Citation Codes

Equivalent Citations

citation codes

Case Number

O.P No. 4626 of 1975

Advocates

For the Appellant: Government Pleader

Judges

George Vadakkel, J.

Acts

section 63(1) of the Income-tax Act read with Order V, rule 17, of the Code of Civil Procedure
section 63(1) of the Income-tax Act and Order V, rule 17, of the Code of Civil Procedure,
section 64 of the Agricultural Income-tax Act, 1950 (in short, the Act)
section 63(1) of the Indian Income-tax Act, 1922,
Revenue Recovery Act, 1958. Exhibits P-1 and P-3
section 63 of the Indian Income-tax Act, 1922,
Order V, rules 17, 18 and 19. Rule 19
INCOME TAX ACT
rule 18 of Order V

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Smart Summary

Summary of the Opinion (George Vadakkel, J.)

Factual and Procedural Background

The deceased assessee (father of petitioners Nos. 1 and 2 and husband of the 3rd petitioner) filed a return on 24 September 1971 in respect of agricultural income for 1971–72. The assessment was not completed before his death on 4 November 1972. After his death a pre-assessment notice was issued to petitioners Nos. 1 and 2 by post; that notice was returned as not served. Thereafter the notice was forwarded to the village officer (the 3rd respondent) for the village where the deceased's cardamom estate is situated. According to the 1st respondent (Additional Agricultural Income-tax Officer) the village officer could not find petitioners Nos. 1 and 2 and served them by affixture on 3 March 1973. No further particulars of that affixture service were supplied in the record.

The first respondent completed the assessment thereafter and, he states, sent the assessment order and demand notice by registered post; those communications were returned with an endorsement that petitioners Nos. 1 and 2 refused to accept them. The petitioners deny any refusal and say the notices were never taken to them at Madurai where they permanently reside and do business. They assert they first learned of the assessment proceedings when cardamom crops on the estate were attached under the Revenue Recovery Act, 1958; the record contains copies of notices under sections 7 and 34 of that Act (Exhibits P-1 and P-3) and an attachment mahazar (Exhibit P-2).

Legal Issues Presented

Whether the pre-assessment notice served by affixture through the village officer complied with the mode of service required by section 64 of the Agricultural Income-tax Act, 1950 (i.e., whether section 64 is exhaustive regarding service and whether service by affixture must conform to the procedure for service of summons under the Code of Civil Procedure).
Whether a best judgment assessment completed without affording the petitioners an opportunity to explain the materials relied on by the assessing officer violates the rules of natural justice.
Whether assessment proceedings in respect of the deceased, with notice given only to two out of three legal representatives, could bind the estate of the deceased (i.e., whether notice to only some legal representatives is sufficient).

Arguments of the Parties

Petitioners' Arguments

The pre-assessment notice purportedly served on petitioners Nos. 1 and 2 through the village officer by affixture was not served as if it were a summons under the Code of Civil Procedure as required by section 64 of the Agricultural Income-tax Act, 1950.
A best judgment assessment without affording the petitioners an opportunity to explain the materials relied upon by the assessing officer is invalid as violative of the rules of natural justice.
The assessment could not bind the estate of the deceased if notice was given to only two of the three legal representatives.

First Respondent / Government Pleader's Arguments

Contended that an opportunity had been given to the petitioners because the pre-assessment notice had been served by affixture through the village officer.
Argued that section 64 of the Agricultural Income-tax Act is not exhaustive as to the manner of service of notices and requisitions under the Act, i.e., notices could be served by methods other than those provided in section 64.
As to the contention about notice to only two legal representatives, relied on the principle of substantial representation.
The learned Government Pleader did not dispute the proposition (based on precedent) that an assessment without giving an opportunity to the assessee or his legal representatives to meet the case is illegal.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
ITRs Nos. 119 and 120 of 1971 (Agrl) (Division Bench of this Court)	Consideration of whether section 64 is exhaustive; held that service by affixture must be proved and, if service is not in the manner provided by section 64, constructive notice cannot be imputed.	The court relied on and adopted the Division Bench's reasoning that service in modes other than personal service must conform to the procedure prescribed by law (section 64 read with the Code) and that proof of service is required for affixture.
Kunhammad Haji v. State ([1960] KLT 930 (Ker))	Authority for the proposition that an assessment without giving opportunity to the assessee (or his legal representatives) to meet the assessing officer's case is illegal.	The court noted the Government Pleader did not dispute that decision and similar decisions; it accepted the proposition that lack of opportunity renders an assessment illegal.
Ramendra Nath Ghosh v. Commissioner of Income-tax ([1967] 66 ITR 414 (Cal))	Notices not served by post must be served by the procedure laid down for service of summons under the Code of Civil Procedure.	The court cited this decision to support the view that where service by post is impossible or not effected, recourse must be to the Code procedure for service; it reinforced the need to follow Code requirements for substituted service.
Commissioner of Income-tax v. Ramendra Nath Ghosh ([1971] 82 ITR 888 (SC))	Service by affixation must be in accordance with law; if the serving officer's report lacks required details, service cannot be treated as in accordance with law.	The Supreme Court's reasoning was relied on to demonstrate that alleged affixture service must be proved and that inadequate or unverified reports may render such service invalid.
Ramnivas Hanumanbux Somani v. Venkataraman, Income-tax Officer ([1959] 37 ITR 329 (Bom))	Instances where, as a matter of fact, service of notice was found to be in accordance with the provisions of the Code of Civil Procedure.	The court observed that this decision actually turned on the factual finding that service complied with the Code, and therefore it did not assist the Government Pleader's argument that section 64 was not exhaustive.
Messrs. K.C. Tiwari & Sons v. Commissioner of Income-Tax, Bombay ([1962] 46 ITR 236 (Bom))	Holds that the mode of service provided in the statute may not be exhaustive, but applies principally where it is proved that the assessee actually received notice and participated in proceedings (waiver/participation).	The court treated this decision as inapplicable on the facts because it proceeded on actual receipt/participation by the assessee—an issue not present in the instant case.
Commissioner of Income-tax v. Bhanji Kanji's Shop ([1968] 68 ITR 416 (Guj))	Similar to K.C. Tiwari: mode of service held not exhaustive where there is proof of actual receipt and participation, amounting to waiver of irregularity.	The court noted that this line of authority turns on proof of actual receipt and participation, which was not the situation before it, and thus it did not support the Government Pleader's position here.
Commissioner of Wealth-tax v. Mrs. Illa Pal Choudhury ([1971] 82 ITR 936 (Cal))	Another case where, as a matter of fact, service of notice was found to be in accordance with the Code.	The court observed this decision similarly offered no assistance to the Government Pleader because it rested on a factual finding of compliance with the Code's procedure.

Court's Reasoning and Analysis

The court began by addressing the principal question whether section 64 of the Agricultural Income-tax Act is exhaustive as to the mode of service of notices. It relied on the reasoning of the Division Bench decision in ITRs Nos. 119 and 120 of 1971 (to which the judge was a party), which held that:

Natural justice requires that a person affected by a decision must be given an opportunity to be heard; statutory provisions concerning service are codifications of that principle.
Where personal service is not possible, statutes often authorize substituted methods (service on an agent, family member, affixture). Constructive notice can be attributed only if there is a legal provision authorizing such substituted service and the substituted service is effected in accordance with the procedure prescribed by law.
If affixture service is claimed to have been effected by invoking section 64 (which directs that notices be served as if they were summons under the Code of Civil Procedure), then the procedure in the Code for affixture (Order V, rules 17–19) must be followed. Those Code rules require proof of service (for example, the serving officer's return and possibly oral examination under rule 19) so that the court or authority can be satisfied that summons was duly served.

Applying that reasoning, the court concluded that, insofar as the Act provides for modes of service, section 64 is the only relevant provision and is exhaustive for substituted or constructive service: if service by affixture is to be treated as imputing constructive notice, it must conform to section 64 and, through it, to the detailed Code procedure for affixture. The court emphasised the need for proof of service where affixture is relied upon and observed that compliance with Order V, rule 18 (endorsement/return details by the serving officer) would be a wholesome practice to check false returns.

The court then reviewed authorities: Ramendra Nath Ghosh (Calcutta) was cited for the proposition that where notices cannot be served by post, the Code procedure for service of summons applies; the Supreme Court's decision in Commissioner of Income-tax v. Ramendra Nath Ghosh was relied on for the proposition that affixation must be in accordance with law and that inadequate serving-officer reports can render such service invalid. The Government Pleader's cited authorities were examined and distinguished: some of those cases rested on findings that service had in fact complied with the Code (thus offering no support for a broad proposition that section 64 is non-exhaustive), and others proceeded on the principle that where an assessee actually received notice and participated, the assessee cannot later challenge service (waiver/participation)—a factual situation not present in the instant case.

On these bases the court found that the petitioners had not been shown to have been validly served in accordance with the procedure required by section 64 and the Code; therefore they had not been afforded the statutory and natural justice opportunity to be heard before assessment was completed.

Holding and Implications

Holding: The petition is allowed. The court held that the petitioners are entitled to all the reliefs prayed for and the petition is therefore allowed; parties shall suffer their costs.

Implications:

Direct effect on the parties: The assessment completed after the alleged service by affixture was set aside in favour of the petitioners; the petitioners obtain the reliefs they sought and the petition is allowed (the order does not specify subsequent steps but the direct operative effect is that the impugned assessment and consequential proceedings could not be sustained on the basis of the defective service described).
On broader law: The opinion applies and endorses the view that, for substituted modes of service (such as affixture) to give rise to constructive notice, the prescribed statutory procedure must be followed — here, section 64 read with the Code of Civil Procedure (Order V, rules 17–19). The opinion did not purport to lay down any novel rule beyond applying established authorities and did not discuss or purport to create any wider precedent beyond reaffirming the existing principles described above.

This summary strictly reflects only the material contained in the provided opinion and does not add facts or inferences not present in the source text.

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A.A Kochandi And Others v. Agricultural Income-Tax Officer, Devicolam, And Others.

George Vadakkel, J.:— Though the assessee, father of petitioners Nos. 1 and 2 and husband of the 3rd petitioner, filed the return on September 24, 1971, in respect of his agricultural income for the year 1971-72, the assessment was not completed till he died on November 4, 1972. After his death a pre-assessment notice was issued to petitioners Nos. 1 and 2 by post. This was not served on them and was returned. Notice was, therefore, forwarded to the 3rd respondent, village officer of the village, in which the cardamom estate of the deceased is situated. According to the 1st respondent, Additional Agricultural Income-tax Officer, the village officer did not find the above persons (petitioners Nos. 1 and 2) and so he served them by affixture on March 3, 1973. No other circumstances relating to the said service by affixture are available in this case. The first respondent appears to have completed the assessment thereafter; according to him, he sent the assessment order and demand notice by registered post, and these were returned with the endorsement that petitioners Nos. 1 and 2 refused to accept them. Petitioners deny that they so refused, their case being that no such order or notice was taken to them at Madurai where they are permanently residing and doing business. It is their case that they came to know of the assessment proceedings only when cardamom crops in the estate were attached under the Revenue Recovery Act, 1958. Exhibits P-1 and P-3 are copies of notices issued under sections 7 and 34 of that Act, and exhibit P-2 is the copy of attachment-mahazar.

2. It is contended that the pre-assessment notice issued to petitioners Nos. 1 and 2 through the village officer and served by affixture was not served on them as if it were a summons issued by a court under the Code of Civil Procedure as required by section 64 of the Agricultural Income-tax Act, 1950 (in short, “the Act”) and that a best judgment assessment without affording them an opportunity to explain the materials relied on by the first respondent is invalid as violative of the rules of natural justice.

3. It is also argued that assessment proceedings with notice only to two out of the three legal representatives of the deceased assessee could not bind the estate of the deceased. It is not disputed before me by the learned Government Pleader that an assessment without giving opportunity to the assessee (or his legal representatives) to meet the case on which the 1st respondent, rejecting the return, proposed to complete the assessment, is illegal and possibly he could not, in view of the decision of this court in Kunhammad Haji v. State, [1960] KLT 930 (Ker) and the decisions following it; the case of the first respondent is that an opportunity was given by service of the pre-assessment notice by affixture. However, there is no case before me that that notice was served as if it were a summons issued by a court under the Code of Civil Procedure. On the other hand, the argument advanced by the learned Government Pleader is that any notice could be served in some manner other than that provided for in section 64 of the Act. In other words, the argument is that section 64 of the Act is not exhaustive as regards the manner of service of notices and requisitions under the Act: To meet the second contention the learned Government Pleader relies on the principle of substantial representation.

4. Taking up the first point, the question whether section 64 of the Act is exhaustive or not was considered by a Division Bench of this court to which I was a party in ITRs. Nos. 119 and 120 of 1971 (Agrl)*. Therein on behalf of the Bench I had occasion to say as follows:

“Canons of natural justice demand that a decision in which a person has a concern cannot be taken against him without affording him an opportunity to be heard; statutory provisions regarding service of notice are only codifications of this principle of natural justice. However, there may arise very many situations when actual personal service is not possible, and, therefore, provisions are made for giving notice of a matter to a person through methods other than personal service, as for example by service on an agent, or on an adult member of one's family. There may arise still worse situations where even service on another person like an agent is also not possible. Statutes, therefore, authorise service by affixture, and substituted service. In all these cases it is presumed that the concerned person would come by the notice or summons, and thereby come to know of the proceedings, even though, as a matter of fact, he may not know about them at all. In other words, constructive knowledge or notice of the proceedings is attributed to him. But for imputing constructive notice it is essential that there should be some provision of law in that behalf; and, further, it is also necessary that service of notice must have been in accordance with the procedure prescribed. Therefore, if the service by affixture in the instant case is, as is contended, not as provided in section 64, it will be a case where law has not provided for imputing constructive knowledge or notice of the proceedings which have been initiated against the assessee. On the other hand if the service by affixture was effected by calling in aid section 64 which provides that a notice can be served as if it were a summons issued by a court under the Code of Civil Procedure, then the procedure prescribed by that Code relating to service by affixture of summons has to be followed. Provisions of the Code relating to service by affixture are those contained in Order V, rules 17, 18 and 19. Rule 19 provides that where summons is returned under rule 17, if the return has not been verified by the affidavit of the serving officer, the court shall examine the serving officer on oath touching his proceedings, and may make such further enquiry in the matter as it thinks fit, and shall either declare that the summons has been duly served or order such service as it thinks fit. This rule requires that the court must be satisfied from the affidavit accompanying the return, or the statement on oath of the serving officer that summons had been duly served. This is what is ordinarily known as ‘proof of service’. The Tribunal was, therefore, right in holding that service by affixture had to be proved, and that, in the absence of proof, such service could not be treated as valid service.”

5. In short, therefore, it was held by this court, that in cases other than cases of personal service, service should be effected in a manner sanctioned or prescribed by law; so far as the Act is concerned, section 64 is the only provision therein relating to service of notices and that section in turn prescribes the mode of service of notice as that applicable to a summons issued by a court under the Code. To this extent section 64 is certainly exhaustive. Whether the provisions of the Code governing personal service would govern personal service of notices under the Act did not arise in that case, and does not in this case as well; it is, therefore, unnecessary to examine that aspect here, though I am inclined to say that compliance with rule 18 of Order V in the Code requiring the serving officer to endorse on or annex to the summons a return stating the details made mention of therein would be a wholesome practice; it would, to a large extent, check false returns.

6. In Ramendra Nath Ghosh v. Commissioner of Income-tax, [1967] 66 ITR 414, 432-33 (Cal), with reference to section 63 of the Indian Income-tax Act, 1922, it was held:

“Since in this case the notices could not admittedly be served on the petitioner by post, the only other way they could be served is by the procedure laid down for service of summons under the Code of Civil Procedure.”

(Underlining by me)

7. And, dealing with an argument that what is required of the Commissioner by section 33B of Income-tax Act is to give the assessee an opportunity of being heard and that, therefore, the impugned service of notice, though not in accordance with section 63, is valid, the same decision pointed out at page 434:

“The statutory notice under section 63(1) of the Income-tax Act read with Order V, rule 17, of the Code of Civil Procedure has one advantage that even though such notice may not be served personally on the assessee there is a statutory presumption attached to such service. Once it can be satisfactorily proved that all the requirements of section 63(1) of the Income-tax Act and Order V, rule 17, of the Code of Civil Procedure, have been satisfied, there would be a statutory presumption that the service has been done properly and regularly.”

8. In dismissing the appeal preferred against the above decision, the Supreme Court said in Commissioner of Income-tax v. Ramendra Nath Ghosh, [1971] 82 ITR 888 at pages 890-91 as follows:

“Admittedly, the assessees have not been personally served in these cases. Therefore, we have to see whether the alleged service by affixation was in accordance with law. It is necessary to mention that, according to the assessees, they had no place of business at all. They claim that they have closed their business long before the notices were issued. Hence, according to them, Mr. Neogi must have gone to a wrong place. This con tention of the assessees has been accepted by the Appellate Bench of the High Court. Bearing these facts in mind, let us now proceed to consider the relevant provisions of law…….”

(Underlining by me)

“As seen earlier the contention of the assessees was that at the relevant time they had no place of business. The report of the serving officer does not mention the names and addresses of the persons who identified the place of business of the assessees. That officer does not mention in his report nor in the affidavit filed by him that he personally knew the place of business of the assessees. Hence, the service of notice must be held to be not in accordance with the law. The possibility of his having gone to a wrong place cannot be ruled out. The High Court after going into the facts of the case very elaborately, after examining several witnesses, has come to the conclusion that the service made was not a proper service.” (Underlining by me). These decisions, I think, support the view taken by this court in I.T.Rs Nos. 119 and 120 of 1971 (Agrl).†

9. The learned Government Pleader relied on Ramnivas Hanumanbux Somani v. Venkataraman, Income-tax Officer, [1959] 37 ITR 329 (Bom), Messrs. K.C Tiwari & Sons v. Commissioner Of Income-Tax, Bombay., [1962] 46 ITR 236 (Bom), Commissioner of Income-tax v. Bhanji Kanji's Shop, [1968] 68 ITR 416 (Guj) and Commissioner of Wealth-tax v. Mrs. Illa Pal Choudhury, [1971] 82 ITR 936 (Cal), in support of his contention that section 64 is not exhaustive. In the first and last of these cases, it was as a matter of fact found that service of notice was in accordance with the provisions of the Code of Civil Procedure. Really, therefore, these two decisions are of no assistance to the learned Government Pleader. The other two cases no doubt hold that the mode of service of notice provided in section 63(1) of the Indian Income-tax Act, 1922, is not exhaustive, but it appears to me that the decisions in these two cases are based more on the principle that when it is proved, by admission or evidence, that an assessee has, as a matter of fact, received notice though not properly served on him, he cannot thereafter raise the contention that there was no valid service of notice, especially when he had participated in the proceedings pursuant to the notice received but not served; in such circumstances, the assessee must be deemed to have waived that irregularity. [See Messrs. K.C Tiwari & Sons v. Commissioner Of Income-Tax, Bombay., [1962] 46 ITR 236 at page 239 (Bom) and Commissioner of Income-tax v. Bhanji Kanji's Shop, [1968] 68 ITR 416 at page 422 (Guj)]. That question does not arise in the case on hand and, therefore, need not be examined any further.

10. In view of the above discussion, the petitioners are entitled to all the reliefs prayed for. I do not, therefore, propose to consider the alternative contention raised by them on the basis of non-service of notice on the third petitioner. This petition is allowed. Parties shall suffer their costs.

A.A Kochandi And Others v. Agricultural Income-Tax Officer, Devicolam, And Others.

Summary of the Opinion (George Vadakkel, J.)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioners' Arguments

First Respondent / Government Pleader's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

A.A Kochandi And Others v. Agricultural Income-Tax Officer, Devicolam, And Others.

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