COMMISSIONER OF INCOME-TAX, PUNJAB vs. DAULAT RAM KHANNA

CIVIL APPEAL No. 580/1966Supreme Court[1967] 3 S.C.R. 29829 March 1967Bench: 3 JudgesAuthor: J.C. SHAH, S.M. SIKRI, V. RAMASWAMI OF INCOME4 pages
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What did the Supreme Court hold?

The Supreme Court held that the substituted service of the notice under Section 34 of the Income-Tax Act, 1922, was valid. The Court interpreted Order V, Rule 20(1) of the CPC, which governs service of summons. It found that the sub-rule provides two alternative methods: (1) affixing a copy in the court-house and another in a conspicuous part of the defendant's premises, OR (2) 'in such other manner as the Court thinks fit'. The Court held that the latter part confers a discretion on the court to adopt any other manner of service, which must be such as to give notice to the person to be served. It found that the Income Tax Officer, by directing the process server to affix the notice at the assessee's address and satisfying himself of proper affixation, had adopted a valid manner of substituted service. The Court overruled its earlier decision in Jhabar Mal Chokhani v. Commissioner of Income-tax, finding it wrongly decided. The appeal was allowed, the High Court's judgment was set aside, and the question was answered in the affirmative and against the assessee. The Court did not decide the second point raised by the revenue regarding timely service.

What were the facts?

The appeal concerns assessment year 1945-46. Proceedings under Section 34 of the Income Tax Act, 1922, were initiated against the assessee, a Hindu Undivided Family, by issuing a notice on March 29, 1954. The process server attempted service on March 30, 1954, but could not serve the karta of the HUF, reporting refusal. The Income Tax Officer (ITO) then ordered substituted service by affixing the notice at the assessee's address and also sent it by registered post. The notice was affixed on March 31, 1954. The Appellate Assistant Commissioner held the substituted service invalid for not affixing a copy on the Income-Tax Office notice board. The Income Tax Appellate Tribunal reversed this, holding the service proper under Order V, Rule 20(1) of the Code of Civil Procedure (CPC), as the ITO was not a court. The High Court, however, following its prior decision, found the substituted service invalid and answered the reference question in the negative.

What were the issues?

1. Whether, on the facts and circumstances, the notice under Section 34 of the Income-Tax Act was properly served on the assessee within the prescribed period? (Question of mixed law and fact, concerning Section 34 of the Income-Tax Act, 1922, and Order V, Rule 20(1) of the Code of Civil Procedure, 1908). Assessee's Contention (implied through High Court's decision): The substituted service was invalid because a copy of the notice was not affixed on the outer wall of the Income-Tax Office, and the ITO, not being a court, was not bound by the strict requirements of Order V, Rule 20(1) of the CPC. The High Court relied on its earlier decision in Jhabar Mal Chokhani v. Commissioner of Income-Tax. Revenue's Contention: The substituted service was valid. The High Court erred in not allowing the revenue to raise a second point regarding timely service even if effected after March 31, 1954. The earlier High Court decision in Jhabar Mal Chokhani v. Commissioner of Income-Tax was wrongly decided.

Which sections of the Income-tax Act were involved?

Section 34,Section 63

AI-generated summary — verify with the full judgment below

COMMISSIONER OF INCOME-TAX, PUNJAB v. DAULAT RAM KHANNA March 29, 1967 [J. C. SHAH, S. M. SIKRI AND V. RAMASWAMI, JJ.] Income Tax Act (11 of 1922) s. 63-Notice under s. 34-Direction by Income-tax Officer to affix at address of assessee-No a/fixture on the notice board of the Income-tax Office-Sufficiency of substituted service.

Code of Civil Procedure (Act 5 of 1908), O. V. '" 20(1)-Scope of.

Under s. 63 of the Income-tax Act a notice under the Act may be served as if it were a summons under the Civil Procedure Code. Order V, r. 20(1) of the Code prescribes two alternative methods of service when the summons could not be served in the ordinary way, namely, ( 1) by affixing one copy of the summons in the court-house and another in a conspicuous part of the residential house or business premises of the party to be served; and (2) "in such other manner as the Court thinks fit". These words confer a discretion on the court to adopt any other manner of service and include a direction to affix a copy in such manner as to give notice to the person to be served, but without affixing a copy thereof in the court-house. [30!A-BJ Therefore, where proceedings under s. 34

The order continues below.

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