SHRI HARISH BHASIN,NEW DELHI vs. ACIT, NEW DELHI

Appellant, Shri Harish Bhasin (hereinafter referred to as ‘the assessee’) by filing the present appeals, 7344 & 7345/Del/2018, sought to set aside the impugned orders all dated 15.09.2018 passed by the Commissioner of Income - tax (Appeals)-15, New Delhi qua the assessment years 2006-07, 2007-08 & 2008-09 confirming the penalties levied u/s 271(1)(c) of the Income-tax Act, 1961 (for short ‘the Act’) on the identical grounds inter alia that:-

Briefly stated the identical facts necessary for adjudication in all the aforesaid appeals at hand are : Assessee did not file return of income for AYs 2006-07, 2007-08 & 2008-09. In AYs 2006-07 & 2007-08, proceedings u/s 147 were initiated vide notices dated 05.06.2009. Notices u/ss 148 & 142 (1) of the Act were also issued in all the aforesaid years and stated to have been served upon the assessee. Assessee is a Director in a company, M/s.

We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.

This is second round of litigation before the Tribunal as the earlier appeals bearing to 1471/Del/2012 filed by the assessee were disposed off vide composite order dated 29.05.2014 vide which all the aforesaid appeals were remitted back to AO for de novo consideration of assessee’s objection that notices issued u/s 148 in AYs 2006-07 & 2007-08 and notice issued u/s 142 (1) in AY 2008-09 were never served upon.

At the very outset, ld. AR for the assessee sought to decide the legal issue as to the service of the notice u/s 148 raised vide ground no.3, issue which was remitted back by the Tribunal earlier to decide afresh by the AO.

Undisputedly, assessee has not filed return of income for AYs 2006-07, 2007-08 & 2008-09. It is also not in dispute that to initiate the reopening u/s 147 of the Act, service of notice u/s 148 is a mandatory provision. It is also not in dispute that assessee stated to have not appeared before the AO during initial assessment on the ground that he had not received any notice qua the assessment proceedings.

In the backdrop of the aforesaid facts and circumstances of the case, the first question to be decided in this case is :-

In order to decide the aforesaid issue, assessment records were summoned and perused by the Bench with the assistance of the ld. AR for the assessee as well as ld. DR for the Revenue and copies of notices along with copy of dispatch register were retained on the file for ready perusal.

For ready perusal, para 1 of the assessment order for AYs 2006-07, 2007-08 & 2008-09, identically worded, containing facts as to issuance and service of notice u/s 148 is extracted as under :-

Perusal of the aforesaid narration given by the AO as to issuance of service of notice dated 05.06.2009 u/s 148 shows that it does not contain facts if the notice (supra) were ever served upon the assessee, it just contains the fact that notices u/s 148 were issued on 05.06.2009. When we further examine assessment record viz. order sheet prepared by the AO and dispatch register, no doubt copy of notices dated 05.06.2009 for AYs 2006-07 & 2007-08 is reportedly issued on 05.06.2009 vide dispatch register but the record is altogether silent if the said notices were served upon the assessee or received back served/unserved nor copy of acknowledgement from the postal authority acknowledging the receipt of notice is there on the file. It is settled principle of law that when the assessee has specifically challenged service of notice u/s 148 as well as u/s 142 (1) since the stage of assessment it is the duty of the Revenue to prove the service of notice.

Hon’ble Supreme Court in case of V.N. Bharat vs. D.D.A. & Anr. 2008 (6) Supreme 343 held in the identical situation that, “onus of proving of service of notice is on the Revenue because except for denial there was nothing else that appellant could have produced to prove a negative fact and presumption under section 114(4) of the Evidence Act is a rebuttable presumption and on denial of receipt of the registered letter from DDA, appellant discharged his onus and the onus reverted back to respondent to prove such service by either examining postal authorities or obtaining a certificate from them showing that the registered article had been deliver to and had been received by the appellant and it was on a mistake understanding of provisions of section 114(f) of the Evidence Act that the Commission came to the erroneous conclusion that allegation of unfair trade practice on the part of the respondent authority had not been proved and Respondent authority was unable to prove that service of the demand notice for the fifth and final installment had been effected on appellant. The allegation of unfair trade practice on the part of the respondent authority stood established, the impugned judgment of MRTP Commission hence set aside and the appeal allowed.”

So, in view of the law laid down by Hon’ble Supreme Court, it is bounded duty of the Revenue to prove the service of notice under sections 148 and 142(1) to the assessee.

Ld. DR for the Revenue supported the order passed by the AO as well as ld. CIT (A) by contending that notices have been duly served in due process and relied upon the order sheet entry and dispatch register showing copy of notice and dispatch thereof through postal department. Ld. DR has also filed written submissions which have been made part of the judicial file and the operative part of which is extracted as under :-

When we examine the order sheet entries for AYs 2006-07 & 2007-08 prepared in due course of official duty by the AO, except for the fact that notices were issued on 05.06.2009, there is not a whisper even if the said notices were served upon the assessee. Identically worded order sheet entries dated 05.06.2009 for AYs 2006-07 & 2007-08 are extracted for ready perusal as under :-

This fact is also clear from para 1 of the assessment order, extracted in the preceding para. Merely producing the carbon copy of notice and dispatch register entry does not prove service of notice on the assessee.

In case, AO is to proceed to frame assessment u/s 144 of the Act on the basis of “due service”, he is required to bring these facts on record in the order sheet that notices issued to the assessee u/s 148/142(1) on 05.06.2009 were served upon the assessee or not received back served/unserved and a period of one month has since elapsed and as such, the same is deemed served. But no such facts are there either in the order sheet or in the assessment order.

Under Order V Rule 16 of the Code of Civil Procedure, 1908, persons served to sign the acknowledgement, which reads as under :-

To prove the service of summon, the AO during the assessment proceedings were required to bring on record that by such and such acknowledgment service of notice was effected on the assessee or he was required to examine the postal authorities to prove that notice (supra) was duly served upon the assessee. But entire record maintained and produced by the Revenue is silent if service was actually affected on the assessee nor any service report or acknowledgment from the postal department has been brought on record.

Needless to say that during the first round of litigation the case was remitted back by the Tribunal to the AO to decide afresh if the notice (supra) was served upon the assessee on the basis of evidence available with the Revenue, however AO has decided this issue again on the fact that notice was dispatched vide order sheet entry and dispatch register on 05.06.2009 and has again not preferred to substantiate his finding with the evidence available, if any, rather reiterated findings returned in the original assessment.

So far as service of notice u/s 142 (1) upon the assessee for AY 2008-09 was concerned, again AO recorded in para 1 of the assessment order that, “notice u/s 142 (1) issued and served upon the assessee on various dates”, however no such dates have been brought on record on which the service of notice was effected upon the assessee.

With the assistance of the ld. DR for the Revenue, we have perused the assessment record in the presence of ld. AR for the assessee which does not contain any order sheet regarding this fact, if any such notice u/s 142 (1) was issued to the assessee. There is one notice dated 24.09.2009, with overwriting and copy of dispatch register showing dispatch of order on 25.09.2009 in the assessment record but the same is not sufficient to treat the service of assessee effected for the reasons recorded and discussed in the preceding paras for returning findings qua AYs 2006-07 & 2007-08.

So far as question of overwriting is concerned which is quite visible but does not go root of the case as many a times wrong date is written and then to avoid preparing of fresh notice, date is corrected by overwriting. Again as discussed in the preceding paras, there is no acknowledgement or any other evidence on the file as required under Order V Rule 16 of the CPC to treat the service of assessee affected qua AY 2008-09 also. Moreover, AO at no stage of assessment proceedings tried to ensure if notice stated to have been issued were served upon the assessee, though he was having sufficient time to conclude the assessment rather merely relied upon copy of dispatch register and treated the same effected.

Reliance placed by the ld. DR for the Revenue on the judgment dated 26.07.2017 passed by the Additional Chief Metropolitan Magistrate (ACMM) (Special Acts), Central, Tis Hazari Courts, New Delhi, to prove the service of notice upon assessee, which is Annexure-2 enclosed with written submissions filed by the ld. DR, is entirely misplaced because ld. ACMM in his wisdom decided the issue as to the service of notice upon the assessee entirely on the basis of the fact that, “the assessee has failed to establish or bring any document on record to show that he was not served upon” and on the fact that u/s 27 of the General Clauses Act, meaning of service by post includes deemed service.

First of all, as discussed in the preceding paras, Hon’ble Supreme Court in the case of V.N. Bharat (supra) held that the onus to prove that service of notice has been effected on the assessee is on the Revenue and the assessee is not to be called upon to prove negative. Secondly, so far as question of “deemed service” of notice by post on the assessee is concerned, no such view has been taken by the AO at any stage of the case. Order sheet entries prepared in the due course of official duties by the AO are self-speaking which shows that he has proceeded to frame the assessment on the basis of symbolic notice without having any follow up if the same was served upon and has nowhere taken the view that it is a case of “deemed service”. Lastly, we are of the considered view that issue before the Bench is to be decided on the basis of facts and evidence on record and not on the basis of borrowed findings returned by ld. ACMM in judgment (supra).

Reliance placed by the ld. DR for the Revenue on the judgment passed by the Hon’ble Delhi High Court in the case of CIT vs. Yamu Industries Ltd. (supra) is also misplaced because it is nowhere the case of the AO at any stage of the assessment proceedings that he has proceeded to hold the service of notice on the assessee as “deemed service”. Because there is not an iota of evidence on file if notice served upon the assessee was not received back within a period of 30 days of its issuance as neither record of postal authorities nor statement of any serving official of the postal department has come on record to prove that notice was served upon the assessee. Entire assessment proceedings ex-facie go to prove that AO at no stage tried and ensured if notice has been served upon the assessee. So, the judgment relied upon by the ld. DR for the Revenue is not applicable to the facts and circumstances of the case.

In view of what has been discussed above, we are of the view that service of notice u/s 148 dated 05.06.2009 for AYs 2006- 07 & 2007-08 and service of notice dated 24.09.2009 u/s 142 (1) in AY 2008-09 is not proved to have been effected upon the assessee in accordance with provisions contained under section 282 (1) of the Act read with order under Rule XII and Order III Rule 6 of CPC, 1908 which is a jurisdictional pre-condition to finalize the reassessment and as such, Revenue has failed to prove the proper service of notice u/s 148 of the Act on the assessee, as there is not an iota of evidence on record to prove this fact. So, the question framed is answered in negative.

Now, the next question arises for determination in this case is :-

It is settled principle of law that when service of notice u/s 148 or u/s 142(1), as the case may be, is not proved to have been effected on the assessee, the entire proceedings u/s 147 are without jurisdiction, hence not sustainable.

Hon’ble Delhi High Court in the case of CIT vs. Chetan Gupta 382 ITR 613 (Del.) in the identical facts and circumstances held that the non-service of notice u/s 148 of the Act as a pre- condition for finalizing the assessment and order to quash the reassessment proceedings by returning following findings :-

Hon’ble Delhi High Court in case of CIT vs. Rajesh Kumar Sharma 311 ITR 235 (Del.) held that, “onus to prove that notice issued u/s 148 has been served upon the assessee is on the Revenue particularly when the assessee had categorically denied receiving the notice and therefore, it could not be said that notice was correctly addressed to the assessee.”

In view of what has been discussed above and following the law laid down by Hon’ble Delhi High Court discussed in the preceding paras, we are of the considered view that when the Revenue has failed to prove the mandatory service of notice upon the assessee issued u/s 148 and u/s 142(1), as the case may be, assessment framed by the AO u/s 254/144 of the Act is not sustainable, hence ordered to be quashed. Consequently, appeals filed by the assessee bearing 5854 & 5855/Del/2016 for AYs : 2006-07, 2007-08 & 2008-09 respectively are ordered to be allowed. , 7344 & 7345/Del./2018 AYs : 2006-07, 2007-08 & 2008-09

On the basis of assessments framed u/s 254/144 of the Act making various additions in AYs 2006-07, 2007-08 & 2008-09, AO initiated the penalty proceedings u/s 271(1)(c) of the Act and reached the conclusion that assessee has concealed his income and furnished inaccurate particulars of income and thereby levied the penalty of Rs.11,73,88,798/-, Rs.4,02,71,624/- & Rs.54,51,082/- @ 100% for AYs 2006-07, 2007-08 & 2008-09.

In view of our findings on the quantum appeals filed by the assessee in the preceding paras vide which very assessments framed u/s 254/144 of the Act has been held to be void ab initio and ordered to be quashed, the penalty levied by the AO and sustained by the ld. CIT (A) is not sustainable as has been held by Hon’ble Supreme Court in the case of KC Builders & Anr. vs. ACIT 265 ITR 562 (SC). Consequently, penalty levied by the AO and confirmed by the ld. CIT (A) for AYs 2006-07, 2007-08 & 2008-09 are ordered to be deleted.

Consequently, quantum appeals bearing 5854 & 5855/Del/2016 and penalty appeals bearing ITA Nos.7343, 7344 & 7345/Del./2018 for AYs 2006-07, 2007-08 & 2008-08 respectively filed by the assessee are allowed. Order pronounced in open court on this 24th day of February, 2020.