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PETITIONER: R.K.UPADHYAYA

       Vs.

RESPONDENT: SHANABHAI P. PATEL

DATE OF JUDGMENT28/04/1987

BENCH: MISRA RANGNATH BENCH: MISRA RANGNATH OZA, G.L. (J)

CITATION:  1987 AIR 1378            1987 SCR  (3)  42  1987 SCC  (3)  96        JT 1987 (2)   287  1987 SCALE  (1)1007

ACT:     Income Tax Act, 1961/Income Tax Act, 1922--Sections 147, 148  and 149/Section 34  Notice  for  reassessment--Issuance or--’Issue of notice’ and ’service of  notice’---Distinction between--Reassessment  not to be made until there  has  been service-Requirement  of  issue of notice  satisfied  when  a notice is actually issued.

HEADNOTE:     The  respondent  challenged the notice  for  reasessment issued  under s. 147(b) of the Income Tax Act, 1961 for  the assessment  year 1965-66. The High Court quashed the  notice holding that the action of the Income Tax Officer was barred by limitation prescribed by the Act. Allowing the appeal of the Revenue,     HELD: 1. The scheme of the 1961 Act so tar as notice for reassessment  is concerned is quite different. What used  to be  contained in s. 34 of the 1922 Act has been  spread  out into three sections, being ss. 147. 148 and 149 of the  1961 Act.     2. A clear distinction has been made out between  "issue of  notice"  and  "service of notice" under  the  1961  Act. Section 149 prescribes the period of limitation. It categor- ically  prescribes  that  no notice under s.  148  shall  be issued  after the prescribed limitation has lapsed.  Section 148(1) provides for service of notice as a condition  prece- dent  to  making the order of assessment. Once a  notice  is issued  within the period of limitations,  jurisdiction  be- comes  vested in the Income Tax Officer to proceed to  reas- sess.  The mandate of s. 148(1) is that  reassessment  shall not be made until there has been service. The requirement of issue  of  notice  is satisfied when a  notice  is  actually issued.     Banarsi  Debi & Anr. v. L T.O. District IV,  Calcutta  & Ors., 53 ITR 100; Janni v. Indu Prasad Bhat, 72 ITR 595  and C.I.T. v. Robert, 48 ITR 177, distinguished. In the instant case, notice was issued within the prescribed period 43 of  limitation  as March 31, 1970 was the last day  of  that period. Service under the new Act is not a condition  prece-

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dent to conferment of jurisdiction in the Income Tax Officer to  deal with the matter but it is a condition precedent  to making of the order of assessment. The High Court lost sight of the distinction and under a wrong basis felt bound by the judgment  in Banarsi Debi & Anr. v. 1. T. 0.,  District  IV, Calcutta  & Ors., ( 53 ITR 100). As the Income  Tax  Officer had  issued notice within limitation the order of  the  High Court is vacated.

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No.  544  of 1975.     From  the  Judgment and Order dated 20.8.  1973  of  the Gujarat  High Court in Special Civil Application No. 631  of 1970. C.M. Lodha and Miss Subhashini for the Appellant. The Judgment of the Court was delivered by     RANGANATH MISRA, J. This is an appeal by the Revenue  by special  leave and is directed against the judgment  of  the Gujarat High Court dated August 20, 1973 in a writ petition. The  High Court quashed the notice for  reassessment  issued under section 147(b) of the Income-tax Act, 1961  (hereinaf- ter referred to as ’the Act’) for the assessment year  1965- 66.  Inspite of service of notice, the  assessee  respondent has not appeared.     The  High Court has quashed the notice by accepting  the assessee’s  contention  that the action  of  the  Income-tax Officer  was  barred by limitation prescribed  by  the  Act. There  is  no  dispute that the notice in  this  case  under section  147(b) of the Act was issued by registered post  on March 31, 1970, and was received by the assessee on April 3, 1970.  To the facts of the case, section 147(b) of  the  Act applies. The two relevant provisions are in sections 148 and 149 of the Act which provide:               "148(1)--Before  making the assessment,  reas-               sessment  or recomputation under section  147,               the  Income-tax  Officer shall  serve  on  the               assessee a notice containing all or any of the               requirements which may be included in a notice               under sub-section (2) of section 139; and  the               provisions  of this Act shall, so far  as  may               be, apply accordingly as if the notice were  a               notice issued under that sub-section.               44                (2).......................................               "149(1) --No notice under section 148 shall be               issued,                (a).....................................               (b)  In  cases  falling under  clause  (b)  of               section  147, at any time after the expiry  of               four  years from the end of the  relevant  as-               sessment year.               (2)  The provisions of sub-section (1)  as  to               the  issue of notice shall be subject  to  the               provisions of section 151." The High Court relied upon the decision of this Court in the case  of Banarsi Debi & Anr. v. 1. T. 0., District IV,  Cal- cutta  &  Ors., 53 ITR 100 where the validity  of  a  notice under  section  34(1) of the Incometax, Act,  1922  and  the scope of section 4 of the Income-tax (Amendment) Act of 1959 by which sub-section (4) was introduced into section 34 were considered. This Court indicated, keeping the provisions  of section  34  in view, that there was really  no  distinction

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between  "issue" and "service of notice". Section  34,  sub- section (1) as far as relevant provided thus:-               "34(1) If--                (a)........................................               (b)   ............   he may in  cases  falling               under  clause (a) at any time within  8  years               and  in cases falling under clause (b) at  any               time  within  four years at the  end  of  that               year,  serve on the assessee,  .........   and               may  proceed  to  assess  or   reassess   such               income  ............." Section 34, conferred jurisdiction on the Income-tax Officer to reopen an assessment subject to service of notice  within the  prescribed period. Therefore, service of notice  within limitation was the foundation of jurisdiction. The same view has  been taken by this Court in Janni v. Indu Prasad  Bhat, 72 ITR 595 as also in C.I.T. v. Robert, 48 ITR 177. The High Court in our opinion went wrong in relying upon the ratio of 53  ITR 100 in disposing of the case in hand. The scheme  of the 1961 Act so far as notice for reassessment is  concerned is quite different. What used to be contained in section  34 of  the  1922 Act has been spread out into  three  sections, being sections 147, 148 and 149 in the 45 1961  Act.  A clear distinction has been  made  out  between ’issue  of  notice’ and ’service of notice’ under  the  1961 Act.  Section  149 prescribe the period  of  limitation.  It categorically  prescribes that no notice under  section  149 shall be issued after the prescribed limitation has  lapsed. Section 148(1) provides for service of notice as a condition precedent  to making the order of assessment. Once a  notice is  issued  within the period of  limitations,  jurisdiction becomes  vested  in  the Income-tax Officer  to  proceed  to reassess. The mandate of section 148(1) is that reassessment shall not be made until there has been service. The require- ment of issue of notice is satisfied when a notice is  actu- ally issued. In this case, admittedly, the notice was issued within  the  prescribed period of limitation  as  March  31, 1970, was the last day of that period. Service under the new Act is not a condition precedent to conferment of  jurisdic- tion  in the Income-tax Officer to deal with the matter  but it  is a condition precedent to making of the order  of  as- sessment.  The High Court in our opinion lost sight  of  the distinction and under a wrong basis felt bound by the  judg- ment  in  53 ITR 100. As the Income-tax Officer  had  issued notice  within  limitations, the appeal is allowed  and  the order  of the High Court is vacated. The Income-tax  Officer shall now proceed to complete the assessment after complying with  the requirements of law. Since there has been  no  ap- pearance on behalf of the respondents, we make no orders for costs. A.P.J.                                                Appeal allowed. 46