Smt. S. Nachiar vs ITO and Others

K.N. Basha, J.—By mutual consent of both the learned Counsel for the Petitioner and the learned standing counsel appearing (income tax)

for the Respondents, the main writ petition is taken up for the final disposal.

The Petitioner has come forward with the petition seeking for the relief of quashing the order of the second Respondent dated 23-2-2005, and

to direct the first Respondent to issue valid notice u/s 148 in accordance with law.

The learned Counsel for the Petitioner submitted that the Petitioner has not been served with the notice as contemplated u/s 148 of the Income

Tax Act, 1961 (hereinafter referred to as ""the Act""). It is contended that without serving such notice u/s 148 of the Act, the first Respondent

proceeded to issue a letter dated 16-10-2000, calling for the return of income for the assessment year 1994-95 from the Petitioner herein. The

learned Counsel would submit that only after serving the notice u/s 148, the other procedures should be followed by the Respondents as per

Section 143(2) of the Act. It is further contended that the notice prescribed u/s 148 cannot be regarded as a mere procedural requirement and

once, if the notice is not served on the Assessee, the entire proceedings initiated for the assessment, on the basis of the invalid notice, would be

illegal and void. It is also contended that the issue of notice u/s 142(1) calling for the Assessee to submit his return, would not amount to a notice

u/s 148 of the Act. Therefore, it is submitted that the impugned order dated 23-2-2005, passed by the second Respondent is liable to be set aside.

The learned Counsel for the Petitioner would also contend that the provision of alternative remedy of filing an appeal can always be waived by

the Assessee as per Section 264 of the Act and the Assessee can file a revision before the Commissioner seeking for the relief of setting aside the

ex parte order of assessment and as the said revision was dismissed through the impugned order, the Petitioner has challenged the same before this

Court by way of filing the above writ petition.

The learned Counsel for the Petitioner, in support of his contention, placed reliance on the following decisions:

(a) Y. Narayana Chetty and Another Vs. The Income Tax Officer, Nellore and Others, ; and (b) Thangam Textiles Vs. First Income Tax Officer, .

Per contra, the learned standing counsel appearing for the Respondents would submit that the notice contemplated u/s 148 of the Act was

issued against the Petitioner on 17-9-1999, and duly dispatched on 22-9-1999, as per the despatch register. It is contended that thereafter, a

reminder letter dated 16-10-2000, was also issued to the Petitioner for the return of income for the assessment year 1994-95 in response to notice

u/s 148 and the said notice was also served on 20-10-2000 and the acknowledgment was also available on record. Learned standing counsel

would further contend that even the notice u/s 142(1) of the Act was also issued against the Petitioner on 11-3-2002 and the same was duly

served on 13-2-2002. Therefore, it is contended that there is no illegality or infirmity in the impugned order dated 23-2-2005 warranting

interference of this Court.

I have carefully considered the rival submissions made on either side and also perused the materials available on record including the impugned

order.

The undisputed fact remains that the Petitioner has suffered an ex parte order of assessment and as against the same, the Petitioner has preferred

a revision u/s 264 of the Act and the said revision was dismissed through the impugned order dated 23-4-2005. However, it is stated in the

counter-affidavit to the effect that the Petitioner was served with the notice of the third Respondent dated 26-4-2006 u/s 221 of the Act asking the

Petitioner to pay the arrears of tax for the assessment year 1994-95 and the same is available on record and in spite of the same, the Petitioner has

not appeared, resulting in passing an ex parte assessment order. It is also stated in the counter that it is not the fault of the Respondents for

necessitating the authority to pass an ex parte order.

The crux of the question involved in this matter is to the effect that whether the assessment order could be passed without serving the notice u/s

148 of the Act.

In respect of such question, it is categorically stated by the Petitioner in the affidavit and also contended by the learned Counsel for the

Petitioner that the notice contemplated u/s 148 of the Act was not served on the Petitioner. On the other hand, it is stated in the counter filed by the

Respondents and also contended by the learned standing counsel that the notice contemplated u/s 148 was issued on 17-9-1999 and duly

despatched on 22-9-1999 as per the despatch register. It is also further stated in the counter that subsequently on 16-10-2000, a reminder letter

was issued calling for the return of income for the assessment year 1994-95 in response to notice u/s 148. The abovesaid statement made in

counter makes it crystal clear that though the notice said to have been issued u/s 148 of the Act, the fact remains that the said notice was not

served on the Petitioner. Therefore, this Court has no hesitation to hold that the Respondents have not complied with the requirements

contemplated u/s 148 by serving a notice on the Assessee, viz., the Petitioner herein. It is also pertinent to point out that though it is claimed by the

Respondents that subsequently a reminder letter dated 16-10-2000 was issued to the Petitioner and the same was also duly served on the

Petitioner on 20-10-2000, the said reminder letter is only for calling the Petitioner to submit the return of income and by no stretch of imagination

the said letter could be construed to be a notice u/s 148 of the Act.

The honble apex court has held in paragraph 4 of the judgment in Y. Narayana Chetty and Another Vs. The Income Tax Officer, Nellore and

Others, :

The notice prescribed by Section 34 cannot be regarded as a mere procedural requirement; it is only if the said notice is served on the Assessee as

required that the Income Tax Officer would be justified in taking proceedings against him. If no notice is issued or if the notice issued is shown to

be invalid then the validity of the proceedings taken by the Income Tax Officer without a notice or in pursuance of an invalid notice would be illegal

and void. That is the view taken by the Bombay and Calcutta High Courts in Commissioner of Income Tax, Bombay City I Vs. Ramsukh Motilal,

Bombay, and R.K. Das and Co. Vs. Commissioner of Income Tax, West Bengal, and we think that that view is right.

The abovesaid decision was also subsequently followed by a Division Bench of this Court in Thangam Textiles Vs. First Income Tax Officer,

wherein the Division Bench has held in paragraph 7 which reads here under (page 415):

In Y. Narayana Chetty and Another Vs. The Income Tax Officer, Nellore and Others, , the Supreme Court held that the service of requisite notice

on the Assessee, is a condition precedent to the validity of any reassessment made u/s 34 of the Income Tax Act, 1922 (which corresponds to

Section 147 of the Income Tax Act, 1961), and if a valid notice was not issued as required, the proceedings taken by the Income Tax Officer in

pursuance of an invalid notice and consequent orders of reassessment passed by him would be void and inoperative.

Section 34 of the old Act referred in the decision cited supra, is 13 equivalent to Section 148 of the Act, 1961. The principles laid down by

the honble apex court as well as this Court, are squarely applicable to the facts of the instant case as in this case also, the notice contemplated u/s

148 of the Act was not served on the Petitioner. As a result, the entire proceedings culminating into the present impugned order dated 23-2-2005,

passed by the first Respondent is vitiated.

The learned standing counsel for the Respondents has also put forward 14 the contention to the effect that the Petitioner is having the

alternative remedy of filing an appeal as per Section 246 of the Act to the Commissioner (Appeals), against the order of assessment and without

exhausting such alternative remedy, the Petitioner is not entitled to maintain a writ petition before this Court. I am not able to countenance the said

contention of the learned standing counsel for the Respondents for the simple reason that the Assessee, viz., the Petitioner can very well waive the

right to file an appeal as per the provision u/s 264 by preferring a revision. It is seen that accordingly, the Petitioner waived his right to file an

appeal and filed a revision as per Section 264 and the said revision was dismissed through the impugned order dated 23-2-2005 passed by the

second Respondent.

For the aforesaid reasons, this Court is constrained to set aside the impugned order dated 23-2-2005 passed by the second Respondent in his

proceedings C. No. 7032(1)/264/CIT-VII/2003-04 and remand the matter to the first Respondent to proceed with the assessment for the period

1994-95 by issuing notice u/s 148 of the Act. Accordingly, the writ petition is allowed. No costs. It is made clear that the consumption of time

taken during the pendency of this proceeding by granting the relief of the stay, would not stand in the way of limitation. Consequently, the

connected miscellaneous petition is closed.