1961 (8) TMI 43 - HC - Income Tax

Invalid Reassessment Due to Notice Issue: Importance of Proper Service and Waiver Rejection

Commissioner of Income-Tax, Kerala Versus Thayaballi Mulla Jeevaji Kapasi

The High Court held that the reassessment for the year 1945-46 was invalid due to improper service of notice under section 34 of the Income-tax Act. The ... - Issues:Validity of reassessment for the year 1945-46 based on the service of notice under section 34(1)(a) of the Income-tax Act.Analysis:The case involved a reassessment for the year 1945-46 based on information about large deposits made by the assessee in a bank, leading to a notice under section 34 of the Income-tax Act. The initial notice was served on the assessee's son and later affixed at the business premises due to the assessee's absence in Bombay or Ceylon. The Appellate Tribunal found the reassessment proceedings illegal due to improper service of notice, as the affixed notice lacked proper witness identification. The Tribunal emphasized that substituted service should only be used when the party is avoiding service, which was not proven in this case.The Division Bench of the High Court highlighted the importance of the notice under section 34 as a condition precedent to the Income-tax Officer's jurisdiction. The court noted that the jurisdiction does not depend on the notice but deems it necessary for the assumption of jurisdiction. The court sought clarification on whether there was a conscious waiver by the assessee to cure the infirmity in the notice. The Tribunal found no conscious waiver based on the facts presented, leading to a conclusion of improper service.The Government Pleader argued that the earlier service on the son was sufficient, rendering subsequent improper service immaterial. However, the court rejected this argument, citing the legislative intent behind section 34 for proper notice to the assessee. The court referenced precedents to emphasize the significance of notice for reassessment proceedings. It concluded that the reassessment made on March 9, 1955, was invalid due to improper service of notice, both on the son and later by affixation at the premises, as it did not meet the legal requirements for service under the Civil Procedure Code.Regarding the issue of waiver, the court clarified that waiver requires a conscious and intentional relinquishment of an existing right, which was not established in this case. The court rejected the argument that the assessee's actions amounted to waiver, as there was no clear relinquishment of objections to the invalid notice. Consequently, the court held that the reassessment for the year 1945-46 was invalid and directed the Commissioner to bear the costs, including counsel's fees.