JUDGMENT This is a reference under Section 66(2) of the Indian Income-tax Act and the statement of the case has been prepared at the instance of Messrs. Kishori Lal Makundi Lal, a Hindu undivided family, by the learned Commissioner of Income-tax, Central and United Provinces. Notice of the reference went to the Department and to the assessee and there is a report of our office dated July 25, 1940 that the notice has been served on the Advocate-General but the notice issued to Kishori Lal Makundi Lal assessee has "been received back undelivered with a report dead". It is not quite clear as to who died, but it is fairly clear that the Hindu undivided family could not have died. The Advocate-General took some time to consider the position and ultimately he made a statement that he did not propose to take any steps in the matter.
The case was listed before us on October 4, 1940 when counsel for the Department took us through the statement of the case prepared by the Commissioner and he submitted that the mere death of the assessee at whose instance the reference was made, even if the assessee happens to be a private individual and not an undivided Hindu family as in the present case, did not preclude this Court from answering the question or questions of law formulated by the Commissioner, and our attention was drawn to the case of Maharajadhiraja of Darbhanga v. Commissioner of Income-tax (1930) 9 Pat. 240. The case, however, was not finished on October 14, 1940 and yesterday when the case was listed before us Mr. Malik made a request that we should allow the case to stand over for one day so that he might present the assessees view point before us and that he had been instructed by the receiver of the Hindu undivided family. We acceded to that request and to-day we have heard Mr. Malik at length.
The facts are that the Income-tax Officer of Allahabad made an assessment to the best of his judgment on December 7, 1937 on a total income of Rs. 75,000 inasmuch as the assessee had made defaults in respect of notices under Sections 22(4) and 23(2) of the Act. The assessee carries on business in commission, grain, money-lending and has a sugar mill and some house property in the district of Allahabad. After completing the assessment the Income-tax Officer under Section 29 of the Act sent a notice of demand by registered post on December 9, 1937. Ordinarily this was perfectly regular inasmuch as a notice under the Income-tax Act has to be served either by post or as if it were a summons issued by a Court under the Civil Procedure Code. In the present case the notice was sent by post and Section 27 of the General Clauses Act provides that the words "by post" mean "by registered post". All the other formalities were complied with, and under the General Clauses Act the service shall be deemed to be effected by properly addressing, prepaying and posting by registered post the notice.
The registered letter was delivered to Mr. A. T. Ray on December 14, 1937. This delivery was made in pursuance of a letter of authority dated September 9, 1937 which had been sent by the assessee to the Sub-postmaster of Jhusi wherein it was said that in cancellation of previous instructions authority was given to Mr. A. T. Ray, the acting manager, to sign and take delivery of money orders, registered and insured article addressed to Messrs. Kishori Lal Makundi Lal and Shree krishna Deshi Supar Works, Jhusi, on and from date till further instructions.
Nothing seems to have happened till February 22, 1938 when the assessee filed an application under Section 27 of the Act before the Income-tax Officer of Allahabad for the cancellation of the assessment made under Section 23(4) of the Act. Section 27 provides that the application should be made within one month from the service of the notice of demand. The Income-tax Officer saw on the face of the proceedings that the application under Section 27 was barred by time having been made more than one month after December 14, 1937 and he therefore asked the assessee to show cause why the application should not be rejected on that ground. The assessee then appeared and alleged that the notice was received by him only on February 17, 1938 and therefore the application dated February 22, 1938, under Section 27 was within time. The contention was that Mr. A. T. Ray had been discharged from service in October 1937 and the service on him of the notice of demand was improper and as Mr. Ray handed over the notice of demand to the proper legal representative of the assessee on February 17, 1938, the latter date should be taken to be the actual date of service of the notice.
The Income-tax Officer then examined certain witnesses and after considering the entire circumstances of the case came to the conclusion that the notice was validly served on December 14, 1937 and the application under Section 27 was liable to be rejected as time-barred and he did so reject the application.
The assessee appealed to the Assistant Commissioner who agreed with the Income-tax Officer and when an application under Section 33 and in the alternative under Section 66 of the Act was preferred before the Commissioner of Income-tax the latter declined to give any relief under Section 33 but has made a reference under Section 66(2) of the Act and has formulated one question for our answer. The question is :-
"Whether the service of the notice of demand was, in the circumstances of the case, legally effected on the petitioner on December 14, 1937 ?"
The opinion of the Commissioner is that the notice was legally effected, but the contention of learned counsel for the assessee is that the notice was not so legally effected inasmuch as it is clear that Mr. Rays services were dispensed with from October 11, 1937. It is not the case for the Department that Mr. Ray continued in service of the assessee after October 1937, but it is equally clear that Mr. Ray continued to receive notices on behalf of the assessee till February 1938 and the assessee never took the trouble to cancel the authorisation given to the sub-postmaster, Jhusi, on September 9, 1937 to which a reference has already been made by us in earlier portion of our judgment. The Income-tax Officef took the trouble to examine Mr. Ray, Mr. Hari Das Mukerji another employee of the assessee who, it is said, succeeded Mr. Ray after October 11, 1937, Jag Narain, postman of Jhusi and Lalji Prasad, Sub-postmaster, Jhusi. The two employees of the post office clearly say that on the authority given by the assessee money orders and registered articles were delivered to Mr. A. T. Ray on behalf of the assessee up till February 1938 without any demur either by Ray or by the assessee and it was only in February 1938 that Mr. Ray for the first time said that letters should no longer be delivered to him, and we have a lurking suspicion that this was done only when the assessee thought of presenting an application under Section 27 of the Act to the Income-tax Officer. It is true that the business of Messrs. Kishori Lal Makundi Lal the assessee, was transferred to Sherwani Brothers & Co., Ltd., and Mr. Ray became the employee of Messrs. Sherwani Brothers & Co., Ltd., after October 11, 1937, but for purposes of receiving postal communications Mr. A. T. Ray continued to be the representative of the assessee.
We cannot agree with the contention of Mr. B. Malik that the authority given to Mr. Ray lost its force when Mr. Ray ceased to be "the acting manager" of the assessee.
The conduct of Mr. Ray and of the assessee makes it clear that Mr. Ray was nominated as the representative of the assessee by name and not by office.
In this view of the matter we agree with the opinion of the Commissioner and answer the question referred to us in the affirmative. The assessee or the assessees estate will pay the costs of this reference. Learned counsel for the Department is entitled to a fee of Rs. 150. Let a copy of our judgment under the seal of the Court and the signature of the Registrar be sent to the Commissioner of Income-tax, Central and United Provinces.
Reference answered in the affirmative.