Demand notice service is mandatory before treating an assessee as in default and starting recovery proceedings.

Service of a valid notice of demand under section 156 of the Income-tax Act, 1961 is a mandatory precondition to treating an assessee as in default. The statutory consequences under section 220, including payment time, interest and default consequences, arise only after such service. On the facts recorded, no legally valid demand notice had been served, despite the assessee's objections from the outset. As a result, recovery proceedings and the consequential bank attachment under the recovery machinery could not be sustained, and the recovery certificate was without jurisdiction. The foundational defect was not cured by lapse of time.

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Issues: (i) Whether any legally valid demand notice under section 156 of the Income-tax Act, 1961 had been served on the assessee; (ii) whether recovery proceedings and attachment could be sustained in the absence of such demand notice.

Issue (i): Whether any legally valid demand notice under section 156 of the Income-tax Act, 1961 had been served on the assessee.

Analysis: The statutory scheme makes service of a notice of demand the foundation for subsequent default consequences. Under section 220, the period for payment, the liability to interest, the possibility of extension of time, and the deeming of default all arise only after service of a notice under section 156. On the facts found from the record, no such demand notice had been served, and the repeated objections raised by the assessee from the earliest stage supported that conclusion.

Conclusion: No legally valid demand notice under section 156 had been served on the assessee.

Issue (ii): Whether recovery proceedings and attachment could be sustained in the absence of such demand notice.

Analysis: Since service of demand notice is mandatory, the assessee could not be treated as being in default, and the machinery provisions for recovery under sections 220 to 226 could not validly be invoked. The recovery certificate and consequential attachment were therefore without jurisdiction, and the lapse of time did not cure the foundational defect.

Conclusion: The recovery proceedings and bank attachment could not be sustained and were liable to be quashed.

Final Conclusion: The absence of service of a valid demand notice rendered the entire recovery action unsustainable, and the assessee obtained full relief against the impugned recovery measures.

Ratio Decidendi: Service of a notice of demand under section 156 of the Income-tax Act, 1961 is a mandatory condition precedent to treating an assessee as in default and to initiating recovery proceedings under the statutory recovery machinery.

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