SH. NAVPREET SINGH,CHANDIGARH vs. ITO, KHANNA

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ITA 568/CHANDI/2016Status: DisposedITAT Chandigarh07 May 2019AY 2008-0915 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the issuance of a notice under Section 148 of the Act is a foundational requirement for reopening an assessment. A notice issued in the name of a deceased person is void and not curable under Section 292B or 292BB of the Act, as it is a substantive error and not a procedural irregularity. The Tribunal relied on the Bombay High Court's decision in 'Sumit Balkrishna Gupta Vs. ACIT' and the Delhi High Court's decision in 'Rajender Kumar Sehgal Vs. ITO'. The Tribunal found no force in the revenue's contention that the legal heir should have informed the AO, especially since the service was by affixation and not witnessed. Regarding Sh. Navpreet Singh's appeal, the Tribunal found that the service by affixation was not valid. The affixture order lacked specific address details, the process was not properly witnessed, and the AO issued the order for affixture without waiting for the outcome of service by registered post. Furthermore, the AO later obtained the assessee's office address but did not serve the Section 148 notice there. Therefore, the Tribunal concluded that there was no valid service of notice under Section 148 on either assessee, rendering the consequent assessment proceedings unsustainable. Both appeals were allowed, quashing the notices and assessment proceedings.

What were the facts?

The appeals concern assessment year 2008-09. The Income Tax Appellate Tribunal (ITAT) heard appeals filed by Sh. Balbir Singh (through his legal heir Sh. Navpreet Singh) and Sh. Navpreet Singh against orders of the Commissioner of Income Tax (Appeals)-2, Ludhiana. The Assessing Officer (AO) had reopened the assessment under Section 147/148 of the Income Tax Act, 1961. In the case of Sh. Balbir Singh, the notice under Section 148 was issued on 26.3.2013, after his death on 25.11.2012. The notice was allegedly served by affixation. In the case of Sh. Navpreet Singh, the notice under Section 148 was also issued on 26.3.2013 and allegedly served by affixation. The assessees contended that the notices were invalid due to improper service and issuance to a deceased person.

What were the issues?

1. Whether the reopening of assessment under Section 147/148 of the Income Tax Act, 1961, by issuing notice to a deceased assessee (Sh. Balbir Singh) is legally valid? The assessee argued that a notice issued to a dead person is void ab initio and not curable under Section 292B or 292BB of the Act, relying on decisions of the Bombay High Court in 'Sumit Balkrishna Gupta Vs. ACIT' and the Delhi High Court in 'Rajender Kumar Sehgal Vs. ITO'. The revenue contended that the legal heir should have informed the AO about the death, enabling issuance of notice to the legal representative. 2. Whether the service of notice under Section 148 of the Act on Sh. Navpreet Singh by way of affixation was valid? The assessee argued that the affixture order lacked details of the address, the process was not witnessed by independent persons, and the AO issued the affixture order without waiting for the outcome of service by registered post. The revenue argued that the notice was served as per procedure. The Tribunal also considered whether the AO had made proper efforts to ascertain the correct address, noting that another address was available in the agreement to sell.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 292B,Section 292BB,Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’, CHANDIGARH

Before: SHRI N.K. SAINI & SHRI SANJAY GARG

आदेश/Order

Per Sanjay Garg, Judicial Member:

The present appeals by different but related assessees have been

preferred against the separate orders dated 15.2.2016 of the

Commissioner of Income Tax (Appeals)-2, Ludhiana [hereinafter

referred to as ‘CIT(A)'].

2.

First, we shall take up the assessee’s appeal in the case of Shri

Balbir Singh, ITA No.567/Chd/2016. This Appeal has been preferred

by Shri Navpreet Singh legal heir of the deceased Shri Balbir Singh,

wherein, following grounds have been taken :- 1. That the Ld. CIT{A) has erred in confirming the action of the Assessing Officer with regard to reopening of the case u/s 148 and also on merits.

2.

That the Ld. CIT(A) has erred in holding that the notice u/s 148 was legally valid and has failed to consider the fact that the notice u/s 148 having been issued to the dead person and, as such, the proceedings are void.

3.

Notwithstanding the above ground of appeal, there was no proper and valid service of notice u/s 148.

4.

Notwithstanding the above said ground of appeal, the Ld. CIT (A) has erred in confirming the action of the Assessing Officer in

ITA Nos. 657 & 658-C-16- S/Sh. Balbir Singh & Navpreet Singh, Mohali 3

assessing the 50% share of capital gain at Rs. 76,12,500/-.

5.

That the CIT(A) has erred in confirming the action of the Assessing Officer in adopting the sale consideration on the basis of so called alleged sale agreement, which is not reliable at all.

6.

That the Ld. CIT (A) has erred in not admitting the additional ground of appeal, which was legal ground of appeal and which ought to have admitted in view of the judgment of Hon'ble Supreme Court in the case of CIT Vs. National Thermal Plant as reported in 229 ITR 383.

7.

That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.

3.

At the outset, the Ld. Counsel for the assessee has submitted that

as per the instructions of his client, he does not press ground No. 6. This

ground is therefore, dismissed as ‘not pressed’.

4.

The facts of the case in brief are that in this case the assessment

was reopened u/s 147 of the Income-tax Act, 1961 (in short 'the Act') by

way of issuance of notice dated 26.3.2013 u/s 148 of the Act in the

name of deceased assessee Shri Balbir Singh. However, admittedly the

assessee had already died on 25.11.2012 i.e. much before the issuance

of notice u/s 148 of the Act. Even, the notice u/s 148 of the Act was

ITA Nos. 657 & 658-C-16- S/Sh. Balbir Singh & Navpreet Singh, Mohali 4

served through affixation and not in a regular mode of service. The

notice was issued in the name of the deceased assessee.

The issue, in our view, is squarely covered by the various decisions of

the Hon'ble High Courts including the latest decision of the Hon'ble

Bombay High Court in the case of ‘Sumit Balkrishna Gupta Vs. ACIT’

in Writ petition No. 3569 of 2018 vide order dated 15.2.2019, wherein,

the Hon'ble Bombay High Court has held that the issue of a notice under

Section 148 of the Act is a foundation for reopening of assessment. The

sine qua non for acquiring jurisdiction to reopen an assessment is that

such notice should be issued in the name of the correct person. This

requirement of issuing notice to a correct person and not to a dead

person is not a merely a procedural requirement but is a condition

precedent to the impugned notice being valid in law. Thus, a notice

which has been issued in the name of the dead person is also not

protected either by provisions of Section 292B or 292BB of the Act.

This is so as the requirement of issuing a notice in the name of correct

person is the foundational requirement to acquire jurisdiction to reopen

the assessment. The Hon'ble High Court has further observed that

Section 148 of the Act requires that before a proceeding can be taken up

for reassessment, a notice be served upon the assessee. The assessee on

ITA Nos. 657 & 658-C-16- S/Sh. Balbir Singh & Navpreet Singh, Mohali 5

whom the notice must be sent must be a living person i.e legal heir of

the deceased assessee, for the same to be responded. That this in fact is

the intent and purpose of the Act. Therefore, Section 292B of the Act

cannot be invoked to correct a foundational / substantial error as it is

meant so as to meet the jurisdictional requirement. Therefore, both the

impugned notices and the impugned assessment order required to be

quashed and set aside.

Similarly, the Hon'ble Delhi High Court in the case of ‘Rajender Kumar

Sehgal Vs. ITO’ [2019] 101 taxmann.com 233 (Delhi) held that where

the notice seeking to reopen assessment was issued in the name of

deceased assessee, since she could not have been participated in

reassessment proceedings, provisions of section 292BB were not

applicable to the assessee’s case and as a consequence, reassessment

proceedings deserved to be quashed.

5.

At this stage, the Ld. DR has pointed out that the LR of the

assessee should have promptly come forward to apprise the Assessing

officer that the assessee had died so that notice could have been issued

in the name of legal representative of the assessee. We do not find any

force in the above contention of the Ld. DR. as noticed above, the notice

was not served through registered post / or by regular mode of service.

ITA Nos. 657 & 658-C-16- S/Sh. Balbir Singh & Navpreet Singh, Mohali 6

The notice in this case was allegedly served through substituted mode of

the service i.e. by affixation of the same at the door of the house of the

assessee. Further, the report of service through affixation have not been

witnessed by any person. Had the Income-tax officials actually gone to

the house of the deceased assessee and enquired from the villagers about

the whereabouts of the assessee for the purpose of service of the notice,

they could have easily come to know about the death of the original

assessee and would have accordingly apprised the Assessing officer.

6.

It is not believable that the Revenue officials had visited the house

of the assessee and they could not get the information about the death of

the assessee despite affixation of the notice which is also required to be

witnessed by some independent / respectable of the village.

7.

The Ld. counsel has further invited our attention to the receipt

which has been printed on the back of the stamp papers upon which the

alleged agreement to sell has been executed, wherein, the name and

address of the seller i.e. Shri Balbir Singh has been mentioned as Shri

Balbir Singh S/o Shri Dharam Singh 1535/34-D, Chandigarh. However,

the alleged notice was never served by the Assessing officer on the said

address despite the address of the assessee duly mentioned on the

receipt which was the part and parcel of the alleged agreement to sell on

ITA Nos. 657 & 658-C-16- S/Sh. Balbir Singh & Navpreet Singh, Mohali 7

the basis of which reopening of the assessment has been made. This

otherwise show that even otherwise the notice is never served on the

address at which the assessee actually was residing before his death.

8.

In view of this, the issue is squarely covered by the decision of the

Hon'ble Bombay High Court in the case of ‘Sumit Balkrishna Gupta Vs.

ACIT’ (supra) and of the Hon’ble Delhi High Court in ‘Rajender

Kumar Sehgal Vs. ITO’ (supra). The impugned notice issue u/s 148 of

the Act, therefore, is held as ‘invalid’ and the consequent assessment

proceedings, are, therefore, liable to be quashed. We order accordingly.

In the result, the appeal of the appellant is hereby allowed.

ITA No. 568/Chd/2016

9.

The present appeal has been preferred by the assessee Navpreet

Singh against the order dated15.2.2016 of the Commissioner of Income

Tax (Appeals)-2, Ludhiana.

10.

The assessee in this appeal has taken following grounds of

appeal:- 1. That the Ld. CIT(A) has erred in confirming the action of the Assessing Officer with regard to reopening of the case u/s 148 and also on merits.

2.

That the Ld. CIT(A) has erred in holding that the notice u/s 148 was legally valid.

ITA Nos. 657 & 658-C-16- S/Sh. Balbir Singh & Navpreet Singh, Mohali 8

3.

Notwithstanding the above said ground of appeal, the Ld. CIT (A) has erred in confirming the action of the Assessing Officer in assessing the 50% share of capital gain at Rs. 76,12,500/-.

4.

That the CIT(A) has erred in confirming the action of the Assessing Officer in adopting the sale consideration on the basis of so called alleged sale agreement, which is not reliable at all.

5.

That the Ld. CIT (A) has erred in not admitting the additional ground of appeal, which was legal ground of appeal and which ought to have admitted view of the judgment of Hon'ble Supreme Court in the case of CIT Vs National Thermal Plant as reported in 229 ITR 383. 6. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.

11.

The Ld. Counsel for the assessee stated at Bar that as per the

instructions of his client, he does not press ground No. 5, this ground is,

therefore, dismissed as not pressed.

12.

The assessee, in this appeal, apart from contesting the additions

made by the lower authorities on merits has also taken the legal ground

regarding the validity of the assessment framed u/s 147 of the Act on the

ground that there was no valid service of mandatory notice required to

be issued u/s 148 of the Act.

13.

The facts of the case in brief are that in this case the assessment

was reopened u/s 147 of the Income-Tax Act, 1961 (in short 'the Act')

ITA Nos. 657 & 658-C-16- S/Sh. Balbir Singh & Navpreet Singh, Mohali 9

by way of issuance of notice dated 26.3.2013 u/s 148 of the Act through

registered post as well as by way of substituted service by affixture on

the same date i.e. 26.3.2013

14.

The Ld. Counsel for the assessee has submitted that the Assessing

officer allegedly issued the notice u/s 148 of the income Tax Act at the

wrong address / old address from which the assessee had already left

long back. That the alleged notice u/s 148 of the Act was never served

upon the assessee. Inviting our attention to the impugned assessment

order framed by the Assessing officer, the Ld. counsel has submitted

that as per the assessment order the Assessing officer issued the alleged

notice u/s 148 of the Act through normal mode of service i.e by

registered post as well as allegedly served the notice through substituted

mode of service i.e byway of affixation, on the same date i.e. 26.3.2013.

He, therefore, has submitted that if the Assessing officer was under

bonafide belief that the assessee was residing at the address at which

notice was issued i.e. village Bhatian Tehsil Khanna and the notice was

issued in the normal course at the last address through registered post

then what prompted the Assessing officer to simultaneously effect the

service through substituted mode i.e. by way of affixation on the same

date. He in this respect has submitted that perhaps the Assessing officer

ITA Nos. 657 & 658-C-16- S/Sh. Balbir Singh & Navpreet Singh, Mohali 10

was already aware that the assessee was not residing at the said address.

The Ld. Counsel, further inviting our attention to the Affixture Report

of the notice, has submitted that the said affixture report has not been

signed by any independent witness in whose presence the alleged

affixture was done at the house of the assessee. The Ld. counsel has

further submitted that the father of the assessee namely Shri Balbir

Singh had already died whereas the assessee had already left the said

address long back. Had the officials of the Department had gone to the

house of the assessee and enquired about the assessee, they could have

easily come to know not only about the death of the father of the

assessee Shri Balbir Singh but also the fact that the assessee was not

residing there.

The Ld. Counsel has further submitted that the old address of

Village Bhattian, Tehsil Khanna at which the notice was allegedly

served / sent to the assessee has not been mentioned in the agreement to

sell in question. Though in the front part of the agreement, the address

of his deceased father Shri Balbir Singh has been mentioned as H. No.

2208C, Phase-7, SAS Nagar, Mohali, however, since the said house

itself was the subject matter of sale, the Assessing officer served the

alleged notice / letter at the old address / village address of the assessee

ITA Nos. 657 & 658-C-16- S/Sh. Balbir Singh & Navpreet Singh, Mohali 11

at Village Bhattian, Tehsil Khanna. However, the other address of the

assessee and his father was available in the agreement to sell itself i.eon

the receipt printed on the back side of the stamp paper at which the

Assessing officer never served notice u/s 148 of the Act.

The Ld. counsel has invited our attention to the receipt which has been

printed on the back of the stamp papers upon which the alleged

agreement to sell has been executed, wherein, the name and address of

the seller i.e. Shri Balbir Singh, the deceased father of the assessee, has

been mentioned as Shri Balbir Singh S/o Shri Dharam Singh 1535/34-D,

Chandigarh. However, the alleged notice was never served by the

Assessing officer on the said address despite the address of the assessee

duly mentioned on the receipt which was the part and parcel of the

alleged agreement to sell on the basis of which reopening of the

assessment has been made. That the notice was never served on the

address at which the assessee actually was residing at that time.

15.

So far as the validity of service through affixture is concerned, a

copy of the letter / affixture order has been placed at page 4 of the

paper book, the contents of which are reproduced as under:-

ITA Nos. 657 & 658-C-16- S/Sh. Balbir Singh & Navpreet Singh, Mohali 12

“AFFIXTURE ORDER

I, Swaran Singh, Income Tax officer, Ward-III, Khanna, am satisfied that the Notice u/s 148 of the I.T. Act, 1961 issued in the case of Sh. Navpreet Singh S/o Sh. Balbir Singh, Vill. Bhattian, Khanna cannot beserved in an ordinary way. I, therefore, direct Sh. Param Vir Singh Duggal, Income Tax Inspector of this office to effect service of the said notice by affixture under Order V Rule 20 of CPC, 1908 on the conspicuous part of palace where the assessee is known to have last resided or carried on his business or personally worked for gain. Sd/- Dated 26.3.2013 (Swaran Singh) Income Tax Officer, Ward-III,Khanna

A copy of this order should be palced on the Notice Board of this office. Sd/- (Swaran Singh) Income Tax Officer, Ward-III,Khanna Attested by me Sd/- P V Duggal 26.3.2013

Imp. Sd/- Mangat Ram”

ITA Nos. 657 & 658-C-16- S/Sh. Balbir Singh & Navpreet Singh, Mohali 13

16.

A perusal of the above affixture order reveals that Shri Swaran

Singh, ITO, Ward-III, Khanna directed Shri PamamVir Singh Duggal,

Income Tax Inspector to effect the service of the notice u/s 148 of the

Act by way of affixture under Order V Rule 20of CPC, 1908 on the

conspicuous part of place where the assessee is known to have last

resided or carried on his business or personally worked for gain.

However, no address of such place has been mentioned in the said

affixture order. It is not clear from where the Income Tax Inspector

would come to know about the last known address of the assessee either

of his residence or of his working place. Even in the report of the

Inspector of the same date i.e. 26.3.2013, he has simply written ‘affixed

by me’. Even he has not mentioned as to where he had gone to affix the

notice, to say whether it was affixed at the last known residential

address of the assessee or at the last known work place of the assessee.

Though the signature of one Shri Mangat Ram have also been appended

but who that Mangat Ram is/was, has not been mentioned; whether he

was an independent witness available at the place where the affixation

was done or was an employee of the income Tax office, is not coming

out. Even as mentioned above, the notice by registered post as well as

by way of substituted service was allegedly served on the same date.

ITA Nos. 657 & 658-C-16- S/Sh. Balbir Singh & Navpreet Singh, Mohali 14

Under the circumstances, there was no reason for the satisfaction of the

Assessing officer that the alleged notice cannot be served in an ordinary

way. The Assessing officer issued the affixture order on the same day

without waiting for the outcome of the service of notice sent through

ordinary way i.e. by way of registered post.

17.

A perusal of the assessment order further reveals that when the

service could not be effected at the village address of the assessee, the

Assessing officer thereafter served the notice u/s 142(1) of the Act at

his office address which means that the Assessing officer had come to

know the office address of the assessee at which service can be effected

but admittedly no notice u/s 148 of the Act was served on the assessee

at his office address also. Under the circumstances, it is clear that

there was no valid service of notice u/s 148 of the Act on the assessee.

18.

The issue, therefore, is squarely covered by the recent decision of

the Hon'ble Bombay High Court in the case of ‘Sumit Balkrishna Gupta

Vs. ACIT’ (supra) in Writ petition No. 3569 of 2018 vide order dated

15.2.2019, wherein, the Hon'ble Bombay High Court has held that the

issue of a notice under Section 148 of the Act is a foundation for

reopening of assessment and condition precedent for framing of the

ITA Nos. 657 & 658-C-16- S/Sh. Balbir Singh & Navpreet Singh, Mohali 15

assessment u/s 147 of the Income Tax Act. Since there was no valid

service of the notice u/s 148 of the Act, therefore, the consequent

assessment proceedings framed u/s 147 of the Act are not sustainable in

the eyes of law and the same are accordingly quashed. The appeal of the

assessee is hereby allowed.

19.

In the result, both the captioned appeals are hereby allowed.

Order pronounced in the Open Court on 13/05/2019

Sd/- Sd/- (संजय गग� / SANJAY GARG) (एन. के. सैनी / N.K. SAINI) उपा�य� /Vice President �या�यकसद�य/ Judicial Member

Dated : 13. 05.2019 “आर.के.”

आदेशक���त�ल�पअ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकरआयु�त/ CIT 4. आयकरआयु�त (अपील)/ The CIT(A) 5. �वभागीय��त�न�ध, आयकरअपील�यआ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड�फाईल/ Guard File

आदेशानुसार/ By order, सहायकपंजीकार/ Assistant Registrar

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