Validity of income tax notice served on authorised representative upheld by Supreme Court

Validity of income tax notice served on authorised representative upheld by Supreme Court as there was sufficient material to draw inference of deemed service

ABCAUS Case Law Citation:
ABCAUS 2214 (2018) (02) SC

The respondent assessee was Proprietor of a Petrol Pump and was regularly assessed to the tax in his Permanent Account No. The assessee filed his return of income as individual which was filed accompanied with duly audited account under section 44AB of the Act. The Income Tax Officer issued a notice u/s 143(2) for the relevant assessment year which was issued and despatched by registered post well within the time prescribed for the issuance of the notice..The notice was served upon the respondent assessee after the expiry of the time limit for issuance of the notice.

The assessee preferred a writ petition before the jurisdictional High Court on the ground that the notice issued u/s 143(2) of the Act was barred by limitation as provided by the Proviso to Section 143(2)(ii) of the Act and therefore, the entire proceedings prayed to be quashed.

However the Income Tax Department (Department/Revenue) stated that the notice was dispatched under registered Cover. The postal Department could not serve the notice on one occasion as the petitioner was not available at the address as mentioned in his return of income. Thereafter the Postal Department approached the petitioner again after three days whereby they were informed that the petitioner had not returned back. Finally it was served two days after the expiry of the limitation period.

The Department also took a plea that the notice was also served on the Advocate who was the authorized representative of the petitioner well within the limitation period and therefore, the notice had been served within the prescribed period. 

The High Court observed that though the notice was issued within time, it was served upon the respondent assessee fater the expory of the limitation period.. The High Court opined that in view of the proviso to Section 143(2)(ii) of the Act which specifically provides that no notice shall be served on the assessee after the expiry of 12 months from the end of the month in which return has been furnished, the Parliament specifically, intended that the notice had to be served within a specified period and mere issue of a notice would not be sufficient.

The High Court further held that the service on the authorized representative could not be treated to be a valid service in the eyes of law. The service has to be upon the assessee which was however beyond the limitation period. The High Court, relying upon the principle laid down by Hon’ble Supreme Court, held that the notice which was served on the respondent assessee after the limitation period was clearly barred by limitation and accordingly it quashed the entire proceedings as prayed.

Aggrieved by the decision of the High Court the Department approached the Hon’ble Supreme Court by way of a Special Leave Petition.

The Hon’ble Supreme Court noted that on two occasions the notice sent by registered post could not be served on the respondent assessee as he was not available and the notice it was served on the an advocate who was the authorized representative of the respondent assessee (whom the assessee disowned before the Court) within the prescribed time limit.

The Hon’ble Supreme opined that the non-availability of the respondent assessee to receive the notice sent by registered post as many as on two occasions and service of notice on the authorized representative of the respondent assessee whom the respondent assessee disowns, was sufficient to draw an inference of deemed service of notice on the respondent assessee and sufficient compliance of the requirement of Section 143(2) of the Income Tax Act, 1961.

The Hon’ble Supreme Court allowed the appeal of the Revenue and set aside the order of the High Court.