Lakhpat Singh vs Commissioner of Income Tax

S.S. Sharma, J.—This order shall also govern the disposal of M.C.C. No. 207 of 1979 (Lakhpat Singh v. Commissioner of income tax). M.C.C. No. 206/79 relates to the assessment year 1968-69, while M.C.C. No. 207/79 relates to the assessment year 1969-70. The applicant has filed separate applications u/s 256(2) of the income tax Act (hereinafter referred to as "the Act"), for the aforesaid two assessment years. The applicant''s applications for referring the following questions, which, according to him, were questions of law and arose out of the consolidated order dated 6th September, 1978, of the Tribunal were dismissed.

(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that Shri Mittal had on November 17, 1976, an authority to receive notice u/s. 148 of the income tax Act even though oh record there is nothing to prove that he is either holding a power-of-attorney or is having any other authority given to him by the assessee?

(2) Whether a notice u/s. 148 of the income tax Act can be served on a ''legal practitioner'' and whether it satisfies the requirement of section 282 of the Act, even though the legal practitioner neither holds a power-of-attorney nor any other authorisation constituting him an agent of the assessee?

(3) Whether Shri Mittal, who is an advocate under the Advocates Act, can be held to be an agent of a party for the service of notice u/s. 282 of the Act?

(4) Whether the income tax authorities can serve notice u/s 148 of the Act on an advocate, who cannot hold power-of-attorney from his client and thus be called his ''agent'' within the meaning of Order 3, rules 2 and 3, Code of Civil Procedure, 1908?

(5) Whether the Tribunal erred in omitting to quash the assessment proceedings altogether as the notice u/s. 148 of the income tax Act was not served on the assessee and on the date of the Tribunal''s order, the assessment proceeding had become barred by time u/s 149 of the income tax Act?

These questions were sought to be referred even in the other reference application. The Tribunal having dismissed the applications of the applicant, he has filed the two separate applications in this court.

The assessee was being assessed to income tax right from the assessment year 1958-59. In respect of the assessment years 1968-69 and 1969-70, the assessee did not file the return of income as required u/s 139(1) of the Act. The ITO, therefore, issued notices for these two years u/s 148 on November 12, 1971. These notices were served on November 17, 1971, on Shri K.C. Mittal, advocate. The assessee not having filed the return even thereafter, the ITO completed the assessments ex parte u/s 144 of the Act on March 25, 1976, on the total income of Rs. 25,000 for each of the assessment years 1968-69 and 1969-70. Against these ex parte assessments, the assessee moved applications for reopening but the ITO declined to reopen the assessments and rejected the assessee''s applications.

The assessee filed appeals before the AAC against the assessment framed u/s 144 of the Act as well as against the orders u/s 146 of the Act refusing to reopen the assessments. The question of the validity of the service of notice u/s 148 on Shri K.C. Mittal, advocate, was, inter alia, raised. The AAC, by a common order in Appeal Nos. M.D.B.-36/76-77 and M.D.B.-35/76-77, held as follows:

The facts that follow show that Shri K.C. Mittal had been representing the assessee round about the time when the assessee was under an obligation to file his returns u/s. 139(1) and when the notices u/s. 148 for assessment years 1968-69 and 1969-70 were served upon him. The notice u/s. 221(1) for the assessment year 1963-64 was served upon Shri K.C. Mittal on 7-1-1969. In response to this notice, he appeared before the ITO on 9-1-1969 and drew the ITO''s attention to the application dated 10-5-1968 which had been moved by him (Shri K.C. Mittal) u/s. 154 of the Act. The assessment folder for the year 1963-64 further shows that Shri K.C. Mittal appeared again before the ITO on the 23rd of July, 1969, in connection with penalty proceedings and conceded the default. Notice of demand u/s. 156 for the penalty levied was served upon Shri K.C. Mittal on the 30th of September, 1969. For the assessment year 1967-68 Shri K.C. Mittal appeared before the ITO on 27-9-1971 and the latter after discussion with the former completed the assessment. It would thus appear that Shri K.C. Mittal was the authorised representative of the assessee in income tax matters till 27-9-1971. There is no letter from the assessee cancelling the authority delegated to Shri K.C. Mittal. In these circumstances, the ITO was justified in treating Shri K.C. Mittal as authorised representative of the assessee and in treating the service of the notices as valid.

In the other two appeals, i.e., MDB-50 and 51/76-77 the AAC referred to the telegram of the assessee to reopen, the proceedings u/s 146 relevant to the assessment years 1968-69 and 1969-70 as also to the letter to which a reference had been made in the telegram. In the letter dated 16th May, 1976, that followed the telegram, the assessee had contended that because of the change in his address, he did not have knowledge about the notices issued u/s 148 and, therefore, could not file the returns in response to those notices. The AAC, by a common order in these two appeals, held that there was no justifiable reason on the part of the assessee for his failure to file the returns in time. He did not find that the assessee was prevented by sufficient cause from filing his returns u/s 148 of the Act. The order of the ITO declining to reopen the assessments for the two years was, therefore, upheld.

The Tribunal decided the appeals by a common order. It was held that the service of a notice u/s 148 of the Act on Shri K.C. Mittal on 17th November, 1971, was quite valid. With regard to the appeals relating to the reopening, the Tribunal held that "there was no material on record to suggest that after the service of the notice on 17th November, 1971, Shri Mittal handed over the notices to the assessee. In the circumstances, it can reasonably be inferred that the assessee was prevented by sufficient cause from complying with the terms of the notices u/s 148 of the income tax Act for the assessment years 1968-69 and 1969-70". Accordingly, the ITO was directed to reopen the assessments u/s 144 of the Act and pass fresh assessment orders for these two years after allowing a reasonable opportunity to the assessee to file the returns of the income.

The Tribunal placing reliance on the decision of the Supreme Court in Commissioner of Income Tax, West Bengal III and Others Vs. Ramendra Nath Ghosh, and of the Gauhati High Court in Sashi Prasad Baruah Vs. Agricultural Income Tax Officer and Others, , held that the question of service of notice was one of fact and so no question of law arose out of the order of the Tribunal. We have examined these cases. They, prima facie, appear to be distinguishable on facts. At this stage, we need not, however, deal with this question elaborately.

Section 282 of the Act deals with service of notice. Sub-section (1) of this section provides that a notice or requisition under the Act may be served on the person herein named either by post or as if it were summons issued by a court under the CPC. Sub-section (2) of this section provides as to whom the notice or the requisition may be addressed in the case of a local authority or company, in the case of any other association or body of individuals and in the case of any other person (not being an individual). The two modes of service provided u/s 282 of the Act are alternative. Order 3 of the CPC deals with recognised agents and pleaders while O. 5 thereof deals with issue or service of summons.

The Tribunal while refusing to state the case on the ground that no question of law arose failed to consider the aforesaid provisions of the CPC which are relevant for deciding the validity of the service of notice u/s 148 of the Act. Their conclusion was based mainly on the ground that Shri K.C. Mittal had been appearing for the assessee in respect of the proceedings for the other years before the ITO. In our opinion, therefore, the Tribunal was not correct in refusing to state the case on the ground that no question of law arose from its order. In our opinion, the following question of law does arise from the order of the Tribunal:

Whether on the facts and circumstances of the case, the Appellate Tribunal was right in holding that the service of notice u/s 148 of the income tax Act for the assessment year 1968-69 on Shri K.C. Mittal, advocate, on November 17, 1971, was a valid service?

With regard to the assessment year 1969-70 the question would be as follows: Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in holding that the service of notice u/s 148 of the income tax Act for the assessment year 1969-90 on Shri K.C. Mittal, advocate on November 17, 1971, was a valid service?

We, therefore, require the Appellate Tribunal to state the case for each of the two assessment years, namely, 1968-69 and 1969-70, and refer the respective questions. There shall be no order as to the costs of these references which shall be borne by the parties as incurred.