Invalid demand notice: prolonged inaction and doubtful service of foundational tax orders led to quashing of default notice.

A demand notice under the Income-tax Act could not be sustained where the alleged service of the foundational assessment orders and demand intimations was implausible on the record and the Department's prolonged inaction was inconsistent with a duly served demand. The Delhi HC accepted the petitioner's challenge on those surrounding circumstances and quashed the notice treating the petitioner as an assessee in default. Liberty was preserved for the petitioner to seek the relevant records, raise objections and pursue statutory remedies, and for the Department to proceed afresh in accordance with law.

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Issues: Whether the notice treating the petitioner as an assessee in default under Section 220 of the Income-tax Act, 1961 was sustainable in view of the alleged non-service of the underlying demand orders and the unexplained lapse of time.

Analysis: The petitioner's case was that the orders and intimations generating the tax demands were never served and that the demand was surfaced only through the impugned notice. The table of demands showed multiple assessment years, substantial amounts, and dates stretching back several years. The Court found it difficult to accept that an assessee faced with large liabilities would remain inactive if service had in fact been effected, and equally difficult to believe that the Department would remain silent for years and act only after such delay. On that basis, the Court accepted that the impugned demand notice could not be sustained as issued.

Conclusion: The notice declaring the petitioner an assessee in default was quashed and set aside, with liberty preserved for the petitioner to seek the relevant documents, raise objections, and pursue statutory remedies, and for the Department to proceed afresh in accordance with law if so advised.

Final Conclusion: The writ petition succeeded, the impugned demand notice was invalidated, and the petitioner was afforded consequential liberty to seek records and pursue remedies without being defeated by limitation for the period directed by the Court.

Ratio Decidendi: A demand notice under Section 220 of the Income-tax Act, 1961 cannot be sustained where the surrounding circumstances make the alleged service of the foundational orders implausible and the long departmental inaction is inconsistent with the existence of a duly served and pursued demand.

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