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I. T. As. Nos. 1455 to 1457 and 3554 of 1979‑80, decided on 6^th June 1981.

‑‑‑‑ Ss. 22 & 23 read with Civil Procedure Code (V of 1908), O. V, r. 12‑Service of notice on person other than partner or agent of assessee‑Held, invalid‑‑Such notice of demand, however, reaching assessee who acted upon it by filing appeal against assessment order Service of notice, held, effective service in circumstances of case notwithstanding invalidity of service of notice.

Commissioner of Income‑tax v. Muhammad Idrees Barry & Co. 1967 P T D 189 ref.

‑‑‑ S. 23‑‑Assessment Sales of goods estimated appearing to be excessive as compared to earlier year‑No reason given by I.‑T. O. for departing from history of case‑Sales reduced accordingly.

K. G. Mehboob, I. T. P. for Appellant.

Ashfaq Ahmad, D. R. for Respondent.

Date of hearing: 29th April, 1981.

These are four appeals on behalf of an assessee relating to assessment years 1976‑77, 1977‑78, 1978‑79 and 1979‑80. The A, A. C. has dismissed the appeals of the assessee relating to assessment years ‑ 1976‑77, 1977‑78 and 19,78‑79 as barred by time. While the appeal for the year 1979‑80 was decided on merits.

2. The learned A. R. contended that the A. A. C. has erred in law in dismissing the appeals as time barred. Assessment order for the years 1976‑77 and 1977‑78 was passed by the I.‑T. O. on 15‑1‑1979 and was got served on 17‑1‑1979 on one Muhammad Iqbal. Appeal was filed by the assessee against this order on 18‑2‑1979. For the year 1978‑79 assessment order was passed on 3‑3‑1979 which was served on 10‑3‑79. The contention of the A. R. was that the order was served on Muhammad Iqbal who was neither a partner nor was authorised by the assessee to receive the notices on his behalf. Secondly it was contented before the A. A. C. that notice was received by him on 20‑2‑79 for the years 1976‑77 and 1977‑78 and on 23‑4‑79 for the year 1978‑79. Appeals for the first two years were filed before the A. A. C. on 18‑2‑79 and for the year 1978‑79 on 22‑5‑79. It was therefore contended that the appeals were filed within time. In support of his contention the A. R. relied upon the case C. I. T. v. Muhammad Idrees Barry & Co. (1967 PTD 195). What happened in that case was that service of notice under section 22(2) of the Income‑tax Act was made on a salesman. Objection was taken by the assessee before the A. A. C. that service on salesman who was not authorised to receive notices on behalf of the assessee was invalid. This plea was accepted by the A. A. C. On departmental appeal the Tribunal held that service was valid and therefore remanded the case to the A. A. C. for decision on merits. The following' question was referred to the High Court under section 66(1) of the Income‑tax Act:

Whether there is any material in support of the Tribunal's finding that Habibur Rehman was assessee's agent empowered to accept the service of notices within the meaning of Order V, rule 12 of C. P. C. read with section 63(l)

The High Court held the service of notice as invalid but at the same time observed that assessee was estopped to raise any objection to the service of notice as he bad taken part in the proceedings subsequent to the notice. The relevant paragraph containing findings of the High Court was as follows:

"Although the answer to the question as framed by the Appellate Tribunal may be against the C. I.‑T. answer ‑to the real question is against the assessee."

Consequently the High Court held the view in that case that notwithstanding the invalidity of service it was an effective service and bound the assessee as he had acted upon it and that no prejudice had been done to the assessee. However the Supreme Court though did not upset this finding of the High Court set aside the order of the High Court on the technical ground that High Court had no jurisdiction to travel beyond the question referred to it which did not include the point as to whether the service was effective on the assessee or not. The Supreme Court came to the above conclusion on the ground that the order of the Tribunal had no reference to the conduct of the assessee and therefore the effectiveness or otherwise of the service could not be said to be a question arising out of the order of the Tribunal. On remand the High Court confined its opinion to the question referred to it and held the notice as invalid. On further appeal by the Department the Supreme Court maintained the order of the High Court.

3. From the facts narrated above it is obvious that the case cited by the learned A. R. could support his case only to a limited extent that service on the person other than the partner or person authorised was invalid Therefore I accept this argument of the A. R. that service on Muhammad Iqbal who was neither a partner nor an agent of the assessee was not al valid service. However the fact remains that the said notices of demand did reach the assessee and he acted upon them inasmuch as he filed appeals against the assessment orders. This fact is not denied by the assessee. Therefore notwithstanding the invalidity of service it would be an effective service on the basis of the view expressed by the High Court which was not overruled by the Supreme Court, The assessee however is entitled to take up the plea in such circumstances that the date of his service of notice was not the same as tine date of service on Muhammad lqbal. It is possible that the assessee had received the notice from Muhammad Iqbal on some later date. In that case the burden to prove is on the assessee as to what was the actual date of receipt of notice by him. According to the assessee notice for the year 1976‑77 and 1977‑78 was received by him on 20‑2‑79 (learned A. R. explained that this was a mistype and is fact the notice was received by the assessee on 20‑1‑1979). For the year 1978‑79 it was alleged that notice was received by the assessee on 23‑4‑79. However this assertion is not supported by any evidence not even by a sworn affidavit. Therefore notwithstanding the invalidity of service, of notice, it was an effective service because of the conduct of the assessee. There is no evidence that the notices were received by the assessee on 20‑1‑1979 and 20‑3‑1979 for the years under consideration. The proper course for the assessee‑ was that he should have filed an application for the condonation of delay explaining the cause of delay and the date of receipt of notice and the date of his knowledge supported by nn affidavit. This has not been done by the assessee and therefore no exception can be taken to the order of the A. A. C. who has rightly dismissed the appeals for the years 1976‑77, 1977‑78 and 1978‑79 as barred by time.

Assessment year 1979‑80.‑---This appeal was decided by the A. A. C. on merits. The assessee deals in watches on wholesale and retail basis. The sales were declared as tinder:‑‑---

In view of the past history of the case given above the sales estimated by the A. A. C. are reasonable and do not call for any interference.

The sales estimated in this account appear to be excessive as compared to the earlier year. No reason had been given by the I.‑T. O. for departing from the history of the case. The sales are therefore reduced in this account to Rs. 25,000.

The I. T. O. made a round addition of Rs. 5,000, which was maintained by the A. A. C.

The I.‑T. O. made a round addition of Rs. 3,000, in this account. The addition is reduced to Rs. 3,000, which will be in accordance with the history of the case.

4. In the result the appeals for the years 1976‑77, 1977‑78 ace 1978‑79 are dismissed while the appeal for the year 1979‑80 is partly accepted to the extent indicated above.

Order accordingly

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