(O&M) COMMISSIONER OF INCOME TAX-II vs. M/S AMM AMM HOLDINGS PVT. LTD., LUDHIANA

This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 28.11.2008 (Annexure A-III) passed by the Income Tax Appellate Tribunal, Chandigarh Bench “B”, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 382/CHANDI/2008 and C.O. No. 22/CHANDI/2008 for the assessment year 1999-2000. The appeal was admitted vide order dated 23.9.2009 to consider questions proposed in para 5 of the appeal which are as under:- I. Whether on the facts and in law, the ITAT was legally justified in holding that the requirements of Order V Rule 17 of the CPC are mandatory for service of notice through affixture? GURBACHAN SINGH 2014.10.10 15:02 authenticity of this document High Court Chandigarh -2- II. Whether on the facts and in law, the ITAT was legally justified in quashing the assessment order made under Section 143(3)/147 by holding that the service of notice issued under section 148 of the Income-tax Act, 1961 was not valid?

The facts, in short, necessary for adjudication of the instant appeal as narrated therein are that the assessee filed its return of income on 7.12.1999 for the assessment year 1999-2000 declaring net loss at ` 5623/-. Subsequently, proceedings under Section 147/148 of the Act were initiated against the assessee on the basis of information received from the Director of Income Tax (Inv.)-I, Delhi. Accordingly, a notice under Section 148 of the Act was issued on 29.3.2006 which was served on the assessee through affixture on 31.3.2006. The Assessing Officer vide order dated 29.12.2006 (Annexure A-1) framed assessment at ` 31,50,00/-. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] who vide order dated 22.2.2008 (Annexure A-II) confirmed the addition of ` 9,01,800/- out of the total addition of ` 31,50,000/- and deleted the balance addition of ` 22,48,200/-. However, the plea regarding validity of service of notice under Section 148 of the Act was rejected. Being dissatisfied, the revenue filed an appeal before the Tribunal. The assessee also filed cross-objections challenging the issue of validity of service of notice under Section 148 of the Act. The Tribunal vide order dated 28.11.2008 (Annexure A-III) passed in ITA No. 382/CHANDI/2008 and C.O. No. 22/CHANDI/2008 dismissed the appeal of the revenue holding that there was no valid service of notice under Section 148 of the GURBACHAN SINGH 2014.10.10 15:02 authenticity of this document High Court Chandigarh -3- Act and, therefore, the assessment proceedings were bad in law. Hence, the present appeal by the revenue.

We have heard learned counsel for the revenue.

Learned counsel for the revenue submitted that in view of Section 292BB of the Act, the notice issued to the assessee is deemed to be valid in the present case. The order of the Tribunal is legally unsustainable in view of judgments of this Court in Om Sons International v. Commissioner of Income Tax (2011) 244 CTR 110 and Commissioner of Income Tax v. Panchvati Motors (P) Ltd. (2011) 243 CTR 189. 5. This Court in Om Sons International's case (supra) following the judgment in Panchvati Motors (P) Ltd.'s case (supra) under similar circumstances decided the issue against the assessee and held as under:- "Section 292BB of the Act was inserted by Finance Act, 2008 w.e.f. 1.4.2008. It reads thus:- "292BB: Where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of Income Tax Appeal No. 869 of 2010 5 the Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was - GURBACHAN SINGH 2014.10.10 15:02 authenticity of this document High Court Chandigarh -4- a) not served upon him; or b) not served upon him in time; or c) served upon him in an improper manner. Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment." A presumption has been raised under the said provision relating to service of notice upon the assessee in respect of assessment or reassessment proceedings. According to this provision, where an assessee appears in any proceedings or cooperates in any enquiry relating to assessment or reassessment proceedings, it shall be presumed that the assessee has been validly served and it shall not be open to the assessee to object that the notice was not served upon him or was not served in time or was served upon him in an improper manner. However, an exception to the aforesaid presumption has been made in a case where such objection has been raised before completion of assessment or reassessment. The Income Tax Appeal No. 869 of 2010 6 provision has been made effective from 1.4.2008 and therefore, shall apply to all pending proceedings. The Central Board of GURBACHAN SINGH 2014.10.10 15:02 authenticity of this document High Court Chandigarh -5- Direct Taxes issued circular No.1 of 2009 dated 27th March, 2009 [(2009) 222 CTR (St) 69: (2009) 310 ITR (St.) 42] giving explanatory notes on the provisions relating to direct taxes contained in Finance Act, 2008. Clause 42.7 (at page 86 of the report) is relevant which relates to applicability of this provision and reads thus: "42.7 Applicability - This amendment has been made applicable with effect from 1st April, 2008. This means that the provision of new-section 292BB shall apply in all proceedings which are pending on 1st April, 2008."

Accordingly, such objection having been raised for the first time before this Court do not give any valid justification for challenging the re-assessment proceedings on that ground. Accordingly, question No.1 is held not to be a substantial question of law calling for consideration of this Court.”

Adverting to the facts in the present case, the notice under Section 148 of the Act was issued to the assessee on 29.3.2006. After expiry of statutory period for filing the return under Section 148 of the Act, a notice under Section 142(1) of the Act was issued to the assessee on 15.11.2006. In response to the said notice objections to assumption of juri iction under Section 148 of the Act were filed on 14.12.2006 which were disposed of by the Assessing Officer on 29.12.2006 and the order of disposing of the objections was duly served upon the assessee on the same day. The objection regarding reassessment proceedings GURBACHAN SINGH 2014.10.10 15:02 authenticity of this document High Court Chandigarh -6- under Sections 147/148 of the Act being bad for want of proper service of notice was not taken up before the Assessing Officer but raised before the CIT(A) for the first time. Accordingly, in view of Section 292BB of the Act as interpreted by this Court in Om Sons International and Panchvati Motors (P) Ltd.'s cases (supra), the assessee is precluded from raising such a plea before the CIT(A). The Tribunal was, thus, in error in adjudicating the question of validity of service of notice in favour of the assessee. Further, this Court in Panchvati Motors (P) Ltd.'s case (supra) while deciding the issue in favour of the revenue remanded the matter to the Tribunal to decide the appeal afresh on merits in accordance with law.

In view of the above, the substantial questions of law are answered accordingly. The appeal is allowed and the order dated 28.11.2008 (Annexure A-III) is set aside. The matter is remitted to the Tribunal to decide the same afresh on merits in accordance with law. (AJAY KUMAR MITTAL) JUDGE August 28, 2014 (FATEH DEEP SINGH) gbs JUDGE GURBACHAN SINGH 2014.10.10 15:02 authenticity of this document High Court Chandigarh