Delhi H.C : The correct address of the assessee might not have been written on the envelope and, therefore, the question of service of notice on the assessee did not arise

High Court Of Delhi

CIT vs. Lunar Diamonds Ltd.

Section 143(2), 260A

Asst. Year 1995-96

Swatanter Kumar & Madan B. Lokur, JJ.

IT Appeal No. 62 of 2005

3rd March, 2005

Counsel Appeared :

Sanjeev Khanna, for the Appellant : None, for the Respondent

JUDGMENT

Madan B. Lokur, J. :

The appellant is aggrieved by an order dt. 22nd July, 2004, passed by the Income-tax Appellate Tribunal, Delhi Bench (for short, the Tribunal), in ITA No. 228/Del/1999. The respondent-assessee filed its return of income for the asst. yr. 1995-96, on 29th Nov., 1995. A notice under s. 143(2) of the IT Act, 1961 (the Act), was issued to the assessee on 29th Nov., 1996, apparently by registered post. The notice was received, if at all, after that date and in any case after 30th Nov., 1996. According to the assessee, in terms of s. 143(2) of the Act, the notice ought to have been served on it within a period of one year and in any case before 30th Nov., 1996. Since that was not done, the proceedings initiated against the assessee were not in accordance with law. Before the AO, this issue was not directly raised but before the Commissioner of Income-tax (Appeals) [CIT(A)], it was contended by the assessee that it had not received any notice under s. 143(2) of the Act by registered post. An affidavit to this effect was filed by one J.S. Walia, DGM (Accounts) and in-charge of taxation matters of the assessee. It was also submitted that the alleged notice was not sent acknowledgement due. It was contended that the receipt issued by the post office did not bear the address of the assessee but only its name. It was, therefore, submitted that there was a possibility that the correct address of the assessee might not have been written on the envelope and, therefore, the question of service of notice on the assessee did not arise. The contention of the assessee was accepted by the CIT(A) and it was held that there was no valid service of notice on the assessee and, therefore, the assessment framed was invalid.

The appellant took-up the matter in appeal before the Tribunal which rejected the contentions urged by the appellant. It was held that in the face of the affidavit filed on behalf of the assessee, the initial burden on the assessee to prove non-receipt of notice had been discharged and that the onus now lay upon the appellant to prove that the notice under s. 143(2) of the Act had, in fact, been served upon the assessee by registered post. The Tribunal found that the appellant had not been able to prove its case at all and, therefore, there was no merit in the appeal. The relevant provision with which we are concerned is the proviso to s. 143(2)(ii) of the Act and this reads as follows : “143(1) xxxxxx (2) Where a return has been furnished under s. 139, or in response to a notice under sub-s. (1) of s. 142, the AO shall,— (i) xxxxxx (ii) notwithstanding anything contained in cl. (i), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return : Provided that no notice under cl. (ii) shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished.” Learned counsel for the appellant contended that the words “served” and “issued” are synonymous and interchangeable. He submitted that the proviso to s. 143(2) used the word “served”, but what is meant was “issued”. It was submitted that under these circumstances, since the notice had been issued before the expiry of a period of one year, no error had been committed by the AO in framing the assessment order. Reliance in this regard was placed by learned counsel for the appellant on Banarsi Debi & Anr. vs. ITO & Ors. AIR 1964 SC 1742. A study of Banarsi Debi (supra) shows that the facts of that case are completely inapposite. In that case, under s. 34(1)(b) of the Indian IT Act, 1922, a notice was required to be served on an assessee within eight years if the ITO had reason to believe that income had escaped assessment. Factually, although a notice had been issued to the assessee therein within a period of eight years, it was served upon him after the eight year period was over. A learned single Judge of the Calcutta High Court agreed with the submissions made on behalf of the assessee and quashed the notice.

During the pendency of an appeal before the Division Bench, s. 34 of the Indian IT Act was amended by Amending Act No. 1 of 1959. Sec. 4 of the Amending Act debarred the Court from questioning the validity of a notice issued under s. 34 of the Act on the ground that the time for issue of such notice had expired. The Division Bench, relying upon the amendment to s. 34 of the Act, decided against the assessee which led him to approach the Supreme Court. In the Supreme Court it was contended that s. 4 of the Amending Act only saved a notice issued after the prescribed time but it did not apply to a situation where notice is issued within time but served out of time. On behalf of the Revenue, it was contended in this context that the expression “issued” means “served”. The Supreme Court went into the legislative history of s. 34 of the Indian IT Act and held that the contention of the assessee could not be accepted because it would defeat the very purpose for which the amendment was carried out. While specifically dealing with the use of the word “issued” in s. 4 of the Amending Act, the Supreme Court noted that there is no prescription in s. 34 of the Indian IT Act of a time-limit for sending a notice. Therefore, it was obvious that the expression “issued” used in s. 4 of the Amending Act could not be used in the narrow sense of “sent”. Concluding the discussion on the subject, the Supreme Court noted that the intention of the legislature was to save the validity of a notice as well as a consequent assessment order from an attack on the ground that the notice was served beyond the prescribed period. That intention would be effectuated if a wider meaning is given to the expression “issued”. Consequently, the Supreme Court held it possible that even though the notice was served beyond the prescribed time, it was saved by s. 4 of the Amending Act. It is quite clear from the above that the decision relied upon by learned counsel for the appellant is not applicable to the facts of the present case.

It was then submitted that the post office in which the notice was dispatched is an agent of the assessee and, therefore, when the notice is sent by registered post, it is deemed to be in the hands of the assessee (through its agent, the post office) on the date posted, which was before the expiry of the prescribed period. Reliance in this regard was placed upon Prima Realty vs. Union of India & Ors. (1997) 137 CTR (SC) 275 : (1997) 223 ITR 655 (SC). We are of the view that Prima Realty (supra) does not at all help learned counsel for the appellant. In Prima Realty (supra), some payment was required to be made. The payee did not indicate the mode of payment in spite of a letter received by it to indicate the mode. In fact, the appellant in that case did not even reply to the letter for suggesting the mode of payment. As per the practice, the Central Government sent the cheque by post. The Supreme Court held that it was reasonable for the concerned authority to have waited for the cheque to get personally collected by the payee till the last date and when the payee did not come to collect the cheque, to have dispatched it by post. The Supreme Court held that this amounted to tender of payment to the payee when the cheque was put in the course of transmission so that it was beyond the control of the sender from the time of its dispatch by post. It was in this context that it was observed that the post office will be the agent of the payee for the purposes of receiving payment. It was finally submitted by learned counsel for the appellant that it cannot be said that the assessment was null and void because notice was served upon the assessee beyond the prescribed period of one year. Reliance in this regard was placed upon CIT vs. Gyan Prakash Gupta (1986) 54 CTR (Raj) 69: (1987) 165 ITR 501 (Raj) and CIT vs. Jai Prakash Singh (1996) 132 CTR (SC) 262 : (1996) 219 ITR 737 (SC). It is not necessary for us to go into this question at all because the Tribunal set aside the assessment without finding it to be null and void; the assessment order was merely set aside on the ground that notice under s. 143(2) of the Act had been served upon the assessee beyond the period of one year prescribed by the law. We may also point out that there appears to be some doubt whether the notice was at all sent to the assessee because, as observed by the CIT(A), the receipt showing that an envelope was sent by registered post merely contained the name of the assessee without its address. Consequently, it is quite possible that the notice may have been sent to the assessee at some wrong or even some incomplete address. However, it is not necessary for us to go into this question at all because the assessee had filed an affidavit stating that it had not received the notice and the Tribunal rightly held that under these circumstances, the burden was upon the appellant to prove that notice was served upon the assessee within the prescribed time. The appellant had failed to prove its case in this regard. We are of the view that the appeal does not raise any substantial question of law which requires our decision. Dismissed.

[Citation : 281 ITR 1]

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