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Income Tax Appellate Tribunal, DELHI BENCH : SMC : NEW DELHI
Before: SHRI R.K. PANDA
BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER Assessment Year: 2008-09 Rajdhani Realcon Pvt. Ltd., Vs. ITO, 2612/13, 2nd Floor, Ward-21(1), Naya Bazar, New Delhi. New Delhi. PAN: AADRC3963P (Appellant) (Respondent) Assessee by : Shri Rakesh Jain, Advocate & Shri Gurjeet Singh, CA Revenue by : Shri S.L. Anuragi, Sr.DR Date of Hearing : 20.02.2019 Date of Pronouncement : 12.03.2019 ORDER
This appeal filed by the assessee is directed against the order dated 26th December, 2017 of the CIT(A)-7, New Delhi for assessment year 2008-09.
Facts of the case, in brief, are that the assessee is a private limited company and filed its return of income on 27th September 2008 declaring a loss of Rs.18,030/-. The return was processed u/s 143(1) of the Act. Subsequently, information was received from the office of the Director of Income-tax, Investigation, New Delhi that during the course of search operation on Surender Kumar Jain and Shri Virender Kumar Jain it was noticed that they had given accommodation entries to the tune of Rs.12,50,000/- to the assessee company through his company M/s Shalini Holdings Ltd., floated by them. Similarly, an amount of Rs.7 lakhs was received by the assessee during AY 2009-10. The AO thereafter issued notice u/s 148 after recording reasons. The notice was duly served on the assessee as mentioned in the assessment order. However, none appeared nor any application for adjournment was filed. Subsequently, notice u/s 142(1) was issued to the assessee at the last known address of the company on 11.01.2016 fixing the hearing on 19th January, 2016. Again, there was no compliance as none appeared nor any reply was filed. Therefore, show cause notice u/s 271(1)(b) was issued on 5th February, 2015l fixing the case for hearing on 12th February, 2015. On that date also none appeared. Again, the AO issued a show cause notice on 8th March, 2016 fixing the date of hearing for 14th March, 2016. Again, there was no compliance. The AO, therefore, completed the assessment u/s 144 of the Act and made addition of Rs.12,50,000/- to the total income u/s 68 of the Act.
Before the CIT(A), the assessee apart from challenging the addition on merit took an additional ground challenging the validity of reassessment proceedings which the ld. CIT(A) forwarded to the AO for his comments. The AO furnished a report vide letter dated 16.11.2017 which has been reproduced by the CIT(A) and which reads as under:-
“ Kindly refer to your office letter No.F.No.CIT(A)-7/2017-18/92 dated 21.07.2017 on the above mentioned subject. 2. In this regard, the factual report sought by you vide above referred letter is as under:
1) Notice u/s 148 of the Income Tax Act, 1961 was issued on 18.03.2015 to the assesses at the address: GF-8, Antariksh Bhavan, 22, K G Marg, Connaught Place, New Delhi which is the address available as per PAN database. Notice u/s 148, dated 19/03/2015 was issued again at the above- mentioned address. There is no information on record for receiving back of the afore-said notice unserved. Further the notice as mentioned before was issued well before the limitation date to issue notice u/s 148, i.e., 31/03/2015. Therefore, since the said notice was not returned unserved, it may be assumed to be a valid service. Copy of snapshot of PAN is enclosed. 2) Notice u/s 142(1) of the I. T. Act, 1961 dated 11.01.2016 calling for information/documents was issued at the same address as mentioned above, i.e. GF-8, Antariksh Bhavan, 22, K G Marg, Connaught Place, New Delhi. This notice was also not returned back. 3) Inspector was deputed to serve the notice at the address: GF-8, Antariksh Bhavan, 22, K G Marg, Connaught Place, New Delhi and submitted in his report that no such company exists on said premises. 4) Notice u/s 142(1) dated 08/03/2016 was issued giving the assesses a final opportunity to file return in response to notice u/s 148 of the Act and was showcaused as under: “1. Why addition u/s 68 be not made for the share application money of Rs. 12,50,000/- received during the year from M/s Shalini Holdings Ltd. as you have failed to prove the onus u/s 68 of the Act i.e. confirmation, etc. to prove the identity, creditworthiness and genuineness of the transactions." The case was fixed for hearing on 14.03.2016 and this notice was issued at the same address as mentioned above. 5) On non-compliance with the above notice, assessment order u/s 147/144 of the Income Tax Act, 1961 was passed on 16/03/2016 with the addition of Rs.12,50,000/- u/s 68 of the Act. Penalty proceedings u/s 271(1)(c) and 271(1)(b) of the Act were also initiated. Notice u/s 274 read with Section 271 of the I. T. Act, 1961, dated: 16.03.2016 was issued at the address: GF-8, Antariksh Bhavan, 22, K G Marg, Connaught Place, New Delhi. 6) The assessment order sent through speed post vide Acknowledgement No. ED043182756IN at the address: GF-8, Antariksh Bhavan, 22, K G Marg,, Connaught Place, New Delhi was received back unserved."
The assessee filed its rejoinder to the remand report. After considering the remand report of the AO and rejoinder of the assessee to such remand report, the ld.CIT(A) upheld the validity of the reassessment proceedings. So far as the merit of the case is concerned, he also upheld the action of the AO by observing that the assessee failed to substantiate with evidence to the satisfaction of the AO regarding the identity and credit worthiness of the investor and the genuineness of the transaction.
4.1 Aggrieved with such order of the CIT(A), the assessee is in appeal by raising the following grounds:-
1. That the Ld CIT(A) was not justified in confirming the issue of notice u/s 148 at old address as service of notice and a valid notice.
2. That the Ld CIT(A) was not justified in confirming addition of Rs.12,50,000/- u/s 68 particularly when all the necessary evidences have been adduced.
3. The appellant craves leave to add, alter or modify any of the above grounds of appeal till the date of hearing/disposal of the appeal.
The ld. Counsel for the assessee, at the outset, submitted that notice u/s 148 was issued on 18th March, 2015 to the assessee at the address GF-8, Antariksh Bhavan, 22, K G Marg, Connaught Place, New Delhi. Another notice u/s 148 dated 19th March, 2015 was issued again at the above mentioned address. He submitted that when the first notice u/s 148 issued on 18th March, 2015 was existing, the Assessing Officer has again, issued another notice on 19th March, 2015 at the same address. He submitted that the assessee had already changed his address and the returns for the subsequent years were filed at the new address at 2612/13, 2nd Floor, Naya Bazar, New Delhi – 110 006. Referring to page 34 to 40 of the paper book, he drew the attention of the Bench to the copy of the income-tax returns filed for assessment years 2011-12 to 2016-17. The return of income for assessment year 2010-11 was filed on 14th September, 2010, return for assessment year 2011-12 was filed on 30th August, 2011, return for assessment year 2012-13 was filed on 18th September, 2012, return for assessment year 2013-14 was filed on 16th January, 2014, return for assessment year 2014-15 was filed on 22nd August, 2014, return for assessment year 2015-16 was filed on 10th September, 2015 and for assessment year 2016-17, it was filed on 8th July, 2016 at the above address. Referring to the decision of the Hon'ble Delhi High Court in the case of CIT vs. Chetan Gupta, of 2014, judgement dated 15th September, 2015, he drew the attention of the Bench to para 18 of the order where the decision of the Hon'ble Delhi High Court in the case of CIT vs. Hotline International Pvt. Ltd., 296 ITR 333 (Del) and that of the Hon'ble Supreme Court in the case of ACIT vs. Hotel Blue Moon, reported in 321 ITR 362 (SC) have been considered and it has been held that on account of absence of valid service of notice u/s 148 of the Act on the assessee, the reassessment proceedings for assessment year 2001-02 were held to be bad in law. Referring to para 34 of the said order, he drew the attention of the Bench to the following observations of the Hon'ble High Court:-
“Onus on Revenue to prove service of notice 34. There is sufficient judicial authority for the proposition that the burden of showing that service of noticed has been effected on the Assessee or his duly authorized representative is on the Revenue. These include Fatechand Agarwal v. Commissioner of Wealth-Tax [1974] 97 ITR 701 (Ori) and Venkat Naicken Trust v. ITO [1999] 107 Taxman 391 (Mad). In CIT v. Thayaballi Mulla Jeevaji Kapasi (1967) 66 ITR 147 (SC), the Respondent to whom the notice was directed was not in town. The only information which the process server had was that the Respondent was either in Bombay or Ceylon. Thereafter, the process server affixed the notice on the business premises of the Respondent. The Supreme
Court affirmed the essential principle that "if no notice was served within the period, the Income-tax Officer was incompetent to commence proceedings for reassessment under Section 34 of 1922 Act." It was further held that "service of notice under Section 34 (1) (a) within the period of limitation being a condition precedent to the existence of jurisdiction, if the Income-tax Officer was unable to prove that the notice was duly served upon the Respondent within the prescribed period, any return filed by the Respondent after the expiry of the period of eight years will not invest the Income-tax Officer with authority to reassess the income of the Respondent pursuant to such return." On the facts of that case it was held that the Revenue had sufficiently discharged the onus by producing the affidavit of the process server.”
5.1 Thereafter, he drew the attention of the Bench to the conclusion of the Hon'ble High Court which reads as under:-
“37. No attempt appears to have been made by the Revenue to serve the Assessee at the address provided by him i.e. "c/o Jagat Theatre, Sector 17, Chandigarh". All the notices were addressed to him at the address "C/o Kiran Cinema, Chandigarh" which was in Sector-22. Therefore, this is not a case where an attempt was made by the Revenue to serve the Assessee at his known address, and upon not finding him there the Revenue learnt of the address where he would be found. Merely because other notices sent to the 'Assessee group' were received by the employees of Kiran Cinema it does not automatically lead to the inference that the Assessee's place of business was also Kiran Cinema. In any event, there could not be an inference that Mr. Ved Prakash was duly empowered by the Assessee to receive notices on his behalf. In the very first notice dated 28th March 2008 the endorsement made by Mr. Ved Prakash shows him describing himself as "Accountant, Kiran Cinema, Sector-22, Chandigarh" and nothing more.”
He accordingly submitted that the decision of the Hon'ble Delhi High court in the case of Chetan Gupta cited (supra) is fully applicable to the facts of the present case since there was no service of notice u/s 148 of the Act. He accordingly submitted that the ld.CIT(A) was not justified in confirming the issue of notice u/s 148 at the old address as service of valid notice.
So far as the merit of the case is concerned, he submitted that the assessee by filing various documents has discharged the onus cast on it by proving the identity and credit worthiness of the investor and the genuineness of the transaction. Therefore, no addition u/s 68 is called for. Referring to the copy of Form No.18 filed with the Registrar of Companies, he submitted that the address bearing in the data base of the Ministry of Corporate Affairs shows that the address has been changed w.e.f. 30.11.2009 to 2612/13, 2nd Floor, Naya Bazar, New Delhi – 110 006.
The ld. DR, on the other hand, heavily relied on the order of the CIT(A). He submitted that the assessee has not intimated the change of address and the PAN database shows the old address. Therefore, the Assessing Officer had no occasion to know about the new address for which the notice was served by affixture. In any case, the provisions of section 292BB will be applicable and will come to the rescue of the Department and the assessee cannot get away on this technicality of non-service of notice u/s 148. He accordingly submitted that the reassessment proceedings cannot be held as illegal. So far as the merit of the case is concerned, he relied on the order of the CIT(A) and submitted that the assessee failed to discharge the onus cast on it by proving the identity and credit worthiness of the investor and the genuineness of the transaction. Therefore, the order of the CIT(A) being in accordance with the law has to be upheld.
I have considered the rival arguments made by both the sides and perused the material on record. I have also considered the various decisions cited before me. I find the AO, in the instant case, issued the notice u/s 148 of the Act at the old address at GF-8, Antariksh Bhavan, 22, K G Marg, Connaught Place, New Delhi which is available as per PAN database. The notice was issued on 18th March, 2015. A perusal of the copy of the acknowledgement of the return filed for assessment year 2010-11 to 2014-15 shows that the returns for these years have been filed with the address at 2612/13, 2nd Floor, Naya Bazar, New Delhi – 110 006. Merely because the notice issued at the old address has not been returned unserved it may be presumed to be a valid service as mentioned by the AO in the remand report cannot be accepted. The ld. DR also fairly conceded that the notice was served by affixture and there is no proof on record that the notice has been served on the assessee. Since the notice u/s 148 in the instant case has not been served on the assessee, the question that arises is as to whether the assessment framed u/s 147/144 of the Act can be construed as a valid assessment in absence of service of notice u/s 148. An identical issue had come up before the Hon’ble Delhi High Court in the case of CIT vs. Chetan Gupta cited (supra) and the Hon’ble High Court quashed the reassessment proceedings on the ground that such proceedings finalised by the AO without effecting proper service of notice on the assessee u/s 148(1) of the Act are invalid and liable to be quashed. The relevant observation of the Hon’ble High Court has already been reproduced in the preceding paragraphs while recording the submissions of the ld. Counsel for the assessee and, therefore, I am not repeating the same. Since it is an admitted fact that the notice u/s 148 of the IT Act has not been served on the assessee which is discernible from the remand report of the AO as reproduced in the body of this order, therefore, 8 respectfully following the decision of the Hon’ble Delhi High court in the case of Chetan Gupta (supra), I hold that the reassessment order framed by the AO without serving the notice u/s 148 is not sustainable in law. Accordingly, the same is quashed. Since the assessee succeeds on this legal ground, the ground on merit is not being decided being academic in nature.