1981 (4) TMI 116 - AT - Wealth-tax

Tribunal affirms AAC's power to reassess under Wealth-tax Act despite challenges to service validity.

The Tribunal upheld the Appellate Assistant Commissioner's authority to set aside assessments and direct fresh assessments under the Wealth-tax Act. ... Service by affixation under section 41 - ex parte assessment under section 16(5) - procedural notice versus jurisdictionconferring notice - effect of invalid procedural notice - remediable irregularity and power to reassess - reassessment pursuant to appellate directionService by affixation under section 41 - ex parte assessment under section 16(5) - Validity of the notice under section 16(2) served by affixation on 23-3-1979 and its sufficiency to support ex parte assessments made on 30-3-1979. - HELD THAT: - The Tribunal examined the departmental reports showing attempts at personal service and the Ward Inspector's report of affixture. It held that section 41 permits service as a summons under the Code of Civil Procedure and that where personal service was attempted but unsuccessful, the WTO properly directed service by affixture. On the facts, the notice of 23-3-1979 was validly served by affixture and therefore the subsequent ex parte assessments made for non-compliance with that notice were not vitiated for want of service. [Paras 10, 16]The notice under section 16(2) served by affixation on 23-3-1979 was validly served and supported the ex parte assessments.Procedural notice versus jurisdictionconferring notice - effect of invalid procedural notice - remediable irregularity and power to reassess - reassessment pursuant to appellate direction - If the notice under section 16(2) were held invalid, whether the resulting assessment would be a nullity or merely vitiated by an irregularity remediable by reassessment after affording opportunity to the assessee. - HELD THAT: - The Tribunal distinguished notices that confer jurisdiction (e.g., under section 14(2) or 17(1)) from procedural notices such as section 16(2), which only require production of evidence. An invalidity in a jurisdictionconferring notice goes to the root and renders the assessment a nullity; by contrast, an irregularity arising from defective service of a procedural notice does not oust the WTO's jurisdiction and can be corrected. Reliance was placed on Guduthur Bros. to the effect that where jurisdiction was validly assumed and illegality supervened during proceedings, the authority may correct the defect and continue proceedings; similarly an appellate authority may set aside an assessment and direct reassessment after removing the irregularity. [Paras 11, 12]Even if the 16(2) notice were invalid, the defect would be an irregularity remediable by reassessment; the AAC was entitled to set aside the assessments and direct fresh assessments after giving the assessee a reasonable opportunity of being heard.Final Conclusion: The order of the AAC setting aside the ex parte assessments and directing fresh assessments after affording a reasonable opportunity of hearing is upheld; the appeals are dismissed. Issues Involved:1. Validity of ex parte assessments under section 16(5) of the Wealth-tax Act, 1957.2. Proper service of notice under section 16(2) of the Wealth-tax Act.3. Consequences of improper service of notice under section 16(2).4. Authority of the Appellate Assistant Commissioner (AAC) to set aside assessments and direct fresh assessments.Detailed Analysis:1. Validity of Ex Parte Assessments under Section 16(5):The primary issue was whether the Wealth Tax Officer (WTO) erred in making ex parte assessments under section 16(5) for the assessment years 1963-64 to 1974-75. The assessee contended that except for the assessment year 1973-74, no notice under section 16(2) was served, making the ex parte assessments null and void. For 1973-74, although a notice was served, the assessee argued that the subsequent process was flawed as no further notice was served after an adjournment.2. Proper Service of Notice under Section 16(2):The AAC found that notices under section 16(2) were served by affixation on 23-3-1979, requiring compliance by 27-3-1979. The AAC concluded that the service by affixation was valid. However, the AAC also noted that the assessee did not receive a reasonable opportunity to explain its case due to the short notice period, leading to the setting aside of the assessments with a direction for fresh assessments after proper opportunity.3. Consequences of Improper Service of Notice under Section 16(2):The assessee argued that the service by affixation was invalid as it was not shown that every effort was made for personal service before resorting to affixation. The argument was supported by references to section 41 of the Act and relevant rules of the Code of Civil Procedure. The department, however, provided evidence of personal service attempts and the necessity of affixation. The Tribunal found that the notice by affixation was in accordance with the procedure laid down in section 41.Even assuming the notice was not properly served, the Tribunal opined that the notice under section 16(2) is procedural and does not confer jurisdiction. The jurisdiction is conferred by notices under sections 14(2) and 17(1). Therefore, an improperly served notice under section 16(2) results in an irregularity that can be rectified, allowing the AAC to direct fresh assessments.4. Authority of the AAC to Set Aside Assessments and Direct Fresh Assessments:The Tribunal upheld the AAC's authority to set aside the assessments and direct fresh assessments. This conclusion was supported by the Supreme Court decision in Guduthur Bros. v. ITO, which established that an illegality occurring during the proceedings does not nullify the jurisdiction once validly assumed. The AAC's direction to reassess after giving a reasonable opportunity to the assessee was deemed proper.The Tribunal also addressed and distinguished other cases cited by the assessee, such as Hardeodas Jagannath, Ramendra Nath Ghosh, and Jai Prakash Singh, noting that these cases did not consider the Supreme Court's decision in Guduthur Bros.Conclusion:The Tribunal concluded that the service of notice under section 16(2) by affixation was valid. Even if it were not, the AAC's direction to reassess was proper. The Tribunal upheld the AAC's order for all 12 years under consideration, dismissing the appeals.Result:The 12 appeals filed by the assessee were dismissed.