1972 (4) TMI 31 - HC - Income Tax

(i) Whether, on the facts and in the circumstances of the case, the notice under section 34 was valid in law ? (ii) Whether, on the facts and in the circumstances of the case, the service of the notice under section 34 was valid in law ? - Questions answered in the affirmative

Summary

Issues Involved:
1. Validity of the notice under section 34 of the Income-tax Act, 1922.
2. Validity of the service of the notice under section 34 of the Income-tax Act, 1922.

Issue-wise Detailed Analysis:

1. Validity of the Notice under Section 34:
The primary question was whether the notice issued under section 34 of the Income-tax Act, 1922, was valid. This arose from a consolidated order dated 6th August 1966, by the Income-tax Appellate Tribunal for the assessment years 1948-49 and 1949-50. The assessee, an agricultural company formed by two limited companies, had been issued a notice on 20th March 1957, by the Income-tax Officer. The assessee argued that the firm had been dissolved due to a High Court order on 25th July 1957, which retrospectively merged the two companies from 1st November 1955. The Tribunal upheld the notice's validity, reasoning that it was issued before the High Court's order. The court examined various precedents, including the Supreme Court's interpretation of section 44, which allows for the assessment of dissolved firms. The court concluded that section 44 applied to cases where business discontinuance accompanied firm dissolution. Therefore, the notice issued on 20th March 1957, was valid, and the first question was answered in favor of the revenue.

2. Validity of the Service of the Notice under Section 34:
The second issue was whether the service of the notice was valid under section 63 of the Income-tax Act, 1922. The notice was sent to the dissolved firm and accepted by the accounts officer of one of the partner companies. The assessee contended that the notice should have been served on a partner or through a partner. The court referred to precedents indicating that service on a partner or someone acting on behalf of the firm suffices. In this case, the notice was accepted by the accounts officer, who was managing the firm's affairs, and a return was filed in response to the notice. The court held that the service was proper and valid, answering the second question against the assessee and in favor of the revenue.

Conclusion:
Both questions regarding the validity of the notice and its service were answered in the affirmative, favoring the revenue. The court emphasized that section 44 of the Income-tax Act, 1922, allowed for the assessment of dissolved firms and that the service of the notice was valid as it was received and acted upon by the firm's representative. The Commissioner was awarded costs, and counsel's fee was set at Rs. 500.