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TMI Blog2013 (1) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... 4(7) of the Income-tax Act, 1961 (the Act), for continuation of registration of the partnership firm in Form No.12 for the assessment year 1985-86. The petitioner received a notice dated November 11, 1987, from the Income-tax Officer, Circle I/F, Ahmeda-bad, calling upon it to furnish the reasons for late filing of Form No. 12 as per the provisions of section 184(7) of the Act. The petitioner furnished the reasons, vide letter dated December 3, 1987. According to the petitioner, subsequently the petitioner did not hear anything as regards passing of any assessment order and/or granting of registration to the petitioner firm. How-ever, vide notice dated January 15, 1991, issued under section 221(1) of the Act, recovery of Rs.10,023 being income-tax and interest of Rs. 8,443 was sought to be made. Vide letter dated February 21, 1991, addressed to the Income-tax Officer, the petitioner informed that the recovery proceedings were bad in law as the same had been commenced without issuance of assessment order or demand notice. The petitioner also requested for a copy of the assessment order and notice of demand, if any, with a further request to drop the recovery proceedings. It appears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentative of the peti-tioner had stated that the petitioner had not received a copy of the assess-ment order and the demand notice. Thereafter, for a period of almost four years nothing was done. On January 31, 2000, the petitioner received a notice from the Tax Recovery Officer, Ahmedabad, in connection with the arrears of taxes amounting to Rs. 54,181 for the assessment year 1985-86. The petitioner again addressed a letter dated February 7, 2000, reiterating what was stated in the earlier letters. The petitioner thereafter received notices under section 221(1) of the Act dated March 10, 2000, and August 4, 2000, demanding arrears of Rs. 58,231 for the assessment year 1985-86 with interest and other arrears for the assessment year 1986-87. Thereafter, in the year 2005, on October 10, 2005, the petitioner again received a letter from the Income-tax Officer, Ward No. 6(3), Ahmedabad, for recovery of arrears for the assessment years 1985-86 and 1986-87. The petitioner addressed a letter dated October 21, 2005, referring to the earlier communications with a request to drop the proceedings.The petitioner received a letter dated January 16, 2007, from respondent No. 3-Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry Officer which had not been challenged by the petitioner at the relevant time. That the demand is now sought to be challenged by the petitioner after a lapse of 16 years. That no records are available with the Office of the Assessing Officer, as the matter is very old. However, there is no factual averment regarding demand notice under section 156 of the Act ever having been served upon the petitioner. 6.Mr. B. D. Karia, learned advocate for the petitioner invited the attention of the court to the various communications addressed by the petitioner to the tax authorities as well as the communication addressed by the Tax Recovery Officer to the Assessing Officer requesting him to issue copies of the assessment order and the demand notice to the petitioner. Attention was invited to the provisions of section 156 of the Act, as was in force at the relevant time, to submit that it was incumbent upon the Assessing Officer to serve upon the petitioner a notice of demand in the prescribed format specifying the sum so payable. It was submitted that in the absence of any demand having been made under section 156, it was not permissible for the respondents to initiate recovery proceedings a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted to challenge the same belatedly by way of this writ petition. 8.Thus, the controversy that arises for determination is (i) whether any legally valid demand notice had been served upon the petitioner ? and (ii) in case the first issue is answered in the negative, whether in the absence of a legally valid demand notice, the recovery proceedings initiated by the respondents are legal and valid. 9.From the facts emerging on record, no demand notice, as contemplated under section 156 of the Act, appears to have ever been served upon the petitioner. On behalf of the respondents, it has been contended that since the petition has been filed after a considerable delay, the record of the case is not available with the Assessing Officer so as to enable the respondents to ascertain as to whether or not any demand notice under section 156 had been served upon the petitioner. However, the said contention appears to be misconceived inasmuch as the petitioner, at the earliest point of time, upon receipt of the recovery notice dated January 15, 1991, had, vide reply dated February 21, 1991, objected to the initiation of the recovery proceedings as it had not received copies of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended under sub-section (3), as the case may be, at the place and to the person mentioned in the said notice, the assessee shall be deemed to be in default. On a plain reading of sub-section (4) of section 220 of the Act, it is apparent that a person can be said to be an assessee in default, (i) if he does not pay the amount specified in a notice under section 156 within the time limited under sub-section (1), viz.,35 days of the service of notice, or (ii) if he does not pay the amount specified in a notice under section 156 within the time extended under sub-section (3) ; at the place and to the person mentioned in the said notice. Thus, before invoking the provisions of section 220 of the Act, a notice is required to be served upon the assessee, specifying the amount as well as the place and the person to whom such amount is to be paid. Unless a demand notice under section 156 of the Act is served upon the assessee, he would not be in a position to know (i) the amount that he is required to pay; (ii) the place where he is required to make payment ; and (iii) the person to whom such payment is required to be made. Moreover, the period of 35 days for making payment under sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce having been served on the petitioner, one fails to understand as to how interest under section 220(2) of the Act came to be computed and as to how the petitioner came to be treated as an assessee deemed to be in default. Thus, in the absence of service of notice of demand under section 156 of the Act, the subsequent proceedings under sections 220 to 226 of the Act are evidently without jurisdiction. 12.The apex court in the case of Sri Mohan Wahi v. CIT [2001] 248 ITR 799 (SC) has held thus (page 809) : "If the amount specified in the notice of demand under section 156 is not paid within the time limited by sub-section (1) or extended under sub-section (3) of section 220, then the assessee shall be deemed to be in default under sub-section (4) of section 220. Tax recovery certificate can be issued under section 222 when an assessee is in default or is deemed to be in default. Proceedings for recovery of tax under the Second Schedule can be initiated against a defaulter. Thus, section 156 provides for a vital step to be taken by the Assessing Officer without which the assessee cannot be termed a defaulter. The use of the term 'shall' in section 156 implies that serv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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