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Income Tax Appellate Tribunal, B BENCH, CHENNAI
Before: HONBLE SHRI MANU KUMAR GIRI & HONBLE SHRI JAGADISH
आदेश / O R D E R MANU KUMAR GIRI (Judicial Member)
The appeal of the revenue and Cross objection by the assessee are arising out of the order dated 21.06.2024 of the Commissioner of Income Tax (Appeals), NFAC, Delhi (in short the ‘’ld. CIT(A)’’). The assessment order u/s 144 r.w.s 147 of the Income Tax Act, 1961 (hereinafter the ‘Act’), was passed vide order dated 19.12.2019.
CO No.78/Chny/2024 2. The registry has noted delay of 14 days in filing the appeal by the revenue. Considering reasons stated in the affidavit by the revenue, we condone the delay and admit the appeal for adjudication. 3. Grounds of appeal filed by the revenue are as under: ‘’1. The order of the CIT (A) is contrary to the facts and circumstances of the case and provisions of Income Tax Act 1961.
2. The Id. CIT (A) erred to hold that the notice u/s 148 was sent for the service after 10 months delay and holding the assessment order dated 19.12.2019 as time barred. 2.1. The Id. CIT (A) erred to hold that the notice u/s 148 was sent for the service after 10 months delay without appreciating the fact that the notice was issued before limitation date of issuance of notice through postal department. 2.2. The Id. CIT (A) erred to hold that the notice u/s 148 was sent for the service after 10 months delay without appreciating the fact that the notice was issued before limitation date of issuance of and subsequently when it retuned back unserved it was served through affixture and later on through post also. 2.3. The Id. CIT (A) erred in not differentiating between issuance of notice and service of notice. 2.4. The Id. CIT (A) erred in not appreciating the provisions of section 153 (2) of the Act wherein it was stated that assessment shall be completed after the expiry of nine months from the end of the financial year in which the notice under section 148 was served. 2.5. The Id. CIT (A) erred in noting that AO took advantage of procedural lapse ignoring the provisions of income tax Act related to issuance of 148 notice and completion of assessment/reassessment.
3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Ld. CIT(A) be set aside and that of the Assessing Officer be restored’.
4. Grounds of Cross Objections filed by the assessee are as under: ‘’1) The Revenue erred in filing the appeal in NFAC, Delhi dated 21.06.2024 without assigning proper reasons and justification. 2) The Revenue failed to appreciate that having reckoned the date for completion of re-assessment on or before 31.12.2018 as per the ITBA Portal (refer Para 4.4 CO No.78/Chny/2024 of the impugned order), the re-assessment completed on 19.12.2019 was correctly held to be invalid. 3) The Revenue in this regard failed to appreciate that having not stated the date of service in clear terms in the Form No. 36 or brought to the notice of the NFAC during the pendency of the appellate proceedings, the presumption of time limit for passing the re-assessment order as reflected in the ITBA Portal should be considered as correct/sacrosanct thereby vitiating the re-assessment order passed beyond 31.12.2018. 4) The Revenue failed to appreciate that in the absence of evidence for issuance of the notice of re-opening before the limitation period namely 31.03.2018, the conclusions reached in Para 4.4 of the impugned order should be reckoned as sustainable in law. 5) The NFAC erred in confirming the addition of Rs.21,28,000/- being the cash deposits considered as unexplained money u/s 69A of the Act in Para 6 of the impugned order without assigning proper reasons and justification. 6) The NFAC erred in confirming the re-computation of long term capital gains on sale of property at Abhiramapuram in Paragraph 5.1 without assigning proper reasons and justification. 7) The NFAC failed to appreciate that in any event, the entire re-computation of LTCG on various facets was wrong, incorrect, invalid and not sustainable both on facts and in law. 8) The Cross Objector/Assessee craves leave to file additional grounds at the time of hearing’.
Brief facts of the case are that the ld. Assessing Officer found that during the financial year 2010-11, the assessee had made cash deposits to the tune of Rs.21,28,000/- in his savings bank account and as per 26AS details, the assessee had received payments to the tune of Rs.6,42,532/-. The assessee has not filed return of income for the A.Y.2011-12, the ld. Assessing Officer initiated proceedings u/s.147 of the Act by issuing notice u/s 148 of the Act dt:28.03.2018 with the prior approval of the Pr. Commissioner of Income Tax-5, Chennai. The notice u/s. 148 of the Act was served on the assessee on 19.02.2019. However, the notice u/s.148 CO No.78/Chny/2024 has not been complied with by the assessee and no return of income was filed by the assessee in response to the said notice. Hence, the ld. Assessing Officer vide letter dt: 04.06.2019 required the assessee to show cause as to why proceedings u/s.276CC of the Act should not be initiated on him for non compliance to notice under section 148. The assessee vide letter dt. 18.07.2019, has enclosed computation of taxable income in response to notice u/s. 148 of the Act but the assessee has not uploaded the return online in the web-portal. The ld. Assessing Officer vide letter dt: 15.10.2019, directed the assessee to submit the complete set of return of income for the A.Y.2011-12, in the form prescribed, manually, since the same was necessary to finalise the pending reopening assessment proceedings, and the said letter was duly served on assessee. However, the assessee has not filed any return of income for the A.Y.2011-12 in response to the notice u/s. 148 of the Act.
The dispute in the present appeal pertains for the assessment year 2011- 2012. The revenue has challenged the impugned order of the ld.CIT(A) holding that notice u/s 148 dated 28.03.2018 of the Act which has been served on the assessee on 19.02.2019 is much beyond the completion of assessment deadline 31.12.2018 as per Income Tax Portal hence, the assessment order dated 19.12.2019 is time barred.
Before us, the ld.DR has filed written submissions as under: ‘’In the case of Shri. Arunachalam Veeraiah (PAN: AAIPA9044Q) for the A.Y.2011- 12 for obtaining approval from the Pr.CIT u/s 151 of the Income Tax Act proposal submitted on 26.03.2018 through the JCIT and to reopen the assessment u/s 147, approval granted by the Pr.CIT on 28.03.2018.
CO No.78/Chny/2024 2. Notice u/s 148 prepared on 28.03.2018 and the same was dispatched on 29.03.2018 through notice server on the same day (29.03.2018). As per the tear off slip, Notice u/s 148 dated 28.03.2018 could not be served since the notice server returned the notice stating that the concerned assessee was not available in the address mentioned which was No16, Sundarajan Street, Abhiramapuram, Chennai 600 018, as he has also enquired with the watchman and finally retuned the notice unserved on 5.4.2018. Then the notice u/s.148 was served by affixure on 26.12.2018 in the address mentioned above. The notice dt. 28.03.2018 was finally served on the assessee on 19.02.2019 (as per Department's tear off slip) and 03.03.2019 (as per assessee's letter dt.08.03.2019), at 34/14B, Beach Home 3. It is to be noted that the notice u/s.148 was issued on 28.03.2018 but actually served on 19.02.2019 for reasons stated in para 2 above. Section 153 of the I.T.Act 1961 tates that "No Order of assessment or reassessment or recomputation shall be made u/s.147 after the expiry of nine months from the end of the financial year in which the notice uls.148 was served" In the instant case, even though the notice was issued on 28.03.2018 the notice could be served only on 19.02.2019 and hence, as per the time limit above, end of the financial year was 31.03.2019 and 12 months from the end of the financial year was 31.12.2019. It is also to be noted that the assessee did not intimate the change of address to the Department and hence there was a delay in ascertaining the present address and consequently, a delay in service of notice in person.
A copy of the tear off acknowledgment of the Notice Server who was tasked with the service on notice issued on 28.03.2018 is also attached. He had returned the notice with the comment that he was informed by the watchman of the building at Abhiramapuram that the assessee was not residing there. The report of the Notice Server is dated 05.04.2018. Therefore, the notice was issued in time and delivery of the same could not be made as the assessee did not inform the fact of change of address. The Revenue also relied upon the judgment of the Hon’ble Apex Court in the case of Pr. CIT v. I-Ven Interactive Ltd. [2019] 110 taxmann.com 332/267 Taxman 471/418 ITR 662 (SC).
The assessee has also filed the written submissions as under: The present appeal of the Revenue is centred around the issue regarding the service of notice under Section 148 of the Act, having cascading impact on the time limit prescribed for completing the consequential re-assessment. According to the revenue, the notice under Section 148 of the Act dated 28.03.2018 was issued through the notice server / messenger of the Income Tax Department on 29.03.2018 to the old address of the Respondent /Assessee and CO No.78/Chny/2024 the tear off slip shared by the revenue before the Hon'ble Bench captured the non service by virtue of the endorsement made therein on 05.04.2018 in Tamil. The notice server / messenger had returned the endorsement in Tamil by making the signature in English is a point worth noting inasmuch the tear off acknowledgment slip is an internal document of the Income Tax Department. In any event, the Respondent / Assessee filed the return of income for AY: 2015- 16 on 31.03.2017 vide Acknowledgement No. 745422780310317 in the new changed address and it is very strange for the Income Tax Department to issue under Section 148 of the Act in the old address. The Screenshot of the return for the AY: 2015-16 is extracted herein after:
As per Rule 127 of the Income Tax Rules, 1962 read with Section 288 of the Income Tax Act, 1961, the sub-rule (2)(a)(iii) envisages the service as per the latest return of income filed by the Assessee and in the present case, the latest return of income was filed for the assessment year 2015-16 communicating the latest / correct address of the Assessee. The stand of the Revenue in justifying their attempt to serve on the wrong address due to the latest address being not communicated is factually incorrect and contrary to the provisions in Rule 127 of the Income Tax Rules, 1962. Moreover, the provisions of Section 282 of the Act prescribe modes of service of notices and the disputed notice under consideration was attempted to be served through a notice server / messenger of the Income Tax Department, which is the course available to the Income Tax Department on an extreme situation. Such an extremity is not existent on the facts and circumstances of the case and in view of the failure to adhere to the prescription of the Section 282 of the Act, the notice under Section 148 of the Act dated 28.03.2018 should be reckoned as issued on 17.02.2019 (over written on 28.03.2018 in the another tear off slip placed through email by the Senior DR on the appellant on 28.01.2025.
The attachment in the email is extracted herein after for demonstrating the undisputed over writing in the another tear off slip shared by the Income Tax Department for the present hearing:
CO No.78/Chny/2024 The provisions in Section 282 of the Act as existed at the time of issuance of disputed notice under Section 148 of the Act dated 28.03.2018 is extracted herein below: Service of notice generally. 282. (1) The service of a notice or summon or requisition or order or any other communication under this Act (hereafter in this section referred to as "communication") may be made by delivering or transmitting a copy thereof, to the person therein named- a) by post or by such courier services as may be approved by the Board; or b) in such manner as provided under the Code of Civil Procedure, 1908 (5 of 1908) for the purposes of service of summons; or c) in the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000 (21 of 2000); or d) by any other means of transmission of documents as provided by rules made by the Board in this behalf.
(2) The Board may make rules providing for the addresses (including the address for electronic mail or electronic mail message) to which the communication referred to in sub-section (1) may be delivered or transmitted to the person therein named. The sub clause (a) is very clear as to the mode of service of the notice and the service of the notice should be either by courier or post services as approved by the Board, which is not the case here. Hence as a consequence, the consequential re-assessment order is correctly annulled by the First Appellate Authority, thereby fortifying the plea for dismissal of the revenue's appeal. The legal consequence of the above facts is leading to another facet and according to the respondent / assessee, the issuance of notice by impermissible method, if accepted, would lead to the invalidity of the reassessment proceedings continued thereafter. The notice under Section 148 of the Act on the contrary was again attempted to be served through notice server / messenger, which is not a permissible mode in terms of Section 282 of the Act on 17.02.2019 and served on the assessee on 19.02.2019, which fact was also acknowledged by the Respondent/Assessee vide letter dated 08.03.2019 (Copy enclosed). If the above facts are taken into reckoning the issue of re-opening notice under Section 148 of the Act after expiry of 6 years from the end of the Assessment CO No.78/Chny/2024 Year (on or before 31.03.2018), the re-assessment completed on the said invalid notice should be considered as correctly annulled by the First Appellate Authority in para 4.4 of the impugned order. Further, the Income Tax portal has clearly captured the time limit for completing the re-assessment for the Assessment Year under consideration as 31.12.2018 as extracted by the First Appellate Authority at page 6 of the impugned order and consequently his decision to annul the assessment as invalid on the inordinate delay in service of notice after 10 months should be considered as not sustainable in law, thereby fortifying the plea for dismissal of the revenue's appeal. Therefore, the Respondent / Assessee pleads for dismissal of the departmental appeal and thus render justice. In the Cross Objection including the additional grounds of Cross Objection, the 2 additions sustained / confirmed by the First Appellate Authority is independently challenged and in the light of the re-assessment order completed under Section 144 of the Act, another meaningful opportunity may be granted to substantiate the stand of the Respondent / Assessee by setting aside the re-assessment order in the event of the Bench coming to a different conclusion on the validity of the said re-assessment. The said submission is made in view of the conclusion of the hearing on the preliminary legal issue’.
We have heard both the parties and perused the appeal records and written submissions. We find that as per revenue version, the first notice under section 148 dated 28.03.2018 was sent / dispatched through the ‘notice server’ on 29.03.2018. However, the same was not served as the concerned assessee was not available at the address mentioned in the notice as reported by watchman. Thereafter, revenue again served the same notice by affixture on 26.12.2018. Further as per revenue version, the notice dated 28.03.2018 was finally served on the assessee on 19.02.2019 by the notice server, hence as per section 153 of the Act the assessment order dated 19.12.2019 is not time barred.
For the service of notice u/s 148 of the Act, we have some guidelines set by the Hon’ble High Courts. The judgment of the Hon’ble Delhi High Court in Court in CO No.78/Chny/2024 Income Tax vs Chetan Gupta, [2015] 62 taxmann.com 249 (Delhi)/[2016] 382 ITR 613 (Delhi), summarised the conclusion as follows: “(i) Under Section 148 of the Act, the issue of notice to the Assessee and service of such notice upon the Assessee are jurisdictional requirements that must be mandatorily complied with. They are not mere procedural requirements. (ii) For the AO to exercise jurisdiction to reopen an assessment, notice under Section 148 (1) has to be mandatorily issued to the Assessee. Further the AO cannot complete the reassessment without service of the notice so issued upon the Assessee in accordance with Section 282(1) of the Act read with Order V Rule 12 CPC and Order III Rule 6 CPC. (iii) Although there is change in the scheme of Sections 147, 148 and 149 of the Act from the corresponding Section 34 of the 1922 Act, the legal requirement of service of notice upon the Assessee in terms of Section 148 with Section 282 (1) and Section 153 read (2) of the Act is a jurisdictional pre- condition to finalizing the reassessment. (iv) The onus is on the Revenue to show that proper service of notice has been effected under Section 148 of the Act on the Assessee or an agent duly empowered by him to accept notices on his behalf. In the present case, the Revenue has failed to discharge that onus. (v) The mere fact that an Assessee or some other person on his behalf not duly authorised participated in the reassessment proceedings after coming to know of it will not constitute a waiver of the requirement of effecting proper service of notice on the Assessee under Section 148 of the Act. (vi) Reassessment proceedings finalised by an AO without effecting proper service of notice on the Assessee under Section 148 (1) of the Act are invalid and liable to be quashed. (vii) Section 292 BB is prospective. In any event the Assessee in the present case, having raised an objection regarding the failure by the Revenue to effect service of notice upon him, the main part of Section 292 BB is not attracted.”
Similarly, in the case of service by affixture, the Hon’ble Punjab & Haryana High Court in the case of Commissioner of Income-tax v. Naveen Chander [2010] 323 ITR 49 (P&H) held as under: 2. The basic controversy raised is as to whether the assessee-respondent was served under section 158BD of the Act at his last known address on July 23, 2001, by way of affixture. The Tribunal considered the aforesaid issue as a "fundamental" controversy because it was necessary to establish that such a notice was served to confer jurisdiction. The Tribunal placed reliance on the provisions of Order V, rule 17 of the Code of Civil. Procedure, 1908 (for brevity "the Code") and has concluded on principle that where notice of service is claimed to have been served by affixation under Order V, rules 17, 18 and 19 of the Code then it becomes necessary to examine whether such CO No.78/Chny/2024 service has been made in accordance with the procedure, as it is mandatory. The first requirement is to ensure that the place is properly identified and, secondly, the report is authenticated by independent persons to avoid any attempt by the process server to prepare the report sitting in his office. The Tribunal has referred to the report dated July 23, 2001, issued by the process server. According to the report of the Inspector/notice server dated July 23, 2001, the notice was affixed on the main door of shop No. 33, Anajmandi, Mullanpur. There was no evidence of any local person having been associated with in identifying the place of business of the assessee- respondent and the report is not witnessed by any person at all. It has been found to be flagrant violation of rule 17 of Order V of the Code which lays down a procedure to serve notice by affixture. The conclusion is recorded in paragraphs 13 and 14 of the order which reads thus : "13. So, however, in the report of the Inspector/notice server, who claimed to have affixed the notice, there is no evidence of any independent local person having been associated with the identification of the place of business of the assessee. In fact such report is not witnessed by any person at all. Evidently, it is in clear violation of the mandate of rule 17 of Order V of the Civil Procedure Code, which lays down the procedure to serve notice by affixture. It mandates that the serving officer shall affix the notice on the outer door or some other conspicuous part of the house in which the person ordinarily resides or carries on business or personally works for gain and shall thereafter report that he has so affixed the copy, the circumstances under which he did so and, the name and address of the person by whom the house was identified and in whose presence the copy was affixed. The impugned report of the Inspector/notice server is bereft of any such lawful requirements enshrined in the Code of Civil Procedure. In fact it would not be out of place to observe that there is no assertion even by the Inspector/notice server that they had personally checked the business place of the assessee and were in a position to identify the same. For all the above reasons, an inference which cannot escape, is that there has been no valid service of notice issued under section 158BD upon the assessee.
14. Before concluding, we observe that having regard to the report of the Inspector/notice server dated March 27, 2001, the requirements of the Code of Civil Procedure have not been fulfilled and, therefore, in view of the aforesaid discussion and the case law referred to, we are of the view that there has been no valid service of notice issued under section 158BD on the assessee. Since there has been no proper service of notice on the assessee, it has to be held that the impugned assessment proceedings resulting in the order dated June 27, 2003, are bad in law. The same is hereby set aside. The Assessing Officer can issue afresh notice, if so authorized under the law."
It is thus obvious that finding with regard to service of notice to confer jurisdiction is absent.
4. The only argument raised by Mr. Vivek Sethi, learned counsel for the Revenue-appellant is that there are signatures of the assessee in the order CO No.78/Chny/2024 sheet entry dated May 19, 2003, which acknowledges the fact that he had duly noted the notice under section 158BD of the Act. However, on close scrutiny, we find that the claim made by the Revenue in the grounds of appeal and in the questions of law that there is order sheet entry dated May 19, 2003, showing that the assessee had noted the factum of notice under section 158BD of the Act is without any substance. The Tribunal had taken the view that registered AD letter was received back unserved and thereafter service was sought to be effected by affixation which was required to be done in accordance with the procedure laid down by Order V, rule 20 of the Code. These are necessarily findings of fact coupled with the finding on law that requirement of Order V, rule 20 of the Code were not complied with. Therefore, we find that no question of law much less a substantive question of law would arise for determination of this court. Accordingly, the appeal fails and the same is dismissed’.
12. Hence, taking guidance from the above referred judgments of the Hon’ble High Courts, we find from the record that as per Income Tax Portal, the deadline of the completion assessment was on 31.12.2018 hence, there was no reason to send the same notice through process server on new address beyond the time barring limitation. We further find that the assessee also filed the return of income for the AY 2015-16 dated 31.03.2017 vide Acknowledgement No.745422780310317 had mentioned the new address in the Income Tax Return hence, the new address was in the conscious knowledge of the revenue. We further observed that the notice by affixture dated 26.12.2018 is not served as per requirement of Order V, rule 20 of the Code of Civil Procedure hence revenue version cannot be relied as gospel truth. We also note that the slip sent by the revenue through email attachment shows notice u/s 148 dated 28.03.2018 was purportedly served on the assessee on 19.02.2019 is over written/altered. Therefore, in the facts and circumstances of the case, we are of the considered view that the notice dated 28.03.2018 served on the CO No.78/Chny/2024 assessee on 19.02.2019 by the notice server was beyond the deadline 31.12.2018, hence, the assessment order dated 19.12.2019 is hopelessly time barred. Facts of the I-Ven Interactive Ltd (supra) case is different from the present one, hence not applicable in this case.
13. Since we have affirmed the action of the ld. CIT(A) in quashing the assessment itself, the adjudication on merits of the case is now only an academic issue and as such we are not dealing with the same.
In the result, the revenue's appeal is dismissed and allow the cross objection of the assessee.
Order pronounced in open court on 14th February, 2025 at Chennai.