Reassessment notice and substituted service upheld where business succession, not discontinuance, was shown and affixation was duly made.

Where a business continued under the same firm name through changes in constitution and, after dissolution, was carried on by the petitioner at the same premises as sole proprietor, the facts showed succession rather than discontinuance; section 44 did not displace section 26(2), and a section 34 notice addressed to the firm name was valid because the relevant assessee was the person responsible for the escaped income. Repeated attempts at personal service having failed and the residential addresses being unascertainable despite due diligence, affixation at the last known business premises constituted valid substituted service under section 63 of the Income-tax Act and Order V Rule 17 CPC.

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Issues: (i) Whether a notice under section 34 could validly be addressed to the dissolved firm in the facts of the case and whether section 44 displaced section 26(2); (ii) whether service of the notices by affixation at the business premises was valid.

Issue (i): Whether a notice under section 34 could validly be addressed to the dissolved firm in the facts of the case and whether section 44 displaced section 26(2).

Analysis: The business carried on under the same firm name had continued through several changes in constitution and, after the last dissolution, the petitioner carried on the same business as sole proprietor at the same premises. On those facts, there was no discontinuance of business in the sense contemplated by section 44. The situation was one of succession within section 26(2). For the purpose of section 34, the relevant assessee was the person whose omission or failure had caused the escape of income for the assessment year in question, and the notice addressed to the firm name, in the circumstances, was not invalid. The assessment machinery could therefore be set in motion.

Conclusion: The notice under section 34 was valid and the contention based on section 44 failed.

Issue (ii): Whether service of the notices by affixation at the business premises was valid.

Analysis: Repeated attempts to serve the partners personally had failed and their residential addresses could not be ascertained despite due diligence. In these circumstances, affixation at the last known business premises was treated as proper substituted service. Such service conformed to the mode recognised by section 63 of the Income-tax Act and Order V, Rule 17 of the Code of Civil Procedure, 1908.

Conclusion: The service by affixation was valid.

Final Conclusion: The challenge to the reassessment notices failed on both grounds, and the petition was dismissed.

Ratio Decidendi: Where the same business continues and the facts show succession rather than discontinuance, reassessment notice may validly be issued in the firm name in the context of escaped income for the relevant assessment year, and substituted service by affixation is valid when personal service cannot be effected despite due diligence.

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