal against an order under section 23(4) to the High Court. The argument presented was that without proper notice under section 34, no assessment could proceed. The High Court analyzed previous judgments and held that the validity of the assessment under section 23(4) could not be questioned in an appeal under section 30 without first pursuing proceedings under section 27 for cancellation of the assessment order.

The High Court emphasized that while proper notice is essential for assessment proceedings, challenging the validity of the assessment directly in an appeal under section 30 without recourse to section 27 is not permissible. The Court cited various precedents to support this conclusion, highlighting that the aggrieved party must follow the prescribed procedure for challenging the assessment order. The Court answered the referred question in the negative, maintaining the requirement to exhaust remedies under section 27 before questioning the validity of the assessment in an appeal under section 30.

In a concurring opinion, another judge agreed with the decision and reasoning of the High Court. The judgment concluded by leaving the parties to bear their own costs in the reference, considering the circumstances of the case.