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TMI Blog1978 (2) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 1956-57, the relevant previous year whereof ended on the 31st December, 1955. In the assessment order it was recorded that interest would be charged under section 18A(6) of the Act. Such interest was calculated and necessary entries were made in the Demand and Collection Register. In the notice of demand sent to the assessee on the 20th August, 1960, the interest charged under section 18A(6) was not included. On the 11 th December, 1964, after the lapse of over four years, the Income-tax Officer issued another notice of demand including in it a sum of Rs. 12,573.03 being the interest which was not included in the earlier notice. This notice was served on the assessee on the 14th December, 1964. Being aggrieved by this notice the assessee preferred an appeal to the Appellate Assistant Commissioner objecting to the legality of the issue thereof. It was contended by the assessee in the appeal that : (a) the Income-tax Officer was not competent to issue the second notice of demand after the expiry of four years ; (b) the mistake, if any, in the first notice of demand could not be rectified without a further notice to the assessee as the rectification enhanced the demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des as follows : "29. Notice of demand.--When any tax, penalty or interest is due in consequence of any order passed under or in pursuance of this Act, the income-tax Officer shall serve upon the assessee or other person liable to pay such tax, penalty or interest a notice of demand in the prescribed form specifying the sum so payable." Mr. Sen submitted that this section cast the duty on the Income-tax Officer to serve upon the assessee or other person liable to pay the tax, penalty or interest a notice of demand in the prescribed form specifying the sum so payable. This, the Income-tax Officer, failed to do in this case in the first instance and subsequently a correct notice was served on the assessee. There was no bar in the Act on serving more than one notice or withdrawing an earlier notice and issuing a fresh notice and there was no time limit prescribed for service of such a notice. In support of his contentions Mr. Sen cited several decisions which we shall consider in their chronological order : (a) Protap Chandra Ganguly v. Commissioner of Income-tax, 1932 Cal 410 [SB]. The facts in this case were that an assessment was made under section 23(4) of the Indian Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In 1956, the Income-tax Officer started proceedings under section 35 of the Act without any notice to the assessee and directed levy of penal interest. After application for revision under section 35A was rejected by the Commissioner of Income-tax, proceedings under article 226 of the Constitution were initiated, challenging the orders of the Income-tax Officer as being contrary to the principles of natural justice. On an appeal from an order of the High Court dismissing the said application, the Supreme Court held that action under section 35 may be taken in favour of the taxpayer without any notice but if the action had the effect of enhancing the assessment or reducing the refund, the Income-tax Officer must send a notice to the assessee and give him a reasonable opportunity of being heard. The contentions of the revenue that facts had been established to show that penal interest was leviable and the issue of a notice was a mere formality were rejected and it was held that the authorities under the statute had to act judicially and one of the requirements of judicial action was to give a fair hearing to a person before deciding against him. The Supreme Court also negatived the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners of the firm moved an application under article 226 of the Constitution against such proceedings and it was held that the proceedings for recovery of tax could be initiated only against an assessee in default. Though under section 44 of the Act, a partner was liable to pay the tax assessed on the firm before its discontinuance, as no notice of demand under section 29 had been served, a partner could be held to be an assessee in default. Thereafter, the Income-tax Officer issued notice of demand to all the partners under section 29 of the Act. The petitioner, a partner, challenged this notice before the Mysore High Court on the ground that it was issued over four years after the assessment and, thus, was clearly illegal. The High Court found that section 29 did not prescribe any period of limitation for issuing a notice. In any event, the High Court held that the notice was issued to the petitioner within a reasonable time and the petitioner had no reason to be aggrieved with the notice. (f) Badri Prosad Bajoria v. Commissioner of Income-tax [1967] 64 ITR 362 (Cal). The facts in this case were that the assessee was a partner in three registered firms and also derived income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he existence of an order and the existence of the order is only possible when the Income-tax Officer has made that order. From the point of view of the Income-tax Officer, he has discharged the statutory liability to assess if he makes an order of assessment within 4 years after the end of the assessment year. The statute does not say that the Income-tax Officer must communicate the order of assessment within 4 years after the end of the assessment year." (g) Commissioner of Income-tax v. Balkrishna Malhotra [1971] 81 ITR 759 (SC). This decision was cited for the following observation of the Supreme Court at page 762 of the report : "It has been stated over and over again by this court as well as by the Judicial Committee that the words 'assessment' and 'assessee' are used in different places in the Act with different meanings. Therefore, in finding out the true meaning of those words in any provision, we have to see to the context in which the word is used and the purpose intended to be achieved. It is true that sub-sections (1), (3) and (4) of section 23 require the Income-tax Officer to ' assess the total income of the assessee and determine the sum payable by him'. In other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch interest. On the 31st October, 1953, the assessee received a notice under section 35 of the Act proposing to rectify the assessment on the ground that while completing the assessment for 1947-48 the penal interest under section 18A was not charged by mistake. The assessee's objections were negatived by the Income-tax Officer and also by the Commissioner on revision. Thereafter, the assessee filed an application under article 226 of the Constitution challenging the proceedings under section 38. It was held by the Andhra Pradesh High Court that a person who had not been assessed previously was under a statutory obligation to send his return voluntarily and pay the amount of advance tax as prescribed by section 18A(8). Section 18A(8) laid a statutory obligation on the Income-tax Officer to levy penal interest under section 18A(6) and add the amount to the regular assessment and if this was not done the omission was a clear mistake apparent from the record and could be rectified under section 35. Mr. Roy also cited M. K. Venkatachalam, Income-tax Officer v. Bombay Dyeing Manufacturing Co. Ltd. [1958] 34 ITR 143 (SC). The facts in this case were that the assessee was assessed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment can always be issued to the assessee. There is no statutory time limit for the issue of such a notice. It is clear from the other decisions cited, viz., Viswanathan Chettiar [1954] 25 ITR 79 (Mad), N. Subba Rao [1963] 48 ITR 808 (Mys) and Badri Prosad Bajoria [1967] 64 ITR 362 (Cal), that though an assessment has to be completed within four years from the completion of the assessment year, a notice of demand can be validly issued even after that period. The right to appeal against the demand arises from the date of service of the second notice and it cannot be held that the assessee's right is being prejudiced in any way. In our view, the purpose of a notice under section 29 of the Act is to bring to the attention of and demand from the assessee the order of assessment and the amount of tax including interest and other items due from the assessee. It is the statutory duty of the Income-tax Officer concerned to give this notice, and there is no bar to the issue of such a notice if a proper or correct notice have not been issued earlier. For the reasons given above, we are unable to accept the contention of the assessee. We answer the questions referred as follows : The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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