1968 (8) TMI 50 - HC - Income Tax

Service of notice - Assessee has not been given an opportunity of being heard inasmuch as she was not served with any notice of hearing of these matters. Expiry of 2 years from order sought to be revised - Tribunal was right in holding that the notices to show cause u/s 33B of the IT Act 1922 and section 263 of the IT Act 1961 for the asst. yrs. 1960-61 and 1961-62 were not validly served

Summary

Issues Involved:
1. Validity of service of notices under section 33B of the Indian Income-tax Act, 1922, and section 263 of the Income-tax Act, 1961.
2. Validity and legality of proceedings under section 33B of the Indian Income-tax Act, 1922, and section 263 of the Income-tax Act, 1961.
3. Tribunal's refusal to direct the Commissioner to pass fresh orders under section 33B of the Indian Income-tax Act, 1922, and section 263 of the Income-tax Act, 1961, after giving the assessee a further opportunity of being heard.

Detailed Analysis:

1. Validity of Service of Notices:
The Tribunal had to determine whether the notices to show cause under section 33B of the old Act and section 263 of the new Act for the assessment years 1960-61 and 1961-62 were validly served on the assessee. The assessee had provided two addresses in her returns, but notices sent to these addresses were returned with remarks indicating that the "addressee not known." The department attempted personal service, which also failed. Consequently, notices were served by affixation at the provided addresses. The Tribunal found that this method did not constitute valid service as per law. The court upheld this view, stating that the service by affixation was not valid because it was not proven that the addresses were the assessee's ordinary place of residence or business. The court emphasized that proper service requires either personal delivery or valid substituted service under Order 5, rule 20 of the Code of Civil Procedure, which was not followed. Therefore, the first question was answered in the affirmative, confirming the Tribunal's decision that the notices were not validly served.

2. Validity and Legality of Proceedings:
The Tribunal had held that the proceedings under section 33B and section 263 were invalid and illegal due to improper service of notices. However, the court distinguished between the initiation of proceedings and subsequent procedural irregularities. The court stated that the proceedings were legally commenced when the Commissioner issued the show cause notice, and any irregularity in the service of notices does not invalidate the entire proceedings. The court referred to the Supreme Court's decision in Guduthur Bros. v. Income-tax Officer, which held that an initial lawful notice does not become inoperative due to subsequent procedural defects. Therefore, the second question was answered in the negative, indicating that the proceedings were not invalidated by the improper service of notices.

3. Tribunal's Refusal to Direct Fresh Orders:
The Tribunal refused to direct the Commissioner to pass fresh orders under section 33B of the old Act and section 263 of the new Act, citing the expiration of the two-year limitation period for passing such orders. The court agreed with the Tribunal regarding section 33B, stating that the limitation period was strict and could not be extended, even for remand orders. The court disagreed with the Bombay High Court's interpretation that the limitation does not apply to orders passed in pursuance of appellate orders. The court emphasized the strict construction of fiscal statutes and concluded that the legislature's omission to provide for such a contingency in section 33B was deliberate.

Regarding section 263 of the new Act, the court noted that the new Act included sub-section (3), which allows for orders in revision to be passed at any time if they are in consequence of or to give effect to an appellate order. Therefore, the Tribunal's refusal to direct the Commissioner to pass fresh orders under section 263 was not justified. The court answered the third question affirmatively for section 33B but negatively for section 263, indicating that the Tribunal should have directed the Commissioner to pass fresh orders under section 263 after giving the assessee a further opportunity of being heard.

Conclusion:
1. The Tribunal was right in holding that the notices to show cause were not validly served on the assessee.
2. The Tribunal was not right in holding that the proceedings under section 33B and section 263 were invalid and illegal.
3. The Tribunal was justified in refusing to direct the Commissioner to pass fresh orders under section 33B but was not justified in refusing to direct fresh orders under section 263 after giving the assessee a further opportunity of being heard.

The reference was answered accordingly, with no order as to costs.