SHUAIB AHMED,NEW DELHI vs. ITO WARD - 65(2), NEW DELHI

आदेश / O R D E R PER C. N. PRASAD, J. M. :

2. The assessee has raised the following grounds of appeal:-

“1. That the appellant assessee challenges assumption of jurisdiction to complete the assessment u/s 147 of the Act because the ld. AO, Ward 46(4), New Delhi failed to serve the notice u/s 148 of the Act before completing the assessment on 06.12.2018.

3. That where service of notice u/s 148 of the Act dated 31.03.2018 which is claimed to have been served upon the assessee on 04.12.2018 by way of affixture and the affixture report did not contain the name of any local witness who identified the address of affixture, the service by affixture on 04.12.2018 is bad in law and consequently, the assumption of jurisdiction, obtained on the basis of such service by affixture, is vitiated.

4. The assumption of jurisdiction is vitiated because the approval u/ s 151 of the Act was granted by the ld PCIT, Delhi-16, in a mechanical manner on a prefilled standard format, which was not even accompanied by the reasons of reopening recorded by the ld AO Ward- 46(4), Delhi.

6. That where notice u/s 148 of the Act dated 31.03.2018 was served upon the assessee on 04.12.2018 and the assessment u/s 147/144 of the Act was completed on 06.12.2018, there is complete violation 2 of principle of natural justice as no opportunity was granted to the assessee either to file his return of income in response to notice u/ s 148 of the Act or to participate in the reassessment proceedings and therefore, order dated 06.12.2018 passed u/s 147/144 of the Act is void and nullity in the eyes of law.

7. That where the assessee being a small trader having income below taxable limit, the ld CIT(A)-16, New Delhi was wrong in confirming the order of the ld AO, who taxed the entire amount of Rs.14,28,900/ - deposited by the assessee in his bank during F.Y. 2010- 11 without providing any benefit/relief for the cash withdrawn from the bank during F.Y 2010-11 and the opening capital balance of life savings of the assessee.”

3. The ld. Counsel for the assessee submits that ground Nos. 1, 2, 3 and 6 are in respect of service of notice under section 148 of the Income Tax Act, 1961 (the Act) and consequent completion of assessment as bad in law. The ld. Counsel for the assessee, at the outset, submits that notice u/s 148 of the Act dated 31st March, 2018 was claimed to have been served on the assessee by the Assessing Officer by way of affixture on 4.12.2018 without allowing the period of 30 days as mentioned in the notice u/s 148 of the Act to file return of income, thus the assessment of jurisdiction is vitiated. The ld. Counsel for the assessee submits that notice u/s 148 dated 31.03.2018 which was claimed to have been served on the assessee on 4.12.2018 by way of affixture and the affixture report did not contain the name of any local witness who made the above affixture and, therefore, the service by affixture on 4.12.2018 is bad in law and consequently the assumption of jurisdiction obtained on the basis of such service by affixture is vitiated and thereby the best judgement assessment made by the Assessing Officer u/s 144 read with section 147 of the Act on 6.12.2018 is void ab initio. The ld. Counsel placing reliance on the decision of the Ess Aar Exports Vs. Income Tax Officer [(2005) 94 ITD 484 (Delhi)] submits that while effecting the service through affixture local witness ought to have been associated in order to identify the address of affixture was not effected with the statutory provisions assessment made u/s 144 read with section 147 of the Act as bad in law. Reliance was also placed on the decision of the Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Kishan Chand [(2010) 328 ITR 173 (P & H)] for the proposition that in the absence of any local witness service by affixture is nullity. The ld. Counsel placed reliance on the decision of Delhi Bench of the Tribunal in the case of Wg. Cdr. Sucha Singh Vs. Income Tax Officer in dated 11.04.2017.

5. The ld. DR relied on the orders of the authorities below.

“11. It is provided in Section 282 of Income-tax Act that notice under the Act is to be served either by post or as if it was summoned under the Code of Civil Procedure. Notice dated 5.3.2001 has been claimed to have been served through affixture as provided in Code of Civil Procedure. Here provisions of Order V Rules 17 to 20 of CPC are relevant. After taking notice of above statutory provisions, their Lordships of Supreme Court in the case of Ramendra Nath Ghosh v. CIT, 82 ITR 888, observed as under (as per head note): "The Inspector of Income-tax who had to serve notices under Section 33B of the Income-tax Act, 1922, claimed to have served the notices by affixing them on the assessee's place of business but in his report did not mention the names and addresses of the persons who identified the place of business of the assessees, nor did he mention in his report or in the affidavit filed by him that he personally knew the place of business of the assessees. The assessees, however, claimed that they had closed their business long before the notices were issued. On writ petition filed by the assessees, the High Court held that there was no proper service on the assessee and the orders of the Commissioner pursuant thereto could not be sustained. On appeal to the Supreme Court: Held, affirming the decision of the High Court, on the facts, that the service of the notices was not in accordance with the law and, therefore, it could not be said that the assessees had been given a proper opportunity to put forward their case as required by Section 33B of the Income-tax Act. Held also, that the question whether the assessees had been served in accordance with the law or not was essentially a question of fact and though the High Court had jurisdiction to entertain their writ petitions challenging the service of notice, the assessees should not have been allowed to invoke the extraordinary jurisdiction of the court."

12. In case of A.A. Kochnadi v. Agriculture ITO, 110 ITR 406, their Lordships of Kerala High Court observed as under: "Where service of a notice on the assessee or his authorized agent or an adult member of his family is not possible, statutes authorize substituted service and such service attributes constructive knowledge of the assessee. To 6 attribute such constructive knowledge, the substituted service must be in accordance with the prescribed procedure, that is, by Section 64 of the Agricultural Income-tax Act, 1950, in this case, which provides that a notice can be served as if it were a summons issued by a court, that is, as provided in Order V Rules 17, 18 and 19 of the Code of Civil Procedure, 1908. In the absence of proof of service as required, in the said Rule 17, such service could not be treated as valid service. A mere statement that service was effected by affixture would not be enough."

14. In the light of clear provisions of law, we are unable to hold that service in this case was effected in accordance with statutory provisions. The report of the Process Server is witnessed by Ms. Indu Rani, the Income-tax Inspector. There is no evidence of any independent person having been associated with identification of place of business 7

of the assessee. There is no evidence that the process server or Ms. Indu Rani had personal knowledge of place of business of the assessee and was, thus, in a position to identify the same. In the absence of above material evidence, notice dated 5.3.2001 cannot be accepted as served on the assessee in accordance with law. Constructive knowledge of the above notice cannot be attributed to the assessee. In these circumstances, we hold that assessment made Under Section 144 was bad in law. The same is required to be set aside. The AO can issue fresh notice if so authorized under the law. The matter is restored to his file.”

the Act on the basis of best judgement. The Commissioner of Income Tax (Appeals) accepted the appeal mainly on the ground that the assessee had not been served. Evidence with regard to service by affixture was rejected on the ground that resort to affixture could not be straightaway taken without first taking other modes of service. The Tribunal affirmed the said finding. It was observed:

From the facts of the case, I find that the search and seizure operations had been taken at the business and residential premises of the appellant as far back as August, 1976, and the income of the assessment year 1969-70 could be assessed by issuing a notice by March 31, 1978. Notice under section 148 was issued on March 23, 1978, and the Income Tax Officer was naturally anxious to see that the notice gets served by March 31, 1978. Though he meticulously complied with all the formalities prescribed with regard to the service of notice through the affixture yet the hurry which he had to make is quite apparent. As pointed out, search had taken place in the year August, 1976, and when no action had been taken up to March 23, 1978 taken recourse to service by affixture can be said only a sheet formality and not the real service as held by their Lordships in different judgements of the different High Courts, referred to above…..

4. In view of the finding of the Tribunal which is not shown to be perverse, the question referred has to be answered against the Revenue and in favour of the assessee. Ordered accordingly.” 9

“5.3 Coming to the facts of the case, it is undisputed that the property located at 123, Hargobind Enclave, Delhi was sold by the assessee during assessment year 2008-2009. It is also undisputed that the return of income for assessment year 2009- 2010 was filed by the assessee on 04/09/2009 whereas the notice under section 143 (2) was dated 14/09/2009 and was served by affixture on 24/09/2009 and, thus, the last known address before the issue of service of notice was H – 234, Naraina Vihar, Naraina, New Delhi i.e. the address mentioned in the return of income for assessment year 2009-2010. The remand report of the AO also admits that all the notices under section 143 (2) remained un- served. Thus, the service of the very first notice has, undisputedly, been done by way of affixture whereas order V, rule 12 of CPC provides that wherever it is practicable, service has to be effected on the defendant in person or on his agent. Order V, rule 17 of CPC further provides that the affixture can be done only when the assessee or his agent refuses to sign the acknowledgement or cannot be found. Thus, for resorting to Assessment year 2008-09 9 affixture, efforts have to be made to serve the notice upon the assessee and only after reaching a finding that the notice cannot be served upon the assessee, the mode of affixture can be resorted to. Further rule 17 of order V of CPC mandates that an independent local person be the witness of service through affixture and for the purpose of having been associated with the identification of the place. However a perusal of the affixture report shows that there was no independent local person as a witness and there is no evidence that anyone identified the place as belonging to the assessee before such affixture. It is seen that the Income Tax Inspector has signed as the local 10 independent person but such witness cannot be considered to be a local independent person for the purposes of rule 17 of order V of CPC. The Hon’ble Punjab and Haryana High Court in the case of CIT versus Naveen Chander reported in 323 ITR 49 has held that the fixation is required to be done in accordance with the procedure laid down in the Code of Civil Procedure, and where in the report of the inspector/notice server, who claimed to have affixed the notice, there was no evidence of any independent local person having been associated with the identification of the place of business of the assessee, it was a clear violation of the mandate Assessment year 2008-09 10 of rule 17 of order V of Code of Civil Procedure, which laid down the procedure to serve notice by affixture. Since there was no valid service of notice, the assessment proceedings were held as invalid. Therefore, in view of the factual matrix of the case, it is our considered opinion that the Department has failed to prove a valid service of notice on the assessee before embarking upon the assessment proceedings. Since the entire reassessment proceedings were based on assumption of jurisdiction through the issue of notice under section 143 (2) of the Act, which was not validly served on the assessee, we hold that the assessing officer was patently wrong in completing the assessment without effecting the service of notice in accordance with section 282 (1) of the Income Tax Act, 1961 read with order V rule 12 and order V rule 17 of the CPC. Therefore, on the facts and circumstances of the case, we have no option but to quash the entire assessment proceedings. Accordingly, we quash the assessment proceedings and allow the appeal of the assessee on the legal issue. In view of our adjudication in favour of the assessee on the legal issue, the other grounds become academic in nature and are not being adjudicated upon.”

13. Since the re-assessment was quashed on the legal issue, I am not inclined to go into other technical grounds and the grounds on merits raised by the assessee as the same would become academic at this stage.

Order pronounced in the open court on : 16/01/2023.