1. A partnership firm carrying on business under the name and style of M/s. Johri Lal Shyam Lal had its head office at Agra and a branch at Gwalior. It maintained two sets of accounts, one in respect of the business at Agra and the other relating to the business at Gwalior. During the previous year, relevant to the assessment year 1950-51, with which we are concerned, the partnership firm comprised of two partners, one of them being the assessee Hindu undivided family through its Karta. The assessment of the partnership firm was pending when the assessment of the assessee was completed. Subsequently in the course of the assessment proceedings on the partnership firm the Income-tax Officer discovered that the assessee had remitted from Gwalior to Agra several sums during the period April 29, 1949, to October 19, 1949, totalling Rs. 62,500. Accordingly, he issued a notice under Section 34 of the Indian Income-lax Act, 1922, and included that amount in the assessment of the assessee on the ground that it was part of the profit which had accrued to the assessee outside the taxable territories and had been brought into the taxable territories during the relevant previous year. The assessee appealed to the Appellate Assistant Commissioner and, upon the appeal being dismissed, carried the case in second appeal to the Income-tax Appellate Tribunal. It was contended before the Appellate Tribunal that the assessment was without jurisdiction because the Income-tax Officer, at the time when he made the original assessment against the assessee was already in possession of information upon which he could have subjected the sum of Rs. 62,500 to lax and that no fresh information had come into his possession entitling him to proceed to reopen the assessment under Section 34. The second contention was that the notice was served beyond the period of four years envisaged by Section 34 (1) (b) and was, therefore, barred by limitation. The Income tax Officer had directed service of notice by affixture and also by registered post. The notice was affixed upon the residential house of the assessee on March 25, 1955, and that issued by registered post was served on April 1, 1955 The argument was that the notice by affixture was not valid and as the provisions of Section 34 (1) (b) had been invoked the proceedings were barred by limitation. The last contention of the assessee was that the amount could not be taxed under Section 4 (1) (b) (iii) of the Act in the hands of the assessee. The contentions failed to find favour with the Appellate Tribunal which, therefore, dismissed the appeal. At the instance of the assessee the Appellate Tribunal has referred the following questions for the opinion of this Court:
1. Whether the reopening of the case by the Income-tax Officer by the issue of a notice under Section 34 of the Indian Income-tax Act fell within the ambit of Section 34 (1) (a) of the Act or under Section 34 (1) (b) of the Act?
2. Whether the service of the notice under Section 34 of the Indian Income-tax Act by affixture on the residential house of the assessee was legal and proper?
3 Whether the amount of Rs. 62,500 was liable to tax under Section 4 (1) (b) (iii) of the Indian Income-tax Act?
2. We shall consider the questions seriatim.
3. Upon the language of the first question we confess that we find it difficult to appreciate clearly what was the point which the Appellate Tribunal intended to raise. It was said at one stage before us that the question was whether, in point of fact, the Income-tax Officer initiated the proceedings under Section 34 (1) (a) or under Section 34 (1) (h). That is a matter turning upon facts, and as the question could only have been referred as a question of law, we take it that that was not the point raised by the Appellate Tribunal when it framed the question. Treated as a question of law, the issue which can be said to arise is whether the proceedings taken by the Income-tax Officer can be justified by reference to the provisions of Section 34 (1) (a) or Section 34 (1) (b). That, we think, was what must have been intended by the Tribunal, and we proceed to decide the question on that assumption.
4. The Appellate Tribunal found that the Income-tax Officer had proceeded on the basis that the case fell within the terms of Section 34 (1) (b). Indeed, that is what the Income-tax Officer expressly said in his assessment order, although he seems to have had in mind also that the remittances amounting to Rs. 62,500 has escaped assessment because of the assessee's failure to disclose them at the time of its original assessment. At the time when the Income-tax Officer initiated the proceeding by the issue of the notice under Section 34 (1), he did not state: in that notice whether he was proceeding with reference to Clause (a) or Clause (b). He was not required by the statute to record such decision in the notice. The question whether the case falls under Clause (a) or under Clause (b) arises when the period of limitation is considered. If the case falls under Clause (b) and the period of limitation of four years has expired the Income-tax Officer will refrain from serving the notice. If, however, the case falls under Clause (a), and the period of four years has expired, he may vet serve the notice. The Appellate Tribunal held that the notice by affixation had been served within four years, and therefore must be considered to have held that the assessment was not barred by limitation But it also held that the provision truly applicable upon the facts of the case was Clause (a) and not Clause (b) It found that the assessee had not disclosed this income in its return nor had it stated the particulars of its income fully and truly when the original assessment for the relevant assessment year was made. This is a finding of fact. The question whether the assessee has or has not failed to disclose fully and truly all material facts necessary for its assessment was regarded as a question of fact by the Supreme Court in Commissioner of Income-tax, Bombay North v. Lakhi Ram Das, 1962-44 ITR 726: (AIR 1967 SC 338). The Income-tax Officer came to know of the remittances when examining the accounts of the firm, in which an account of the assessee was maintained, during the assessment of the firm. Learned counsel for the assessee says that copies of the accounts had been produced by the assessee during its original assessment and therefore the case did not fall under Clause (a). There is nothing to bear out this, and, indeed, the finding of the Appellate Tribunal, to which we have referred above, is clearly to the contrary. The assessee was bound to disclose that this remittance had been made from Gwalior to Agra, and when it did not do so either in the return or in the assessment proceedings taken upon the return, it must be held that the provisions of Clause (a) were attracted. There was undoubtedly concealment of material facts. The amount did escape assessment, and it escaped assessment because certain facts material to the assessment were not brought to the notice of the Income-tax Officer. The escape did not take place because the Income tax Officer, having all the material facts before him, took a wrong view of them in the first instance. The proceedings taken by the Income-tax Officer, therefore, properly fell within the ambit of Section 34 (1) (a) and not under Section 34 (1) (b). We answer the first question accordingly. The assessee contends that the Appellate Tribunal had no jurisdiction to enter into the question whether the case fell within the scope of Section 34 (1) (a) or Section 34 (1) (b) and urges that as the Income-tax Officer had initiated proceedings under Section 34 (1) (b) it was not for the Appellate Tribunal to sustain the validity of those proceedings by reference to the provisions of Section 34 (1) (a). It is pointed out. moreover, that the question whether a proceeding should be initiated under Section 34 (1) (a) or 34 (1) (b) was a matter to be decided by the Income-tax Officer, because it was for him to have reason to believe that either on account of the default of the assessee a part of the income had escaped assessment or although there was no such default he has come to that belief because of information which has come into his possession. It is said that the Appellate Tribunal could not usurp the function of the Income-tax Officer and consider itself whether there was reason to believe that income had escaped assessment because of the default of the assessee All these are questions which have not been referred to us expressly or impliedly and, therefore, we decline to express any opinion upon them.
(4-A) We shall now turn to the second question, namely whether the service of the notice under Section 34 by affixture on the residential house of the assessee is valid. According to the facts set out in the statement of the case, the Income-tax Officer issued a notice under Section 34 to the assessee on March 19, 1955. The process server took the notice to the business premises of the partnership firm on March 23, 1955, but as Johri Lal, Karta of the assessee, was not available he proceeded to the residential house of the assessee There he found only the ladies and children of the family and not Johri Lal. He was informed, it appears, that Johri Lal had gone out and was expected to return on April 2, 1955. The process server submitted a report to that effect to the Income-tax Officer. The Income-tax Officer, in the opinion that the provisions of Section 34 (1) (b) applied and that the assessment would become barred by limitation after March 31, 1955, directed that the notice be served by affixture. Notice was served by affixture on March 25, 1955, on which date the process-server submitted a report to the Income-tax Officer slating that he had taken the notice for service on March 23, 24 and 25, 1955, but that he did not succeed in meeting Johri Lal and that in accordance with the order of the Income-tax Officer he had affixed the notice upon the house of the assessee on March 25, 1955. The Income-tax Officer, on the next day, recorded the statement of the process-server, and declared that the notice had been validly served. The Income-tax Officer had also, by way of abundant caution, sent a notice under Section 34 by registered post, which was served on the assessee on April 1, 1955. The Appellate Tribunal held that the Income-tax Officer had reason to believe that the notice could not be served with due diligence in the ordinary manner and, therefore, applying the provisions of Order 5, Rule 20 of the Code of Civil Procedure, ordered service of the notice by affixture. It found that there was no evidence that a copy of the notice had been pasted on the notice board of the Income-tax Office, but that omission it considered immaterial. It also observed that apart from the specific provision in Order 5, Rule 20 relating to substituted service it was open to the Income-tax Officer to adopt any other mode of substituted service under the alternative provision which enables substituted service "in such manner as the Court thinks fit," and held that the affixing of the notice on the residential house of the assessee fell within the scope of that alternative provision.
5. Order 5, Rule 20 provides for substituted service. It enables the Court, where it is satisfied that there is reason to believe that the defendant is keeping out of the way for the purpose of avoiding service, or that for any other reason the summons cannot be served in the ordinary way to order the summons to be served by affixing a copy thereof in some conspicuous place in the court-house, and also upon some conspicuous part of the house, if any, in which the defendant is known to have last resided or carried on business or personally worked for gain, or in such other manner as the Court thinks fit. Service by this mode is as effectual as if it had been made on the defendant personally. Now, it seems to us, that if substituted service is resorted to all the conditions mentioned in the procedure set out in Order 5, Rule 20 must be fulfilled. The Code has specifically spoken of it as "substituted service". It is not service in the ordinary sense of the word. It is service in an artificial sense proceeding upon a fiction imported by necessity. A special mode of procedure has been proscribed, and it is incumbent for the purpose of effecting such service that the entire procedure specifically mentioned in the rule should receive full compliance When an Income tax Officer resorts to Order 6, Rule 20, not only is it necessary that a copy of the notice should be affixed upon some conspicuous part of the house in which the assessee is known to have last resided or carried on business or personally worked for gain, but it is also necessary that he should cause to be affixed a copy of the notice on a conspicuous place in the Income-tax Office. Unless this is done, it cannot be said that substituted service has been effected. We are supported in this view by the decision of the Punjab High Court in Jhabar Mal Chokhani v. Commr. of Income-tax, 1963-49 ITR 391: (AIR 1963 Punj 486).
6. It is contended for the Department that the Income-tax Officer has no court-house and, therefore, the requirement of Rule 20 that a copy should be affixed in the court-house was not required to be complied with by the Income-lax Officer. Moreover, it was pointed out, the assessment proceedings being confidential, no notice could have been affixed on the notice board. We see no force in either contention. Section 63 of the Income-tax Act permits the service of a notice under the Act by the mode set out in Order 5, Rule 20 and in order to apply the provision it must be read as if reference to the court-house was reference to the office of the Income-tax Officer. As regards the argument that the proceedings are confidential, reliance was placed upon Section 54, but that provision does not prohibit the Income tax Officer from affixing a notice on the notice board of his office calling upon an assessee to file his return. Such notice is not included within the scope of Section 54.
7. It is then urged that the affixture of the notice on the residential house of the assessee can be treated as service under the alternative provision of Order 5, Rule 20 which speaks of "Service in such other manner as the Court thinks fit." We are referred to Haji Adreman v. Haji Suleman, AIR 1955 Sau 28. There, the Saurashlra High Court was concerned with a case where copies of the summons had not been affixed either in the court-house or upon the residence of the party sought to be served, but service had been effected by publication of the summons in the official Gazette. The Court held that that was service which conformed to the provisions of the Code of Civil Procedure. The service so effected was so essentially different from service by affixture of a copy in the court-house and another copy at the residence that it could be held to be the alternative service contemplated by Rule 20. In the instant case the service by affixture at one place only was not so essentially different that it could be said to be such alternative service. The service to be alternative must be service other than that by mere affixture at the courthouse and at the residence. Mere affixture at one place or both is not the alternative service contemplated by Rule 20. The mode of service must be different. The relevant provision uses the word "manner". Doing less than what is laid down in the earlier provision cannot be said to be service in another manner because that would render the earlier provision meaningless. Doing less than what is prescribed cannot be said to be an alternative to doing the prescribed thing. Hence, affixture of the copy of the notice at the residential house cannot be justified as service "in such other manner" within the meaning of Rule 20.
8. Accordingly, service by affixture of the notice under Section 34 on the residential house of the assessee was not in accordance with law, and we answer the second question in the negative.
9. What the Income-tax Officer could be said to have done was to direct service by affixture and registered post. This combined mode would be a manner different from the mode mentioned in the earlier provision of Order 5, Rule 20 and could be said to fall within the scope of the alternative provision contained in that Rule. It is a mode essentially different from the combined mode mentioned in the earlier provision. But the decision of this question requires a finding of fact, and that finding has not been given by the Appellate Tribunal. Nor has that question been referred by it.
10. We shall now consider the third question referred by the Appellate Tribunal. The Appellate Tribunal has found that the remittance were made from the personal account of the assessee in the books of the Gwalior branch to its account at Agra. It has found that the amounts standing to the credit of the assessee, which could be attributed to the profits earned by it during earlier years, aggregated to more than Rs. 95,000 and that, in the circumstances, it could be presumed that the remittance totalling Rs. 62,500 proceeded from that amount. It was argued before the Appellate Tribunal that the amount of Rs. 62,500 could not be taxed because the partnership firm had already been taxed on its profits, which included this amount, and that the amount could not be taxed twice over. The Appellate Tribunal held that the Income-tax Officer making those assessments merely allocated to the assessee its share of profits relating to the earlier years, and as the profits were credited in the books at Gwalior they were not taxed. They became taxable when they were brought from Gwalior to Agra, and became income falling within the ambit of Section 4 (1) (b) (iii). As regards the contention that the profits could be assessed only in the hands of the partnership firm to whom they had originally accrued, the Appellate Tribunal pointed out that although the profits had been earned by the firm, upon allocation of the share crediting it in the assessee's personal account it became the income of the assessee. The Appellate Tribunal has found that the remittances made from Gwalior to Agra were a part of the income of the assessee. That is a finding which cannot be disputed before us. When the remittances were made, the provisions of Section 4(1) (b) (iii) were clearly attracted Accordingly, we answer the third question in the affirmative.
11. We, therefore, return the following answers:
Question 1--Section 34 (1) (a). Question 2--Negative. Question 3--Affirmative.
12. A copy of this judgment under the seal of the Court and the signature of the Registrar shall be sent to the Income-tax Appellate Tribunal.
13. In the circumstances of the case, there is no order as to costs.