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Writ Petition No, 323 of 1963, decided on 9^th April 1963.

Rectification of assessment‑Fresh notice of demand, whether necessary‑Assessment under Act of 1922‑Rectification under Act of 1961‑Notice, whether governed by old Actor new Act‑Income -tax Act, 1961, Ss. 156 & 297 (2).

The provisions for service of a proper notice of demand con tained in section 29 of the Indian Income‑tax Act, 1922, and section 156 of the Income‑tax Act, 1961, are mandatory and must be complied with before proceedings are taken for recovery of any tax or penalty from an assessee.

Where assessments made before the Income‑tax Act, 1961, came into force were rectified by an order under section 35 of the Income‑tax Act, 1922, after the Income‑tax Act of 1961 had come into force: Held, that proceedings for the recovery of the tax due under the rectified order of assessment cannot be taken without duly serving on the assessee a notice of demand under section 156 of the Act of 1961, i.e., a notice in Form No. 7 of the Income‑tax Rules, 1922, giving 35 days' notice.

K. Ranganathachari for Petitioner.

C. Kondaiah for Respondent.

The petitioner is the wife and the legal representative of late Rameshwar Pershad residing at Hyderabad, who is an assessee under the Income‑tax Act. On May 30, 1959, Rameshwar Pershad was assessed for the assessment year 1958‑59 and on September 30, 1958, for the assessment year 1957‑58 and also for the assessment year 1956‑57 in his individual status. He had also an interest in a firm called Messrs Kishanlal Oil Mills and at the time of the original assessments, his share of the income there-from was tentatively fixed with the proviso that the assessment would be rectified under section 35 of the Indian Income‑tax Act, 1922, after the assessment of the firm was completed. Subsequently, the assessment of the firm was completed and on the basis of that, the assessments of Sri Rameshwar Pershad for the years 1956‑57, 1957‑58 and 1958‑59 were rectified on March 7, 1963. As a result of this rectification, the assessee had to pay Rs. 6,142.50 nP. for the year 1956‑57, Rs. 8,074*50 nP. for the year 1957‑58 and Rs. 2,283'44 nP. for the year 1958‑59.

The order, as I stated, was passed on March 7, 1963. On the order itself, the Income‑tax Officer endorsed as follows:

This should be paid within a week of receipt of the order.

In the counter‑affidavit filed by the Income‑tax Officer, it is stated that the assessee's authorised representative had no objec tion to the proposed rectification and that in consent thereof, he signed the order‑sheet on January 7, 1963, and that on the same day similar opportunity was given to Sri Ghanshyamdas of Messrs S. G. Dastgir & Co., chartered accountants, who represented the assessee for the assessment years 1956‑57 and 1957‑58 and also that the said gentleman gave his consent to the proposed revision of the assessment and that in token thereof, he also signed the order‑sheet. So that, it must now be taken that there is no objection at all to the order passed under section 35 of the Indian Income‑tax Act, 1922.

The point raised in this writ petition by the assessea's legal representative, who is his wife, is that no notice of demand as required by the Indian Income‑tax Act, 1922, or the Income‑tax Act of 1961 was ever served on her. It is also further urged that as the rectification under section 35 of the Indian Income‑tax Act, 1922, is made only on March 7, 1963, after the Income‑tax Act of 1961 came into force, the notice of demand should be given under section 156 of that Act. In paragraph 5 of the counter‑affidavit i t is admitted that no separate demand notice was served on the petitioner as the very order under section 35 mentions in the end that the amount is payable within a week of the receipt of the order and that, as the order was passed with the consent of the assessee's authorised representative and further the order being one of rectification under section 35, the formality of issuing a demand notice was not strictly observed. In paragraph 4 of the counter‑affidavit, it is stated that it is the old Act that applies to the present case as the assessment year was one which was prior to the coming into force of the new Act of the year 1961, and that, therefore, notice of demand, if at all, has to be given as required by section 29 of the Act of 1922 and that it is not necessary to give a notice under section 156 of the new Act of 1961.

Under section 29 of the Income‑tax Act, 1922:

When any tax, penalty or interest is due in consequence of any order passed under or in pursuance of this Act, the Income‑tax Officer shall serve upon the assessee or other person liable to pay such tax, penalty or interest., a notice of demand in the prescribed form specifying the sum so payable.

This section is mandatory and it is obligatory on the part of the Income‑tax Officer to serve on the assessee or the person liable to pay the tax a notice of demand in the prescribed form. Rule 20 of the Income‑tax Rules, 1922, prescribed that the notice of demand under section 29 shall be in the form which was specified below that rule. Admittedly, the Income‑tax Officer did not serve any notice in that prescribed form on the petitioner and without serving any notice of demand, he could not take further steps to recover the tax from the petitioner or to levy any penalty or to take any further proceedings for the recovery of the tax.

It is further contended by Mr. Ranganathachari, the learned counsel for the petitioner, that, since the rectification order was passed after the coming into force of the Income‑tax Act, 1961, notice under section 156 of the new Act has to be given before further steps to recover the tax can be taken and before any penalty can be imposed. Section 156 is substantially in the same language as section 29 of the old Act and is as follows:

When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the Income‑tax Officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable.

This section also is clearly mandatory. Rule 15 of the Income‑tax Rules, 1962, prescribed that subject to the provisions of rules 16 and 38, with which I am not now concerned, the notice of demand under section 156 shall be in Form No. 7. Form No. 7 prescribed that it should be stated that the amount of the tax should be paid within 35 days of the service of the notice in that form or that the previous approval of the Inspecting Assistant Commissioner of Income‑tax has been obtained for allowing a period of less than 35 days for the payment of the amount. The Income‑tax Act of 1922 is repealed by section 297 of the Income‑tax Act, 1961, and under clause (j) of subsection (2) of section 297:

Any sum payable by way of income‑tax, super-tax, interest penalty or otherwise under the repealed Act may be recovered under this Act, but without prejudice to any action already taken for the recovery of such sum under the repealed Act.

In the present case, the order of rectification itself was passed after the coming into force of the Income‑tax Act, 1961. There is no proceeding pending which was already taken before the coming into force of the new Act for the recovery of the amount, for the simple reason that the order itself was passed after the commencement of the new Act. The amount due by the assessee, late Rameshwar Pershad, and now payable by the petitioner has to be recovered under the provisions of the new Income‑tax Act, 1961. Therefore, a notice of demand under section 156 of the new Act in Form No. 7 given under rule 15 of the Income‑tax Rules, 1962, calling upon the petitioner to pay the amount due within 35 days of the service of the notice m that form has to be served by the Income‑tax Officer before he can take any further action for the recovery of the tax or for levying penalty. But such a notice admittedly has not been served on the petitioner.

Therefore, this writ petition is allowed and a direction will issue to the respondent to forbear from taking further proceedings inclusive of the collection of tax and the levy of penalty is pursuance of the orders G. I. R. 471‑r, dated March 7, 1963, for the assessment years 1956‑57, 1957‑58 and 1958‑59, unless and until he serves a notice on the petitioner as prescribed by section 156 of the Income‑tax Act, 1961, and in Form No. 7, under rule 15 of the Income‑tax Rules, 1962. I make no order as to costs in this writ petition.

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