Valid service of demand notice is essential for income-tax recovery, though reduced arrears remained payable from the decretal deposit.

Service of a notice of demand is treated as a prerequisite to recovery of income-tax arrears as a recoverable debt, and mere acknowledgements did not prove valid service on the assessees or any person legally authorised to receive notice. The article also notes that service under the governing provision requires delivery to the assessee or a competent recipient such as an authorised agent, manager, principal officer, or adult family member. Despite the defective service, the reduced arrears for 1962-63 and 1963-64 remained payable and were stated to be recoverable from the decretal deposit as income-tax dues.

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Issues: Whether recovery of income-tax arrears under section 226(4) could be resisted on the ground that notices of demand under section 156 had not been duly served, and whether the amount admittedly due for the years 1962-63 and 1963-64 could still be realised from the decretal deposit.

Analysis: Service of notice of demand is a precondition to treating the tax liability as a recoverable debt. Under section 282, service may be effected by post or as a summons under the Code, but the record must show delivery to the assessee or to a person legally competent to receive it. The acknowledgements on record did not establish personal service on the assessees or service on an adult family member, authorised agent, manager, or principal officer, and no presumption of valid service arose. At the same time, the earlier concession before the Supreme Court and the appellate modifications showed that the arrears for the years 1962-63 and 1963-64 remained payable in the reduced sums.

Conclusion: Recovery of the balance arrears was not permissible for want of proved service of demand notices, but the reduced amounts of Rs. 77,832.25 for 1962-63 and Rs. 1,973 for 1963-64 were recoverable from the deposit as arrears of income-tax dues.

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