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Commissioner of Income-tax, West Bengal, Calcutta Vs. Malchand Surana, Calcutta - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Ref. No. 12 of 1953
Judge
Reported inAIR1956Cal537,[1955]28ITR684(Cal)
ActsIncome-tax Act, 1922 - Sections 34, 63 and 66(1); ;General Clauses Act, 1897 - Section 27; ;Evidence Act, 1872 - Sections 16, 101 to 103 and 114
AppellantCommissioner of Income-tax, West Bengal, Calcutta
RespondentMalchand Surana, Calcutta
Cases ReferredNirmalabala Debi v. Provat Kumar Basu
Excerpt:
- chakravartti, c.j.1. i confess i do not feel altogether happy aboutthe way in which the facts have been found in this case or the manner, in. which the case has been stated. not that it is impossiole to answer the question, as framed, but since the question touches only a fringe of the real controversy between the parties, it is not possible to feel sure that should the answer be against the assessee, his contention will be fairly laid to rest.2. the facts are as follows. on 23-1-1949, a notice under section 34, income-tax act, was served on the assessee, malchand surana, with respect to the assessment year 1945-46. the notice was sent under registered post and it is not disputed that it was correctly addressed. the assessee, however, was not present at his shop at the time the postal.....
Judgment:

Chakravartti, C.J.

1. I confess I do not feel altogether happy aboutthe way in which the facts have been found in this case or the manner, in. which the case has been stated. Not that it is impossiole to answer the question, as framed, but since the question touches only a fringe of the real controversy between the parties, it is not possible to feel sure that should the answer be against the assessee, his contention will be fairly laid to rest.

2. The facts are as follows. On 23-1-1949, a notice under Section 34, Income-tax Act, was served on the assessee, Malchand Surana, with respect to the assessment year 1945-46. The notice was sent under registered post and it is not disputed that it was correctly addressed. The assessee, however, was not present at his shop at the time the postal peon took the letter there for delivery -- in fact, he was not even in Calcutta -- and the delivery of the letter was taken by a brother of the assessee, named Chaganlal. It has been found that Cha-ganlal is separate from the assessee in mess and also lives separately and further that he is not concerned with the assessee's business, nor had he anyauthority to receive the notice on the assessee's behalf. It has further been found that at the relevant time he happened to be at the shop only casually.

3. The assessee did not file any return in response to the notice and in due course the Income-tax Officer made a summary assessment under Section 23(4) of the Act. Thereafter, the assessee made an application under Section 27 for a cancellation of the assessment on the ground that he had been prevented by sufficient cause from making a return in compliance with a notice under Section 34. The sufficient cause was stated to be that the notice under Section 34 had not been served on him.

4. The Income-tax Officer rejected the application in the view that proper service of the notice had been effected. On appeal, the Appellate Assistant Commissioner affirmed that finding, but before him the assessee seems to have put his sufficient cause in a slightly different shape. He was no longer contending that service on Chaganlal was not proper service on him and indeed. admitted that it was proper service. But his contention was that, in any event, apart from whether the service had been technically correct or not, the fact of the service of the notice had not been brought to his knowledge by Chaganlal. The Appellate Assistant Commissioner did not consider such cause to besufficient because in his view there had been a proper service of the notice and if there was, no other question arose. Incidentally, he observed that Chaganlal was over twenty two years of age and was doing some business as a broker on his own account. In that view, the Appellate Assistant Commissioner rejected both the appeal against the order under Section 27, refusing cancellation of the assessment and the appeal from the assessment itself.

5. Two appeals were next taken to the Income-tax Appellate Tribunal. Before the Tribunal, the sufficient cause appears to have been put as a pure question of law and the Tribunal gave effect to the assessee's contention. Reference was made to the decision of the Rangoon High Court in the case of 'Commissioner of Income-tax, Burma v. Dey Brothers', 1935 Rang 144 (AIR V 22) (A), and it was held on the principles said to have been laid down in that case that service on Chaganlal, who was not an agent of the assessee, nor authorised to accept service of the notice on his behalf, could not be service in law and whether or not the assessee had come to know of the notice otherwise was wholly immaterial. I should add that as regards what Chaganlal actually did on receipt of the notice, the case made by the Appellate Tribunal and apparently accepted by them was that he had not communicated to the assessee the information contained in the notice.

6. In accordance with the view taken by them on the question of the proper service of the notice under Section 34, the Tribunal allowed the appeal against the order, refusing cancellation of the assessment and necessarily allowed the appeal from the assessment as well.

7. The Commissioner of Income-tax then applied to the Tribunal for a Reference to this Court of a question of law regarding the sufficiency of the service. The Tribunal agreed that a question of law did arise and has referred to this Court the following question :

'Whether on the facts and in the circumstances of this case the Tribunal was justified in holding that service of the notice under Section 34, Income-tax Act, by Registered Post, which had been received by Chaganlal, a brother of the Assessee at the place of the business of the Assessee was not sufficient service within the meaning of Section 63, Income-tax Act?'

8. On the broad facts found by the Tribunal, namely, that the notice was served upon a separated brother of the assessee and not on the assessee himself, one should have thought that there could not be any good reason for the Commissioner of Income-tax to trouble about this particular case any further and try to obtain any opinion or advice from this Court. Mr. Meyer, however, pointed out that the basis upon which the Tribunal had proceeded required to be examined, because they had in effect held that if a notice, sent by registered post, was served, not on the addressee but on someone else who had no authority to accept the notice on the assessee's behalf, that fact by itself would be sufficient to invalidate the service. Mr. Meyer submitted that if such were indeed the law, it might be extremely difficult to effect valid service in many cases, for example, if the assessee caused the acknowledgment receipt to be signed by a different person and he added that it was for that reason that the Commissioner of Income-tax wanted to be advised by this Court as to whether such indeed was the law.

9. On behalf of the assessee, Mr, Sen Guptacontended that the real point in the case was whether or not the assessee had sufficient reason for not submitting the return in compliance with the notice under Section 34 and that the sufficiency or otherwise of the service was only a secondary question. We have, however, to decide only the question which has been referred to us. I have read the question already and what the question really means has been made clear by the Tribunal in a passage in the statement of the Case which I may now read. The Tribunal have observed as follows :

'The Tribunal relied on the 'ratio decidendi'of the case of '1935 Rang 144 (AIR V 22) (A)' wherein it was held that the mere fact that the notice had in some way or other reached the person upon whom it was to be served was not sufficient, but there must be service as prescribed inSection 63(1), Income-tax Act, that as D alone was the Manager or Agent of the Assessee, the notice should have been served on him. The Tribunal therefore came to the conclusion that there was no sufficientservice in the eye of law on the assessee and he was therefore prevented by sufficient cause in not filing the return.'

This explanation of the view which the Tribunalhad taken in their appellate order makes it perfectly clear that their view is that once it appears that a registered letter was not served on the addressee, but was served on someone else who had no authority to receive it on the addressee's behalf, it must be held that there was no service in law and such deficiency as respects the service would be sufficient cause within the meaning of Section 27 of the/ Act. Prom what the Tribunal have further said as to the notice having reached the addressee in some way or other, it would appear that they consideredactual knowledge of the notice on the part of the assessee, even if such knowledge had been acquired, to be immaterial. In their view if the service, as such, was not good service in law, the assessee would be entitled to disregard the service even if he might come to know of the notice or its con-tentSs subsequently or otherwise and that he would be entitled to plead such illegality of the service as sufficient cause for not having made a return. That, it would now be clear, is the real question referred to this Court and an answer to it requires to be given.

10. Before I take up the question on the merits, I would say a word in passing as regards the appellate order of the Tribunal. The whole of it appears to be based upon a misconception of both fact and law. As regards the law, the Tribunal says that :

'under Section 33. Income-tax Act, notices have to be served as if it were summons issued by a Court under the Code of Civil Procedure, V of 1908.' What the Tribunal quote is only one-half of the section, because the provision contained in the section is that :

'a notice * * may be served on the p3rson therein named either by post or, as if it were a summons issued by a Court, under the Code of Civil Procedure, 1908.' The observations of the Tribunal disclose no awareness of the first part of the section by which the present case really fell to be decided. Even as regards the second part, the Tribunal appear to have been under a misapprehension, because after referring to the Code of Civil Procedure, they say that according to that Code, service by means of registered post is good sendee. It is but elemen-lary that under the Code of Civil Procedure, service by registered post cannot be resorted to in the first instance, but can be resorted to only afterthe various modes of personal service have been exhausted. Since, however, the Tribunal took notice of the fact that the service in the present case was by registered post, it perhaps makes no difference that they treated such service as prescribed by the Code of Civil Procedure rather than by Section 63, Income-tax Act itself.

11. But the misconception with which the Tribunal started seems to have persisted. They referred to and purported to rely upon the decision of the Rangoon High Court in the case of '1935 Rang 144 (AIR V 22) (A)', in complete disregard of-the fact that the service in that case had been effected by a Process-server and was not service by registered post at all. It need hardly be pointed out that the considerations by which the legal sufficiency of service by registered post has to be judged are entirely different from those which apply to service through or by a peon or a Process-server. One cannot, therefore, derive any assistance from the Tribunal's treatment of the question which they had before them.

12. Whether or not there was proper and sufficient service in the present case has to be decided by reference to the provisions of Section 27, General Clauses Act, and also to a certain extent to Section 16, Illus. (b), Evidence Act, and Illus. (f) of Section 114 of the same Act. The main section, however, is the section which I named first and the material portion of which I shall now read. Section 27, General Clauses Act, so far as is material, runs thus :

'Where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, .... then, unless a different intention appears the service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.'

Since I am reading the relevant sections, I might as well read the two sections of the Evidence Act to which I referred. Illustration (b) of Section 16 of the Evidence Act reads thus :

'The question is, whether a particular letter reached A. The facts that it was posted in due course, and was not returned through the Dead Letter Office, are relevant.'

Illustration (f) of Section 114 of the Evidence Act reads thus :

'The Court may presume that the common course of business has been followed in particular cases.'

13. Reversing now to Section 27, General Clauses Act, there can be no question that the Income-tax Act is a Central Act and that it was enacted after the commencement of the General Clauses Act which is an Act of 1897. There can also be no: question that Section 63 of the Income-tax Act authorizes a notice under Section 34 to be served by post. There is no dispute that the notice in the present case was sent by registered post, as Section 63 permits, nor has it been said or found that it was not properly addressed or pre-paid. The preliminary conditions laid down in the section being thus all satisfied, the service of the notice must, under the terms of the section, be deemed to have been effected and effected at the time at which the notice would be delivered in the ordinary course of post.

14. What, however, Section 27 provides for is only a presumption and a presumption of fact can undoubtedly be rebutted. Various types of cases canbe found in the books, where how the presumption is to be rebutted in the case of a particular set of facts has been discussed. The commonest type of case is one where a registered letter, fully pre-paid and properly addressed, comes back to the sender with an endorsement of refusal to accept delivery. The endorsement is necessarily made by a peon of the Postal Department and there is some discussion in the books as to whether, in order that the presumption of service may have full effect, it is necessary to call the peon and obtain his evidence that the letter was, in fact, tendered to the addressee and was refused by him. It has, however, generally been held that it is not necessary to call the peon and that the fact of presentation to the proper addressee and the making of a true endorsement will be presumed under Section 114, Illus. (f). The most authoritative decision where the above principle was laid down is a decision of Rankin, C. J. and Pearson, J., in the case of 'Hari Pada Dutta v. Joy Gopal Mukherjee', 39 Cal WN 934 (B), where it was held that if a registered letter came back with an endorsement of refusal, that, in itself, until explained, was prima facie sufficient evidence that the addressee had had an opportunity to accept it. There is also a very old decision in the case of 'Loolf Ali Mean v. Fearee Mohun Roy', 16 WR 223 (C), where the same principle was laid down and it was held that where there was evidence that a letter had been forwarded to the addressee by post duly registered, it was to be presumed that it had been tendered to him and the addressee could not take advantage of his own refusal to take it. These, however, are cases where the letter came back with an endorsement by the Postal Department that the addressee had refused to take delivery. The present case is a stronger one on the facts for the addressee, because here the registered letter did not come back but was actually served on a different person who had no authority to accept it on behalf of the addressee. That precise case fell to be considered by the Judicial Committee in 'Harihar Banerje v. Ramshashi Roy', 1918 P.C. 102 (AIR V 5) (D).

15. The case before the Judicial Committee was concerned with the service of a notice to quit given under Section 106, T. P. Act. Three of the tenants were members of a joint Hindu family and one of them was duly and personally served with a duplicate copy of the notice. As regards the other two and indeed the other joint tenants, the registered lettfer containing the notice was not served on the addressee, but was served on another person who had no authority from the addressee to receive it. The question being whether the mere fact that the letter had been served on and received by a person who. was not the addressee and who had no authority to receive it on the addressee's behalf, would establish that no legal or proper service could be claimed, their Lordships observed as follows :

'....it is an entire mistake to suppose that the addressee must sign the- receipt for a registered letter himself, or that he cannot do so by the hand of another person, or that if another person does sign it on the addressee's behalf, the presumption is that it never was delivered to the addressee himself mediately or immediately. For instance, if a servant in the addressee's house saw a notice handed in by the postman carried to the addressee and handed to him, that servant could certify that it was delivered to his master and could, if requested by the master, sign the receipt on the latter's behalf, though he was not the agent of the master authorized to take delivery 011 his, the master's behalf.'

And again :

'if a letter properly directed, containing a notice to quit, is proved to have been put into the postoffice, it is presumed that the letter reached its destination at the proper time according to the regular course of business of the post office; and was received by the person to whom it was addressed. That presumption would appear to their Lordships to apply with still greater force to letters which the sender has taken the precaution to register, and is not rebutted, but strengthened; by the fact that a receipt for the letter is produced, signed on behalf of the addressee by some person other than the addressee himself.'

16. It would thus appear that the mere fact that the physical delivery of the notice was made to a person other than the addressee and a person who had no authority to receive the letter on the addressee's behalf, would not be sufficient to prove that there had been no proper service. The presumption that a proper service had been effected would still be there and would not be rebutted by the mere fact that the actual service had been effected on a different person and the acknowledgment of receipt was by him. It is but fair to recognise that the Judicial Committee appear to have been thinking of cases where the only fact relied on in rebuttal of the presumption of good service was that the acknowledgment of receipt was by the hand of a different person who had no authority from the addressee to receive letters on his behalf. The illustration given by their Lordships of the master and the servant presupposes that the delivery was in fact made to the master, although the acknowledgment receipt was signed by a different person. But there might be a case where the letter never reached the addressee. In such a case, there would be room left for rebuttal of the presumption by further facts proved by the addressee who sought to avoid the effect of the service and it would depend upon the circumstances of each case, whether or not! the presumption had been thus rebutted by the pro6f of further facts. But the onus would be on the addressee. Mr. Sen. Gupta contended that the real basis of the decision of the Judicial Committee was that three of the tenants were members of a joint family and he referred to the well-settled principle that in the case of joint tenants, service of a notice to quit upon one of them is 'prima facie' evidence that the notice had reached the other joint tenants. It does not, however, appear that the Judicial Committee proceeded on that principle and in fact there were other defendants in that case who were not members of the joint family like defendants 5, 6 and 7. There was, however, another fact to which the Judicial Committee did refer and it was that none of the other defendants had appeared as witnesses to deny that they had received the notices properly addressed to them and properly posted. I may recall that in a case decided by this Court, 'Gobinda Chandra v. Dwar-ka Nath', 1915 Cal 313 (AIR V 2) (E), it was held that the presumption of due service would be rebutted when the addressee pledged his oath that the letter had never been tendered to him and he was believed.

17. In the present case, the assessee did say, whether in the course of a deposition or by his lawyer, it does not appear that the letter had not been served upon him and that he had not received it. The latter averment, however, seems to have been couched in very strange language, because if the relevant ground taken in the memorandum of appeal to the Appellate Tribunal fairly represents the language he used, all that he said was that, to the best of his knowledge, the notice had not been received by him. If the Tribunal had directed themselves to the proper question at issue and upon applying their minds to that question, deter-mined what the true facts were and held that they believed the assessee when he said he never got the notice, nor was he informed of it, it could certainly toe said that they had decided the question correctly and that no error of law had been committed. It is this part of the case which causes the embarrassment to which I referred at the beginning of this judgment. . It is undoubtedly true that so far as the postal peon is concerned, he served the notice upon Chaganlal who accepted it. But what Chaganlal did with the letter and to what extent the assessee came to be connected with it or to avow of it, was never investigated, nor found. Before the Appellate Assistant Commissioner, the as-sessee's case was that the fact of service of the notice had not been brought to his knowledge by his brother. If the same contention had been adhered to before the Tribunal and the Tribunal accepted it, it would be decisive and the Tribunal would be well entitled to hold that the presumption raided by Section 27, General Clauses Act, had been fully rebutted. But the case made before the Tribunal appears to have been, as I have already pointed out, substantially different and it is that case which the Tribunal have found to be true and which they have incorporated in the Statement of Case. The contention of the assessee which the Tribunal have accepted is that the brother never communicated to him the information contained in the notice. What that actually means or could possibly mean, no one was able to explain. Did it mean that the brother had opened the cover and read the notice and while telling the assessee that a notice from the Income-tax Department had been received, did not tell him what the contents of the notice were? If such was the fact, it would be a matter for enquiry under Section 27 of the Act whether the assessee, on being informed of the service of a notice from the Income-tax Department, was not required to take possession of the notice or to inform himself of its contents or make some attempt in that behalf before he could plead sufficient cause for not complying with the notice. Regarded as a question under Section 27, General Clauses Act, the Tribunal would have to find what the facts were, namely, whether the assessee had come to know of the service of the notice at all or whether having come to know that some notice had been served, he had not made any further enquiry and had not been informed of what the notice contained and whether the presumption raised by the section had been rebutted according as the facts found proved in the affirmative or the negative. The Tribunal do not seem to have considered it necessary to pay any attention to that question at all, because they thought that the decision of the Rangoon High Court invoked by them was sufficient for the disposal of the case and that whether or not the notice had in some way or other reached the assessee, was wholly immaterial. It is perfectly clear that the Tribunal failed to apply themselves to the real question before them and indeed their order, one regrets to find, does not indicate that they had any appreciation of what the real question was. They completely ignored the fact that the service they had to consider was service by registered post and, necessarily they never thought of the special provisions of law by which the validity or sufficiency of service by that mode has to be judged. In. sp far as they held that the mere fact that the notice was physically delivered to a person other than the assessee, who had no authority from the assessee to receive letters on his behalf, would be sufficient to establish that no proper or legal service had been effected, their decision was plainly wrong and that unfortunately is their whole decision.

18. Mr. Sen Gupta, when pressed by these considerations, referred to the terms of the question forwarded to this Court and pointed out that we had been asked to say whether the Tribunal had been right in the view taken by them 'on the facts and in the circumstances of this case.' It is quite true that we have to decide the correctness or otherwise of the Tribunal's decision in the facts and the circumstances of the case, but the only facts and circumstances to which the Tribunal paid regard are that the registered letter, properly addressed to the assessee, was served upon, not the assessee but his brother; that his brother was separate from him and had no authority to receive any letters on his behalf; and that the brother did not communicate the information contained in the notice to the assessee, but whether he did or did not do so, was immaterial. The decision of the Tribunal against the legality or the sufficiency of the service on those facts and circumstances alone and upon the view that the assessee's knowledge of the notice or want of the same was of no account is obviously not a correct decision. In a reference under Section 66 (1) of the Act, it is not for us to go further than examining the legality of the Tribunal's decision, as it is, on the case stated and it is not for us ta consider facts and presumptions for ourselves.

19. Certain decisions were cited at the Bar. They do not carry the matter any further, but I shall mention them briefly, because, except one, they are all decisions given in references under the Income-tax Act and, therefore, might be expected to put the Tribunal in mind of what the real question was and how it was to be approached. In the case of M. X. De Nornha & Sons, Cawn-pore v. Commissioner of Income-tax, U. P., : [1950]18ITR928(All) , a notice to a firm, sent by registered post, was served on a clerk and it was held that there was a presumption of good service which would prevail unless the assessee could rebut it by good evidence. In the case of L. C. De Souza, In re : AIR1932All374 , the postal acknowledgment was signed by a minor son of the assessee and it was held that there was good service. In the case of Shri Bhagwan Radha Kishen v. Commissioner of Income-tax U.P., : [1952]22ITR104(All) , it was held that the endorsement of refusal made by postal authorities was sufficient to raise a presumption of service on the assessee. The case of Nirmalabala Debi v. Provat Kumar Basu, 52 Cal WN 659 (I), decided by myself, was not an Income-tax case, but there also it was held that an endorsement of refusal was sufficient to raise a presumption of good service and the entire law on the subject of service by registered post was reviewed.

20. As I said at the beginning, there is some danger in returning a negative answer to the question, as framed because the real question which arose out of the assessee's contention and which required consideration was never considered by the Tribunal and therefore if the matter goes no further, that contention will not have been properly disposed of. We can however protect the interest of the assessee only by qualifying our answer and indicating the precise point to which it is limited. What we do decide is only this, that the Tribunal was not justified in holding that the service of the notice was not sufficient service within the meaning of Section 63, Income-tax Act, merely on the finding that the notice had been served upon a brother of the assessee who had no authority to receive it on the assessee's behalf, without considering the presumption which arose under Section 27, General Clauses Act, and with-out coming to any decision as to whether that presumption had been rebutted.

21. The answer to the question referred will, therefore, be, 'No, in the absence of any consideration of the presumption under Section 27, General Clauses Act, and any finding that the said presumption had been rebutted'.

22. There will be no order as bo costs.

Lahiri, J.

23. I agree.


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