1971 (11) TMI 35 - HC - Income Tax

Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the service of notice under section 22(2) of the Indian Income-tax Act, 1922, was invalid in law

Summary

Issues:
Validity of service of notice under section 22(2) of the Indian Income-tax Act, 1922.

Detailed Analysis:
The case involved a question referred under section 66(1) of the Income-tax Act regarding the validity of the service of notice under section 22(2) of the Indian Income-tax Act, 1922. The notice was affixed through an inspector in the presence of witnesses after the assessee refused to accept it. Subsequently, an ex-parte assessment was made under section 23(4) as the assessee did not file a return despite appearing and taking adjournments. The assessee contended that the notice under section 22(2) was not issued in compliance with the provisions of Order 5 of the Code of Civil Procedure, rendering the proceedings void ab initio. The Tribunal upheld the annulment of the assessment due to non-compliance with the provisions of rule 19 of Order 5, Civil Procedure Code, as the serving officer was not examined on oath by the Income-tax Officer.

The Commissioner of Income-tax argued that the Tribunal erred in holding the notice invalid based on non-compliance with rule 19 of Order 5, as the assessee's case was about non-compliance under rule 20 of Order 5. It was contended that the provisions of rule 19 were not mandatory, and the non-examination of the serving officer on oath was merely an irregularity that did not invalidate the service of the notice. Additionally, it was argued that the assessment order could not be annulled as the assessee participated in the proceedings without challenging the validity of the notice under section 22(4).

The High Court clarified that the reference did not include questioning the validity of the assessment order or the effect of the assessee's appearance before the Income-tax Officer. The Tribunal had jurisdiction to consider whether the service of the notice under section 22(2) was valid, even if it was deemed to have been effected under rule 17 of Order 5. Analyzing the provisions of rule 19 of Order 5, the Court found that non-compliance with the rule, specifically regarding the verification of the return by an affidavit of the serving officer and the examination of the officer on oath, rendered the service of the notice invalid in law. As the process-server was not examined on oath and did not verify the return by an affidavit, the Tribunal's decision upholding the annulment of the assessment was deemed correct.

In conclusion, the Court answered the question referred in the affirmative, affirming the invalidity of the service of the notice under section 22(2) of the Income-tax Act. The assessee was awarded costs, assessed at Rs. 200, with counsel's fee set at the same amount.