Case: Commissioner of Income Tax, Kerala Vs. Thayaballi Mulla Jeevaji Kapasi (Decd.) (By His Legal Representatives)

1. Thayaballi Mulla Jeevajihereinafter called " the respondent "was a trader in " Malabar produce ", cloth, pepper and other commodities. For the assessment yearthe respondent submitted a return disclosing a net business loss of Rs. 7, 960. TheOfficer, Kozhikode, District Malabar, completed the assessment on March 29, 1946, and computed the total income of the respondent at Rs. 8, 009 and brought it to tax. On December 4, 1953, theOfficer received information that in the name of the respondent there stood credited large sums of money in account with the Central Bank of India Ltd. at Bombay. TheOfficer being of the opinion that the deposits made by the respondent represented profits of the business which had escaped assessment issued on March 18, 1954, a notice under section 34(1)(a) of theAct, 1922, to the assessee. The notice was, it is claimed, tendered to the son of the respondent and was accepted by him. The process server was informed that the respondent was in Bombay and that " it would take a week for him to return ". Being of the view that service of the notice on the respondents son was irregular, theOfficer cancelled that notice and issued a fresh notice on March 24, 1954. This notice was affixed on March 25, 1954, to a conspicuous part of the business premises of the respondent by the process server in the presence of two persons and an endorsement was made on the notice that " At the above address on enquiry the owner (the assessee) was said to be in Bombay or in Ceylon, and, as directed by theOfficer, the notice was pasted at the permises of the company of the owner and that witnesses had also signed on the notice ". On March 25, 1954, the process server swore an affidavit in support of the truth of the endorsement, in the presence of theOfficer After some correspondence the respondent on November 12, 1954, submitted a fresh return again disclosing a net loss of Rs. 7, 960 in his business transactions. TheOfficer completed the proceeding for reassessment under section 23(3) and section 34 of the IndianAct, 1922, and brought to tax an additional amount of Rs. 61, 036. In appeal before the Appellate Assistant Commissioner the contention of the respondent that the proceedings for reassessment was " illegal and invalid " because the notice under section 34(1)(a) was not served on him was rejected and the order of theOfficer was confirmed. But theAppellate Tribunal set aside the order of reassessment holding that there was no proper service of the notice under section 34At the instance of the Commissioner, the Tribunal referred the following question to the High Court ofWhether, on the facts and in the circumstances of the case, the reassessment formade on March 9, 1955, was validThe High Court, after calling for a supplementary statement on the question whether the respondent had waived the notice, held that a notice under section 34 of the IndianAct was a condition precedent to the commencement of the proceeding for reassessment and since the notice was not properly served upon the respondent, the proceeding for reassessment could not be maintained. The High Court accordingly answered the question referred in the negative. With special leave the Commissioner ofhas appealed to this court

Reasoning:
The notice was, it appears, handed over to a person who, thebelieved, was the son of the respondent. But the service of that notice was defective, and the notice was cancelled. The second notice dated March 24, 1954, was affixed on a conspicuous part of the business premises of the respondent and themade the requisite endorsement. Before theOfficer a sworn statement of thewas recorded and theOfficer declared the service valid6. The Tribunal and the High Court regarded the service as improper. In our view the Tribunal and the High Court were in error in so holding. It is true that Order V, rule 17, of the Code of Civil Procedure, prescribes certain conditions on the existence of which alone a summons served by affixing it to 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 may be deemed to be duly served. There is no dispute in the present case that the notice was affixed on a conspicuous part of the business premises of the respondent. Thehad, it is clear from his reports, made inquiries on March 18, 1954, and March 25, 1954, about the presence of the respondent in Calicut. Thewas informed on the first occasion that the respondent was in Bombay and that it was expected that he would return to Calicut within a week. On the second occasion also it was found that the respondent was not in Calicut and thewas informed that the respondent was " in Bombay or in Ceylon ". TheOfficer was apparently satisfied on a sworn statement made before him about the correctness of the recitals made in the endorsement made by theand he declared the summons duly servedThat attempts were made to personally serve the respondent with the notice cannot, on the materials placed before the court, be denied. Whether the steps taken in a particular case amount to using all due and reasonable diligence must depend upon the circumstances of each case. The respondent was on March 25, 1954, not in Calicut. That is not denied. The only information which thereceived on March 25, 1954, was that the respondent was " in Bombay or in Ceylon ". It was thereafter that theaffixed the notice on the business premises of the respondent. Thereby, prima facie, the statutory requirements wereThe principle laid down in that case is unexceptionable, but it has, in our judgment, no application in this caseIn the present case attempts were made to serve the notice upon the respondent at his place of business. He was not then in Calicut. No definite information could be secured in spite of inquiries as to the whereabouts of the respondent, and only thereafter, the notice was served by affixing. TheOfficer held the necessary inquiry and declared the notice duly served. In the circumstances, we do not think that there was any irregularity in the service of the notice under Order V, rule 17, of the Code of Civil Procedure, read with section 63 of the, however, cannot, in our judgment, affect the validity of the service10. The answer recorded by the High Court to the question submitted by the Tribunal will be discharged and an answer in the affirmative will be recorded