DY COMMISSIONER OF INCOME TAX vs. MS CAMERON SINGAPORE PTE LTD

By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby Tribunal has allowed

Counsel for the appellant has framed following substantial questions of law:- i) Whether in the facts and circumstances of the case, the ITAT was justified in law in deleting direction of DRP solely on the ground that the notice u/s 143(2) was not served within limitation. ii) Whether in the facts and circumstances of the case, the ITAT was justified in law in deciding the appeal on technical issue and not going on the merits of the case. iii) Whether in the facts and circumstances of the case, the ITAT was (2 of 6) [ITA-93/2018] justified in law in quashing the draft assessment order in pursuance to the notice u/s 143(2) of the Act holding the same as barred by the limitation.

The facts of the case are that the first notice for the assessment year 2010-11 was issued u/s 143(2) on 29.9.2011 and the same was served on the assessee on 5.10.2011. The AO has issued draft assessment order in which the income of the assessee was assessed at Rs.52227000/- as against returned income of Rs.20890802/-. The AO considered the activities carried out by the assessee as fees for technical service covered in section 9(1)(vii) of the Income Tax Act and imputed an profit rate of 25% on total receipts. The assessee filed objection against the draft assessment order before the Dispute Resolution Panel (DRP). The objections were with regard to assessment being time barred as well as on merits. The DRP rejected the objections and sustained the finding of the Assessing Officer.

Counsel for the appellant has contended that tribunal has committed serious error in holding that notice was not given u/s 143(2) in a prescribed manner.

In support of his contention, counsel for the appellant has relied upon the following decisions:-

1 (1964) 53 ITR 100 (SC), it has been held as under:-

It would be seen from this provision that Parliament used the words "serve", "give" and "send" as interchangeable words. So too, in ss. 553, 554 and 555 of the Calcutta Municipal Act, 1951, the two expressions "issued to" or "served upon" are used as (3 of 6) [ITA-93/2018] equivalent expressions. In the legislative practice of our country the said two expressions are sometimes used to convey the same idea. In other words, the expression "issued" is used in a limited as well as in a wider sense. We must, therefore, give the expression "issued" in s. 4 of the Amending Act that meaning which carries out the intention of the Legislature in preference to that which defeats it. By doing so we will not be departing from the accepted meaning of the expression, but only giving it one of its meanings accepted, which fits into the context or setting in which it appears.

With this background let us give a closer look to the provisions of s. 4 of the Amending Act. The object of the section is to save the validity of a notice issued beyond the prescribed time. Though the time within which such notice should have been issued under s. 34(1)of the Act, as it stood before its amendment by s. 18 of the Finance Act of 1956, had expired, the said notice would be valid. Under s. 34(1) of the Act, as we have already pointed out, the time prescribed was only for service of the notice. As the notice mentioned in s. 4 of the Amending Act is linked with the time prescribed under the Act, the section becomes unworkable if the narrow meaning is given to the expression "issued". On the other hand, if we give wider meaning to the word, the section would be consistent with the provisions of s. 34(1) of the Act. Moreover, the narrow meaning would introduce anomalies in the section: while the notice, assessment or re-assessment were saved, the intermediate state of service would be avoided. To put it in other words, if the proceedings were only at the stage of issue of notice, the notice could not be questioned, but if it was served, it could be questioned; though it was served beyond time, if the assessment was completed, its validity could not be questioned. The result would be that the validity of an assessment proceeding would depend upon the stage at which the assessee seeks to question it. That could not have been the intention of the Legislature. All these anomalies would disappear if the expression was given the wider meaning.

Admittedly, under the provisions of Section 143(2) of the I.T. Act, 1961 (as then in force) the notice has to be served on the Respondent-Assessee latest by 30th Oct., 2006. In the present case, notice was issued on 16th Oct., 2006 which was dispatched on 18th Oct., 2006 by registered post. The materials on record indicate that on two occasions the notice sent by registered post could not be served on the Respondent- Assessee as he was not available and that it was served on the Authorized Representative of the Respondent-Assessee on 19th Oct., 2006. The question, therefore, that arises in the writ petition was whether in such circumstances the requirement Under Section 143(2) of the I.T. Act, 1961 was met by the Revenue. The High Court answered the question in the negative taking the view that what is required to be satisfied by the Revenue is service of notice and not mere issuance thereof.

The non-availability of the Respondent- Assessee to receive the notice sent by registered post as many as on two occasions and service of notice on 19th Oct., 2006, on the Authorized Representative of the Respondent-Assessee whom the Respondent- Assessee now disowns, in our considered view, is sufficient to draw an inference of deemed service of notice on the Respondent- Assessee and sufficient compliance of the requirement of Section 143(2) of the I.T. Act, 1961. On the aforesaid view that we have taken we are of the opinion that the High Court was not right in coming to the impugned conclusion in the facts of the instant matter. We accordingly, allow this appeal and set aside the order of the High Court.

Counsel for the appellant has further contended that in view of the above decisions, the circular which sought to be relied upon by CBDT would not apply in the facts of the case.

However, counsel for the respondent has supported the order of the tribunal and contended that tribunal while considering the matter has rightly decided in favour of the assessee and taking into consideration the decision of this court in ITA No.347/2011 (CIT, Kota vs. Narendra Kumar Khurana) & other connected matter decided on 5.7.2013 wherein while considering the provisions of section 143(2) Division Bench has observed as under:- We may also observe that in the order dated 28.04.2006, the ITAT referred to a decision of this Court in Gyan Prakash Gupta (supra). Noticeable it is that even in Gyan Prakash Gupta, this Court did not hold that omission to serve within time was merely a procedural irregularity. In the said decision, this Court observed that assessment so made without notice under Section 143(2) could only be set aside and not annulled. Be that as it may, now the law declared by the Hon'ble Supreme Court in Hotel Blue Moon (supra) puts it beyond a pale of doubt that the requirement of issuance of notice within prescribed time under Section 143(2) of the Act for the purpose of assessment in case of the AO repudiating the return filed by the assessee in response to the notice under Section 158BC is a mandatory requirement and omission to serve such a notice within time is not a curable irregularity of procedure, as assumed by the ITAT in its earlier order dated 28.04.2006. Going by the principles on the applicability of case law, as explained by the Hon'ble Supreme Court in Saurashtra Kutch Stock Exchange Ltd. (supra), we have no hesitation in observing that in the demand of justice, only the principles in Hotel Blue Moon can be considered applicable to the present case. Moreover, in the present case, the proceedings had even otherwise not attained finality because of the pendency of the appeal against the order dated 22.05.2009. Viewed from any angle, the ITAT appears to have acted just and proper in modifying its (6 of 6) [ITA-93/2018] earlier order standing at contradiction to the dictum of the Hon'ble Supreme Court. The order dated 12.10.2012 being squarely in consonance with the requirements of justice, and on the admitted fact situation that the notice under Section 143(2) of the Act was not given in this case within prescribed time, no case for interference is made out.

In that view of the matter, we are in complete agreement with the view taken by the tribunal, therefore, no substantial question of law arises.

Hence, the appeal stands dismissed. (VIJAY KUMAR VYAS),J (K.S. JHAVERI),J Brijesh 10.