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Before: Shri Laliet Kumar & Dr. Mitha Lal Meena
In the Income-Tax Appellate Tribunal, Agra Bench, Agra
Before : Shri Laliet Kumar, Judicial Member And Dr. Mitha Lal Meena, Accountant Member
ITA No. 110/Agr/2018 Assessment Year: 2009-10
Suresh Singh, 3/303, Miss Gill vs. Income-tax Officer, Compound, Marris Road, Aligarh. Ward 1(1), Aligarh. PAN : AEOPS7989G (Appellant) (Respondent)
Appellant by Sh. Pankaj Gargh, Advocate Respondent by Sh. Waseem Arshad, Sr. DR
Date of Hearing 01.07.2019 Date of Pronouncement 10.07.2019
ORDER Per Laliet Kumar, J.M.: This appeal was filed by the assessee, being aggrieved by the order passed by the CIT(A) on 30.10.2017 for the assessment year 2009-10 on the following grounds : Ground No. 1 (i) Because the Ld. CIT(A) has wrongly, illegally, arbitrarily rejected the specific grounds taken objecting the issuance and the service of notice u/s 148 of the Income Tax Act.
(ii) Because Ld. CIT(A) has erred both hi law and on facts in rejecting the specific ground that the assessment framed deserves to be quashed as notice u/s 148 has not been served on the assessee with in stipulated time.
(iii) Because the Ld. CIT(A) has wrongly, illegally and arbitrarily rejected the appellants submission and the specific ground that notice u/s 148 has not been received. Ld. CIT(A) has erred is wholly unjustified in giving finding that there is no evidence that the impugned notice has been
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returned by Postal Department ignoring the undisputed fact that the notice sent as wrong and incomplete address was returned by Postal Department with the remark "Incomplete address".
(iv) Because Ld. CIT(A) has further erred both in law and on facts in rejecting the specific ground that the assessment framed deserves to be quashed ignoring the undisputed fact that notice u/s 148 sent on wrong and incomplete address, can never be served and cannot be taken as notice issued within time.
(v) Because copy of the notice/s 148 dated 5.3.2016 served on the assessee on 28.11.2016 cannot be said to be valid service in the eyes of law and within time. Ld. CIT(A) has wrongly and arbitrarily rejected the appellant submission.
(vi) Because proceedings initiated u/s 147 and the consequent issuance of notice u/s 148 is wrong, bad in law, unwarranted and without jurisdiction as neither there exists any adverse material nor there is own reason to believe of the Assessing Officer. The Ld. CIT(A) has erred in law in rejecting the specific ground and the submission filed.
(vii) Because the assessment framed is also wrong, bad in law and without jurisdiction as reason recorded for initiating proceedings u/s 147 were not supplied to the appellant before the completion of the assessment. The Ld. CIT(A) has wrongly erred in rejecting appellant specific submission on the issue.
(viii) Because considering the facts of the case and legal position and the grounds as above the assessment deserves to be quashed. Ground No. 2: (i) Because Ld. CIT(A) has erred both in law and on facts in confirming the addition of Rs,1553649/- under the head short term capital gain as against the addition of Rs.2491000/-made by the Assessing Officer.
(ii) Because Ld.CIT(A) has further erred in rejecting the appellant submission and the facts of the case that the impugned property was allotted to the appellant by Moradabad Development Authority in the year 2004 and the payments in installments was made from F.Y. 2004-05. Thus the profit, if any, though not admitted, should have been assessed
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under the head long term capital gain and benefit of indexed cost should be allowed to the appellant. Ld.CIT(A) has wrongly, arbitrarily rejected the appellant submission on specific ground and the facts of the case. (iii) Because the Ld. CIT(A) has wrongly, illegally and arbitrarily confirmed the action of the Assessing Officer who invoked the provisions of Section 50C to workout the income under the head short term capital gain.
(iv) Because considering the facts of the ease and the legal position the addition as confirmed by Ld. CIT(A) being wrong, bad in law, unjustifiable, deservers to be deleted. Ground No. 3: Because without prejudice to the grounds as mentioned above and in the alternative the capital gain, if any, to be worked out should be assessed under the head long term capital gain and the benefit of indexed cost should be allowed.”
The assessee has filed an application for admission of additional grounds, which are as under : “1. Because the addition made by the Assessing Officer invoking provisions of Section 50C of the I.T Act and confirmed by Ld, CIT(A) is wrong, bad in law, unjustified and without jurisdiction as the Assessing Officer has not referred the issue to the Valuation Officer to obtain the Valuation Report.
Because in the absence of the reference to the Valuation Officer and the Valuation Report the addition made being wrong, arbitrary and bad in law deserves to be deleted.”
It was submitted that these grounds are legal in nature and therefore the same are required to be admitted by the Tribunal. Reliance is placed upon the decision of Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. CIT, 229 ITR 383. The ld. DR has not objected to the admission of these two grounds. Accordingly, the additional grounds Nos. 1 & 2 are admitted.
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At the outset, the ld. AR had submitted that the notice issued u/s. 148 dated 15.03.2016 was not served on the assessee, as the address given in the notice was incomplete. For that purpose, our attention was drawn on the order of the Assessing Officer where the address of the assessee at page 2 was mentioned as under :
SURESH SINGH MARRIS ROAD ALIGARH-202001
It was submitted by the ld. AR that as per requirement of section 148, the notice is required to be served before completion of assessment proceedings and after the service of notice, the assessee is required to file return of income and to avail other statutory rights which are available to the assessee, namely, to ask for the reasons for reopening u/s. 148 and to file objections, if any, on the reopening after receiving the reasons for reopening. Therefore, it was the duty of the AO to pass a reasoned order dealing with the objections of the assessee in the light of the decision of Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd., 259 ITR 19 (SC). It was submitted that before the ld. CIT(A), the assessee had raised the specific ground which was mentioned at page 12 to 13 to the following effect:
“1. Because the order passed u/s. 144/147 of IT Act by the Ld. AO is wrong, illegal and contrary to the facts.
Because the notice issued by the Ld. A.O. u/s 148 of the I.T. Act is without of application of mind and hence the assessment passed u/s 144/147 of IT. Act is illegal, bad in the eye of law and unwarranted.
Because the notice issued u/s 148 of I.T. Act dated 15/03/2016 never served on the appellant with in stipulated time but served on 28/11/2016, duly admitted by the A.O. in his order, which was barred by limitation.
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Because the Ld. A.O. has failed to appreciate that any notice served on beyond prescribed limit of time is illegal, unwarranted and hence thereafter order passed u/s 144/147is wrong and illegal, deserves to be quashed as such.
Because the notice issued by the Ld. A.O either u/s 148 or 142(1) sent at incomplete address and never served on the appellant.
Because the Ld. A.O. has failed to appreciate that the appellant had filed his return of income in physical form and complete postal address duly mentioned therein.
However, despite raising the specific grounds by the assessee, the ld. CIT(A) has dismissed the grounds on the basis of assumption. The order passed by the ld. CIT(A) to this effect is scanned and reproduced hereunder :
“8.2 Decision On basis of these grounds the appellant has challenged the legality of assessment order. Appellant submission that the Assessing Officer has issued notice on incomplete address due to which the notice has not been received by him. Appellant submitted that he filed his return on 30.09.2009 in which there was complete address and in spite of this the notice has been issued on incomplete address. Appellant submitted that notice u/s 148 has not been received within the prescribed time limit and hence the assessment proceedings should be declared void ab-initio. I have considered all the facts and circumstances the Assessing Officer issued notice u/s 148 on 15.03.2016 and was sent by post. There is no evidence that the said notice has been returned by the postal department. Hence it is not proved that the address on which notice was sent by Assessing Officer was wrong or incomplete. If it is taken that the address was incomplete that it may be possible that the postal department after getting the complete address of the appellant may have served the notice. If it is not so then also the legality of the assessment proceedings should not be questioned because it is undisputed that the Assessing Officer issued the notice on 15.03.2016. According to the provisions of Income Tax Act the time limit of issuance of notice is prescribed but so far as service of notice is concerned no time limit is mentioned. Hence, there is no ground to challenge the legality of assessment proceedings. On the above observation these grounds are being dismissed.”
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It was submitted before us that it is the duty of the Assessing Officer to serve the notice before invoking the jurisdiction u/s. 148. As the notice was not served, there was jurisdictional error in invoking the provisions of section 147/148. Hence, entire exercise undertaken by the Assessing Officer was without jurisdiction. The ld. AR has also made legal submissions in support of the grounds. However, the Bench has indicated to the parties that the Bench would only be considering the legal ground on validity of initiation of proceedings u/s. 148 in respect of validity of service of notice upon the assessee.
Per contra, the ld. DR has vehemently opposed the grounds raised by the assessee and has submitted the written submissions. On facts it was submitted as under : "The show cause notice dated 09.01.2015 issued under section 144 was dispatched by the A.O. vide his office's dispatch no. 1175 on 16.01.2015 fixing the date of compliance as 27.01.2015. The order sheet in the assessment folder confirms the fact of issue of this show-cause notice as well as the fact that no compliance was made thereto by the appellant on 27,01.2015. Additionally, it is seen that three notices issued under section 142(1) on 09.06.2014, 10.09.2014 and 19.11.2014 were sent by the A.O. to the appellant prior to the said show cause notice dated 09.01.2015 and none of those came back un-served and also none of those were responded to by the appellant. Hence, the appellant's contention that the show-cause notice dated 09.01.2015 remained to be served on the appellant as he was not present at Agra because of his job in the Army, is not proved from facts. "Assessment proceedings in your case is pending with the undersigned for the A.Y. 2007-08 as the notice u/s 148 of the Income Tax Act, 61 for the A.Y. 2007-08 was issued by this office in your case on 24/03/2014 and served upon you on 26/03/2014 through speed post. As per this office record, no return of income for the A.Y. 2007-08 has been filed by you in compliance to the above referred notice.”
The ld. DR had relied upon the following decisions :
(i). Pr. CIT vs. Jakhotia Plastics, 94 taxmann.com 89 (Delhi HC) (ii). Nar Singh vs. State of Haryana dated 11.11.2014 (SC)
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(iii). CIT vs. Pearl Mechanical Engineering, 179 ITR 144 (P&H) (iv). CIT vs. Jai Prakash Singh, 1996 AIR 1303 (SC) (v). ITO vs. Shahid Atiq L/h of Late Atiquer, 89 ITD 489(Del. ITAT) (vi). R.K. Upadhyaa vs. Shanabhai P. Patel, 1987 AIR 1378 (SC) (vii). CIT vs. Sudev Industries Ltd. (ITA No. 805/2005-Del-HC) (viii). ITO vs. Shri Lal Chand Agarwal (ITA No. 169/Agra/2007- ITAT Agra) (ix). CIT vs. Jagat Novel Exhibitors dated 08.02.2012(ITA 07/2006-Del. HC) (x). N. Govindaraju (ITA No. 504/2013 – Karnataka HC) (xi). Pr. CIT vs. M/s. Modinagar Rolls Ltd. (ITA No. 275 of 2015 – Alld. HC) (xii) CIT vs. Harsingar Gutkha Pvt. Ltd. (ITA No. 34 of 2010 – Alld. HC) (xiii). Ajay Kapoor vs. CIT (2018) 93 taxmann.com 433 (J&K)
It was submitted that there is distinction between the service of notice and issuance of notice. The requirement of law is to issue the notice before 31.03.2016 and in the present case, the notice was issued prior to 31.03.2016 and there is no requirement of law to serve the notice before reopening. The requirement of law is to serve the notice before finalization of assessment proceedings. It was further submitted that as per decision of Hon’ble Allahabad High Court, it is merely an irregularity which cannot invalidate the proceedings u/s. 148.
In rebuttal, the ld. AR relied upon the following judgments :
(i). ACIT vs. Vindhya Telelinks Ltd., 107 TTJ 149 (TM)(ITAT Jabalpur) (ii). Nirmala Ghaziabad vs. ITO (ITAT Delhi) (iii). Sanjay Chaubey HUF (ITA No. 140/A/18 – ITAT Agra) (iv). ACIT vs. Lalitha Karan (ITA No. 1130/Hyd/2015) – ITAT Hyd. (v). Hari Om Garg vs. ITO (ITA No. 342/Agra/2017- ITAT Agra)
We have heard the rival contentions of the parties and perused the record. Since we are deciding the technical issue as mentioned above, hence, we are not referring to any other legal submissions in respect of other grounds of appeal. Firstly, the Assessing Officer in the assessment order mentioned the address as “Marris Road, Alligarh – 202001” on which the notice u/s. 148 was issued, whereas
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the assessee had brought on record acknowledgement of return of income filed by the assessee wherein the correct address was mentioned as 3/303, Marrish Road, Miss Gil Compound, Aligarh (UP). It is not the case of AO that the Assessing Officer was not aware of the correct address, as the Assessing Officer subsequently, when issued notice u/s. 142(1) has rightly mentioned the correct address as “ Shri Suresh Singh, 3/303, Miss Gill Compound, Marris Road, Aligarh”. At page 12 of the paper book filed by the assessee, the assessee has categorically mentioned that the notice issued on 15.03.2016 u/s. 148, and notice issued u/s. 142(1) on 18.04.2016, 09.05.2016, 13.05.2016 and 20.06.2016 were remained un-served, as these notices were sent on incomplete address whereas notice issued on 25.10.2016 was served on the assessee, as it was issued at correct address. However, despite bringing the above facts into the notice of lower authorities (AO & CIT), they did not bother to comply with the provisions of law. We fail to appreciate as to on what basis the ld. CIT(A) has decided that the notice would have been served on the assessee after collecting the correct address by the Postal Authorities. The law is not working on the presumption. The Law is working on certainty and predictability. We do not comprehend that the notice would be served by the Postal Authorities on its own at the assessee in absence of correct address. In our view once correct address is available with the Revenue authorities, then it is a duty of the Revenue Authorities to serve the notice at the correct address. The ld. CIT(A) has not brought on record any certification from the Postal Authorities suggesting that the notice was served by the Postal Authorities in spite of incomplete address. In absence of any cogent and reliable evidence, we have no option but to rely upon the assessee’s version. In view of above said facts, we are of the opinion that the notice u/s. 148 has not been served upon the assessee and therefore, there is error in assuming of the jurisdiction to reopen the case.
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The argument of the ld. DR that the requirement of section 148/147 is met if the notice is merely issued by the Assessing Officer. In our considered opinion, the law is required to be interpreted in the way it was sought to be enacted by the legislature, i.e., the purpose of providing the “service of notice” is to ensure timely issuance of notice by revenue, but also valuable right enure in favour of assessee if notice is not served on the assessee. The strict rule of interpretation is required to be applied and once the law requires that the notice is required to be served then no other interpretation can be in the statute. Since in the instant case, nothing is brought on record that the notice was served upon the assessee, therefore, we do not find any force in the submissions made by the ld. DR.
10.1. The contention of the ld. DR that by participation in the proceedings subsequently pursuant to the notice dated 25.10.2016, the assessee was debarred from challenging the issue of notice as the notice was received by the assessee on 28.11.2016, is of no consequence. As per law, the notice is required to be issued on or before 31.03.2016 for the assessment year 2009-10, as the return of income for this year was filed by the assessee on 30.09.2009 and therefore, if we uphold the arguments of the ld. DR that the notice which was subsequently received by the assessee on 28.11.2016 as correct, then the purpose of providing the limitation by the Act would become redundant and otiose. The Bench is duty bound to give meaningful interpretation to various provisions of the IT Act including the provisions of issuance of notice. Once, the notice is served upon the assessee beyond the period stipulated under the Act then that notice would be treated to have been served beyond the period of limitation and hence, there is jurisdictional error in view of section 149 of the IT Act. In view of the above, we do not find any merit in the submissions made by the ld. DR and the reliance placed by the ld. DR on various
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decisions of jurisdictional as well as other High Courts is of no consequence, as the facts in all the cases were different.
10.2. The decision in the case of Pr. CIT vs. Jakhotia Plastics, 94 taxmann.com 89 (Delhi HC) relied by the ld. DR, was not pertaining to service of notice on the assessee. Rather, it was a case for supplying the reasons for reopening, whereas the in the case of before us no such issue is involved. Therefore, this decision is not applicable to the present case.
10.3 The decision in the case of Nar Singh vs. State of Haryana (supra) is also not applicable to the facts and circumstances of the case.
10.4 In the case of CIT vs. Pearl Mechanical Engineering, 179 ITR 144 (P&H), the assessee has not complied with the notice u/s. 142(1) of the Act and as the assessee has not complied with the notice, the Hon’ble High Court has rejected the contention of the assessee. In the present case, immediately after the receipt of notice by the assessee on 28.11.2016 u/s. 142(1), the assessee had submitted that he had not received the notice u/s. 148 of the Act and therefore, the proceedings are required to be vitiated. Therefore, the facts of the present case are different from the facts in the matter of CIT vs. Pearl Mechanical Engineering (supra).
10.5 The decision in the case of CIT vs. Jai Prakash Singh, 1996 AIR 1303 (SC) is also not applicable because the facts are not pertaining to the issue under consideration.
10.6 The decision in the case of ITO vs. Shahid Atiq L/h of Late Atiquer, 89 ITD 489(Del. ITAT) is also not applicable to the present case as in the said case, one of
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the legal heirs after receipt of the notice u/s. 148 had participated in the assessment proceedings and had not raised any objection with respect to the illegal assumption of jurisdiction. In the present case, as stated hereinabove, the assessee in the first instance after the receipt of notice on 28.11.2016 has raised the objection of assumption of jurisdiction and had submitted that no notice u/s. 148 was received. Present case is not of participation in the proceedings without any objection, rather the case of raising the objections before the lower authorities as to the wrong assumption of jurisdiction.
10.7 CIT vs. Sudev Industries Ltd. (ITA No. 805/2005-Del-HC): In this case, the assessee had raised the ground of improper service for the first time before the Tribunal and therefore, the High Court has held that after participating in the assessment proceedings before the lower authorities, it does not lie in the mouth of the assessee to say that notice has not been served. In the present case, notice was not issued at the correct address and therefore, the presumption raised u/s. 27 of the General Clauses Act cannot be presumed in law of service of notice upon the assessee in the absence of issuing the notice at the correct address. Therefore, this decision is also not applicable.
10.8 The decision in the case of CIT vs. Jagat Novel Exhibitors dated 08.02.2012(ITA 07/2006-Del. HC) is also different. As mentioned in para 11 of the decision, the notice was issued by registered post at the local address of the assessee and thereafter in response to the notice u/s. 142(1) and 143(2) the return of income was filed stating that the original return filed for the assessment year 1989-90 should be treated as return filed in pursuance to the notice u/s. 148. As mentioned hereinabove, it was a case of sending the notice at correct local address. In the present case, notice was sent at incomplete address. Therefore, no
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presumption of service of notice can be raised in view of section 27 of the General Clauses Act, as the notice was sent at incomplete address of the assessee.
10.9 The decision in the case of Pr. CIT vs. M/s. Modinagar Rolls Ltd. (ITA No. 275 of 2015 – Alld. HC) is also not applicable to the present case, as the assessee had raised the additional ground before the Tribunal for the first time objecting to the validity of notice u/s. 148.
10.10. The judgment in the case of CIT vs. Harsingar Gutkha Pvt. Ltd. (ITA No. 34 of 2010 – Alld. HC) is also not applicable in the present case, as in the said case, notice was not served upon the assessee through registered post, but was served upon the assessee through process server and was received by the officer of the assessee. Pursuance to that, the officer of assessee participated in the assessment proceedings. The facts are different, as the present case is of non-service of notice either by registered post or through process server.
The assessee had also relied upon certain decisions of Tribunal. However, we find that the decision entered by the Delhi High court in the case of CIT vs. Chetan Gupta, 62 taxmann.com 249 (Delhi) and the decision in the matter of PCIT vs. Silver Line, 65 taxman.com 137 are squarely applicable to the facts of the case, wherein the Hon’ble High Court after considering plethora of judgments has come to the conclusion that service of notice u/s. 148 is sine qua non for reopening of assessment and the notice should have been issued within the statutory period as contemplated in law. Further, the Hon’ble High court in paragraph No. 20 had recorded that because the assessee merely participated in the proceedings that will not obliviate mandatory requirement of service of notice by the Assessing Officer upon the assessee. In view of the above there is no attempt on the part of the
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Assessing Officer to serve on the assessee either through registered post or through other mode. They have wrongly assumed jurisdiction u/s. 147/148. Therefore, there is jurisdictional error. Hence, the appeal of assessee is liable to be allowed.
In the result, the appeal is allowed. Order pronounced in the open court.
Sd/- Sd/- (Dr. Mitha Lal Meena) (Laliet Kumar) Accountant Member Judicial member
Dated: 10/07/2019 *aks* Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant Registrar Income Tax Appellate Tribunal Agra Bench, Agra