Effective service and limitation in income-tax revision proceedings: defective notice does not void valid initiation, but old-law remand is time-barred.

A revision notice under the income-tax revision provisions required written, legally effective service so the assessee could be heard; oral intimation, returned postal notices, and unsupported affixation were insufficient. Defective service, however, did not by itself invalidate proceedings that had been validly initiated by the Commissioner, and the proceeding could continue according to law. On limitation, the two-year bar under the old Act was treated as absolute for remand orders, with no implied exception, while the newer provision contained an express saving that permitted a fresh order in appropriate cases.

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Issues: (i) Whether the notices to show cause under section 33B of the Indian Income-tax Act, 1922, and section 263 of the Income-tax Act, 1961, were validly served on the assessee. (ii) Whether the proceedings under section 33B of the Indian Income-tax Act, 1922, and section 263 of the Income-tax Act, 1961, were invalid and illegal because of defective service. (iii) Whether the Tribunal was justified in refusing to direct the Commissioner to pass fresh orders under section 33B of the Indian Income-tax Act, 1922, and under section 263 of the Income-tax Act, 1961, after giving the assessee a further opportunity of being heard.

Issue (i): Whether the notices to show cause under section 33B of the Indian Income-tax Act, 1922, and section 263 of the Income-tax Act, 1961, were validly served on the assessee.

Analysis: A proceeding for revision under section 33B required a written notice giving the assessee an effective opportunity of being heard. Mere oral intimation was insufficient. Service by post failed when the notices were returned unserved, and affixation at the stated addresses was not enough because those addresses were not shown to be the assessee's ordinary residence or business place. Substituted service under the Civil Procedure Code could not be relied upon without the necessary judicial order and foundation of fact. The service adopted was therefore not in accordance with law.

Conclusion: The notices were not validly served, and the answer was in favour of the Revenue on this issue.

Issue (ii): Whether the proceedings under section 33B of the Indian Income-tax Act, 1922, and section 263 of the Income-tax Act, 1961, were invalid and illegal because of defective service.

Analysis: The revision proceedings were lawfully initiated when the Commissioner called for the record and issued the show-cause notice. Defective service at a later stage did not destroy the proceeding itself. An illegality in the step of service did not wipe out the entire proceeding, and the proceedings could survive to be continued in accordance with law. The principle that a proceeding may relate back to its valid commencement was applied.

Conclusion: The proceedings were not invalid or illegal merely because service of notice was defective, and the answer was against the assessee on this issue.

Issue (iii): Whether the Tribunal was justified in refusing to direct the Commissioner to pass fresh orders under section 33B of the Indian Income-tax Act, 1922, and under section 263 of the Income-tax Act, 1961, after giving the assessee a further opportunity of being heard.

Analysis: Under section 33B, the two-year limitation was held to be absolute and no exception could be implied for remand orders. The omission to provide a saving provision comparable to section 34 could not be filled by judicial construction, and the Tribunal was justified in declining to direct a fresh order under the old Act. As regards section 263 of the new Act, the statutory text contained an express saving in sub-section (3), so the limitation objection did not apply in the same manner. The Tribunal's refusal to direct a fresh order under the new Act was therefore unsustainable.

Conclusion: The Tribunal was justified in refusing a remand under section 33B of the Indian Income-tax Act, 1922, but was not justified in refusing a remand under section 263 of the Income-tax Act, 1961; the answer was mixed, partly in favour of the assessee and partly against her.

Final Conclusion: The reference was answered by upholding the invalidity of service, rejecting the contention that the whole revision proceedings were vitiated, and drawing a distinction between the time-bar under the old Act and the express saving under the new Act.

Ratio Decidendi: In revision proceedings where the statute requires an opportunity of being heard, a written and legally effective notice is essential; defective service does not nullify the entire proceeding if it was validly initiated, and a limitation bar expressed in clear terms cannot be extended by implication.

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