Service of notice and diligent prosecution are essential in tax references; absent both, the reference may be returned unanswered.

A reference under Section 256(1) of the Income-tax Act was returned unanswered because the Revenue had not been served and no affidavit of service or authorised appearance was filed. The Court noted that constructive notice could not be presumed without a vakalatnama or other authority enabling appearance for the Revenue. Applying Rule 658 of the Bombay High Court (Original Side) Rules, it held that the party at whose instance the reference is made must take steps to serve the opposite party and bring the matter to final conclusion; since the assessee did not prosecute the reference, the reference was treated as not prosecuted and returned unanswered.

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Issues: Whether the references were liable to be returned unanswered for want of service on the Revenue and absence of prosecution by the applicant-assessee.

Analysis: The references were made under Section 256(1) of the Income-tax Act, 1961. The Revenue had not been served, no affidavit of service was filed, and no vakalatnama authorised any advocate to appear for it. In the absence of authorised appearance, constructive notice could not be presumed. Under Rule 658 of the Bombay High Court (Original Side) Rules, the party at whose instance the reference is made must take steps to bring it to a final conclusion and serve notice on the opposite party within the prescribed time. As service was not effected and the applicant-assessee had not pursued the references, the Court held that the references were not being prosecuted.

Conclusion: The references were returned unanswered and the assessee failed in the matter.

Ratio Decidendi: Where a reference is not served on the opposite party and the applicant fails to take the steps required to prosecute it, the Court may return the reference unanswered.

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