Validity of notice and business status must be decided before limitation can be computed against the assessee.

Service of notice under Section 27 of the Income-tax Act, 1922 depended on the legal character of the business: if it was a valid partnership, service on one partner could bind the other; if it was an association of persons, the further question was whether the person served was the principal officer. The authorities could not reject the application as time-barred without first determining that status and the legal sufficiency of service. Limitation could not be computed conclusively against the assessee while those foundational questions remained undecided.

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Issues: (i) Whether, for the purpose of an application under Section 27 of the Income-tax Act, 1922, notice served on one person could bind the other, depending on whether the business was a valid partnership or an association of persons. (ii) Whether the application under Section 27 was barred by limitation without first determining the legal character of the business and the sufficiency of notice.

Issue (i): Whether, for the purpose of an application under Section 27 of the Income-tax Act, 1922, notice served on one person could bind the other, depending on whether the business was a valid partnership or an association of persons.

Analysis: The legal effect of notice depended on the character of the business. If the arrangement was a lawful partnership, service on one partner could bind the other. If it was an illegal partnership assessable as an association of persons, the question then arose whether the person served was the principal officer within the meaning of the Act. The record showed that this factual and legal issue had not been examined by the authorities.

Conclusion: This issue was required to be determined before the application under Section 27 could be rejected on limitation.

Issue (ii): Whether the application under Section 27 was barred by limitation without first determining the legal character of the business and the sufficiency of notice.

Analysis: The rejection of the application solely on the footing that 30 days ran from service of notice on one person assumed the very point in dispute. The authorities did not decide whether the business was a partnership or an association of persons, nor whether the notice served was legally sufficient to bind the assessee. Without those findings, limitation could not be computed conclusively against the assessee.

Conclusion: The finding that the application was out of time was not justified.

Final Conclusion: The matter turned on unresolved questions of status and service, so the assessee's application could not be dismissed as time-barred without first deciding those questions.

Ratio Decidendi: Where the validity of notice depends on whether the entity is a lawful partnership or an association of persons, limitation for an application challenging assessment cannot be decided until the legal status of the entity and the sufficiency of service are first determined.

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