COMMISSIONER OF INCOME-TAX VS SATTANDAS MOHANDAS SIDHI
1999 P T D 3677
[230 I T R 591]
[Madhya Pradesh High Court (India)]
Before A. K. Mathur, C. J. and Dipak Misra, J
COMMISSIONER OF INCOME-TAX
Versus
SATTANDAS MOHANDAS SIDHI
Income-tax Reference No.79 of 1995, decided on 23/06/1997.
Income-tax---
----Revision---Orders prejudicial to interests of Revenue---Jurisdiction of Commissioner---Issue of notice under 5.263---Not a mere procedural requirement- --Notice should state reason for exercising revisional jurisdiction---Notice will not be valid, unless it bears signature of concerned officer and bears seal of office---Telegram sent by Commissioner to assessee not containing reason as to how order was prejudicial to interests of Revenue---Notice by telegram not a substitute for notice by post---Order was passed by Commissioner without giving opportunity of hearing to assessee-- Order invalid---Indian Income Tax Act, 1961, Ss.263 & 282.
For the assessment year 1985-86, the Commissioner initiated proceedings under section 263 of the Income Tax Act, 1961,, as he considered the assessment order erroneous and prejudicial to the interests of the Revenue. The Commissioner of Income-tax sent a telegraphic notice to the assessee for making appearance to show cause, as to why the assessment order should not be cancelled. The assessee acknowledged receipt of the telegram and requested for an adjournment by telegram, which was refused. Thereafter the Commissioner of Income-tax passed an order under section 263 of the Act. On appeal, the Tribunal allowed the appeal of the assessee and cancelled the order under section 263 on the ground that the order was passed by the Commissioner without giving an opportunity of being heard. The Tribunal rejected the Department's contention that the issue of show-cause notice was a mere procedural requirement and any infirmity therein did not affect the jurisdiction of the Commissioner under section 263. The Tribunal observed that no notice could be regarded as a valid notice unless it bore the signature of the concerned officer and also the seal of the office. On a reference:
Held, (i) that under section 263 notice has to be sent to the assessee and the notice should contain reasons as to how the order is prejudicial to the Revenue. According to section 282 of the Income-tax Act, a notice or requisition under the Act has to be, served on the person either by post or as if it were a summons issued by the Court under the Civil Procedure Code, 908. In the present case, neither of the requirements was complied with by the Commissioner. Notice by way of telegram could not be said to be a substitute for a notice by post.
(ii) That so far as the service of the notice under section 282 of the Act is concerned, it is mandatory and it has to be in the manner provided under the Act and in no other way. Notice under section 263 of the Act requires that the reason for exercising the revisional jurisdiction has to be mentioned in they notice. The telegram which was sent, to the assessee by' the Commissioner did not contain any reason except directing him to appear before that authority, and that was also misconceived.
(iii) That, therefore, the order passed by the Commissioner of Income- tax under section 263 was invalid for want' of detailed show-cause notice under his seal and signature.
CIT v. General Trade Agencies (1973) TLR 1383 (Cal.); Gooyee B:K.) v. CIT (1966) 62 ITR 109 (Cal.); Rampyari Devi Saraogi v. CIT (1968) 67 ITR 84 (SC); Rawani Dal and Flour Mills v. CST (1992) 86 ITR 409 (Orissa) and Umashankar Mishra v. CIT (1982) 136 ITR 330 (MP) ref.
Abhay Sapre for the Commissioner
B. L of the Assessee
JUDGMENT
A. K. MATHUR, C. J.---This is a reference under section 256(1) of the Income-tax Act at the instance of the Revenue and .the following two questions of. law have been referred by the Tribunal for answer of this Court:
"(i) Whether the Tribunal was justified in law in holding that the order passed by the Commissioner of Income-tax under section 243 was bad in law for want of detailed show-cause notice under his seal and signature?
(ii) Whether the Tribunal, in the facts and circumstances, should have set aside the matter to the file of the Commissioner of Income-tax with a direction to issue a fresh notice in, accordance with law under section 263'?"
The brief facts, which are necessary for the disposal of this reference are that the assessment order dated November 18, 1986, for the assessment year 1985-86 was considered erroneous and prejudicial to the interests of the Revenue. Proceedings under section 263 of the Income Tax Act, 1961 were initiated. The Commissioner of Income-tax sent a telegraphic notice on March 28, 1989, to the assessee for making appearance on March 31, 1989, to show cause as to why the assessment order should not be cancelled. The Commissioner was obviously in hot haste since the limitation was to expire on March 31. 1989. The assessee acknowledged the receipt of the telegram and requested for an adjournment by telegram, which was refused, An order under section 263 of the Act was passed on March 31, 1989.
On appeal before the Tribunal, the Tribunal allowed the appeal of the assessee and cancelled the order under section 263 of the Act with the observation that the impugned order was passed by the Commissioner without giving an opportunity of being heard. The Tribunal rejected the Department's contention that the issue of show-cause notice was a procedural requirement and the infirmity therein did not affect the jurisdiction of the Commissioner under section 263 of the Act. The tribunal rejected the department's contention. The tribunal accepted the appeal and observed that no notice can be regarded as valid unless it bears the signature of the concerned officer and bears the seal of the office. In this connection, the Tribunal relied on the decision of this Court in the case of Umashankar Mishra v. CIT (1982) 136 ITR 330 and in the case of B. K. Gooyee v. CIT (1966) 62 ITR 109 (Cal.). It was also observed that the question of rectification of the notice does not arise and. therefore, it was observed that the order of the Commissioner for want of notice is bad in lawthe order was accordingly cancelled.
The Revenue thereafter approached the Tribunal for making reference and accordingly, the aforesaid two questions of law have been referred by the Tribunal for answer of this Court.
We have heard learned counsel for the parties and perused the record
It is true that under section 263 of the Act, notice has to be sent to the assessee and the notice should contain reasons and, secondly, under section 282, notice has to be served on the person either by post or as if it were a summons issued by the Court under the Code of Civil Procedure, 1908. In the present case, no such notice was served either by post or summons was sent as required under the Code of Civil Procedure. The telegram was sent which also did not contain any reason as to how the order is prejudicial to the. Revenue. According to section 282 of the Income-tax Act, a notice or requisition under this Act has to be served on the person either by post or summons issued by the Court under the Civil Procedure Code. In the present case neither of that was complied with by the Commissioner. Notice by way of telegram, cannot be said to be a substitute for a notice by post. Section 282 contemplates two modes either by post or by way of a summons issued by the Court under the Civil Procedure Code. This view has been taken by this Court in the case of Umashankar Mishra v. CIT (1982) 136 ITR 330, and in that case, even an order of penalty was set aside as it was found that the notices were not sent as required under Order 5, Rule 1(3), of the Code of Civil Procedure. Similarly, in the case of B. K. Gooyee v. CIT (1966) 62 ITR 109, the Calcutta High Court has also taken the same view that the irregularity of serving a notice under section 34 of the Indian Income-tax Act, 1922, cannot be waived by the assessee or his counsel as the irregularity is not one of a merely procedural nature, and service of, a valid notice is necessary to invest the Income-tax Officer with jurisdiction to take proceedings under the section. Therefore, so far as the service of notice under section 282 of the Act is concerned, it is mandatory and it has to be in the manner provided under the Act and in no other way. Secondly notice under section 263 of the Act requires that the reason for exercising revisional jurisdiction has to be mentioned to the notice. The telegram, which was sent to the assessee did not contain any reasons except directing him to appear before that authority, that was also misconceived. Their Lordships of the Calcutta High Court in the case of CIT v. General Trade Agencies (1973) TLR 1383, have taken the view that a show-cause notice issued by the Commissioner did not fairly indicate the grounds used by him for ordering cancellation of the firm's registration and for cancellation of assessments made by the Income-tax Officer. It was also held that the assessee was deprived of fair opportunity to show-cause against proposed action. The Tribunal was thus justified in reversing the Commissioner's order. There Lordships have made a reference to a decision of the Supreme Court in the case of Rampyari Devi Saraogi v. CIT (1968) 67 ITR 84. A similar view has been taken by the Orissa High Court in the matter of sales tax in the case of Rawani Dal and Floor Mills v. CST (1992) 86 STC 409, and under the Orissa Sales Tax Act, the Commissioner issued notice exercising his revisional jurisdiction without giving reasons in the notice. Their Lordships held that the notice should contain the reasons so also give an opportunity to the assessee and in the absence of that the notice is had. Hence, we are of the opinion that the view taken by the Tribunal is quite right and we accordingly answer both the aforesaid questions against the Revenue and in favour of the assessee. This reference is accordingly answered.
M.B.A./ 3162 / FCReference answered.