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Issues: (i) Whether the notice issued under section 34 of the Income-tax Act, 1922 for the assessment year 1939-40 was duly served on the assessee by affixture. (ii) Whether the notices of demand issued under section 29 of the Income-tax Act, 1922 for the assessment years 1940-41 and 1941-42 were duly served so as to sustain action under section 46(2) of the Income-tax Act, 1922.
Issue (i): Whether the notice issued under section 34 of the Income-tax Act, 1922 for the assessment year 1939-40 was duly served on the assessee by affixture.
Analysis: Service by affixture could be treated as valid only if the requirements corresponding to Order V, Rules 17 and 19 of the Code of Civil Procedure, 1908 were satisfied. The assessee was known to be in Rangoon when the notice was issued, while the affixture was made at Ilayangudi where the partners were not ordinarily carrying on business at that time. The records showed that no effective personal service was attempted in the manner required by law, nor were the further safeguards for validating affixture complied with. In the circumstances, the notice did not afford a real opportunity of knowledge of the reassessment proceedings and the service was treated as a mere ritual.
Conclusion: The notice under section 34 was not duly served and the reassessment under section 34 could not stand.
Issue (ii): Whether the notices of demand issued under section 29 of the Income-tax Act, 1922 for the assessment years 1940-41 and 1941-42 were duly served so as to sustain action under section 46(2) of the Income-tax Act, 1922.
Analysis: The demand notices were also served by affixture when the partners were still in Burma and had no practical means of knowing of the assessments or demands. Since there was no due service of the notices of demand, the assessee could not be treated as being in default within the meaning of section 45 of the Income-tax Act, 1922. Certificates under section 46(2) could therefore not validly be issued, and the recovery proceedings were without jurisdiction.
Conclusion: The notices of demand were not duly served and the certificates issued under section 46(2) were invalid.
Final Conclusion: The reassessment for 1939-40 and the recovery proceedings for 1940-41 and 1941-42 were set aside because the statutory notices were not duly served and the consequential action of the Revenue had no legal basis.
Ratio Decidendi: Where service by affixture is relied upon under the Code of Civil Procedure as applied by the Income-tax Act, it is valid only if the statutory safeguards for alternative service are strictly met and the method adopted is reasonably calculated to bring the proceedings to the assessee's knowledge; absent such due service, consequential assessment and recovery steps fail for want of jurisdiction.
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