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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI VIKAS AWASTHY
This appeal by the assessee is directed against the order of CIT(A)-53, Mumbai dated 15.10.2018 for assessment year 2010-11.
The assessee has challenged the reopening under Section 147 of the Income Tax Act, 1961 (in short ‘the Act’) on the legal ground that notice under Section 148 of the Act was not validly served on the assessee. The assessee has further raised a legal ground that no notice under Section 143(2) of the Act was served on the assessee after filing of return of income.
Shri R.C. Jain & Shri Ajay Daga appearing on behalf of the assessee submitted at the outset that the impugned order is an ex parte order,
Sajjan Kumar Agarwal however, it is amply clear from the assessment order that reopening has been done after a period of 4 years in a manner contrary to the well established principles of natural justice. The learned AR submitted that notice under Section 148 of the Act was not served on the assessee as per the provisions of the Act. Service of notice under Section 148 of the Act was made by way of affixture. The learned AR referred to the report of Inspector at page 26 of the Paper Book. The learned AR further pointed that even the affixture was not witnessed by an independent witness and another Inspector of the Department had witnessed the affixture of notice. The assessee filed letter dated 11.08.2016 stating that return originally filed under Section 139(1) of the Act may be treated as return in response to notice under Section 148 of the Act. Thereafter, the Assessing Officer failed to issue mandatory notice under Section 143(2) of the Act. The Assessing Officer directly made assessment vide order dated 30.12.2016 under Section 143(3) r.w.s. 147 of the Act. The learned AR asserted that assessment framed without service of notice under Sections 148 and 143(2) of the Act is bad in law.
Shri R. Bhoopathi representing the Department vehemently defended the impugned order. The learned DR submitted that despite service of notice, the assessee has failed to appear before the CIT(A), hence an ex parte order was passed. Insofar as the issue of validity of reopening, the learned DR submitted that notices under Sections 148 and 143(2) of the Act were issued to the assessee. The notice under Section 148 of the Act was issued on the assessee through affixture as nobody was available at the premises when the Inspector had visited the address available with the Department. As regards notice under Section 143(2) of the Act, the learned DR pointed that after issuance of notice under Section 148 of the Act dated 31.03.2016, assessee did
Sajjan Kumar Agarwal not comply with the conditions mentioned therein, hence notice under Section 143(2) of the Act was issued to the assessee on 17.06.2016.
I have heard the submissions made by rival sides and have perused the orders of authorities below. I have also examined the documents furnished by the assessee in the form of Paper Book. The primary objection raised by the assessee challenging validity of reopening is that notice under Section 148 of the Act was not validly served on the assessee. Undisputedly, notice under Section 148 of the Act was served on the assessee by way of affixture.
The provision of Section 282 of the Act deals with service of notice. For the sake of ready reference, the provisions of Section 282(1) of the Act are reproduced hereinbelow :-
“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.”
A plain reading of the above provision would show that notices are to be served by post or through courier service approved by the Board. In the present case, it is not emanating from records that any effort was made by the Assessing Officer to serve the notice under Section 148 of the Act either
Sajjan Kumar Agarwal through post or courier service approved by the Board. It appears that the Inspector in the first instance itself served the notice on assessee by way of affixture.
The provision of Section 282(1)(b) of the Act provides for service of notice/summons in accordance with the Code of Civil Procedure, 1908 (in short ‘CPC’). Order 5 Rules 17 & 20 of the CPC deals with the situation where the notice/summons could not be served in the ordinary course and the notice/summons is to be served by way of substituted service. The relevant extracts of provisions of O5 R17 & R20 of CPC are reproduced hereinbelow :-
“17. Procedure when defendant refuses to accept service, or cannot be found
Where the defendant or his agent or such other person as aforesaid refuses to sign the acknowledgement, or where the serving officer, after using all due and reasonable diligence, cannot find the defendant, who is absent from his residence at the time when service is sought to be effected on him at his residence and there is no likelihood of his being found at the residence within a reasonable time and there is no agent empowered to accept service of the summons on his behalf, nor any other person on whom service can be made, the serving officer shall affix a copy of the summons on the outer door or some other conspicuous part of the house in which the defendant ordinarily resides or carries on business or personally works for gain, and shall then return the original to the Court from which it was issued, with a report endorsed thereon or annexed thereto stating that he has so affixed the copy, the circumstances under which he did so, and the name and address of the person (if any) by whom the house was identified and in whose presence the copy was affixed.”
“20. Substituted service.— (1) Where the Court is satisfied that there is reason to believe that the defendant is keeping out of the way for the purpose of avoiding service, or that for any other reason the summons cannot be served in the Sajjan Kumar Agarwal ordinary way, the Court shall order the summons to be served by affixing a copy thereof in some conspicuous place in the Court-house, and also upon some conspicuous part of the house (if any) in which the defendant is known to have last resided or carried on business or personally worked for gain, or in such other manner as the Court thinks fit.”
(underlined for emphasis by us)
As per R17, the serving officer has to show that all due and reasonable diligent efforts were made to serve the assessee/defendant with the notice. Mere statement of the process-server that the defendant/assessee was not available at his residence is not sufficient. Thus, the Assessing Officer has to show that reasonable number of attempts were made to serve the notice on the assessee and the process-server visited the address available with the Department at a time when the assessee is expected to be present at the available address. Before proceeding with substituted mode of service, the Assessing Officer is also required to show that if the assessee was available, he has refused to accept the notice or was deliberately avoiding to accept the notice.
Rule 20 mandates that before proceeding with substituted mode of service of notice/summons, the Presiding Officer has to record satisfaction that the notice/summons could not be served in ordinary course. In the instant case, it is not emanating from the records that due and reasonable diligence was exercised by the Assessing Officer for serving notice in the normal course before proceeding with service of notice by way of affixture.
Further, from the records before us it is not emanating that the Assessing Officer has recorded satisfaction as envisaged under O5 R20 of CPC
Sajjan Kumar Agarwal that the notice could not be served on the assessee in ordinary course and hence, service of notice has to be effected through substituted mode. The Assessing Officer has merely observed that notice under Section 148 dated 31.03.2016 was served on the assessee by way of affixture as per Inspector’s report on the same date. The manner of service of notice on assessee is certainly not in accordance with the provisions of Section 282 of the Act or even as per the provisions of Code of Civil Procedure, 1908. Thus, I am of considered view that notice under Section 148 of the Act was not validly served on the assessee. In the absence of valid service of notice issued under Section 148 of the Act, the proceedings under Section 148 of the Act are void ab initio and the assessment order passed consequent thereto is null and void.
The assessee has also challenged validity of reassessment proceedings on the ground that notice issued under Section 143(2) of the Act was not served on the assessee. From the assessment order, it is observed that assessee had filed reply to the notice under Section 148 of the Act on 16.08.2016. Thereafter, no notice under Section 143(2) of the Act was served on assessee. In the assessment order, only reference of notice under Section 143(2) of the Act is dated 17.06.2016. The notice under Section 143(2) of the Act to be valid has to be served after filing of return of income by the assessee. The Revenue has not brought on record any evidence to show that notice under Section 143(2) of the Act was served on the assessee after 16.08.2016. The Hon’ble Supreme Court of India in the case of ACIT vs Hotel Blue Moon reported as 321 ITR 362 (SC) has held that issuance of valid notice under Section 143(2) of the Act is a mandatory pre-requisite for assessment/reassessment. The Hon'ble Bombay High Court in the case of ACIT vs Geno Pharmaceutical, 214 taxmann 83 and in the case of CIT vs Abacus
Sajjan Kumar Agarwal Distribution Systems (India) (P.) Ltd., 78 taxmann.com 321 has held that omission to issue notice under Section 143(2) of the Act is incurable and the requirement to issue such notice cannot be dispensed with. The assessment proceedings sans valid notice under Section 143(2) of the Act are bad in law.
Thus, in view of the fact that reassessment order was passed without valid notice under Section 148 of the Act, and notice under Section 143(2) of the Act, the same is unsustainable in law. We find merit in the legal ground nos. 3 & 4 raised by the assessee and hence, the same are allowed.
Since we have allowed the appeal of the assessee on legal grounds, the other grounds raised in the appeal on merits of the addition have become academic and hence, are not deliberated upon.
In the result, the impugned order is set aside and appeal of the assessee is allowed.
Order pronounced in open court on Friday, the 31st day of January, 2020.