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TMI Blog1972 (7) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... rte assessment did not refer to that default at all in the assessment order ?" The material facts, so far as they are relevant for answering the above questions, are: D. D. Italia, a member of the Hyderabad Deccan Liquor Syndicate (hereinafter referred to as "the Syndicate"), filed return of his individual income for the assessment year 1358 Fasli, which included his share income from the Syndicate of Rs. 77,972. According to him, the Syndicate had earned from its liquor business for the year 1358 F. an income of Rs. 2,07,926. The Income-tax Officer assessed D. D. Italia to income-tax for the assessment year 1358 F. in September 1952. Another member of the Syndicate, by name, Namchand, was also assessed to tax in respect of his share income from the Syndicate for the same year. Since the Syndicate did not file its return of income for the year 1358 F. before the expiry of the assessment year 1358 F. its income chargeable to tax for that year escaped assessment. Bansilal managed the business of the Syndicate, had maintained its accounts and also kept the account books of the Syndicate with him. Notices issued by the Income-tax Officer to Bansilal as representing the Syndicate, un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income-tax the Tribunal upheld the contention of the assessee and set aside the assessment, as no notices were served on all the members of the erstwhile association of persons before making the assessment. At the instance of them Commissioner of Income-tax, the following question of law was referred to this court: " Whether an assessment can be made on a dissolved association of persons without service of notice on all the erstwhile members of the association?" That question was answered by this court in favour of the department and against the assessee. The appeal was once again heard by the Tribunal. The Tribunal then considered the other objections raised before it by the assessee and found that what was served on Bansilal by affixture was only a "summons" and not a "notice" to file the return of income of the Syndicate. Notices issued in the name of D. D. Italia were served on his employee, Manchusha, and it was not a valid service. D. D. Italia was not the principal officer of the association. Having elected and assessed the individual members of the A.O.P. in respect of their share incomes, the Income-tax Officer could not once again assess the same income in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter accepting the claim of partition of the Hindu undivided family the Income-tax Officer made assessments against the members of the Hindu undivided family. Subba Rao J. (as he then was), observed that after the proceedings initiated against the Hindu undivided family under section 34 culminated in the assessment of the Hindu undivided family, appropriate adjustments had to be made by the Income-tax Officer in respect of the tax realised by the revenue on that part of the income of the family assessed in the hands of the individuals. To do so, was not to reopen the final orders of assessment but, in reality, to arrive at the correct figure of tax payable by the Hindu undivided family. In that very judgment, his Lordship Subba Rao J. (as he then was), pointed out that section 3 conferred an option on the Income-tax Officer to assess either an A.O.P., or the members of the association, but no such option is conferred on the Income-tax Officer to either assess the Hindu undivided family or its members in respect of the income of the family. Therefore, that decision will not lend any assistance to the department's contention that, after making an assessment on the A.O.P., adjustment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 1358 Fasli, and tried to recover the tax from another member of the A.O.P., Raja Reddy Mallaram. Raja Reddy Mallaram then challenged the legality of the assessment before this court. This court held that the assessment bad in law, as the assessment was made on the A.O.P. and not on the members of the A.O.P., at the time of its dissolution jointly and severally and, therefore, the demand of tax could not be enforced particularly against any member of the A.O. P. on whom notice under sections 34 and 22(4) was not served. Aggrieved by the decision of this court, the Commissioner of Income-tax filed an appeal to the Supreme Court. The decision of the Supreme Court is now reported in Commissioner of Income-tax v. Raja Reddy Mallaram. The Supreme Court reversed the decision of this court. The Supreme Court upheld the validity of the assessment on the A.O.P. and justified the demand of tax from Raja Reddy Mallaram. In coming to such conclusion, Shah J., speaking for the court, observed that: "Under Chapter IV of the Indian Income-tax Act, 1922, an association of persons may be assessed as a unit of assessment or the individual members may be assessed separately in respect of their re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. It is sufficient to serve the notice of assessment on the appropriate member of the association. It is immaterial whethere all the individual members of the A.O.P. are assessed to tax in respect of their share incomes of the A.O.P. or some of them. In either case, the Income-tax Officer will be considered to have elected to assess the individual members of the association, and that would be a bar to the making of assessment on the A.O.P. once again on the income of the A.O.P. In the case before us, two of the members of the A.O.P., namely, D.D. Italia and Namchand, have been assessed to tax in respect of their share incomes from the A.O.P. for the assessment year 1358 F. Those assessments have remained valid and, we are told, that even taxes have been paid by them. Those individual assessments would, therefore, operate as a bar against the Income-tax Officer making all assessment on an A.O.P. once again in respect of the same income for the year 1358 F. provided the Income-tax Officer knew or had information in his possession that there was in existence an A.O.P. If the Income-tax Officer did not, at the time of making the assessment on individual members, know about the existe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and earned an income which attracted tax. At that time, the Income-tax Officer should have been careful enough to exercise the option and to elect to assess either the A.O.P. or the members of the association. We are, therefore, satisfied that the assessments on the individual members of the A.O.P. may, at best, be considered to have been made by the Income-tax Officer under an erroneous impression of law, rather than under ignorance of necessary facts. After having made assessments on the individual members of the association in such circumstances, it was not open to the Income-tax Officer, under section 3 of the Act, to once again make an assessment on the A.O.P. in respect of the same income. We have, therefore, no hesitation in holding that the assessment made on the A.O.P. after making assessments on two of the members of the A.O.P. is bad in law. Although the assessment made on the A.O.P. is liable to be set aside on the ground that the assessments made on the individual members would bar a further assessment on the A.O.P., we would, however, like to consider the question of validity of the service of notices on the members of the association, as it was argued at great ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of the Indian Civil Procedure Code (No. V of 1908) will apply to service of notices. Sub-section (1) of section 63 of the Indian Income-tax Act, 1922, provides that a notice may be served on the person therein named either by registered post or, as if it were a summons issued by a court under the code of Civil Procedure Sub-section (2) of section 63 provides that, in the case of an A.O.P., notice may be served on the principal officer thereof. The words "service by registered post" and "service on the principal officer" in respect of an A.O.P. which are present in section 63 of the Indian Income-tax Act, 1922, are absent in section 78 of the Hyderabad Act. Would that make the procedure prescribed under the Hyderabad Act, for service of notices and summons, different from the procedure prescribed for service of notices under the Indian Income-tax Act, 1922? This aspect of the matter has been considered by this court in the assessee's own case in Commissioner of Income-tax v. Hyderabad Deccan Liquor Syndicate. Considering section 63 of the Indian Income-tax Act, 1922, and section 449 of the Hyderabad Civil Procedure Code, which governed the service of notices and summ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice on Bansilal for making a valid assessment on the A.O.P. from a different angle. Indian Finance Act (No. 25 of 1950) which came into force on April 1, 1950, extended the application of the Indian Income-tax Act of 1922 to the Part B State of Hyderabad and repealed the Hyderabad Act. Section 13 of that Act preserves the operation of the State income-tax law for the purposes of levy, assessment and collection of tax in respect of the income of the previous years, relevant to the assessment years prior to 1951. Obviously, the State income-tax law applied to the income of the previous year ending September 30, 1948, relevant to the assessment year 1358-F., which was earlier to the previous year relevant to the assessment year 1951. To "levy" a tax means "to impose or assess" or "to impose, assess or collect under the authority of law". It is a unilateral act of superior legislative power to declare the subjects and rates of taxation and to authorise the collector to proceed to collect the tax. "Assessment" is the official determination of liability of a person to pay a particular tax. "Collection" is the power to rather in money for taxes, by enforced payment if necessary. The levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal and it is for the party who applied for a reference to challenge those findings of fact, first, by an application under section 66(1). If the party concerned has failed to file an application under section 66(1) expressly raising the question about the validity of the findings of fact he is not entitled to urge before the High Court that the finding was vitiated for any reason." Since the department has not asked in its application under section 66(1) or 66(2) to refer to this court a question challenging the correctness of the above finding of fact that no notice under section 46(1) of the Hyderabad Act was served on Bansilal, it is not open to the department to urge before us that the said finding of fact is either vitiated or defective. We have, therefore, necessarily to agree with the assessee's counsel that no notice under section 30(2) read with section 46(l) of the Hyderabad Act was served on the principal officer of the A. O. P. This is the second reason on the basis of which we agree with the Tribunal that the impugned assessment on the A. 0. P. is bad in law. Since D. D. Italia was not the principal officer of the association, nothing turns upon the validity or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There no doubt exist inveterate process dodgers who are bent upon being obstructive. That, however, is no justification for relaxing the requirements of the law. If determined efforts are made, service can be satisfactorily effected in the majority of cases. In a really difficult case, the Code has provided an adequate remedy......... In the case of a service by affixation, it is not sufficient to state in the affidavit of service that the process-server was satisfied upon enquiry that the defendant could not be found at his residence within a reasonable time. Facts must be stated in the affidavit to show what enquiries were made and whether it was reasonable under the circumstances to assume that the defendant could not be found at his residence within a reasonable time. The court must be satisfied that the process-server was justified in coming to such a conclusion, and in the absence of particulars it cannot do so. Reading Order 3, rule 6, with Order 5, rule 9, there can be no doubt that the empowering of an agent under Order 5, rule 9, can only be in the manner indicated in Order 3, rule 6, and verbal authority is not enough. Rules 16 and 17, coming as they do after rule 9, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the A. O. P. Thus, the assessment on the A. O. P. is bad for two reasons: one is that the Income-tax Officer had assessed to tax the individual members of the A. O. P. in respect of their share incomes from the A. O. P. and in doing so, he had elected to assess the individual members of the association. It was not, thereafter, open to him, in law, to make an assessment on the A. O. P. and the second is that no notice was served on Bansilal, who was the principal officer of the A. O. P., before making an assessment on the A. O. P. and that, in any case, service on him by affixture was bad in law. Service of notice of assessment on D. D. Italia was also bad and, even assuming it was good and valid service, still it would not help the department in getting the assessment upheld by this court, because D. D. Italia was not the principal officer of the association. Section 81 of the Hyderabad Income-tax Act does not also lend any help to the department. Under that section, no assessment could be quashed as void if merely there was a defect in the form of the notice issued. However, that section does not say that even if the notice is not duly served on the assessee, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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