Judgment:
Bharati Sapru, J.
1. Heard learned Senior Counsel Shri Bharat Ji Agarwal assisted by Shri Piyush Agarwal and Shri Nimai Das, learned Standing Counsel for the State.
2. This revision has been filed against an order of the Trade Tax Tribunal dated March 14, 2001 for the assessment year 1982-83. There are two other trade tax revisions which have been filed against the same order for the assessment years 1980-81 and 1982-83 being T.T.R. Nos. 366 of 2001 and 367 of 2001 and they are also been decided by this judgment.
3. The questions of law referred to are as hereunder:
1. Whether, on the facts and circumstances of the case, the Trade Tax Tribunal after recording a finding in favour of the applicant that the notice by affixation on March 27, 1985 was not legal and valid, was not justified in treating the service of notice on Madan Lai, who was admittedly the brother of the wife of the sole proprietor of the applicant as legal and valid?
2. Whether, on the facts and circumstances of the case, the Tribunal was not justified in holding that in the absence of the proprietor of the applicant, the service of notice on Madan Lai shall be treated as valid?
3. Whether the observation of the Tribunal that the conduct of Madan Lai was that of an agent is based on surmises and conjectures since there is no material whatsoever on record to indicate that either Madan Lai was managing the business affairs or acting as an agent?
4. Whether on the basis of the information regarding the seizure of the documents by the income-tax authorities, which were neither produced before the assessing authority nor were transmitted to the assessing authority prior to the issuance of the notice under Section 21, there was no reason to warrant initiation of the proceedings under Section 21 of the Act?
5. Whether in view of the decision of the Division Bench of this honourable court in the case of Mohd. Yakoob v. Sales Tax Officer [1972] UPTC 502 and the judgments reported in [1990] ATJ 500 and [1986] ATJ 577 at page 579, no proceedings under Section 21 of the U.P. Trade Tax Act, 1948 could have been legally initiated?
6. Whether in any view of the matter, the Tribunal was not justified in remanding the case instead of quashing the proceedings?
4. The learned Counsel is present only in the case of question Nos. 1, 2 and 3.
5. The facts of the case are that the original assessment orders for the assessment year 1982-83 was passed on October 26, 1983 and there were no adverse findings against the assessee. Subsequently, a survey was made on July 20, 1984 in which it was alleged that some income of the assessee had escaped assessment and thereafter, a notice was issued to the assessee under Section 21 of the the U.P. Sales Tax Act, 1948 by the assessing authority.
6. Other facts as stated in the writ petition are that the assessee was undergoing depression and, therefore, his brother-in-law Madan Lai had come to Kanpur from Amritsar to look after Moti Lai, the assessee.
7. The contention of the assessee is that the jurisdictional notice under Section 21 was never served upon the applicant and provisions of Rule 11 were not complied with faithfully and, therefore, no proceedings under Section 21 could be continued for that matter, even if it be initiated under the so-called notice under Section 21.
8. The order under Section 21 was passed on September 25, 1985 against which the assessee filed an appeal under Section 9 of the U.P. Sales Tax Act before the Assistant Commissioner. The Assistant Commissioner allowed the appeal and has remanded the case to the assessing authority by his order dated February 7, 1987. The assessee, thereafter, filed a second appeal under Section 10 of the U.P. Sales Tax Act before the Tribunal. The Tribunal by its order dated March 14, 2001 has dismissed the appeal of the assessee and has confirmed the order of the Assistant Commissioner.
9. The learned Counsel for the assessee has confined his argument on the issue of the notice, which was issued under Section 21 of the Act. He has argued that the notice issued under Section 21 of the Act read with rule 11 of the U.P. Trade Tax Rules, 1948 was not a valid notice and therefore, the entire proceedings initiated under Section 21 of the Act are liable to be dropped.
10. The learned Counsel for the assessee has argued that in fact, the Tribunal itself has recorded that the notice was not validly served upon the assessee. Firstly, the notice, which was sent through process server, was not received by the assessee. On the second occasion, the notice was pasted on the premises of the assessee and thirdly, the notice which was sent by registered post was received by the brother-in-law of the assessee, who was neither his manager nor his munim nor the person authorized by him to receive such a notice.
11. In view of this findings of facts, learned Counsel for the assessee has argued that the notice is bad and proceedings initiated on the basis of such a notice are liable to be dropped. In support of his contentions, learned Counsel for the assessee has relied upon a decision of this Court as reported in Commissioner of Trade Tax, U.P., Lucknow v. Chaudhary Ramchandra & Sons, Kanpur [2006] 44 STR 1020, wherein this Court has held that in order to treat the service of notice as proper, it is essential that the notice should be served either on the assessee or on the authorized agent and the authorization should be reduced to writing. In the absence of such an authorization in writing, he has argued, it would not amount to proper service as envisaged under Rule 77(4) which is quoted hereinbelow:
(4) When service is made by post, an acknowledgment purporting to have been signed by the addressee or his manager, munim, accountant or agent or an employee or member of his family or an endorsement by a postal employee that the addressee or his manager, munim, accountant or agent or employee or member of his family refused to take delivery may be deemed by the concerned authority to be proof of service.
12. The next decision relied upon by him is as reported in : [1980] 46 STC 71 (All) : [1980] UPTC 125 in the case of Laxmi Narain Anand Prakash v. Commissioner of Sales Tax wherein a Full Bench of this Court decided that service of notice on a stranger is improper service and in a case where such a notice is given and the assessee later on participated in the matter, even then, it would not amount to a proper service of notice and proceedings initiated on the basis of such a notice would be without jurisdiction.
13. The Full Bench held that the service of notice is a condition precedent to assume jurisdiction. This is the requirement of Section 21 of the Act. The Full Bench held that this requirement of law cannot be circumvented by saying that the assessee participated in the proceedings thereafter. Thus, the service of notice for the purpose of initiating proceedings under Section 21 is not merely a procedural requirement but is a condition precedent and if this condition precedent is not complied with, then consequential order under Section 21 would be rendered illegal and void irrespective of the fact that the dealer gains knowledge of the proceedings under Section 21.
14. The third citation relied upon by learned Counsel is as reported in [2006] UPTC 125 in the case of National Chemical Products, Firozabad v. State of U.P., wherein also this Court has decided that a notice under Section 21 is a jurisdictional notice and service by affixation without resort to other modes is illegal and invalid. The learned Counsel has relied on this decision to advance the argument that while making an order for affixation of a notice, the assessing authority must pass an order or report a reason why it is resorting to this mode. In the present case, he has argued that the fixation was made without passing any order or giving any reason as to why this mode was resorted to.
15. The learned Standing Counsel Shri Nimai Das has argued that in fact the court has recorded a finding that the notice, which was sent by registered post was accepted by the brother-in-law of the assessee and while the provisions of Rule 77A are a complete mode of service, Rule 77B stands on its own and the fact that the registered notice was accepted by the brother-in-law of the assessee, it was sufficient compliance of Rule 77B and it cannot be said that the notice was bad.
16. In reply to these arguments, learned Counsel for the assessee has once again reverted to the provisions of Rule 77(4) which I have already quoted above. He has argued that even if Rule 77B stands on its own, then too, due compliance may be made to Rule 77(4), which requires that even registered notice should be received either by the assessee or by a person authorized on his behalf and he has drawn the attention of this Court to the decision of this Court in the case of Commissioner of Trade Tax v. Chaudhary Ram-chandra & Sons [2006] 44 STR 1020 wherein it was held by the court that authorization should be an authorization in writing. It cannot be made to a stranger and he has also reverted back to the finding of the Tribunal, which has recorded that there is no material on record to show that the brother-in-law of the assessee, to receive registered notice was either his agent, manager or munim or that he had been authorized by the assessee in writing to accept any notice or to act on his behalf.
17. I have heard learned Counsel on both sides at length and I have also perused the order of the Tribunal and other materials on record.
18. It is a settled law that the notice under Section 21 is a jurisdictional notice and in order to initiate proceedings under Section 21 of the Act, proper service of notice as contemplated under Rule 77 of the Rules must be complied with.
19. In the present case, the Tribunal has on its own recorded firstly that the notice sent through process server was not served upon the assessee. Secondly, the mode of notice used by the assessing authority was by pasting on the premises of the assessee. However, the order of the Tribunal does not reflect in any manner that the assessing authority has given any reason for resorting to this mode and, therefore, the Tribunal, on its own, has recorded that the mode of fixation used by the assessing authority was illegal. Thirdly, the notice, which has been held to be valid by registered post by the Tribunal, is also in the teeth of the finding recorded by the Tribunal itself that it has not come on record anywhere that Madan Lal, who was the brother-in-law of the assessee was either the agent or the munim, manager or the person authorized by the assessee in writing to act on his behalf and to accept the notice.
20. All the factors above, lead this Court to come to the conclusion that the notice, which was served upon the assessee by registered post was also not the valid notice as it had failed to comply with the provisions of Rule 77(4) of the Rules.
21. In view of the above, this Court comes to the conclusion that the notice issued under Section 21 was not properly served on the assessee and, therefore, the proceedings initiated on the basis of such a notice were bad and are liable to be set aside by this Court.
22. Thus, the proceedings initiated by the notice are hereby set aside by this Court. The order passed by the Tribunal dated March 14, 2001 is set aside.
The order under Section 21 is also set aside.
23. The revision is allowed.