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Principal Commissioner of Income Tax (Central)-1 v. NRA Iron and Steel Pvt. Ltd.

Civil Appeal · 2019 INSC 1198Decided 25 Oct 2019
Civil Appeal No. 2463 of 2019
Justice Uday Umesh Lalit · Justice Indu Malhotra

Background

The Supreme Court had earlier, on 05.03.2019, decided an appeal in favour of the Income Tax Department against NRA Iron & Steel Pvt. Ltd. (a well-known ruling on bogus share capital under Section 68 of the Income Tax Act) after the company failed to appear and the matter proceeded ex-parte. NRA Iron & Steel later filed this application seeking recall of that judgment, claiming it was never properly served with notice of the case because the notice was served on its Chartered Accountant, Mr. Sanjeev Narayan, whom it argued was not its authorized "principal officer," and because Narayan had been undergoing eye surgery around the relevant time.

Decision Breakdown

The Supreme Court examined the service record and found that notice had been validly served on Mr. Narayan, who held a power of attorney from the company and therefore qualified as its "agent"/"principal officer" under Section 2(35) of the Income Tax Act. The Court rejected the explanation that Narayan mistook the Court's notice for routine tax documents, and noted he had continued representing the company before tax authorities on several dates between the service of notice and his surgery, giving him ample opportunity to inform the company. Finding no credible or cogent ground to disturb the earlier judgment, the Court dismissed the recall application, holding that the company had been duly served and given multiple opportunities to appear but chose not to.

Lesson Learnt

Service of legal notice on an authorized agent or power-of-attorney holder (such as a company's chartered accountant) is treated as valid service on the company itself, and a party cannot later escape the consequences of an ex-parte judgment by claiming ignorance when its representative had clear opportunity to act on the notice received.

Official source (sci.gov.in)View Judgment (PDF)

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