TMI Blog1971 (3) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 274 read with section 271(1)(c) and another notice under section 274 read with section 271(1)(b) was issued. In this application under article 226 of the Constitution, the petitioner challenges the aforesaid proceedings initiated by the said notices. Two points were urged in support of this application, namely: (i) that there were no grounds or materials for reopening the assessment under section 147 of the Income-tax Act, 1961; (ii) the notice under section 148 of the Income-tax Act, 1961, had not been served properly and in accordance with law within the prescribed time. No separate argument was advanced challenging the penalty proceedings. The application first came up for hearing before me on the 16th January, 1971. Inasmuch as there was some controversy that all the documents referred to in the affilavit-in-opposition had not been given inspection directed the income-tax department to give inspection to the petitioner of the following documents: (i) the copy of the reasons recorded for reopening; (ii) the return alleged to have been filed on behalf of the petitioner; (iii) the return of service by affixation of the notice on the petitioner-firm referred to in the affida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of subsequent investigation it was found out that the assessee had obtained large credits from the Bank of Bikaner and the Punjab National Bank during the financial year 1946-47, against the security of fixed deposits in various names. In fact the position was, it was asserted in the said note, that creditors of the firm were those persons in whose names the fixed deposits accounts amounting to Rs. 3,01,000 were credited in these two banks, and, therefore, the firm of Vijay Co. was liable for those credits and was liable to explain them. In the reasons it has been recorded that the assessee had operated a loan account with the Bank of Bikaner which was opened on the 18th October, 1946, and closed on the 31st August, 1947. The said loan made to the said firm amounted to Rs. 1,32,500 which was granted during the period. All these loans were advanced by the bank against the security of several fixed deposit accounts in several different names, details of which had been given in the reasons recorded. It has been stated in the reasons that these fixed deposits were made by a group of Ganesh Das Bajranglal for securing loan facilities for the firm instead of investing directly to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have material bearing on the question of under-assessment. It has to be remembered that in an application under article 226 challenging a notice under section 148, this court is not concerned with the sufficiency of the reasons. It is concerned to find out whether there were some reasonable grounds for thinking that there had been some non-disclosure as regards primary facts. Reliance may be placed for this proposition on the decision of the Supreme Court in the case of Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I, Calcutta, the decisions of the Supreme Court in the case of S. Narayanappa v. Commissioner of Income-tax and Kantamani Venkata Narayana and Sons v. First Additional Income-tax Officer, Rajahmundry. Dr. Pal, however, placed a strong reliance on the decision of the Supreme Court in the case of Chhugamal Rajpal v. S. P. Chaliha (Civil Appeal No. 1311 of 1967-judgment delivered on 21st January, 1971 (unreported)). The facts of that case, however, were entirely different. That was a case where the sanction accorded by the Commissioner under section 151(2) of the Income-tax Act, 1961, had been challenged. It was contended in that case that there we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first contention of Dr. Pal fails. The second contention of Dr. Pal was that notice under section 148 had not been served upon the assessee within the prescribed period in accordance with law. Dr. Pal contended that service of notice upon the assessee within the prescribed period was a condition precedent for initiation of proceedings. As mentioned hereinbefore in the affidavit-in-opposition originally filed on behalf of the respondents it had been stated that notice was posted by registered post on the 26th February, 1964; but it came back unserved. Thereafter, service of the notice was effected by affixing a copy of the notice on the 12th March, 1964, at premises No. 5B, Maktaram Babu Street. A notice under section 148 dated 21st March, 1964, was also addressed to the Lilooah Steel Wire Co. Ltd., partner of M/s. Vijay Co. An inspector, it has been asserted, tried to serve the aforesaid notice personally on two occasions; but he was unable to do so as none was willing to accept the service. In those circumstances it was asserted that the said notice was again affixed on the 23rd March, 1964. Another notice was also sent by registered post and the petitioner has filed a retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the notice under section 148. Dr. Pal contended that the aforesaid service indicated that there was no service in accordance with Order 5, rule 17, of the Code of Civil Procedure. Dr. Pal submitted that under the Income-tax Act it was necessary to serve the notice of reopening as if it was a summons issued by a civil court and Order 5, rule 17 of the Code of Civil Procedure, applied. He further urged that the fact that his client had filed a return would not cure the defect, if any, in the service of the notice. Dr.Pal placed strong reliance on the decision of this Court in the case of Gopiram Agarwalla v. First Additional Income-tax Officer. There it was held that the mere fact that the serving officer did not find the party to be served with the notice at his address was not sufficient to establish that he could not be found. It must be shown not only that the serving officer went to the place at a reasonable time when the assessee would be expected to be present, but also that if he was not found, proper and reasonable attempts were made to find him either at that address or elsewhere. If after such reasonable attempts the position still was that the party was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it can be held whether service was good or bad. In may opinion, Mr. Sen is right in his contention that when there was service by affixation on the ground that the person to be served could not be found, each attempt should not be judged separately. Considering here the entire course of attempts made to serve the notice I am of opinion that reasonable attempts had been made to find the petitioner and as such there was compliance of the requirements of Order 5, rule 17. Mr. Sen has sought to argue that even if the service by affixation was not good, defect was cured by the fact that the notice was served on the 3rd April, 1964, by registered post. In view of the aforesaid decision of the Supreme Court I am, however, unable to accept the position. Service of notice must be within the time prescribed as a condition precedent for initiating the proceedings. Mr. Sen also drew my attention to the judgment of the Gujarat High Court in the case of Commissioner of Income-tax v. Bhanji Kanji's Shop. It was held by the Gujarat High Court that the two modes of service mentioned in section 63(1) were not exhaustive and it was permissible to have a notice served in a way not mentioned in se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Income-tax Officer, Kottayam v. R. M. Subramania Iyer. Dr. Pal, on the other hand, contended that it had been held by the Supreme Court that where the Income-tax Officer initiated proceedings without jurisdiction the same was liable to be quashed in writ proceedings. He drew my attention to the relevant decisions of the Supreme Court. In my opinion, the proper and harmonious way of judging this question would be, where on admitted facts it is established that the notice was not served in accordance with the Code of Civil Procedure or as enjoined by law within the time prescribed, then, inasmuch as the service of the notice was a condition precedent for initiation of proceedings under section 148, such a contention could be raised in a proper writ proceeding, but where the question whether notice has been properly served or not is itself a question to be decided by adjudication upon the facts and upon such adjudication of facts it can be contended that the notice is barred by limitation it would not be proper for the court in a writ application to entertain such a contention. The court should in such a case direct the parties to proceed in accordance with the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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