Section 523: notice deemed to be valid in certain circumstances

Introduction

An assessee who appears in assessment or reassessment proceedings or cooperates in an inquiry may be treated as having received a required notice properly and on time.

The protection for the notice does not apply if the assessee objected to service before completion of the assessment or reassessment. This timing makes the date and record of an objection important.

Key takeaways

When a notice is deemed validly served

Where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under the Act which is required to be served upon him has been duly served upon him in time as per the provisions of this Act. As a result, the assessee is precluded from taking any objection in any proceeding or inquiry under the Act that the notice was:

• Not served upon him
• Not served upon him in time
• Served upon him in an improper manner

The exception

The deeming rule in sub-section (1) does not apply where the assessee has raised such an objection before the completion of the assessment or reassessment. So it only protects the department where the assessee stayed silent about the service defect until after the assessment/reassessment was completed - if the objection was raised earlier, it survives.

Applying Section 523 in practice

Deeming and safeguard. An assessee who appears in an assessment or reassessment proceeding, or cooperates in its inquiry, is generally prevented from later objecting that a required notice was unserved, late or improperly served. But subsection (2) preserves an objection raised before completion of the assessment or reassessment. Checklist: identify the notice, service record, participation and date of any objection; separate an objection to service from a challenge to the notice's substantive jurisdiction. Hypothetical: A taxpayer who participates and first objects to method of service after assessment faces section 523; an objection recorded before completion invokes its express exception.

Step-by-step flow for applying Section 523

1. 1

   Was a notice under the Act required to be served on the assessee?

   Section 523 deals with objections that the notice was not served, not served in time, or served in an improper manner (clauses (a) to (c) of Section 523(1)).

2. 2

   Did the assessee appear in any proceeding or co-operate in any inquiry relating to the assessment or reassessment?

   • No: The deeming in Section 523(1) does not arise; service is tested under the ordinary provisions of the Act.
   • Yes: Go to the next step.
3. 3

   Apply the deeming

   The notice is deemed to have been duly served on the assessee in time as per the Act.

4. 4

   Did the assessee raise the objection before the assessment or reassessment was completed?

   Section 523(2) switches off Section 523(1) where the objection was raised before completion.

   • Yes: Section 523(1) does not apply; the objection on service can be pursued.
   • No: The assessee is precluded from objecting in any proceeding or inquiry under the Act that the notice was not served, not served in time, or served improperly.

Practical checklist

Glossary

Deemed service

Under Section 523(1), a notice is treated as duly served in time where the assessee has appeared in the proceeding or co-operated in the inquiry.

Objection to service

An objection that a notice was not served, not served in time, or served in an improper manner.

Frequently asked questions