KAPIL GUPTA,DELHI vs. ITO, WARD-55(4), NEW DELHI

At the time of hearing, no one was present on behalf of the assessee. The appeal was passed over. In the second round also the assessee remained unrepresented despite issuance of notice. Accordingly, after hearing the ld. DR it was deemed appropriate to proceed with the present appeal ex-parte qua the assessee appellant on merits.

The relevant facts pertaining to ground No.1 and 2 are found adduced in para No.4 and 5 of the impugned order. A perusal of the same shows that the notice was issued to the only known address provided by the Bank. The AO also made efforts to locate the assessee’s shop and sent notices to this address which was responded to by the assessee’s Advocate. In the circumstances in the absence of any evidence and argument to the contrary finding no infirmity in the conclusion arrived at same is upheld. For ready reference the relevant facts extracted from the order which have been relied upon by the SR. DR is reproduced here under. “4. The ground no.1 is in relation to passing of order u/s 147 without service of notice of 148 to the appellant. In this statement of facts, the appellant has stated that he was a very small business man doing business from shop of his father. He obtains order from outside parties and sells to them. The parties deposited the amount in the bank account. The appellant admits that he did not file his return for the AY 2010- 11. He thereafter states that notice under section 148 was not served upon him and therefore the proceedings are invalid. I have gone through the facts. The A.O had received a copy of the bank account of the appellant showing large amount of cash deposits. The bank provided the address of the appellant as “453,Teliwara, Shahdara”, The Bank could not provide any PAN of the appellant and therefore a letter was sent on 16-03-2016 to Sh. Kapil Gupta asking him to provide explanation of cash deposits in his bank account. Since the appellant did not comply to the notice, there was a reason to believe that income had escaped assessment (since assessee was concealing these deposits). Proceeding u/s 147 were initiated after obtaining approval of CIT and thereafter notice was issued on 30-03-2016 vide speed post no. ED929937053IN. However, no compliance were made. Further, letters were sent on same address but again no compliance was made. After doing much effort, the Assessing Officer was able to locate the shop address of the appellant at 2039/3 Shiv Shakti Market, Bhagirat Palace, Delhi. Therefore, notices were sent on this new address. Sh. Raju Advocate appeared but again thereafter no compliance was made in spite of the fact that the notices were issued on the address reported now in the appellate memo. The proceedings were therefore completed u/s 144. The main challenge of the appellant is that the notice u/s 148(1) was not served upon him. I have already pointed out that the information was without Permanent Account Number. Notices u/s 148 was duly served by speed post at the last known address of the appellant which was informed by the bank. The Kapil Gupta vs. ITO service on the last known address by speed post is deemed to be a valid service as laid down by the Hon’ble Supreme Court: In the case of C.C. Alavi Haji vs Palapetty Muhammed & Anr in appeal No. 767 of2007 (6 SCC 555) before a three member Bench. It was a matter in which the notice for initiating legal proceedings for dishonor of a cheque was sent to the drawer by post. The same returned unserved. Thereafter the payee attached the same with his complaint filed with the Court. The question before the Bench was as under:- Whether in absence of any averments in the complaint to the effect that the accused had a role to play in the matter of non-receipt of legal notice; or that the accused deliberately avoided service of notice, the same could have been entertained keeping in view the decision of this Court in Vinod Shivappas case (supra)? The Honourable Court relied on the decision in K. BHhaskaran Vs Sankaran Vaidhyan Balan & Anr. Where said expression came up for interpretation. It held “The words in Clause(b) of the proviso to Section 138 (Of Negotiable Instrument Act)of the Act show that payee has the statutory obligation to make a demand by giving notice. The thrust in the clause is on the need to make a demand. It is only the mode for making such demand which the legislature has prescribed: A payee can send the notice for doing his pari for giving the notice. Once it is dispatched his part is over and the next depends on what the sendee does.

Since in Bhaskarans case (supra), the notice issued in terms of Clause (b) had been returned unclaimed and not as refused, the Court posed the question: Will there be any significant difference between the two so far as the presumption of service is concerned? It was observed that though Section 138 of the Act does not require that the notice should be given only by post, yet in a case where the sender has dispatched the notice by post with correct address written on it, the principle incorporated in Section 27 of the General Clauses Act, 1897 (for short G.C. Act) could profitably be imported in such a case. It was held that in this situation service of notice is deemed to have been effected on the sendee unless he proves that it was not really served and that he was not responsible for such non-service.

All these aspects have been highlighted and reiterated by this Court recently in Vinod Shivappas case (supra). Elaborately dealing with the situation where the notice could not be served on the addressee for one or the other reason, such as his non availability at the time of delivery, or premises remaining locked on account of his having gone elsewhere etc; it was observed that if in each such case, the law is understood to mean that there has been no service of noticeT 'it would completely defeat the very purpose of the Act. It would then be very easy for an unscrupulous and dishonest drawer of a cheque to make himself scarce for sometime after issuing the cheque so that the requisite statutory notice can never be served upon him and consequently he can never be prosecuted. It was further observed that once the payee of the cheque issues notice to ike drawer of the cheque, the cause of action to file a complaint arises on the expiry of the period prescribed for payment by the drawer of the cheque. If he does not file a complaint within one month of the date on which the cause of action arises under Clause (c) of the proviso to Section 138 of the Act, his complaint gets Page 3 of 7 Kapil Gupta vs. ITO barred by time. Thus, a person who can dodge the postman for about a month or two, or a person who can get a fake endorsement made regarding his non availability, can successfully avoid his prosecution because the payee is bound to issue notice to him within a period of 30 days from the date of receipt of information from the bank regarding the return of the cheque as unpaid. He is, therefore, bound to issue the notice, which may be returned with an endorsement that the addressee is not available on the given address. This Court held: We cannot also lose sight of the fact that the drawer may by dubious means manage to get an incorrect endorsement made on the envelope that the premises has been found locked or that the addressee was not available at the time when postman went for delivery of the letter. It may be that the address is correct and even the addressee is available but a wrong endorsement is manipulated by the addressee. In such a case, if the facts are proved, it may amount to refusal of the notice. If the complainant is able to prove that the drawer of the cheque knew about the notice and deliberately evaded service and got a false endorsement made only to defeat the process of law, the Court shall presume service of notice. This, however, is a matter of evidence and proof. Thus even in a case where the notice is returned with the endorsement that the premises has always been found locked or the addressee was not available at the time of postal delivery, it will be open to the complainant to prove at the trial by evidence that the endorsement is not correct and that the addressee, namely the drawer of the cheque, with knowledge of the notice had deliberately avoided to receive notice. Therefore, it would be pre- mature at the stage of issuance of process, to move the High Court for quashing of the proceeding under Section 482 of the Code of Criminal Procedure. The question as to whether the service of notice has been fraudulently refused by unscrupulous means is a question of fact to be decided on the basis of evidence. In such a case the High Court ought not to exercise its jurisdiction under Section 482 of the Code of Criminal Procedure 10. It is, thus, trite to say that where the payee dispatches the notice by registered post with correct address of the drawer of the clreque, the principle incorporated in Section 27 of the G.C. Act would be attracted; the requirement of Clause (b) of proviso to Section 138 of the Act stands complied with and cause of action to file a complaint arises on the expiry of the period prescribed in Clause (c) of the said proviso for payment by the drawer of the cheque. Nevertheless, it would be without prejudice to the right of the drawer to show that he had no knowledge that the notice was brought to his address. In fact a copy of the notice could have been further served on the 5. appellant had he attended the proceedings inspite of being served the subsequent notices. . The address mentioned by the appellant memo is of his shop and he has not stated that address 445,Teliwara Shahdara was a wrong address or was incorrect address, since, the same had been duly furnished by the appellant to the bank which he had been consistently operating. The subsequent conduct of defiance shows that the original notice u/s 148 was duly served, but ignored by the assessee, just like the subsequent notices. This ground of the appellant is therefore rejected.”

Addressing the next issue challenged by the assessee by way of ground No.3 and 4, the ld. Sr. DR relied upon para 6 page 6 of the order. Addressing ground Page 4 of 7