Mandatory notice in rectification proceedings made without hearing is void, and later notices beyond limitation are barred.

A rectification order under section 35(1) of the Indian Income-tax Act, 1922 is invalid where the assessee is not given the mandatory prior notice and reasonable opportunity of hearing before enhancement or reduction of refund; such an order is a nullity. Fresh rectification notices issued beyond the four-year statutory period are time-barred and without jurisdiction, and a void earlier proceeding cannot save limitation or amount to a valid commencement of rectification. The special limitation for rectification is not extended by the provisions applicable to assessments or reassessments.

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Issues: (i) Whether a rectification order under section 35(1) of the Indian Income-tax Act, 1922, made without prior notice and opportunity of hearing to the assessee was valid. (ii) Whether fresh rectification notices issued more than four years after the firm's assessment order were within limitation and within jurisdiction.

Issue (i): Whether a rectification order under section 35(1) of the Indian Income-tax Act, 1922, made without prior notice and opportunity of hearing to the assessee was valid.

Analysis: The proviso to section 35(1) required the Income-tax Officer, before enhancing an assessment or reducing a refund, to give the assessee notice of the proposed rectification and a reasonable opportunity of being heard. That safeguard was mandatory. An order made in breach of that requirement was not a valid rectification order and was liable to be treated as a nullity.

Conclusion: The first rectification order made without notice was invalid and void.

Issue (ii): Whether fresh rectification notices issued more than four years after the firm's assessment order were within limitation and within jurisdiction.

Analysis: Section 35 required rectification proceedings to be initiated and completed within four years from the date of the final order in the firm's case. The earlier void rectification proceedings could not save limitation or be treated as a valid commencement of proceedings. The later notices were therefore the first effective notices under section 35, but they were issued long after expiry of the statutory period. The provisions relating to assessments and reassessments did not extend that limitation to rectification proceedings of this kind.

Conclusion: The fresh notices were time-barred and without jurisdiction.

Final Conclusion: The rectification proceedings could not be sustained, and the appeals failed.

Ratio Decidendi: Where rectification is governed by a special limitation period and the statute makes prior notice and hearing mandatory, a rectification order made without compliance is void and cannot be relied upon to defeat the statutory bar of limitation for later proceedings.

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