DR. V. SUDARSHINI,BENGALURU vs. INCOME TAX OFFICER, WARD-5(3)(2), BENGALURU

Per N.V. Vasudevan, Vice President These are appeals by the three different assessees against three different orders dated 27.11.2017 and 22.11.2017 of CIT(Appeals)-5, Bengaluru, and dated 03.01.2018 of CIT(Appeals)-10, Bengaluru, all relating to assessment year 2008-09. Since some common issues are involved in these appeals, they were heard together and we deem it convenient to pass a common order. 2. We shall first take up for consideration the appeals in ITA No.1798 & 1203/Bang/2018 in which the two assessees have challenged the validity of notice issued u/s. 148 of the Income-Tax Act, 1961 [“the Act”] as bad in law on the ground that it is issued beyond a period of six years from the end of relevant assessment year. 3. The assessees in both these appeals are individuals. Notice u/s. 148 of the Act was issued to both the assessees dated 31.03.2015 by the AO for the purpose of making a reassessment u/s. 147 of the Act in respect of income that has escaped assessment. As per the provisions of section 148 of the Act, before making a reassessment u/s. 147, the AO has to serve on the assessee notice requiring him to furnish a return. Section 149 of the Act prescribes time limit for issue of notice u/s. 148 of the Act. It is not in dispute that the time limit applicable in the case of both the assessees is a period of six years from the end of relevant assessment year. The relevant assessment year being AY 2008-09, the period of six years would end on 31.3.2015. 4. The dispute in both these appeals is with regard to the date on which the notice dated 31.03.2015 u/s. 148 of the Act was issued by the AO. It is not in dispute that though the notice u/s. 148 of the Act in the case of both assessees is dated 31.03.2015, the same was handed over to the

ITA Nos.798, 741 & 1203/Bang/2018 Page 3 of 13 postal authorities for the purpose of service on the assessee only on 01.04.2015. The question that needs to be decided therefore is as to, whether the date of issue of notice should be taken as the date on which the notices bear or the date on which the notice was handed over to the postal authorities for the purpose of service on the assessee. The plea of the assessee is that the date of issue of notice u/s. 148 of the Act is the date on which the letter containing the notice addressed to the assessee and proper postage stamp paid is delivered to the post office for the purpose of transmission to the assessee. The assessee in this regard has placed reliance on the decision of the Hon’ble Gujarat High Court in the case of Kanubhai M. Patel (HUF) v. Hiren Bhatt {2011] 12 taxmann.com 198 (Guj). In the aforesaid case, the last date of limitation for issue of notice u/s. 148 was 31.02.2010. However, the said notices were sent for booking at the Speed Post Centre on 07.04.2010. The question before the court was as to, whether the date of issue of notice u/s. 148 of the Act should be 31.03.2010 or 07.04.2010. The Hon’ble Gujarat High Court held as follows:- “14. In the background of the aforesaid facts and contentions, the core issue that arises for consideration is as to when can the notice under section 148 of the Act be said to have been issued. In this context it would be necessary to examine the true import of the expression "shall be issued" as employed in section 149 of the Act. 15. The expression "issue" has been defined in Black's Law Dictionary to mean "To send forth; to emit; to promulgate; as, an officer issues orders, process issues from court. To put into circulation; as, the treasury issues notes. To send out, to send out officially; to deliver, for use, or authoritatively; to go forth as authoritative or binding. When used with reference to writs, process, and the like, the term is ordinarily construed as importing delivery to the proper person, or to the proper officer for service etc.

ITA Nos.798, 741 & 1203/Bang/2018 Page 4 of 13 15.1 In P. Ramanathan Aiyer's Law Lexicon the word "issue" has been defined as follows: "Issue. As a noun, the act of sending or causing to go forth; a moving out of any enclosed place; egress; the act of passing out; exit; egress or passage out (Worcester Dict.); the ultimate result or end. As a verb, "To issue" means to send out, to send out officially; to send forth; to put forth; to deliver, for use, or unauthoritatively: to put into circulation; to emit; to go out (Burrill); to go forth as a authoritative or binding, to proceed or arise from; to proceed as from a source (Century Dict.) Issue of Process. Going out of the hands of the clerk, expressed or implied, to be delivered to the Sheriff for service. A writ or notice is issued when it is put in proper form and placed in an officer's hands for service, at the time it becomes a perfected process. Any process may be considered "issued" if made out and placed in the hands of a person authorised to serve it, and with a bona fide intent to have it served.” 16. Thus, the expression to issue in the context of issuance of notices, writs and process, has been attributed the meaning, to send out; to place in the hands of the proper officer for service. The expression "shall be issued" as used in section 149 would therefore have to be read in the aforesaid context. In the present case, the impugned notices have been signed on 31.03.2010, whereas the same were sent to the speed post centre for booking only on 07.04.2010. Considering the definition of the word issue, it is apparent that merely signing the notices on 31.03.2010, cannot be equated with issuance of notice as contemplated under section 149 of the Act. The date of issue would be the date on which the same were handed over for service to the proper officer, which in the facts of the present case would be the date on which the said notices were actually handed over to the post office for the purpose of booking for the purpose of effecting service on the petitioners. Till the point of time the envelopes are properly stamped with

ITA Nos.798, 741 & 1203/Bang/2018 Page 5 of 13 adequate value of postal stamps, it cannot be stated that the process of issue is complete. In the facts of the present case, the impugned notices having been sent for booking to the Speed Post Centre only on 07.04.2010, the date of issue of the said notices would be 07.04.2010 and not 31.03.2010, as contended on behalf of the revenue. In the circumstances, impugned the notices under section 148 in relation to assessment year 2003-04, having been issued on 07.04.2010 which is clearly beyond the period of six years from the end of the relevant assessment year, are clearly barred by limitation and as such, cannot be sustained.” 5. The plea of the revenue is that the AO who has issued the notices u/s 148 in the case of all the three assessees is working in the Private Salary Range -5(3), Bangalore. This Range is a huge Range with ten (10) offices, viz., office of the Range Additional/Joint Commissioner of Income- tax, offices of two (2) Assistant / Deputy Commissioners of Income-tax and seven (7) ITOs. All these officers / offices regularly make huge correspondence with the private salaried employees of Bangalore city, who will be in lakhs. For maintaining and proper control of the outward & inward correspondence (tapaal), there is an independent Central Dispatch Section with separate staff working under the direct supervision of the Range Head. The Office Procedure leading to the issue of notice followed in the 6. Range 5(3), Bangalore, as enumerated by the AO in his letter dated 25th September, 2018 (Paper Book page No. 45 - 46) is as under : (i) First AO signs the notice. (ii) It is then handed over to the Central Dispatch Section working under the direct control of the Range Head (Addl. / Joint Commissioner). This Central Dispatch Section of the Range is independent of the assessment units and managed by a Dispatch Clerk who reports to the Range Head. The AO has no control or authority whatsoever on the functioning of the Dispatch Clerk.

ITA Nos.798, 741 & 1203/Bang/2018 Page 6 of 13 (iii) The official in-charge of the dispatch section, i.e., Dispatch Clerk while accepting the notice, acknowledges it by affixing the "dispatch stamp" with date and his short signature. (iv) Dispatch seal is the proof of dispatch of the notice and the date mentioned in the seal is the date of handing over of the notice in the dispatch section. (v) Once the notice is dispatched i.e., handed over to the dispatch clerk, it goes out of the control of the AO. According to AO he becomes functus officio with respect to such notice, once the notice is dispatched. (vi) The dispatch clerk puts the notice in a cover, seals the cover, writes the address of the assessee. (vii) He then enters the details of the addressee of the notice in the Speed Post Booking Journal (SPBJ) issued by the Department of Posts, Government of India and affixes the correct bar code sticker available against each entry on the cover containing the notice. Each SPBJ contains 200 receipts. (viii) Once details are entered in the Booking Journal (SPBJ), the Dispatch Clerk awaits for the Post Man from Government run Postal Department to come to him (Income-tax Office) and to collect the cover containing the notice for further circulation of the notice. (ix) No staff / official from the Range /Income-tax Department goes to the Post Office but, the Post Office comes to the Department to collect the notice. (x) Post Man comes once a day to the Department, in the afternoon mostly towards the end of the day. (xi) if the tapaal is handed over to the Dispatch Clerk after the Post Man comes & leaves on a particular day, the tapaal will be picked up by the Department of Posts, India only on the next day.

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(xii) Booking of the notice in the Post Office is always subsequent to the act of collecting the notice from the Department by the Post Man. 7. Page Nos. 47 & 48 of the Paper Book contain the notices u/s 148 issued by the AO in this group of cases, which clearly show the dispatch seal on them with the date & initials of the dispatch clerk. This according to the learned DR is evidence that the notices were properly dispatched and went out of the control & power of the AO on 31-03-2015 itself, though the officer to whom it was delivered was the dispatch section in his own office. 8. In short, the contention of the revenue is that the date on which the AO signs the notice u/s. 148 of the Act and hands it over to the despatch clerk in his office would be the date on which the notice u/s. 148 should be treated as “issued”. Another contention of the ld. DR was that the provisions of section 292B of the Act would come to the rescue of the department. Section 292B of the Act provides that no notice issued in pursuance of any provisions of the Act shall be invalid merely by reason of any mistake, defect or omission in such notice, if such notice is, in substance and in form, in conformity with or according to the intent and purpose of the Act. The ld. DR has cited judicial precedents in support of the case of the revenue, which we will deal with a little later. 9. The AO and the CIT(Appeals) held that the date of despatch would be the date of issue of notice u/s. 148 of the Act. 10. We have considered the rival submissions. As we have already observed, it is undisputed that the last date for issue of notice u/s. 148 in the case of two assessees is 31.03.2015. It is also not in dispute that the notices were given to the postal authorities on behalf of the department only on 01.04.2015. In similar circumstances, the Hon’ble Gujarat High Court has taken a view that notice u/s. 148 of the Act is barred by limitation. We have already extracted the relevant portion of the decision of the

ITA Nos.798, 741 & 1203/Bang/2018 Page 8 of 13 Hon’ble Gujarat High Court. It has been clearly held that signing the notice on a particular date cannot be equated with issuance of notice u/s. 148 of the Act. The date of issue would be the date on which the notices are actually handed over to the post office for the purpose of effecting service on the assessees. In view of the aforesaid decision of the Hon’ble Gujarat High Court, we are of the view that the assessments u/s. 147 in the case of both the assessees are invalid and are liable to be annulled as barred by limitation. 11. The ld. DR, however, placed reliance on certain judicial pronouncements in support of his claim that when the notice u/s.148 of the Act is duly signed by the AO and is handed over to the despatching clerk, that date would be the date of issue of notice u/s.148 of the Act. He pointed out that the notices in the case of both the Assessees have been handed over to the despatch section on 31.3.2015, the last date of limitation for issue of notice u/s.148 of the Act in the case of the Assessee for AY 08-09 and therefore the notices were issued within the period of limitation as laid down by Sec.148 read with Sec.149 of the Act. 12. The learned DR relied on the decision of Hon'ble Supreme Court in Collector of Central Excise, Madras Vs. M/s M.M. Rubber and Co., Tamil Nadu AIR 1991 2141 (SC) wherein the Hon’ble Supreme Court examined the provisions of Section 35E(3) of the Central Excise & Salt Act, 1944 which provided a period of limitation for exercising powers of revision of record of any proceedings and it says that no order shall be made after the expiry of one year from the date of decision or order of the adjudicating authority. The issue before the Court was as to, whether the time period has to be reckoned from the date of the order or the date on which the same was communicated to the Assessee. The Hon’ble Supreme Court held that if the intention or design of the statutory provision was to protect the interest of the person adversely affected, by providing a remedy against

ITA Nos.798, 741 & 1203/Bang/2018 Page 9 of 13 the order or decision, any period of limitation prescribed with reference to invoking such remedy shall be read as commencing from the date of communication of the order. But if it is a limitation for a competent authority to make an order, the date of exercise of that power and in the case of exercise of suo motu power over the subordinate authorities, the date on which such power was exercised by making an order are the relevant dates for determining the limitation. The Hon’ble Court also observed that the ratio of this decision may also be founded on the principle that the Government is bound by the proceedings of the officers, but persons affected are not concluded by the decision. 13. The learned DR’s submission was that when the notice u/s.148 is signed, the same becomes operative from the date on which it is signed. 14. We fail to see as to how the aforesaid decision is relevant for the present case. The provisions of Section 148 of the Act mandates issue of a notice before proceeding to frame an assessment u/s.147 of the Act of income that has escaped assessment. Sec.149 lays down period of limitation for issue of notice u/s.148 of the Act. The act of issuing a notice u/s.148 of the Act cannot be equated with the date of order for the purpose of Sec.35E(3) of the Central Excise & Salt Act, 1944. 15. The learned DR relied on decision of Hon’ble Supreme Court in State of Punjab v. Khemi Ram, AIR 1970 SC 214, wherein the question before the Court was whether an order of suspension under Rule 3.26(d) of the Punjab Civil Services Rules, which provided that a Government Servant under suspension for misconduct shall not be permitted to retire on his reaching superannuation until enquiry into charge was completed and final order passed thereon. The order of suspension in the said case was passed on 2.8.1958. The Government servant received the order on 4.8.1958. He retired on 4.8.1958 before receipt of the order of suspension. The Court held that it was the communication of the impugned order which

ITA Nos.798, 741 & 1203/Bang/2018 Page 10 of 13 was held to be essential and not its actual receipt by the officer concerned and such communication was held to be necessary because till the order is issued and actually sent out to the person concerned, the authority making such order would be in a position to change its mind and modify it, if it thought fit. But once such an order is sent out, it goes out of the control of such an authority, and therefore, there would be no chance whatsoever of its changing its mind or modifying it. In the view of the Court, once an order is issued and it is sent out to the concerned government servant, it must be held to have been communicated to him, no matter when he actually received it. 16. The learned DR submitted that the notice u/s.148 of the Act went out of the control of the AO and therefore the date of notice should be regarded as the date of issue of notice u/s.148 of the Act. 17. We are of the view that the decision cited by the learned DR is not of any use to the plea of the revenue. We have already held that the date of communication of the order in the present case would be the date on which the letter containing the notice with address of the Assessee properly written and appropriate postage stamp paid is delivered to the postal authorities 18. The above decision rendered in a different context would therefore not advance the plea of the revenue. For the very same reason given above, the decision of the Hon’ble Supreme Court in Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co., AIR 1966 SC 543 relied upon by the learned DR is not of any use to the plea of the revenue. In the said case, decision was rendered in the context of the provisions of Section 4 of the Contract Act, 1872. It was held that the moment the proposer puts his proposal in the course of transmission, it is complete as against the acceptor i.e. addressee. The learned DR argued that the moment the notice is signed and put in the course of transmission by the

ITA Nos.798, 741 & 1203/Bang/2018 Page 11 of 13 department, the notice is deemed to be served as the communication is out of the proposer. We have already held that the handing over of the postal cover to the postal authorities is the date of issue of notice. The decision cited rendered in the context of conclusion of contract between parties would therefore be not relevant. 19. The ld. DR also relied on the decision of the Hon’ble Punjab & Haryana High Court in the case of VRA Cotton Mills Pvt. Ltd. v. UOI, 359 ITR 495 (P&H). The Hon’ble Court had to deal with a case of expression of “service” as occurring u/s. 143(2) of the Act. The provisions of section 148 r.w.s. 149 of the Act are different and therefore the aforesaid decision would not be of any assistance to the plea of the revenue. Besides the above, the aforesaid decision lays down that the date of receipt of notice will be irrelevant for the purpose of section 143(2) of the Act and if the notice u/s. 143(2) is issued within the period of limitation, then that would be sufficient. This decision does not deal with the date on which the notice can be said to have been issued and therefore the same is not relevant. 20. The ld. DR also relied on the decision of the Bangalore Bench of ITAT in the case of ITO v. Mohta Udyog Ltd. in ITA No.24/Bang/2015 dated 26.08.2016. This decision is also in the context of issue of notice u/s. 143(2) of the Act. Even in this decision, the Tribunal has taken the view that the moment the notice is signed and put in the course of transmission by the department, the notice is deemed to be served. Therefore, the aforesaid decision is not of help to the plea of the revenue. 21. As far as the applicability of section 292B of the Act is concerned, we are of the view that the same cannot come to the rescue of the revenue. Firstly, the period of limitation prescribed for doing a particular act cannot be overlooked as a mistake, defect or omission. Secondly, judicial decisions have taken a view that provisions of section 292B are applicable

ITA Nos.798, 741 & 1203/Bang/2018 Page 12 of 13 only to procedural irregularities which could be cured and not in case where there is lack of jurisdiction in the following decisions:- (i) V. Ramaiah v. CIT, 356 ITR 656 (Mad) (ii) Monga Metals (P) Ltd. v. ACIT [2000] 111 Taxman 175 (Mag.) (iii) PCIT v. Maruti Suzuki India Ltd., 397 ITR 681 (Del) (iv) CIT v. Norton Motors, 275 ITR 595 (P&H) 22. For the reasons given above, we hold that reassessment proceedings in the case of both the assessees are invalid and are liable to be annulled and are accordingly annulled. 23. In view of the aforesaid decision, the other disputes raised by the assessees in their appeals do not require any consideration. Thus, these appeals of the assessee are allowed. 24. In the appeal by the assessee in ITA No.741/Bang/2018, the only issue is with regard to validity of notice u/s. 148 of the Act on the ground that it was issued beyond six years from the end of the relevant assessment year. The facts as it exists in this case is identical to the facts as it exists in the case of other two assessees. In this case, records show that a notice u/s. 148 of the Act dated 31.03.2015 was issued by the AO. The records further show that this notice was given to the postal authorities for the purpose of transmission to the assessee on 30.03.2015. Therefore, the notice u/s. 148 of the Act in this case is valid and consequently the assessment framed u/s. 147 of the Act has to be held as valid. 25. The ld. counsel for the assessee, however, submitted that when the notice u/s. 148 is dated 31.03.2015, how could it be delivered to the postal authorities on 30.03.2015 for the purpose of transmission to the assessee. On this aspect, we have seen that the notice issued u/s. 148 of the Act insofar as this assessee is concerned and we find that the notice though is dated 31.03.2015, it has been despatched to the despatch section on 30.03.2015. Thus, it is clearly a case of a wrong mentioning of the date in

ITA Nos.798, 741 & 1203/Bang/2018 Page 13 of 13 the notice u/s. 148 and beyond this, no other adverse inference can be drawn in the facts and circumstances of the case. We, therefore, find no merit in this appeal by the assessee and the same is dismissed. 26. In the result, the appeals in ITA No.798/Bang/2018 and 1203/Bang/2018 are allowed, while the appeal in ITA No.741/Bang/2018 is dismissed. Pronounced in the open court on this 08th day of February, 2019.

Sd/- Sd/- ( JASON P. BOAZ ) (N.V. VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT

Bangalore, Dated, the 08th February, 2019.

/ Desai Smurthy /

Copy to: 1. Appellant(s) 2. Respondent(s) 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file

By order

Assistant Registrar ITAT, Bangalore.