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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’: NEW DELHI
Before: SHRI S RIFAUR RAHMAN & SHRI SUDHIR PAREEK
directed against the order of the learned Commissioner of Income Tax (Appeals), 28, New Delhi, [hereinafter referred to as “Ld. CIT(A)”] dated 23.01.2017 for the Assessment Year 2012-13.
1.1 The Assessee has raised the following grounds of appeal:
“1. That on the facts and circumstances of the case and the provisions of law, the order passed by the Ld CIT (A) is illegal, bad in law and in violation of the principles of natural justice.
2. That on the facts and circumstances of the case and the provisions of law, the Ld CIT (A) has erred in ignoring the fact that the appellant company has not received any notice u/s 143(2) within the statutory time limit of up to 30.09.2013 (relevant for the Asst. Year 2012-2013) and hence, the assessment proceedings conducted and assessment order passed in the absence of proper service of notice u/s 143(2) are also illegal and invalid and liable to be quashed. 3. 1) That on the facts and circumstances of the case and the provisions of law. the Ld. CIT (A) was not justified to make an addition of Rs. 41,92,006/-in trading results by presuming estimated profit @ 5% of Rs.8,38,40,139/-. II) That on the facts and circumstances of the case and the provisions of law, the Ld. CIT (A) has also erred in determining the above said income even without rejecting/pointing any defect in the books of accounts.
I) That the Ld. CIT (A) has erred in ignoring the explanation given, evidences and material placed and available on record. The same
Page 2 of 17 .- 1515-17 & 1991-17 Sukriti Information system P. Ltd. have not been properly considered and judicially interpreted and the same do not justify the addition made. The addition has been made with preset mind of the Ld. CIT (A) and his order is based on presumptions, surmises, conjectures and suspicion. II) That the Ld. CIT (A) has erred in ignoring the fact that the Ld. AO was not justified to ignore the fact that the appellant company has submitted complete details of sales made i.e. names, addresses, PAN of the customers to whom sales have been made during the F.Y.2011-2012 and last 3 years, its bank statements and bank books, sales bills on random basis, stock registers maintained in the ordinary course of business activities for the F.Y.2011-2012 and last 3 years, confirmations of trade receivables as on 31.03.2012; complete details of parties from whom purchases made during the F.Y.2011-2012 and last 3 years and explanation regarding difference in amount of reserves and surplus/stock in the ITR's of the appellant company filed for the A.Y.2012-13 vis-a-vis- A.Y.2011- 12 and A.Y.2010-11 etc., during the assessment proceedings.
That on the fats and circumstances of the case and the provisions of law, the appellate order /assessment order being passed are in violation of the principles of natural justice as no show cause notice were issued to the appellant company before making the addition during the course of appellate as well as assessment proceedings and hence, he said appellate order / assessment order are bad in the eyes of law and liable to be quashed.
6. That on the facts and circumstances of the case and the provisions of law, the Ld. CIT(A) as well as the Ld. AO were not justified to rely on the report of the inspector without confronting it to the appellant company.
7. That the appellant company craves the right to amend, append delete any or all grounds of appeal. “ 1.2 The Revenue has raised the following grounds of appeal:
"1. The Ld.CIT (A) erred in not considering that the assessee did not show figures of any accumulated profit / Reserve & Surplus before AY 2012-13. The ITRs for AY 2007-08 & 2008-09 which show such figures were filed on 03.02.2014 i.e. after the ITR for AY 2012-13 had been filed. Thus the source of accumulated profit / Reserve & Surplus remained unexplained."
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2. "Alternatively the Ld. CIT(A) erred in treating the sale of closing stock during the previous year relevant to AY 2012-13 particularly when the assessee has shown the closing stock of Rs. 6.62 Cr. & 2.91 Cr. in its subsequent assessment years of 2013-14 & 2014-15. In light of the facts he should have given the finding that the entry of closing stock was only created in order to have Reserve & Surplus of Rs. 8.38 Cr." 3. "The appellant craves leave to add, alter or amend any of the ground(s) of appeal before or during the course of hearing of the appeal.
Facts of the case may be summarized as that the assessee filed electronic return declaring income of Rs. 15,592/- on 28.02.2012. The return was processed u/s 143(1) and subsequently selected under CASS for detailed scrutiny. During the year under consideration the assessee company is engaged in the business of trading of fabrics and textiles and in the course of assessment proceedings, on perusal of the return filed by the assessee, it is noticed that the assessee has shown an amount of Rs. 8,38,55,374/- to its balance sheet under the head ‘Profit and Loss Account’. Whereas on perusal of return filed by the assessee for A.Y. 2011-12 no accumulated profit has been shown by the assessee in its return. Further, on perusal of the computation sheet of the assessee, the assessee has shown only Rs. 15952/- as business profit. The Ld. AO, found that the sale of goods shown by Page 4 of 17 .- 1515-17 & 1991-17 Sukriti Information system P. Ltd. the assessee is nothing but introduction of its own money under the veil of sale and purchase of cloths and brought to tax u/s 68 of the Act and addition of Rs. 8,38,55,374/- made as bogus inventory shown by the assessee.
2. Heard rival submissions and carefully perused the material available on record before us.
Reiterating the grounds of appeal in the Ld. AR submitted that in the appeal preferred by assessee, it is specifically raised ground no. 2 and such grounds goes of root of the case in order to dispose of the appeal which should be decided first even prior to other grounds.
4. The appellant has contended that no notice under section 143(2) was received or served upon the assessee within the statutory time limit i.e. 30.09.2013 relevant to AY 2012-13. In the absence of a valid notice under section 143(2), the assessment order passed in the absence of proper service of notice is illegal and void. It is also submitted that the assessee company has not received notice dated 23.09.2013 issued u/s. 143(2) of as stated in the assessment order and it has received first notice dated Page 5 of 17 .- 1515-17 & 1991-17 Sukriti Information system P. Ltd. 18.12.2013 issued u/s. 142(1) alongwith questionnaire and later on, it has received another notice dated 07.01.2015 issued u/s. 143(2). In response to notice, the assessee company filed the requisite details, i.e. copy of complete set of balance sheet with ITRs vide its letter dated 12.01.2015.
5. The Ld. DR heavily relied upon the orders of the authorities below.
The Ld. Counsel for the assessee further submitted that the statutory limit to issue notice U/s 143(2) for framing assessment for AY 2012-13 was six months from the end of financial year. So the statutory limit to issue notice U/s 143(2) had expired on 30.09.2013 and the assessee had not received the notice within the said period. In this regard, submitted chronologically that the notice U/s 143(2) dated 23.09.2013 was sent to the registered address the assessee i.e. B-340, Second Floor, Hari Nagar, New Delhi-110064 through speed post no.- ED906633941IN. However, on 26.09.2013, it was returned un-served to the office of revenue department with remarks landlord informed that any company with this name does not exist on this address' and on 24.04.2014, notice U/s 142(1) was Page 6 of 17 .- 1515-17 & 1991-17 Sukriti Information system P. Ltd. issued to the assessee and delivered on the same registered address of Hari Nagar 'by hand'. Subsequently, the assessee attended the assessment proceedings pursuant to 142(1) notice. 07.01.2015, another notice U/s 143(2) was issue to the assessee on the same registered address. However, it was not a regular 143(2) notice. It was in the form of a questionnaire. On 23.01.2015, the assessee had filed reply to the notice U/s 143(2). The specific queries asked in the aforesaid notice had been replied to with the relevant annexures. It was submitted that in the course of proceeding vide reply dated 09.02.2015, the assessee / appellant had raised an objection before Ld. AO prior to the completion of proceedings. The same is reproduced as under:
"We submit that assessment proceedings at Ward24(3) are without jurisdiction. Further, notice U/s 143(2) was also not served on the assesse company within the statutory time limit up to 30.09.2013. Therefore, on this ground also assessment proceedings are illegal."
It is also submitted that as per the decision of Hon'ble Supreme Court in ACIT vs Hotel Blue Moon, [2010] 321 ITR 362 (SC), this defect is not curable under section 292BB of Income Tax Act, 1961. However, the AO without addressing this issue passed
Page 7 of 17 .- 1515-17 & 1991-17 Sukriti Information system P. Ltd. assessment order on 17.03.2015. He further contended that the assessment order was passed without disposing off the objections raised by the assesse as per section 292BB of Income Tax Act, 1961. Dissatisfied from the order of the Ld. AO the assesee had filed the appeal before CIT(A) assailing the assessment order passed by Ld. AO on the ground that framing of assessment U/s 143(3) without service of notice U/s 143(2) to the assesse is bad in law.
The same is reproduced below:
"2. That the appellant company has not received any notice U/s 143(2) within the statutory time limit of up to 30.09.2013 (relevant for AY 2012-13) and hence, the assessment proceedings conducted and assessment order passed in the absence of notice U/s 143(2) are also invalid and illegal and liable to be quashed.”
Before the first appellate authority, the assessee / appellant had filed an affidavit dated 24.06.2015 stating as under:
"That the assesse company had participated in the assessment proceedings under protest. Vide its letter dated 09.02.201 submitted to the AO, stating that notice U/s 143(2) has not been served on the assesse company within the statutory time limit i.e, upto 30.09.2013. Accordingly, scrutiny assessment proceedings were required to be dropped and on this ground also assessment proceedings are illegal."
The Ld. AO submitted remand report by stating that notice U/s 143(2) was served through speed post. Further, the AO has Page 8 of 17 .- 1515-17 & 1991-17 Sukriti Information system P. Ltd. taken refuge of the section 27 of General Clauses Act, 1927, stating proper address and stamp for 'deemed service' in which himself acknowledged the fact that assessee had raised objection on 09.02.2015 regarding the non-issuance of notice U/s 143(2). as per the judgement of Hon'ble High Court in Commissioner of Income- tax v. Lunar Diamonds Ltd., (2006) 281 ITR 1, that once the assessee had filed an affidavit stating it had not received notice U/s 143(2), the burden of proof had shifted to the revenue department to prove that the notice was served within prescribed time. The relevant para 16 of the judgment Lunar Diamonds (supra) is reproduced as under:
“16. We may also point out that there appears to be some doubt whether the notice was at all sent to the assessee because, as observed by the CIT(A), the receipt showing that an envelope was sent by registered post merely contained the name of the assessee without its address. Consequently, it is quite possible that the notice may have been sent to the assessee at some wrong or even some incomplete address. However, it is not necessary for us to go into this question at all because the assessee had filed an affidavit stating that it had not received the notice and the Tribunal rightly held that under these circumstances, the burden was upon the Appellant to prove that notice was served upon the assessee within the prescribed time. The Appellant had failed to prove its case in this regard.”
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Thereafter, on 20.11.2015, the assessee had filed rejoinder to the Remand Report wherein at para 2, assessee had stated the following:
"The AO in its report dt. 15.10.2015 has not brought this fact to your honour's knowledge that notice issued u/s 143(2) dt. 23.09.2013, in fact was received back, being non-served. He has just relied upon general presumption of section 27 of General Clause Act. Copy of addressed envelope (non-served) along with copy of notice ws 143(2) dt. 23.09.2013, which was received by the assessee company from the assessment records on inspection of the assessment records, has already been filed with our earlier submissions dt.07.10.2015 (Page Nos 63 to 65 of Paper Book), which clearly shows that notice is received back. Thus, it is crystal clear that notice w/s143(2) dt. 23.09.2013 for the AY 2012-13 2012-13 was not served on the assessee company within the statutory time limit. Therefore, the assessment proceedings for the AY 2012-13 are illegal, time barred. Accordingly, resultant assessment order is also illegal and bad in law and liable to be quashed."
It is also submitted that all the prior service was being done on the registered address of Hari Nagar only. It is submitted that it is settled law that if the assessee is not found on the given address then a notice has to be affixed at its last known given address.
However, after the notice was returned back no further steps were taken by the AO to further serve the notice. And in this case, the ITI can effect the service by affixture on his own initiative without waiting for an order from the Ld. AO. The copy of the notice should be affixed on the outer door or on a conspicuous part of the Page 10 of 17 .- 1515-17 & 1991-17 Sukriti Information system P. Ltd. business or residential premises. A report is to be drawn up by the ITI, on the facts and circumstances of the service by affixture, specifying the date and time of service and the name of the identifier if any. It should conclude with an affidavit of the ITI solemnly affirming the facts and particulars of service as reported.
The report is to be filed as an endorsement to the original notice after being docketed in the order sheet. The report should be verified by an affidavit. In the absence of such an affidavit the Assessing Officer must examine the Inspector on oath." In the present case when the notice was returned unserved no affixture was done by AO or ITI.
The CIT(A) passed the impugned order dated 23.01.2017 and held that notice U/s 143(2) was duely served on 25.09.2013 at the registered address of the assessee duely reflected in the return of income and ignoring the affidavit of assessee and averment of notice being return un-served which was never controverted or rebutted by the Ld. AO. Relevant para of this order is reproduced as under:
“3.2 Considering above a factual report was called from the assessing officer the notice under section 143(2) of the Act was duly issued on 23.09.2013 and served through the speed post on 25.09.2013 at the address duly shown by the assessee in the return Page 11 of 17 .- 1515-17 & 1991-17 Sukriti Information system P. Ltd. of income filed for the year under consideration. The evidence for the service of the above through speed post was also enclosed. Considering above and since the appellant has failed to prove that that the notice in question was not sent in the proper address, stamped or properly posted, the ground taken by the appellant is dismissed.”
During the hearing, the Ld. AR attracted our attention towards this fact that on 23.08.2024, the assessee had filed an affidavit as
per Rule 10 of Income Tax (Appellate Tribunal) Rules, 1963 reiterating the fact that notice U/s 143(2) dated 23.09.2013 was never received by it and the delivery man/post man return from the ground floor itself without delivering the notice to the second floor.
He further referred the order of Co-ordinate Bench in Anil Kisanlal Marda v. CIT, 2019 SCC Online ITAT 13123; ITA 1763/PUN/2013 had held in the para 17 and onwards-
"17. We have gone through the relevant material on record. In this regard, it is observed from the assessment order that the assessee filed his return on 31-10-2009 showing total income at Rs. 87,06,746/-. It has been recorded in the assessment order that "notice u/s. 143(2) dated 08/09/2010 was issued and served on the assessee. Subsequently, notice u/s. 143(2) dated 11-11-2011 was again issued and served on the assessee". Proviso to section 143(2) of the Act at the material time provided that "no notice under the said section shall be served on the assessee after the expiry of six months from the end of the relevant assessment year". The assessment year under consideration is 2009-10. Period of six months from the end of the relevant assessment year expires on 30-09-2010. It means that a valid notice u/s. 143(2) could have been issued on or before 30-09-2010 enabling the AO to proceed with the assessment u/s. 143(3) of the Act. The AO has referred to two notices u/s. 143(2) dated 08-09-2010
Page 12 of 17 .- 1515-17 & 1991-17 Sukriti Information system P. Ltd. and 11-11- 2011. It is obvious that the second notice u/s. 143(2) dated 11- 11-2011 is of no consequence as having been issued after a period of six months from the end of the relevant assessment year. Now we need to find out as to whether notice w/s. 143(2) dated 08-09-2010 was actually issued and served on the assessee on or before 30-09-2010.
Now turning to the facts of the instant case, it is found as an admitted position that no notice u/s. 143(2) was actually served upon the assessee on or before 30-09-2010. The only notice which was issued on 08-09- 2010 was returned by the postal authorities and thereafter no effort was made to serve another notice before the deadline. Since the requirement of 'service' of notice u/s. 143(2) and not its 'issue', is a jurisdictional condition, which is unfortunately lacking in the instant case, the sequitur is that the AO lacked jurisdiction to make the assessment. Ex consequenti, the assessment order passed in absence of a valid jurisdiction has to be and is hereby quashed.
In view of our decision on quashing the assessment for want of service of notice u/s. 143(2), there is no need to delve into the grounds raised
by the assessee on merits.
26. In the result, the appeal is partly allowed."
In the instant case assessee / appellant company declared an income of Rs. 15,592/- on 28.02.2012 for A.Y. 2012-13. Notice U/s 143(2) of the Act was sent registered address of assessee / appellant company on 23.09.2013 was returned undelivered on 26.09.2013 and thereafter another notice u/s 143(2) of the Act was issued on 07.01.2015. The relevant A.Y. is 2012-13 and statutory period of six months from the end of the relevant A.Y. expires on 30.09.2013 and as per law valid notice u/s 143(2) supposed to issued on or before 30.09.2013 enabling the Ld. AO to proceed with Page 13 of 17 .- 1515-17 & 1991-17 Sukriti Information system P. Ltd. the assessment u/s 143(3) of the Act. It is relevant to mention here that second notice u/s 143(2) dated 07.01.2015 has no value in the eye of the law as having been issued after prescribed period for this purpose and so far notice u/s 143(2) dated 23.09.2013 is concerned, it was returned undelivered by postal remarks “मकान मािलक ने बताया क� इस नाम �क यहां कोई कंपनी नह�ं है” (landlord informed that any company with this name does not exist on this address) which was sent to assessee’s registered address on 26.09.2013, and thereafter and before dated 30.09.2013, no any other notice u/s 143(2) of the Act was issued or served as per law. Facts as mentioned hereinbefore and material placed on record reveals that no steps were taken to serve the notice in even alternative mode and also assessee / appellant submitted affidavit containing facts of that effect before the Ld. AO in the assessment proceedings but the Ld. AO completed the assessment without disposing the objection regarding question of valid service. The Ld. CIT(A) also ignored the affidavit filed before him by the assessee / appellant as aforesaid.
In this regard, Hon’ble Delhi High Court in the case of Lunar Diamonds (supra) held that once the assessee had filed an affidavit Page 14 of 17 .- 1515-17 & 1991-17 Sukriti Information system P. Ltd. stating it had not received notice u/s 143(2) of the act. The burden of proof had shifted to the revenue to prove that the notice was served without prescribed time. But instead of prove the relevant fact as aforesaid and required by law, both the lower authorities even ignored the same and treated notice u/s 143(2) timely issued and duely served.
Foregoing discussions enables us to reach this conclusion that no notice u/s 143(2) was duely served upon the assessee / appellant on or before 30.09.2013, hence requirement of law not been fulfilled and in the above fact situation and legal position as aforementioned, the Ld. AO was not having jurisdiction to make assessment and consequently impugned assessment order passed lacking jurisdiction liable to be quashed and ground no. 2 of appeal of assessee deserves to be allowed.
As we quashed the assessment for want of service of statutory notice u/s 143(2), other grounds of both the appeal are not required to adjudicate on merit. In the result, the appeal of the assessee deserves to be allowed.
Page 15 of 17 .- 1515-17 & 1991-17 Sukriti Information system P. Ltd. 20. Consequently, the appeal of the assessee (ITA No.- 1515/Del/2017) is allowed and the appeal of the Revenue (ITA No.- 1991/Del/2017) stands dismissed.
Order pronounced in the Open Court on 31 .01.2025