JOHRI LAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) A partnership firm carrying on business under the name and style of M/s. Johri Lal Shyam Lal had its head office at Agra and a branch at Gwalior. It maintained two sets of accounts, one in respect of the business at Agra and the other relating to the business at Gwalior. During the previous year, relevant to the assessment year 1950-51, with which we are concerned, the partnership firm comprised of two partners, one of them being the assessee Hindu undivided family through its Karta. The assessment of the partnership firm was pending when the assessment of the assessee was completed. Subsequently in the course of the assessment proceedings on the partnership firm the Income-tax Officer discovered that the assessee had remitted from Gwalior to Agra several sums during the period April 29, 1949, to October 19, 1949, totalling Rs. 62,500. Accordingly, he issued a notice under Section 34 of the Indian Income-lax Act, 1922, and included that amount in the assessment of the assessee on the ground that it was part of the profit which had accrued to the assessee outside the taxable territories and had been brought into the taxable territories during the relevant previous year. The assessee appealed to the Appellate Assistant Commissioner and, upon the appeal being dismissed, carried the case in second appeal to the Income-tax Appellate Tribunal. It was contended before the Appellate Tribunal that the assessment was without jurisdiction because the Income-tax Officer, at the time when he made the original assessment against the assessee was already in possession of information upon which he could have subjected the sum of Rs. 62,500 to lax and that no fresh information had come into his possession entitling him to proceed to reopen the assessment under Section 34. The second contention was that the notice was served beyond the period of four years envisaged by Section 34 (1) (b) and was, therefore, barred by limitation. The Income tax Officer had directed service of notice by affixture and also by registered post. The notice was affixed upon the residential house of the assessee on March 25, 1955, and that issued by registered post was served on April 1, 1955 The argument was that the notice by affixture was not valid and as the provisions of Section 34 (1) (b) had been invoked the proceedings were barred by limitation. The last contention of the assessee was that the amount could not be taxed under Section 4 (1) (b) (iii) of the Act in the hands of the assessee. The contentions failed to find favour with the Appellate Tribunal which, therefore, dismissed the appeal. At the instance of the assessee the Appellate Tribunal has referred the following questions for the opinion of this Court:

(2.) WHETHER the service of the notice under Section 34 of the Indian Income-tax Act by affixture on the residential house of the assessee was legal and proper?

(3.) ORDER 5, Rule 20 provides for substituted service. It enables the Court, where it is satisfied that there is reason to believe that the defendant is keeping out of the way for the purpose of avoiding service, or that for any other reason the summons cannot be served in the ordinary way to order the summons to be served by affixing a copy thereof in some conspicuous place in the court-house, and also upon some conspicuous part of the house, if any, in which the defendant is known to have last resided or carried on business or personally worked for gain, or in such other manner as the Court thinks fit. Service by this mode is as effectual as if it had been made on the defendant personally. Now, it seems to us, that if substituted service is resorted to all the conditions mentioned in the procedure set out in ORDER 5, Rule 20 must be fulfilled. The Code has specifically spoken of it as "substituted service". It is not service in the ordinary sense of the word. It is service in an artificial sense proceeding upon a fiction imported by necessity. A special mode of procedure has been proscribed, and it is incumbent for the purpose of effecting such service that the entire procedure specifically mentioned in the rule should receive full compliance When an Income tax Officer resorts to ORDER 6, Rule 20, not only is it necessary that a copy of the notice should be affixed upon some conspicuous part of the house in which the assessee is known to have last resided or carried on business or personally worked for gain, but it is also necessary that he should cause to be affixed a copy of the notice on a conspicuous place in the Income-tax Office. Unless this is done, it cannot be said that substituted service has been effected. We are supported in this view by the decision of the Punjab High Court in Jhabar Mal Chokhani v. Commr. of Income-tax, 1963-49 ITR 391: (AIR 1963 Punj 486).