MITTER J. - The question referred under section 66 (1) of the Act is :
Whether on the facts and in the circumstances of the case, assessment under section 34 (1) (a) of the Indian Income-tax Act was in accordance with law ?'
The facts discovered from the statement of the case are as follows :
The assessee is an individual doing business in stationary. The assessment year in question is 1946-47, the financial year ending on March 31, 1946. A notice under section 22 (2) of the Act was issued to the assessee on August 27, 1946. He filed his return on February 11, 1949, showing an income of Rs. 17,457. A provisional assessment was made on the basis of this return on February 16, 1949. Thereafter, the Income-tax Officer found that the assessee had done some business in stationary not disclosed in the return. He issued a notice under section 28 (1) (c) of the Act for the levy of penalty on February 21, 1952. The assessee came forward with a disclosure under the voluntary disclosure scheme in March, 1952. On the basis of this disclosure an assessment was made on an amount of Rs. 49,091. The Income-tax Officer thereafter came to know that the assessee had encashed high denomination notes worth Rs. 18,000 after the ordinance of January, 1946 and that he had also made certain deposits in the Midnapore Bank Ltd. which had not been disclosed before. He issued a notice under section 34 (1) (a) of the Act on March 4, 1955, with the previous approval of the Commissioner of Income-tax. An attempt was made to serve this notice though the process-server who reported on March 9, 1955, that the notice could not be served as the assessee was not available. A second attempt made by the process-server on March 11, 1955, was also not successful and the other inmates of the house of the assessee refused to accept the notice. The Income-tax officer thereafter directed service of notice by registered post. The notice was put in the post on March 14, 1955. As no acknowledgment or service was received from the postal authorities even on March 29, 1955, the Income-tax Officer ordered that the notice be served by affixation and service was accordingly effected in this manner by the inspector on March 30, 1955. According to the report of the inspector this affixation was done in the presence of two persons. No return was however filed by the assessee in spite of repeated opportunities allowed by the Income-tax Officer. An expert assessment under section 23 (4) of the Act was made by the said officer adding an amount of Rs. 68,000 to the originally assessed figure of Rs. 49,091.
On appeal, the Appellate Assistant Commissioner reduced the assessment by Rs. 50,000 but sustained the addition of Rs. 18,000 on account of the high denomination notes. He rejected the objection of the assessee about the service of the notice under section 34. He also did not agree that the original assessment for the year 1946-47 was barred by lapse of time because it was not completed before March 31, 1951. Before the Tribunal the assessment was challenged on two grounds, viz., (i) the impropriety of the service of notice under section 34 (1) (a), and (ii) service of the notice under section 28 (1) (c) after March 31, 1951, could not extend the time limit of assessment. According to the Tribunal, whatever might have been the validity of the earlier assessment the supplementary assessment had to be judged from the point of view of section 34 (1) (a) under which it was started. The appellant had not established that the exchange of high denomination notes was disclosed to the Income-tax Officer who made the original assessment at the time of making the return and it was not possible for the appellant to suggest that this was not a primary material or fact relevant to the assessment.
Under section 63 of the Act a notice or requisition under the Act may be served on the person therein named either by post or, as if to were a summons issued by a court, under the Code of Civil Procedure, 1908. Under Order 5, rule 12, of the Cope of Civil Procedure, where ever it is practicable, service shall be made on the defendant in person, unless he has an agent empowered to accept service, in which case service on such agent shall be sufficient. Under Order 5, rule 15 : where... the defendant cannot be found and has no agent empowered to accept service of the summons on his behalf, service may be made on any adult male member of the family of the defendant who is residing with him, Under rule 16 : 'where the serving officer delivers or tenders a copy of the summons to the defendant personally or to an agent or other person on his behalf, he shall require the signature of the person to whom the copy is so delivered or tendered to an acknowledgment of service endorsed on the original summons.' Under rule 17 : 'where the defendant or his agent or such other person as aforesaid refuses to sign the acknowledgment, or where the serving officer, after using all due and reasonable; diligence, cannot find the defendant, and there is no agent empowered to accept service of the summons on his behalf, nor any other person on whom service can be made, the serving officer shall affix a copy of the summons on the outer door or some other conspicuous part of the house in which the defendant ordinarily resides or carries on business or personally works for gain....'
The facts relating to the service of the notice as appearing in the order of the Income-tax Officer are as follows :
A notice under section 34 dated March 4, 1955, was issued after getting the necessary satisfaction of the Commissioner of Income-tax, Calcutta. This notice was sent for service through the notice-server of District 1 (2) and he could not serve the notice either on March 9, 1955, or on March 11, 1955. On March 9, 1955, it was returned because of the absence of the assessee at the above-noted address. Service was tried on March 11, 1955, and it was returned by the notice-server as the assessee was absent at the above noted address and as other persons, who were present at the above premises, refused to receive the notice in the absence of the assessee. The said notice dated March 4, 1955, was sent through post with acknowledgment due on March 14, 1955. As the acknowledgment of service of such notice was not received in the office even on March 29, 1955, a direction was given to the inspector, District 1 (2), to serve a copy of the said notice by affixation. Accordingly a duplicate of the said notice dated March 4, 1955, was served by the inspector by affixation on March 30, 1955.
In this case it is not known whether the notice which was sent by registered post reached the assessee or not. But the revenue authorities have proceeded on the basis that the service was effected by affixation of a duplicate copy of they notice on March 30, 1955, and it is the validity of this service which has to be examined. In my opinion, the service is quite in order. The notice was attempted to be served personally on the defendant on March 9, 1955, as also on March 11, 1955. On both occasions he was found absent from his residence. On the last occasion the in mates of the house refused to accept service of the notice on his behalf. An attempt was made to save the notice by registered post on March 14, 1955. Normally the acknowledgment of the receipt of the notice should have been available at the office of the Income-tax Officer long before March 29, 1955. The Income-tax Officer was certainly justified in taking into consideration the fact that even the notice sent by registered post had not apparently reached the assessee and two attempts made through the process-server on March 9, 1955, and March 11, 1955, had been unsuccessful. In my opinion, the Income-tax Officer was justified in coming to the conclusion that the assessee could not be found in ordinary way and that there appeared to be no agent empowered to accept service not any other person on whom service could be made and consequently his direction that the notice be served by affixation of a copy on the outer door or some other conspicuous part of the house in which the assessee ordinarily resided was in order. It is not suggested in this case that the address of the assessee to which the notice was went was not his proper address, nor that he had any agent to whom he had given instructions to receive such notices on his behalf. In my view, reasonable diligence had been used to find the assessee without any avail and the circumstances justified the service of the notice by affixing a copy of it on the outer door or some other conspicuous part of the house in which the assessee lived. Reliance was placed on a judgment of the Division Bench of this court in Gopiram Agarwalla v. First Additional Income-tax Officer in support of the contention that the service by affixation is not good service unless all efforts to trace the assessee are found to be unsuccessful. Then the facts were as follows :
When the serving officer went with the notice to the address of the assessee he found that the assessee was out. He offered the notice to a person who was pointed out to him as the assessees son and on the latters refusal to accept the service he affixed the notice on the premises. There it was held that before it can be said that the defendant cannot be found, it must be shown not only that the serving officer went to the place at a reasonable time when he would be expected to be present, but also that if he was not found, proper and reasonable attempts were made to find him either at the address or elsewhere. If after such reasonable attempts the position still is that the defendant is not found, then and then only it can be said that the defendant cannot be found. The facts there were very different from the facts before us. In that case only one attempt was made to find the defendant when he was found to be absent and merely because his son refused to accept service of the notice it cannot be aside that the assessee could not be found. But what are the facts here On two occasions, the process-server goes to the assessees premises, finds him absent on both occasions; the inmates of the house -whoever they were - refused to accept service; the notice is sent by registered post on March 14, 1955; no acknowledgment is received even on March 29, 1955; on March 30, 1955, the process-server goes again and not finding the assessee affixes a copy of the notice on the premises. I do not see why in such a case it should not be held that sufficient attempts had been made to find the assessee. It is well known that in a city like Calcutta people living in the house next door to the house of the person required will hardly be able top say where the said person is to be found. The inmates of the house-usually unconnected with the person required - are not usually helpful in such matters. It is well known that if a letter is sent by registered post to particular address the peon takes it to the address every day from day to day for at least a week or longer to hand over the letter to the addressee or some authorised person. From all the circumstances of the case and especially from the fact that personal attempts on the part of the process-server to find out the assessee and the attempts to serve him by registered post were all unavailing, the Income-tax Officer was justified in concluding that the assessee was a person who could not be found and service had to be effected on him by affixing a copy of the notice on the outer door of the premises where the lived.
On the second point the argument addressed was as follows : No notice under section 28 (1) (c) could have been issued on February 21, 1952, because no assessment had been made on the return filed in 1949. Further, no assessment could have been made in 1952, because the four-year period had expired in 1951 If the assessment made in 1952 was a nullity, the Income-tax Officer could not proceed on the basis of any Income escaping assessment in 1955, so as to sanction the issue of a notice under section 34. The learned advocate for the assessee drew our attention to certain observations in the case of Commissioner of Income-tax v. Ranchhoddas Karsondas and Commissioner of Income-tax v. S. V. Angidi Chettiar in aid of his contentions. In the first case the assessee had not made a return of his income in response to a public notice under section 22 (1) of the Act on or about May 1, 1945. He submitted a voluntary return on January 5, 1950 of his income for the accounting year 1944-45 (assessment year 1945-46), showing a total net income of Rs. 1,935 below the taxable limit. The Income-tax Officer did not act on this return but on February 27, 1950 he purported to issue a notice under section 34 calling upon the assessee to submit his return. This notice was served on the assessee on March 3, 1950, who in answer thereto, submitted a return on March 14, 1950 showing the same income. The income-tax Officer then issued and served upon the assess notices under sections 22 (4) and 23 (2) of the Act asking him to produce his books of account. These notices were complied with but on February 26, 1951, the Income-tax Officer included the sum of Rs. 59,026 (being cash credits which he had discovered in the books of a partnership of which the assessee was a partner). The assessee contended, inter alia, that the amended section 34 of the Act had no retrospective effect and that the assessment completed on February 26, 1951, was invalid inasmuch as kit was completed four years after the end of the relevant assessment year, Having lost before the revenue authorities he applied under section 66 (1) for determination of the question as to whether the notice issued under section 34 of the Act by the Income-tax Officer on February 27, 1950 after he had filed a voluntary return was valid in law and whether the assessment made on February 26, 1951, was proper. The Supreme Court noted that the return filed on January 5, 1950 was as valid return and that there was no failure or omission on the part of the assessee, so as to bring the matter within section 34 (1) (a) of the Act and sub-section (3) of section 34 would they apply to the case limiting the period to four years. In that event, the assessment should have been completed on or before March 31, 1950. The court was of opinion that a return showing an income below the taxable limit could not be ignored. It was open to the Income-tax Officer to take up the return and proceed to assess the income of the assessee. According to the court, the notice under section 34 was improper because with the return already filed, there was neither an omission nor a failure on the part of the assessee, not was there any question of assessment escaping. The notice under section 34 (1) was, therefore, invalid and the consequent assessment, equally so'.
The case of S. V. Angidi Chettiar related to the levy of penalty under the provisions of section 28. It was observed by the court that 'the power to impose penalty under section 28 depends upon the satisfaction of the Income-tax Officer in the course of proceedings under the Act; it cannot be exercised if he is not satisfied about the existence of conditions specified in clause (a), (b) or (c) before the proceedings are concluded. The proceeding to levy penalty has however, not to be commenced by the Income-tax Officer before the completion of assessment proceedings by the Income-tax Officer. Satisfaction before conclusion of the proceedings under the Act and not the issue of a notice or initiation of any step for imposing penalty is a condition for the exercise of jurisdiction. There is no evidence on the record that the Income-tax Officer was not satisfied in the course of the assessment proceeding that the firm had concealed its income'.
These two cases however do not help the assessee before us.
Under section 34, as it stood at the material time, no order of assessment under section 23 or of assessment or reassessment under sub-section (1) of the section could be made after the expiry, in any case to which clause (c) of sub-section (1) of section 28 applied of eight years and in any other case of four years from the end of the year in which the income, profits or gains were first assessable. The statement of the case before us show that it was after the provisional assessment in November, 1949, that the Income-tax Officer found that the assessee he done some business in stationary which had not been disclosed in return and he, consequently issued notice under section 28 (1) (c) on February 21, 1952. The case was therefore, one where the assessment could have been completed within 8 years from the end of the year in which the income, profits or gains were first assessable. We have already held in the case of Ashutosh Bhattacharjee v. Commissioner of Income-tax (Income-tax reference No. 65 of 1962) that a notice under section 28 (1) (c) of the Act can be given even beyond four years of the end of the year in which the income, profits or gains were first assessable. Consequently the assessment in 1952 was not invalid. Further, it was only after the said assessment that the Income-tax Officer came to know about the exchange of high denomination notes and he caused notice under section 34 (1) (a) to be served on March 30, 1952 that is to say, within eight years from the end of the year in which the income, profits or gains were first assessable. If the earlier assessment of 1952 was in order and thereafter, on further information coming to the Income-tax Officer, he gave notice under section 34 (1) (a) within the period of eight years, the notice was in order. If the earlier assessment of 1952 was not in order, or in other words, there was an invalid assessment resulting in the escapement of income, the only method available to the Income-tax Officer was under section 34 (1) (a) if it were applicable.
Mr. Mukherji appearing for the revenue contended that if it be held that the notice under section 28 (1) (c) was not given in time and the earlier assessment in 1952 was not within time and, as such, invalid, the income had clearly escaped assessment. He contended on the strength of the authorities in Chatturam Horilram Ltd. v. Commissioner of Income-tax, Maharajadhiraj Sir Kameshwar Singh v. State of Bihar and Commissioner of Income-tax v. Narsee Nagsee & Co. that, where assessment proceeding had failed to result in a valid assessment owing to some lacuna other than that attributable to the assassin authorities, there was a case of chargeable income escaping assessment and not a case of mere non-assessment of income-tax. In our view, there is considerable force in his not necessary to examine this contention in greater detail as it appears to us that the income-tax authorities came to have knowledge of some facts after the assessment in 1952, which were not known before, and consequently. There were within their rights top serve the notice under section 34 (1) (a).
The answer to the question passed will be in affirmative and against the assessee who will pay the costs of the reference.
MASUD J. - I agree
Question answered in the affirmative.