High Court Of Rajasthan
Shubhashri Panicker vs. CIT
K. S. Jhaveri & Vijay Kumar Vyas, JJ.
D.B. Income Tax Appeal No. 202/2015
Section 148, 142(1)
24th October, 2017
Counsel appeared:
Mahendra Gargeiya for the Petitioner.: Anuroop Singhi with Aditya Vijay for the Respondent
JUDGMENT
1. By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby the Tribunal has allowed the appeal of the department and also partly allowed the cross objection of the assessee for statistical purposes.
2. This court while admitting the matter framed the following question of law:“i) Whether the ld. ITAT was right in holding that the notice u/s 148 dated 22.03.2010 having been sent through speed post and not having been received back, there was a presumption as to the service of the same ignoring fact that the address on which such notice was sent, was altogether a completely different location and hence no such presumption could have been considered?â€
3. Counsel for the appellant Mr. Gargeiya has taken us to the order of the AO wherein it has been observed as under:
“3.4. On 2.12.2010, the A/R of the assessee has filed two letters. One is of challenging the service of notice. The another is challenging the validity of reasons recorded for initiating proceedings u/s 148 of the Act.
i) First letter challenging the service of notice u/s 148 is dealt with as under:
For the sake of convenience and ready referrence, the assessee’s letter is reproduced as under:
On 22.3.2010 a notice u/s 148 appears to have been sent through Speed Post vide No. ER017540747 at the following address:
M/s Shubshri Pankcer E-5, Kailas Marg, Bani Park.
However, no receipt or any other evidence of service is available.
The above notice was not a valid notice to the assessee and as such bad in law since incorrect address is posted on envelope. The correct address as appears in the PAN of the assessee is F-58(B) Kalidas Marg Bani Park Jaipur.
A letter dated 10.11.2010 appears to have been sent on 18.11.2010 at 14.57. by speed post…at the same address as above. However, the same came back on 24.11.2010 as per noting of postmen on the returned envelop for the reason that no such house exist in the Kailash Marg and endorsement of receipt by the receiving clerk of your ward.
No evidence or other material found available showing personal service of the notice u/s 148 on the assessee or any of its relative or any other person authorized on that behalf nor is there any material material showing the dispatch of such notice through registered A.D.
It is well settled that through various decisions that a valid service of a notice u/s 148 is condition precedent for a valid assumption of jurisdiction. Moreover, the onus lay upon the revenue to establish such service.
Thus it is clearly established that there is no service at all of the notice u/s 148 much less a valid service and therefore, your good self was wrongly assumed jurisdiction. The further proceedings are void ab initio.â€
The above application of the assessee has duly been disposed of vide this office letter No.1667 dated 8.12.2010 and sent to the assessee through registered post A/D vide No. 4801 dated 10.12.2010. The letter is reproduced hereunder for ready reference:
“The notice u/s 148 was issued in the name of Ms. Shubashri Panikar, F-58, Kailash Marg, Bani Park, Jaipur on 22.3.2010 and sent for service through Speed Post on 22.3.2010. Inspection of the assessment records were made by your A/R on 30.11.2010 and this fact has also been verified by your A/R. The said notice was not received back un-served. From the assessment record it has also been noticed that a notice u/s 142(1) dated 4.10.2010, issued on the same address, fixing the hearing on 19.10.2010, which was sent for service through Speed Post, has duly been served on you and in response to which your A/R attended the hearing on 19.10.2010 and the case was adjourned to 29.10.2010. It shows that although in the notices the road name was mentioned as Kailash Marg, Bani Park, Jaipur, instead of Kalidas Marg, Bani Park, Jaipur the speed posts were served on the addressee as there is no road in the name of Kailash Marg at Bani Parek.
In view of the above facts your application is not accetable, and hence, the same is therefore rejected.”
The notice u/s 148 was issued in the name of Ms. Shubashri Paniker, F-58, Kailash Marg, Bani Park, Jaipur on 22.3.2010 and sent for service through Speed Post on 22.3.2010. The Speed Post was not received back from the Postal Authorities. Again, the notice u/s 142(1) dated 4.10.2010 fixing hearing on 19.10.2010 was sent on the same address. In response to which Shri N.K. Shrimal, CA/AR attended this office on 19.10.2010. It is pertinent to note that there is no Road in the name of “Kailash Marg” in Bani Park, Jaipur and the Plot No. F=58 is situated at “Kalidas Marg”, Bani Park, Jaipur. From these facts, it is evident that the notice u/s 148 sent through Speed Post has duly been served on the assessee.
ii) Second letter -challenging the reasons recorded for issue of notice u/s 148 is dealt with as under:
In the impugned reasons, your goodself has reachyed to a reason to belief that an entry of Rs. 5,01,000 dated 18.12.2002 was received by the assessee, was a bogus entry and therefore, you had a reason to believe that there was an escapment of income of Rs. 5,01,000/
The reasons is erroneous and invalid for the following reasons:
2.1. There are no details or material extracted in the impugned reasons showing further the nature or type of the information
2.2. How your good self had a reason to belief of escapement based on such information is not known…
2.3…
2.4. There appears only suspicious on your part… In any case, we shall not appear nor shall cooperate in any of the proceedings in hands.â€
4. He contended that all the authorities have seriously committed an error and the Tribunal has also committed an error in observing as under:“3.5. The ld. DR on the other hand contends that notices issued u/s 148 and 142(1) were served on the assessee. In response thereto, the ld. AR of the assessee duly appeared from time to time and sought adjournments without raising any grievance about non-service of 148 notice. It is only at the fag end of the assessment by way of an afterthought that story about non-services of the notices u/s 148 was concocted to defeat the statutory process of the assessment. The notice u/s 148 was issued in the name of Ms. Shubashir Paniker, F-58, Kailash Marg, Bani Park, Jaipur on 22.3.2010 and sent for service through speed post on 22.03.2010. This speed post was not received back from the postal authorities suggesting any non service. Again the notice u/s 142(1) dated 4.10.2010 fixing hearing on 19.10.2010 was sent on the same address. In response to which, Shri N.K. Shrimal, CA/A/R attended this office on 19-10-2010 which clearly demonstrates to her CA. From these facts, it is evident that the notice u/s 148 sent through speed post stand duly been served on the assessee in the eyes of law. It has been held by Hon’ble Delhi High Court in the case of CIT vs. Yamu Industries Ltd. (supra), if it is assumed that first notice was not served on the assessee then in second notice if the assessee appeared and did not raise any objection after 30 days of issuance of notice, then and it is a valid presumption under law that no notice is served. This fact is further corroborated by repeated appearance of AR of the assessee. Apropos reasons recorded for reopening, the impugned bogus entry was found in the books of the assessee; it has been held by the Hon’ble Apex Court in the case of Phool Chand Bajrang Lal And Another vs. ITO, 203 ITR 456 that it is not for the Court to judge the sufficiency of reasons recorded for forming the belief which is the initial stage of income escaping assessment. The AO had valid information in his possession which is placed on the record. It is pleaded that the ld. CIT(A) erred in holding that there is no service of notice and assumption of jurisdiction is invalid.â€
5. He has relied upon the decision of the Delhi High Court in case of Commissioner of Income Tax vs. Rajesh Kumar Sharma (2009) 311 ITR 0235 wherein it has been held as under:
Section 282(1) of the Act provides that a notice or requisition under the Act may be served on the person therein named either by post or as if it were a summons issued by a court under the Code of Civil Procedure, 1908. The provisions of Order V of the CPC, more particularly Rules 12 to 15 are relevant in so far as the present Appeal is concerned.
Order V Rule 12 of the CPC provides that wherever it is practicable, service shall be made on the defendant in person, unless he has an agent empowered to accept service, in which case service on such agent shall be sufficient. Rules 13, 14 and 15 form a part of the same scheme. A joint reading of these Rules suggest that if a summon is accepted by a person who is authorised to do so, then only can it be said that the defendant (or the assessed in this case) has received the summons or that that service is good service.
In so far as the present Appeal is concerned there is nothing to suggest that Lalmani was in any manner authorised to receive any summons on behalf of the assessed. It was never the case of the Revenue that Lalmani was authorised to accept any notice on behalf of the assessed or was an agent of the assessed who was entitled to receive the notice under Section 147/148 of the Act. This being the position, it cannot be held that receipt of the notice by Lalmani amounted to service of the notice on the assessed.
8. As far as the second contention is concerned, with regard to service of the notice by post, the proviso to Order V Rule 9(5) of the CPC provides that the summons must be properly addressed and sent by registered post. In the present case, the notice was sent by speed post at the following address as per the postal receipt: “SH R K PROP M/S KAROL BAGH NEW DELHI, PIN 110065”
9. Clearly, the above is not the address of the assessed. It would have been a different matter altogether if the Revenue had been able to show from the envelope that it was addressed to the correct person but the receipt prepared by the postal department was incomplete. However, for proving this, the onus would have been on the Revenue, particularly when the assessed had categorically deemed receipt of the notice. The Revenue did not discharge this burden but placed reliance only upon the receipt, which as we have noted hereinabove does not give the correct or complete address of the assessed. Under no circumstances, Therefore, can it be said that the notice was correctly addressed to the assessed.
10. It was submitted by learned Counsel for the Revenue that the envelope did not return with any remark to the effect that it was undelivered and so it must be presumed that it was actually served upon the assessed.
11. We are not in position to make any such assumption because of the categorical stand of the assessed that he had not received the notice. The burden was entirely upon the Revenue to show that the notice was dispatched to the correct address. It is only then that such a presumption could have been made. But learned Counsel for the Revenue has not been able to show that the envelope containing the notice was correctly addressed. We are, Therefore, not inclined to accept this contention of learned Counsel for the Revenue.
12. It was finally contended that the assessed presented himself in the proceedings before the Assessing Officer. However, as we have noted above, the assessed appeared before the Assessing Officer in response to a notice under Section 142(1) and 143(2) of the Act and not pursuant to a notice under Section 147/148 of the Act. In fact, as we have already noted, the assessed had written a letter to the assessed soon after receiving the notice under Section 142(1) and 143(2) of the Act and that he was unaware of any notice having been issued under Section 147/148 of the Act. Moreover, the assessed entered appearance and filed his return under protest making it abundantly clear that he had not received the notice under Section 147/148 of the Act. This argument does not, Therefore, Advance the case of the Revenue.
5.1. He has relied upon the decision of Supreme Court in case of Y. Narayana Chetty and Anr. vs. The Income Tax Officer, Nellore and Ors. (1959) 35 ITR 388 (SC) wherein it has been held as under:
4. The first point raised by Mr. Sastri is that the proceedings taken by respondent 1 under section 34 of the Act are invalid because the notice required to be issued under the said section has not been issued against the assessees contemplated therein. In the present case the Income-tax Officer has purported to act under section 34(1)(a) against the three firms. The said sub-section provides inter alia that “if the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of the assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax has been under-assessed”, he may, within the time prescribed, “serve on the assessee a notice containing all or any of the requirements which may be included in the notice under sub-section (2) of section 22 and may proceed to re-assess such income, profits or gains.” The argument is that the service of the requisite notice on the assessee is a condition precedent to the validity of any reassessment made under section 34; and if a valid notice is not issued as required, proceedings taken by the Income-tax Officer in pursuance of an invalid notice and consequent orders of re-assessment passed by him would be void and inoperative. In our opinion, this contention is well-founded. The notice prescribed by section 34 cannot be regarded as a mere procedural requirement; it is only if the said notice is served on the assessee as required that the Income-tax Officer would be justified in taking proceedings against him. If no notice is issued or if the notice issued is shown to be invalid then the validity of the proceedings taken by the Income-tax Officer without a notice or in pursuance of an invalid notice would be illegal and void. That is the view taken by the Bombay and Calcutta High Court in the commissioner of Income-tax, Bombay and Calcutta High Court in the Commissioner of Income-tax, Bombay City v. Ramsukh Motilal : [1955]27ITR54(Bom) and R. K. Das &; Co. v. Commissioner of Income-tax, West Bengal: [1956]30ITR439(Cal) , and we think that that view is right.
5.2. He has also relied upon the decision of Supreme Court in case of R.K. Upadhyaya vs. Shanabhai P. Patel (1987) 166Â ITR 163 (SC) wherein it has been held as under:
2. The High Court has quashed the notice by accepting the assessee’s contention that the action of the Income-tax Officer was barred by limitation prescribed by the Act. There is no dispute that the notice in this case under Section 147(b) of the Act was issued by registered post on March 31, 1970, and was received by the assessee on April 3, 1970. To the facts of the case, Section 147(b) of the Act applies. The two relevant provisions are in Sections 148 and 149 of the Act which provide:
148(1)-Before making the assessment, reassessment or recomputation under Section 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under Sub-section (2) of Section 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section.
(2) … 149(1) -No notice under Section 148 shall be issued, (a) …
(b) In cases falling under Clause (b) of Section 147, at any time after the expiry of four years from the end of the relevant assessment year.
(2) The provisions of Sub-section (1) as to the issue of notice shall be subject to the provisions of Section 151. The High Court relied upon the decision of this Court in the case of Banarsi Debi and Anr. v. I.T.O., District IV, Calcutta and Ors., : [1964]53ITR100(SC) where the validity of a notice under Section 34(1) of the Income-tax, Act, 1922 and the scope of Section 4 of the Income-tax (Amendment) Act of 1959 by which Sub-section (4) was introduced into Section 34 were considered. this Court indicated, keeping the provisions of Section 34 in view, that there was really no distinction between “issue” and “service of notice”. Section 34, Sub-section (1) as far as relevant provided thus:
34(1) If
(a) …
(b) …he may in cases falling under Clause (a) at any time within 8 years and in cases falling under Clause (b) at any time within four years at the end of that year, serve on the assessee,…and may proceed to assess or reassess such income….
Section 34, conferred jurisdiction on the Income- tax Officer to reopen an assessment subject to service of notice within the prescribed period. Therefore, service of notice within limitation was the foundation of jurisdiction. The same view has been taken by this Court in Janni v. Indu Prasad Bhat, : [1969]72ITR595(SC) as also in C.I. T. v. Robert, : [1963]48ITR177(SC) . The High Court in our opinion went wrong in relying upon the ratio of : [1964]53ITR100(SC) in disposing of the case in hand. The scheme of the 1961 Act so far as notice for reassessment is concerned is quite different. What used to be contained in Section 34 of the 1922 Act has been spread out into three sections, being Sections 147, 148 and 149 in the 1961 Act. A clear distinction has been made out between ‘issue of notice’ and ‘service of notice’ under the 1961 Act. Section 149 prescribe the period of limitation. It categorically prescribes that no notice under Section 149 shall be issued after the prescribed limitation has lapsed. Section 148(1) provides for service of notice as a condition precedent to making the order of assessment. Once a notice is issued within the period of limitations, jurisdiction becomes vested in the Income-tax Officer to proceed to reassess. The mandate of Section 148(1) is that reassessment shall not be made until there has been service. The requirement of issue of notice is satisfied when a notice is actually issued. In this case, admittedly, the notice was issued within the prescribed period of limitation as March 31, 1970, was the last day of that period. Service under the new Act is not a condition precedent to conferment of jurisdiction in the Income-tax Officer to deal with the matter but it is a condition precedent to making of the order of assessment. The High Court in our opinion lost sight of the distinction and under a wrong basis felt bound by the judgment in : [1964] 53ITR100(SC) . As the Income-tax Officer had issued notice within limitations, the appeal is allowed and the order of the High Court is vacated. The Income-tax Officer shall now proceed to complete the assessment after complying with the requirements of law. Since there has been no appearance on behalf of the respondents, we make no orders for costs.
5.3. He has relied upon the decision in case of Harcharan Singh vs. Smt. Shivrani and Ors. AIR 1981 SC 1284 wherein it has been held as under:
“Section 27 of the General Clauses Act, 1897 deals with the topic-‘Meaning of service by post’ and says that where any Central Act or Regulation authorises or requires any document to be served by post, then unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre-paying and posting it by registered post, a letter containing the document, and unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post. The section thus arises a presumption of due service or proper service if the document sought to be served is sent by properly addressing, pre-paying and posting by registered post to the addressee and such presumption is raised irrespective of whether any acknowledgement due is received from the addressee or not. It is obvious that when the section raises the presumption that the service shall be deemed to have been effected it means the addressee to whom the communication is sent must be taken to have known the contents of the document sought to be served upon him without anything more. Similar presumption is raised under Illustration (f) to Section 114 of the Indian Evidence Act whereunder it is stated that the Court may presume that the common course of business has been followed in a particular case, that is to say, when a letter is sent by post by pre-paying and properly addressing it the same has been received by the addressee. Undoubtedly, the presumptions both under Section 27 of the General Clauses Act as well as under Section 114 of the Evidence Act are rebuttable but in the absence of proof to the contrary the presumption of proper service or effective service on the addressee would arise. In the instant case, additionally, there was positive evidence of the postman to the effect that the registered envelope was actually tendered by him to the appellant on November 10, 1966 but the appellant refused to accept. In other words, there was due service effected upon the appellant by refusal. In such circumstances, we are clearly of the view, that the High Court was right in coming to the conclusion that the appellant must be imputed with the knowledge of the contents of the notice which he refused to accept. It is impossible to accept the contention that when factually there was refusal to accept the notice on the part of the appellant he could not be visited with the knowledge of the contents of the registered notice because, in our view, the presumption raised under Section 27 of the General Clauses Act as well as under Section 114 of the Indian Evidence Act is one of proper or effective service which must mean service of everything that is contained in the notice. It is impossible to countenance the suggestion that before knowledge of the contents of the notice could be imputed the sealed envelope must be opened and read by the addressee or when the addressee happens to be an illiterate person the contents should be read over to him by the postman or someone else. Such things do not occur when the addressee is determined to decline to accept the sealed envelope. It would, therefore, be reasonable to hold that when service is effected by refusal of a postal communication the addressee must be imputed, with the knowledge of the contents thereof and in our view, this follows upon the presumptions that are raised under Section 27 of the General Clauses Act, 1897 and Section 114 of the Indian Evidence Act.â€
5.4. He has relied upon the decision in case of CIT vs. Chetan Gupta (2015) 94 CCH 13 (Del) wherein it has been held as under:
24. The Court first would like to deal with the question whether notice under Section 148 of the Act is a jurisdictional requirement. The relevant portion of Section 148 (1) reads as under: “148. Issue of notice where income has escaped assessment -(1) Before making the assessment, reassessment or recomputation under Section 147, the Income-tax Officer shall serve on the Assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of Section 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section.”
25. The Supreme Court in R.K. Upadhyaya (supra), explained that there was a distinct shift in the scheme of the provisions of the 1961 Act in comparison with the corresponding provision i.e. Section 34 under the 1922 Act under which the mandatory requirement was that both the issuance and service of notice had to be completed within the prescribed period. Consequently, the service of notice within the limitation period was the foundation of jurisdiction under the 1922 Act. In Y. Narayana Chetty v. Income Tax Officer, Nellore [1959] 35 ITR 388 (SC) the Supreme Court observed in the context of Section 34 of the 1922 Act,:
“The notice prescribed by section 34 of the Income tax Act for the purpose of initiating reassessment proceedings is not a mere procedural requirement; the service of the prescribed notice on the assessee is a condition precedent to the validity of any reassessment made under section 34. If no notice is issued or if the notice issued is shown to be invalid then the proceedings taken by the Incometax Officer without a notice or in pursuance of an invalid notice would be illegal and void.”
This was also the basis for the decision in Banarasi Debi v. ITR (1964) 53 ITR 100. However, under the 1961 Act the procedural requirement has been spread over three sections, being Sections 147, 148 and 149. The period of limitation within which notice under Section 148 has to be issued is specified in Section 149. Section 153 (2) of the Act stipulates that no order of re-assessment can be passed beyond the period of one year from the expiry of the financial year in which service of the notice was effected. Section 148 (1), however, is clear that no reassessment can take place without service of notice being effected on the Assessee or his authorised representative.
In R.K. Upadhyaya (supra) the Supreme Court explained that “the mandate of Section 148 (1) is that reassessment shall not be made until there has been service.” However, the said decision does state that jurisdiction becomes vested in the AO to proceed with the assessment once notice is issued within a period of limitation. It also emphasized that no reassessment shall be made “until there has been service.” The legal position therefore, even under the 1961 Act, is that service of notice under Section 148 is a jurisdictional requirement for completing the re-assessment. This has been emphasized in several other decisions of the High Courts as well.
28. In C.N. Nataraj v. Fifth Income-tax Officer (1965) 56 ITR 250 (Mys), the High Court of Mysore was dealing with the case where the notice under Section 148 of the Act was issued in the names of the Assessee who were minors and not in the names of their guardians. The notices were served on a clerk of the father of the Assessee who was neither an agent of the Assessee nor authorized to accept notices on their behalf. The Court, relying on the decision in N. Narayana Chetty (supra) observed: “There is no doubt that a notice prescribed under section 148 of the Act for initiating reassessment proceedings is not a mere procedural requirement ; the service of the prescribed notice on the assessee is a condition precedent to the validity of any reassessment made under section 147. If no notice is issued or if the notice issued is shown to be invalid, then the proceedings taken by the Income tax Officer without a notice or in pursuance of an invalid notice would be illegal and void.”
29. In CIT v. Hotline International (P) Ltd. (supra) this Court held that affixation of notice on an address at which the security guard of the Assessee-company refuses to receive such notice cannot be construed to be a proper service of notice under Section 148 of the Act. The security guard was not an agent of the Assessee and therefore, the reassessment proceedings were held to be bad in law.
30. In Dina Nath v. Commissioner of Income-tax [1994] 72 Taxman 174 (J & K) the notice under Section 143 (2) of the 1961 Act was served upon one S, who was neither a member of the family of the Assessee nor his duly authorized agent. However, S had been accepting the notice on behalf of the Assessee and prosecuting the cases on his behalf earlier before the income tax authorities. The High Court held: “the object of issuance the notice or summons is to intimate the concerned person to appear and answer the queries or the question sought to be clarified by a Court or the authorities. As serious consequences are likely to follow, a notice or summons must necessarily be issued and served in the form and in the manner prescribed by law.”
31. The High Court in Dina Nath (supra), referred to Order V Rule 12 CPC as well as Order III Rule 6 CPC. It thereafter concluded that notice must be served personally upon the individual or upon his agent duly authorized in terms of Order III Rule 6 CPC. The contention of the Assessee was upheld and the reassessment proceeding was quashed.
32. In Jayanthi Talkies Distributors v. Commissioner of Income-tax (1979) 120 ITR 576 (Mad) the notice was served by the notice-server of the Department on the Manager of the Assessee-firm. The Manager wrote to the ITO seeking time. Since no return was filed by the Assessee within the time granted, the ITO completed the reassessment under Section 144 of the 1961 Act. On appeal the High Court found that none of the partners of the Assessee-firm had been personally served with the notice. Service was effected only on the Manager of the firm who had no specific or written authority to receive such notice. It was held: “when the statute provides that a notice should be served in a particular mode, it was not possible to hold that there had been a proper service of notice merely from the fact that the person to whom the notice had been addressed had received the notice through some other source or that he had become aware of the contents of the notice. There had not been a due service of notice as contemplated by the provisions of the Code of Civil Procedure dealing with service of notice or summons. Therefore, the service of the notice on the Manager who had no written authority to receive the same could not be held to be a proper service on the Assessee.”
33. In Sri Nath Suresh Chand Ram Naresh v. CIT (supra) it was reiterated that service of valid notice under Section 148 was “the foundation for the initiation of reassessment proceedings and a condition precedent for the validity of the notice.” It was held that the Tribunal was not right in holding that the notices under Section 148 addressed as “SCR” and the karta “S” were valid notices for reassessing the income of the HUF “MM” or “MS” or its successors. Onus on Revenue to prove service of notice
34. There is sufficient judicial authority for the proposition that the burden of showing that service of noticed has been effected on the Assessee or his duly authorized representative is on the Revenue. These include Fatechand Agarwal v. Commissioner of Wealth-Tax [1974] 97 ITR 701 (Ori) and Venkat Naicken Trust v. ITO [1999] 107 Taxman 391 (Mad). In CIT v. Thayaballi Mulla Jeevaji Kapasi (1967) 66 ITR 147 (SC), the Respondent to whom the notice was directed was not in town. The only information which the process server had was that the Respondent was either in Bombay or Ceylon. Thereafter, the process server affixed the notice on the business premises of the Respondent. The Supreme Court affirmed the essential principle that “if no notice was served within the period, the Income-tax Officer was incompetent to commence proceedings for reassessment under Section 34 of 1922 Act.” It was further held that “service of notice under Section 34 (1) (a) within the period of limitation being a condition precedent to the existence of jurisdiction, if the Income-tax Officer was unable to prove that the notice was duly served upon the Respondent within the prescribed period, any return filed by the Respondent after the expiry of the period of eight years will not invest the Income-tax Officer with authority to reassess the income of the Respondent pursuant to such return.” On the facts of that case it was held that the Revenue had sufficiently discharged the onus by producing the affidavit of the process server.
35. Under Section 282 (1) of the Act, service of notice may be made by delivering or transmitting a copy thereof to the person to whom the notice is addressed by more than on mode. One of the modes is “in such manner as provided under the Code of Civil Procedure, 1908 (“CPC”)”. For the purpose of service of summons under Order V Rule 12 CPC, service can be taken to complete, if it is effected, on person to whom his address or to another person who is empowered to receive such notice on his behalf. Besides the appointment of such agent by the Assessee has to be in writing in order to meet the requirement of Order III Rules 2 and 6 CPC. Therefore, in the instant case, the Revenue had to show that the person on whom the notice was served i.e., Mr. Ved Prakash was in fact empowered by the Assessee to receive notices on his behalf. Apart from invoking the doctrine of “apparent authority”, the Revenue has been unable to show that, in fact, Ved Prakash was empowered to receive such notice on behalf of the Assessee.
36. The reliance by the Assessee on the decision in Harshad J. Shah v. LIC of India (supra) appears to be misplaced. The facts there were that the relationship of principal and agent flowed from the contract. The agent was employed as such by the LIC and the letter of appointment contained an expressed prohibition on him collecting premium on behalf of the LIC. Further there were regulations that prohibiting the agents from collecting premium on behalf of the LIC. The Court explained the doctrine of apparent authority and observed: “the authority of the agent is apparent where it results from a manifestation made by the principal to third parties.” On the facts of the case, the said doctrine was held not to bind the LIC against third parties who may have been unaware of the lack of authority of the agent to whom they handed over the premium cheques. In the present case, however, the Revenue has not been able to show that the Assessee held out Mr. Ved Prakash to be his employee or agent.
37. No attempt appears to have been made by the Revenue to serve the Assessee at the address provided by him i.e. “c/o Jagat Theatre, Sector 17, Chandigarh”. All the notices were addressed to him at the address “C/o Kiran Cinema, Chandigarh” which was in Sector-22. Therefore, this is not a case where an attempt was made by the Revenue to serve the Assessee at his known address, and upon not finding him there the Revenue learnt of the address where he would be found. Merely because other notices sent to the ‘Assessee group’ were received by the employees of Kiran Cinema it does not automatically lead to the inference that the Assessee’s place of business was also Kiran Cinema. In any event, there could not be an inference that Mr. Ved Prakash was duly empowered by the Assessee to receive notices on his behalf. In the very first notice dated 28th March 2008 the endorsement made by Mr. Ved Prakash shows him describing himself as “Accountant, Kiran Cinema, Sector- 22, Chandigarh” and nothing more.
38. It was not as if the Revenue was not made aware of the lapse. Vipin Aggarwal & Associates, the Chartered Accountants (CAs) of the Assessee, by their letter dated 12th December 2008 informed the ACIT that the Assessee had not till then received the notice dated 28th March 2008 under Section 148 of the Act. They made a specific request to the ACIT that a copy of notice under Section 148 “along with basis and reason of opening the above mentioned case under Section 148” be provided to them to enable them to “comply with the same.” However, the ACIT in his reply of the same date continued to show the addresses of the Assessee as “c/o Kiran Cinema, Sector- 22, Chandigarh” and “c/o M/s. Vipin Aggarwal & Associates CA” and insisted that notice had been “validly served on Shri Ved Prakash, accountant of Kiran Cinema (who also receives other notices of the concerned group concerns).” The CAs for a second time on 19th December 2008 pointed out that that “notice u/s 148 was not received by the assessee” and again asked for a copy thereof along with the reasons for reopening the assessment. However, no attempt was made by the ACIT to ascertain the correct address of the Assessee and serve a copy of the notice afresh on him. Participation by Assessee in proceedings not a waiver
39. The next issue to be considered is whether the failure by the Assessee to specifically protest that Mr. Ved Prakash was not his Accountant or agent or that he was not empowered to accept notices on his behalf should be taken to be a waiver by the Assessee of the requirement of proper service of notice in terms of Section 148 of the Act. The settled legal position is that merely because an Assessee may have participated in the proceedings, the requirement of service of proper notice upon the person in accordance with the legal requirement under Section 148 of the Act is not dispensed with.
40. In B. Johar Forest Works v. Commissioner of Income-tax (1977) 107 ITR 409 (J&K) the notice issued by the ITO to the Assessee under Section 22 (2) of the 1922 Act. The notice was served on an employee of the Assessee who was not authorized to accept such notice. Subsequently, the General Manager of the Assessee applied for extension of time for filing the return, which was allowed by the ITO.
However, the return was not filed within the extended time and an ex parte order was passed. Before the High Court it was contended that the employee on whom the service of the notice was found to have been made was not duly authorized to accept such notice and that the mere fact that the General Manager of the firm applied for time, would not render the service of notice on the employee a valid and a legal service. It is contended that the Assessee had not denied service of notice on such employee. The High Court however negatived the plea of the Revenue and held that in the absence of finding by the Tribunal that the employee of the Assessee was authorized to accept such service on behalf of the Assessee, notice could not be said to have been duly served upon the Assessee. It was held that “acquisition of knowledge in regard to the issuance of a notice under Section 22 (2) of 1922 Act could not be considered to be equivalent to, or a substitute for, the service of the notice on the Assessee.” It was further observed that “knowing about the issuance of the notice otherwise than by its service on the person concerned is one thing and the service of the notice on the person is another.”
41. In the context of sales tax the Full Bench of the Allahabad High Court in Laxmi Narain Anand Prakash v. Commissioner of Sales Tax, Lucknow AIR 1980 All 198 it was held that the notice of initiation proceeding under Section 21 of U.P. Sales Tax Act, 1947 was a condition precedent and not only a procedural requirement. The mere fact that the Assessee had obtained knowledge of the proceeding and participated could not validate the proceeding being initiated without jurisdiction. It is subsequently held that “it is firmly established that where a Court or Tribunal has no jurisdiction, no amount of consent, acquiescence or waiver can create it.”
46. To summarize the conclusions:
(i) Under Section 148 of the Act, the issue of notice to the Assessee and service of such notice upon the Assessee are jurisdictional requirements that must be mandatorily complied with. They are not mere procedural requirements.
(ii) For the AO to exercise jurisdiction to reopen an assessment, notice under Section 148
(1) has to be mandatorily issued to the Assessee. Further the AO cannot complete the reassessment without service of the notice so issued upon the Assessee in accordance with Section 282 (1) of the Act read with Order V Rule 12 CPC and Order III Rule 6 CPC.
(iii) Although there is change in the scheme of Sections 147, 148 and 149 of the Act from the corresponding Section 34 of the 1922 Act, the legal requirement of service of notice upon the Assessee in terms of Section 148 read with Section 282 (1) and Section 153 (2) of the Act is a jurisdictional pre-condition to finalizing the reassessment.
(iv) The onus is on the Revenue to show that proper service of notice has been effected under Section 148 of the Act on the Assessee or an agent duly empowered by him to accept notices on his behalf. In the present case, the Revenue has failed to discharge that onus.
(v) The mere fact that an Assessee or some other person on his behalf not duly authorised participated in the reassessment proceedings after coming to know of it will not constitute a waiver of the requirement of effecting proper service of notice on the Assessee under Section 148 of the Act.
(vi) Reassessment proceedings finalised by an AO without effecting proper service of notice on the Assessee under Section 148 (1) of the Act are invalid and liable to be quashed.
(vi) Section 292 BB is prospective. In any event the Assessee in the present case, having raised an objection regarding the failure by the Revenue to effect service of notice upon him, the main part of Section 292 BB is not attracted.
6. Counsel for the respondent contended that the Tribunal has taken into consideration all the points raised before the authority and there is no question of reconsidering the same. He has relied upon the decision of Delhi High Court in case of Commissioner of Income Tax vs. Three Dee Exim Pvt. Ltd. [2012] 20 TAXMANN.COM 146 wherein it has been held as under:
In view of our discussions as above, we are of the view that service of notice, a contemplated pre-condition before assessment would be a question of fact depending upon the facts and circumstances of each case. In the present case, not only that no objection was raised with regard to non-issue of notice dated 27.03.2006, the Assessee vide its letter dated 11th December, 2006 adopted the return as originally filed as the return in response to the said notice under Section 148. It was only thereafter that the AO proceeded with the reassessment proceedings. During the assessment proceedings, certain queries were raised to which the Assessee gave detailed response. Even during the reassessment proceedings no objection was raised any kind with regard to defect or irregularity in the notice. In a given situation, as in the present case when the Assessee appears before the Assessing Officer and is given copy thereof before assessment and also makes correspondence and participates in the assessment proceedings, notice issued at old address available on record may constitute service of notice. In such circumstances, the service of copy of notice also would be service of notice within the ambit of Section 148(1) of the Act.
Learned Counsel for the Revenue also submitted that the Tribunal has ignored the provisions of Section 292BB of the Act which lays down that where an Assessee has appeared in any proceedings or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time and the Assessee shall be precluded from taking any objection in any proceedings or inquiry under the Act that notice was not served upon him or was served in an improper manner. In this regard, it may be stated that this provision came to be inserted by the Finance Act, 2008 with effect from 1st April, 2008 and is not applicable to the assessment year in question. However, this provision also substantiates our finding that in the given circumstances as in the present case, service of notice before assessment could be inferred. The participation by the Assessee in the assessment proceedings on receipt of the copy of the notice can be deemed to be service of notice within the ambit of Section 148(1) of the Act. That is what is the legislative intent of “service of notice” on Assessee under this section that no assessment under Section 147 can be finalized before the Assessee has sufficient notice thereof.â€
Taking into consideration, the notice which was sent u/s 148 on 22nd March 2010 on the address where the assessee was not residing, in that view of the matter, the presumption could not have been drawn. However, the service made at the address which was referred on the envelop is not of assessee.
Hence, the issue is required to be answered in favour of the assessee and against the department. The appeal stands allowed.
[Citation : 407 ITR 434]
