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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
ORDER
Per Shri A.T.Varkey, JM
This is an appeal preferred by the assessee against the order of Ld. CIT(A)-7, Kolkata dated 06.10.2016 for AY 2013-14.
Though the assessee has raised as many as nine grounds of appeal
, the main issue of assessee in this appeal is against the action of Ld. CIT(A) in adjudicating the issue in- respect of service of notice u/s. 143(2) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) which according to AO was sent by speed post [ which according to assessee was to the incorrect address of the assessee] therefore, the same was returned by Postal authority with remarks “Not Known” and subsequently alleged to have been served by affixation [which according to assessee was also in wrong address].
3. Brief facts of the case are that the assessee an individual is engaged in the business of jewellery. In the instant case a survey was conducted on the premises of the assessee on 13.02.2013 in the physical absence of the assessee in person. According to AO, during the course of survey, no books of account were produced. No stock registers, purchase register, sales register was also found. According to AO, in reply to question no. 13, the manager of the assessee’s jewellery after consulting the proprietor Shri Pradip Kr. Das (assessee)
Pradip Kr. Das, AY 2013-14 admitted undisclosed jewellery of 1785 grams. Further, in reply to question no.15, the manager stated that he intends to pay advance tax of Rs. 15 lakhs in March quarter. According to AO, he intended to scrutiny the assessment of the assessee for the assessment year under consideration, so he duly issued notice on 12.09.2014 u/s. 143(2) of the Act and despatched by Speed Post on 15.09.2014; and when even after lapse of ten days, acknowledgment for services of notices were not returned, the AO deputed his Inspector and notice was served through affixation in the address “Durgachak Colony, Block C, Post & P.S. Durgachak, Dist. Purba Medinipur,.” The AO further sent questionnaire to the assessee on 02.11.2015 issuing notices u/s. 142(1) of the Act. However, the assessee objected to the scrutiny proceedings on the ground that no notice u/s. 143(2) was served upon him and, therefore, the assessee refused to comply with the questionnaire dated 02.11.2015. Subsequently, also the AO gave the assessee opportunity to submit the details. However, the assessee kept on repeating the ground that notice u/s. 143(2) of the Act was not served upon him within the limitation prescribed by the statute and, therefore, did not submit the details asked for by the AO. Subsequently, the AO completed the assessment u/s. 144 of the Act and made additions on account of undisclosed profit of Rs.17,94,483/- and undisclosed investment of Rs.52,12,200/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who confirmed the action of AO. Aggrieved, the assessee is now in appeal before us, raising non-service of section 143(2) notice on him, which according to assessee is mandatory for framing of assessment under section 143(3) of the Act.
We have heard rival submissions and gone through the facts and circumstances of the case. We note that the return of income was filed by the assessee on 06.10.2013 declaring total income of Rs.29,31,764/-. A survey was conducted in the assessee’s premises on 13.02.2013 and the case was selected for scrutiny initially by the then AO (ITO, Ward-1, Halida). The AO who completed the assessment is noted as ACIT, Circle-27, Halida, who took note of the fact that since the return of income of the assessee in the case for the year under consideration was more than Rs.15 lakhs, the ITO, Ward-27(1), Halida had transferred the assessment to the office of the ACIT on 19.06.2015. Thereafter, the ACIT noticed that he issued notice u/s. 142(1) and also u/s. 143(2) on 22.06.2015. The ACIT noticed that the assessee objected to the scrutiny proceeding stating that no notice u/s. 143(2) was served upon him earlier and notice issued to him by the ACIT is barred by Pradip Kr. Das, AY 2013-14 limitation of time. In the light of the aforesaid objection raised by the assessee, the ACIT asked for explanation from the ITO, Ward-27(1), Halida who in turn submitted that notice u/s. 143(2) was issued on 12.09.2014 and despatched to the assessee by Speed Post on 15.09.2014. As per the ITO, since after ten days elapsed after despatch of notice u/s. 143(2) and no acknowledgment of the notice was returned by the Speed Post authority, [ as token of a receipt by the assessee] he (ITO) instructed the Inspector of the Department to serve the notice to assessee. Thereafter according to the ITO, on 25.09.2014 the Inspector served the notice on the assessee by mode of affixture. This reply of the ITO in respect of service of notice by affixture was brought to the notice of the assessee by the ACIT. However, assessee again objected to the service of notice by Speed Post (purportedly despatched by the ITO on 15.09.2014 and duly returned back to ITO on 30.09.2014) as well as by mode of affixture by Inspector dated 25.09.2014, on the plea that it was not affixed in the correct address. Further we note that the assessee had sent several letters to the ACIT pleading mainly that notice u/s 143(2) was not served upon his correct address and asking for evidences in the hands of the department to prove service of the mandatory notice u/s. 143(2), the contents of one of which is reproduced as under:
Pradip Kr. Das, AY 2013-14 5. Our attention was drawn to page 8(1) of the paper book which is the found to be the order sheet maintained by the AO in respect of assessment of the assessee, from which it is revealed that an entry [first] has been made on 12.09.2014, which reads as under: “12.09.2014: Survey in this case was conducted on 13.02.2013 and in the course of survey the books of account vide ID mark MJ/1 to MJ-5 were impounded vide annexure. It is seen from the return of income filed by the assessee electronically on 6th October, 2013 declaring total income at Rs.29,31,760/-. As all the conditions laid down in para 1(c) of the CBDT instruction number 6/2014 dated 02.09.2014 for selection of cases for scrutiny during 2014-15 are not fulfilled, this case is taken up for scrutiny. Issued notice u/s. 143(2) of the I. T. Act, 1961 to the assessee fixing the case for hearing on 29.10.2014 at 12.00 PM.”
According to Ld. AR from a perusal of the aforesaid order-sheet entry dated 12.09.2014, it reveals that it has been initiated by the AO at that time (ITO, Ward-27(1), Haldia, herein after termed ‘ITO’) and after this order sheet entry, next date of action/event recorded, revealed in the order-sheet was dated 19.06.2015 which was made by ACIT (Haldia) recording the fact of receipt of assessment records from ITO, Ward-27(1), Haldia and thereafter the order sheet is found to have been maintained by ACIT, Haldia and it was pointed out by the Ld. AR that subsequent events has no much relevance to adjudicate the legal issue before us i.e, whether service of notice u/s 143(2) issued by ITO Ward-27(1), Haldia dated 12.09.2014 has been validly carried out within the limitation time i.e. on or before 30.09.2014 or not ? For adjudicating this issue, we note from a perusal of the order- sheet entry dated 12.09.2014 by ITO, Ward-27(1), Haldia (which is the only entry made by the ITO and that too typed and initialled by him) it is noted that on 12.09.2014, the ITO is recording the facts that notice u/s. 143(2) against the assessee has been issued, fixing the case for hearing on 29.10.2014 at 12.00 pm. Thereafter, no event is recorded by ITO, Ward-27(1) in the case of assessee in the order sheet and the next event is dated 19.06.2015 recorded by ACIT acknowledging transfer of assessment records to him from ITO, Ward- 27(1), Haldia. So, according to Ld. AR, the ITO issued notice u/s. 143(2) and later despatched the notice which was returned back [un-served] to him on 30.09.2014. However, when the assessee pleaded before the ACIT (subsequent AO) that no notice u/s. 143(2) was received/served upon him, the ACIT asked explanation from ITO who stated that some other actions also took place in the case of assessee regarding service of notice. In his reply to ACIT, on this aspect, the ITO states that he issued the notice u/s. 143(2) on 12.09.2014 Pradip Kr. Das, AY 2013-14 and later despatched the same via Speed Post Acknowledgment no. EW457965153IN on 15.09.2014 addressing the assessee’s address in Block ‘C’ (which according to assessee is wrong and it should have been Block-B). Further, it was revealed by the ITO that when he found that even after ten days of despatch of notice by Speed Post (i.e, on 25th September 2014), that no acknowledgment of service of notice by Speed Post to assessee was received back from postal authorities [as proof of service of ibid notice], he deputed an Inspector to serve the sec. 143(2) notice; and the Inspector filed a report that on 25.09.2014, that the notice by mode of affixture was made at the address wherein it is stated to be at Block “C” has been carried out(which the assessee again says it is wrong address and not that of assessee, which is at Block-B). So, according to Ld. AR of the assessee, the wrong address on Speed Post as well as the Inspector affixture report [i.e. address shown at Block “C”], even if assumed as correct, then also it will be evident that it [service of notice] has been done/served at the wrong address and thus AO/ITO has not served the mandatory statutory notice u/s. 143(2) within the time prescribed by the statute, which expired on 30th September 2014, so the scrutiny assessment is bad in law. Per Contra, the Ld. CIT, DR pointed out that the assessee is the proprietor of the only gold jewellery shop in that area and so he is a well known figure, so the question of postal authorities serving the notice to any other address does not arise; and drew our attention to the Return of Income (ROI) filed by the assessee to show that the assessee himself has shown in the Box wherein Flat/Door/Block Number has to be filled, the assessee has typed “D Colony” and therefore now according to him, the assessee cannot take advantage of his own wrong committed at the first place, by saying the correct address is Block-B. In his re-jointer, the Ld. AR pointed out that “D Colony” in the Box in ROI is nothing but “Durgachak Colony”[ which forms part of the correct address] and thus the assessee has not misled the department by stating so in ROI. Moreover, according to Ld. AR, it doesn’t lie in the mouth of department to say now that since the assessee is the only jewellery owner in that area, so postal authorities knew him well and the question of non-service of notice by Speed Post doesn’t arise, which contention of the Ld. CIT, DR is nothing but based on surmises and conjectures ;and when the un-disputed fact on record is that the speed-post despatched by the ITO on 15.09.2014 addressed to Block-C, has been returned back to him [ITO] un-served on 30.09.2014. Further it was pointed out by the ld AR that the department cannot say that it was ignorant about the Pradip Kr. Das, AY 2013-14 correct address of assessee when the very same department had conducted survey u/s 133A of the Act, in assessee’s premises on 13.02.2013 pursuant to which the scrutiny assessment was ordered against the assessee after impounding certain documents and extracting some admission by duress from his employee as revealed in the order-sheet (supra). So, according to ld. AR, the department was aware of the correct address and that is how they were able to conduct survey u/s. 133A of the Act and prepare a survey report. In that factual back-drop, according to ld. AR, if the Inspector was deputed by the ITO/AO as contended by him to serve the notice, then it could have been served upon the assessee, so according to Ld. AR this affixation theory by interested witness (both server of notice i.e. the inspector and witness of affixation were departmental employees) is an afterthought to cover the lapse of non-service of notice u/s. 143(2) before 30.09.2014, and that is the precise reason why despite assessee pleading for affidavits to be sworn by the server of notice by affixation as well as the witness to this action, both shied away from doing so, which omission exposes the cooked-up purported service by affixation was false and an afterthought, so it cannot be believed. It was also argued by the Ld. AR that even if for argument sake it is believed that ITO’s contention of deputing departmental personnel for service/affixture is correct, then also it can be seen that they have gone to the wrong premises to serve/affix the notices, which fact is evident from perusal of the Inspector Report dated 25.09.2019 [wherein address of Block-C is mentioned]. So, Ld. AR wondered as to how it can be said that notice was served/affixed in the correct address of the assessee when the fact which is evident from their own Inspector’s Report dated 25.09.2014 placed at page 11 of paper book that they affixed it at Block ‘C’ and not Block ‘B’ wherein the assessee has acknowledged receipt of other notices from ACIT (Haldia). Elaborating on his argument, the Ld. AR painstakingly contended that if the notice was issued/despatched by Speed Post at the wrong address (Block ‘C’ address), how it can be expected to be served upon by the postal authorities to the assessee at the wrong address at Block-C. Likewise, when the ITO deputed the inspector to serve the notice at the very same address, where the postal authorities failed to serve the speed-post, how the Inspector could be expected to serve/affix the notice at Block –C and thus according to Ld AR, the affixation theory of the notice on 25.09.2014 falls and looking from any angle the notice u/s 143(2) was not served upon the assessee. In order to appreciate the aforesaid contention, we need to look at the address to Pradip Kr. Das, AY 2013-14 which AO sent the notice and we note that the address to which the AO/ITO, Ward-27(1), Halida has purportedly issued on 12.09.2014 and despatched on 15.09.2014 by Speed Post happened to be at the address wrongly to Block “C” which is as under (found placed at page 2 of paper book): “Shri Pradip Kumar Das Block C Durgachak Colony Durgachak Haldia Midnapore West Bengal 721602”
And it is noted that Inspector who was purportedly deputed to serve notice has given an Inspector Report which is found placed at page 11 of paper book dated 25.09.2014 and which is signed by Sri Anurag Priyadarshi (Inspector) who states that on 25.09.2014, he received a notice u/s. 143(2) dated 12.09.2014 in the case of Shri Pradip Kr. Das, prop. M/s. Modern Jewellers, Block-C, Durgachak Colony, Haldia, Purba Medinipur for AY 2013-14 and then he went to the spot (address) and the person present there refused to receive the notice, which fact he conveyed to ITO, Ward-1, Haldia (AO) who instructed him to serve the notice by way of affixation which he did in the presence of Shri Arghya Mishra, Inspector attached to ITO, Ward-3, Haldia. From a perusal of the Inspector’s report, we note that the address mentioned in the report is addressed as Block-‘C’ (supra) and so, the action of Inspector to have affixed notice cannot come to the rescue of the ITO, since this was the same address of the assessee which was written on the cover of the Speed Post which in turn was returned back un-served by the postal authorities on 30.09.2014. In the light of the aforesaid facts it is clear that no notice u/s. 143(2) of the Act could be served upon the assessee by Speed Post or by affixation, since the address was wrongly mentioned as in Block ‘C’. Moreover, we note that the department has conducted the survey at the assessee’s premises on 13.02.2013, so, it does not lie in the mouth of the AO/ITO to say that they were not aware of the correct address. Be that at it may be, even if the address given in Speed Post is undisputedly was that of Block “C”, (Speed Post returned on 30.09.2014), however when Inspector was deputed to serve the notice, he could have served it on the correct address, since physical survey was conducted in February 2013 at the Pradip Kr. Das, AY 2013-14 assessee’s premises. However, from a perusal of the Inspector Report reveals the address as that of Block ‘C’ which the assessee contends to be Block ‘B’, [which fact the assessee himself acknowledges of receiving that other notice under section 143(2) which was despatched by subsequent incumbent AO/ACIT, Haldia on 22.06.2015]. Moreover, we note that assessee despite asking for the process server/Inspector’s affidavit, they have failed to swear an affidavit of service of the notice even by mode of affixture at the address of assessee at the correct address at Block “B” (copy of letter, supra). And even we find force in the contention of the Ld. AR that the Inspector who purportedly affixed the notice has not taken the aid of an independent witness residing in the locality for identification of the assessee’s address, but has erred in carrying out the mode of service by affixation in the presence of departmental officer Sri Arghya Mishra (Inspector) attached to ITO, Ward-3, Haldia, which action itself makes the service of notice by affixture itself suspect/bad in law. So, from the discussions made (supra), we sum up the facts and note that the notice u/s. 143(2) dated 12.09.2014 was first sent to the wrong address of assessee (Block ‘C’) by Speed Post on 15.09.2014 which was returned back to the ITO/AO on 30.09.2014. The ITO’s second contention of service through Inspector i.e. the Inspector’s Report states that Shri Anurag Priyadarshi (Inspector) served the notice by affixture on 25.09.2014 at the wrong address (Block ‘C’) and that too in the presence of department representative and not witnessed by any independent witness of the locality, which omission to carry out the affixation of notice makes the action of ITO, Ward-27(1), bad in the eyes of law and thirdly, the order sheet maintained by the ITO Ward-27(1) in respect of the assessee for the assessment year, does not mention about any action taken by the ITO on 25.09.2014 to depute the Inspector to serve the 143(2) notice against the assessee or the fact of affixture. From the aforesaid facts, we find that the notice u/s. 143(2) despatched by the ITO by Speed Post was returned back on 30.09.2014 and in no way the mode of service of the said notice by affixation was carried out in the correct address of the assessee. And since the issue and service of notice u/s. 143(2) of the Act by the AO within the stipulated time i.e. 30.09.2014 is sine qua non for successful completion of scrutiny/section 143(2) assessment as held by the Hon’ble Supreme Court in ACIT Vs. Hotel Blue Moon (2010) 321 ITR 362 (SC), the action of AO to frame assessment order without complying with the same as discussed (supra) is bad in law since notice u/s. 143(2) of the Act could not be served upon the Pradip Kr. Das, AY 2013-14 assessee. Several case laws have been cited by the Ld. AR, a few of which we have considered to come to the aforesaid conclusion is given below: i) Coconut Palm Beach Garden Vs. CIT (2014) 224 Taxman 65 (Mag.)(Ker); ii) Romi Vs. CIT (2014) 363 ITR 311 (Ker); iii) CIT Vs. Salarpur Cold Storage Pvt. Ltd. (2015) 228 Taxman 48 (Mag) (All); iv) CIT Vs. Pradeep Kumar Gupta (2014) 221 Taxman 15 (Mag)(All)’ v) CIT Vs. Cebon India Ltd. (2010) 229 CTR (P&H) 188; vi) CIT Vs. Sunil Kumar Chhabra (2012) 250 CTR (P&H) 195; vii) CIT Vs. AVI-OIL India (P) Ltd. (2010) 323 ITR (P&H) viii) CIT Vs. Mukesh Kumar Agrawal (2012) 25 taxman.com (All) ix) CIT Vs. CPOR Capital Services ltd. 330 ITR 43 (Del); x) CIT Vs. Silver Streak Trading Pvt. Ltd. 326 ITR 418 (Del.).
So, since the ITO, Ward-27(1) failed to serve the section 143(2) notice to the assessee within the stipulated time i.e. 30.09.2014, the scrutiny assessment has been framed by AO without jurisdiction and sec. 292BB of the Act cannot come to the rescue of AO since as per proviso to section 292BB, if the assessee has raised during the assessment proceedings itself the objection of non-service of notice then the shield provided to the department u/s. 292BB cannot come to the rescue of the department. So, on the facts and circumstances discussed supra and case laws cited above, the assessment order is null in the eyes of law and we quash the assessment order framed by AO dated 22.02.2016.
In the result, appeal of assessee is allowed.