SHRI.H.C.BYREGOWDA vs. ASST. COMMISSIONER OF INCOME TAX

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF SEPTEMBER 2021 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE HEMANT CHANDANGOUDAR I.T.A. NO.679 OF 2016 BETWEEN: SHRI. H.C. BYREGOWDA L/ H OF LATE CHIKKANNA @ THAMMAIAH AGED ABOUT 53 YEARS SON OF LATE SRI CHIKKANNA NO 1288/3 3RD MAIN, MAGADI CHORD ROAD BENGALURU - 560079. ... APPELLANT (BY SRI. A. SHANKAR, SR. COUNSEL FOR SRI. B.S. BALACHANDRAN, ADV.,) AND: ASST. COMMISSIONER OF INCOME TAX CIRCLE -9 (1), BENGALURU - 560085. ... RESPONDENT (BY SRI. ARAVIND K.V. ADV.,) - - - THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 17.06.2016, PASSED IN ITA Nos.606 & 607/BANG/2015, FOR THE ASSESSMENT YEARS 2004-2005 & 2005-2006, VIDE ANNEXURE-A, PRAYING THIS HON'BLE COURT TO

(A) FORMULATE THE QUESTION OF LAW STATED ABOVE;

(B) ALLOW THE APPEAL AND SET-ASIDE THE ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL BEARING ITA Nos.606 &

2 607/Bang/2015 FOR THE ASSESSMENT YEARS 2004-2005 & 2005- 2006; AND

(c) PASS SUCH OTHER SUITABLE ORDERS AS THIS HON'BLE COURT DEEMS FIT TO GRANT ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE INTEREST OF JUSTICE AND EQUITY. THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee against the order dated 17.06.2016 passed by Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short). The subject matter of the appeal pertains to the Assessment year 2004-05 & 2005-06. The appeal was admitted by a bench of this Court on the following substantial question of law: Whether in law, the finding of Tribunal that an AO could issue two notices is perverse for reason that the first notice continued to subsist?

3 2. Facts leading to filing of this appeal briefly stated are that assessee is the legal representative of Late Chikkanna alias Thimmaiah. A search was conducted in the premises of the assessee on 29.03.2006. The revenue found the documents during the course of the search, which related to his father Late Chikkanna and proceeding was initiated invoking provisions of Section 153C of the Act. Thereafter, an order of assessment was passed on 22.12.2008 in the case of the father of the assessee under Section 143(3) read with Section 153C of the Act for Assessment Years 2004-05 and 2005-06. The aforesaid order of assessment was under challenge in an appeal. The Commissioner of Income Tax (Appeals) annulled the proceeding under Section 153C of the Act on the ground that the condition precedent for issuing notice under Section 153C of the Act was non existent. The revenue did not assail the order passed by the Commissioner of Income Tax (Appeals), which has attained finality.

4 3. Thereafter, the Assessing Officer initiated re- assessment proceeding under Section 147 of the Act and issued notices dated 22.03.2011 under Section 147 of the Act. The first notice was served at the business premises of the assessee on 25.03.2011, whereas, another notice was served at the residential premises of the assessee on 06.04.2011. The assessee thereupon filed objections to the re-opening proceeding inter alia on the ground that since, notice under Section 148 of the Act was issued to the assessee on 25.03.2011, the proceeding for re-assessment as required under Section 153(2) of the Act ought to have been completed within 9 months from the end of financial year i.e., on or before 31.12.2011. However, the Assessing Officer by an order dated 28.02.2013 completed the assessment under Section 143(3) read with Section 147 of the Act. 4. The assessee filed an appeal before the Commissioner of Income Tax (Appeals) who by an order dated 10.02.2015 dismissed the appeal. The aforesaid

5 order has been affirmed by the tribunal on 17.06.2016. In the aforesaid factual background, this appeal has been filed. 5. Learned Senior counsel for the assessee submitted that tribunal has failed to assign any reasons while recording the conclusion that time limit for completion of the assessment has to be reckoned from the date of service of notice at the residential premises of the assessee i.e., with effect from 06.04.2011, though, first notice was admittedly served on the assessee on 25.03.2011. it is further submitted that the assessment has not been completed within the period of nine months as stipulated under Section 153(2) of the Act and therefore, the same is beyond limitation. It is also urged that tribunal failed to appreciate that until and unless one set of proceeding is disposed of, the Assessing Officer was precluded in law from initiating another proceeding under Section 148 of the Act and it ought to have been appreciated that the proceeding

6 initiated pursuant to notice which was served on the assessee on 25.03.2011 continued. In support of aforesaid submissions, reliance has been placed on decisions 'COMMUNIDADO OF CHICALIM VS. INCOME-TAX OFFICER', (2000) 113 TAXMANN 331 (SC), 'ADITYA MEDISALES LTD. VS. DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE 1(1)', (2016) 73 TAXMANN.COM 197 (GUJARAT), 'GAY TRAVELS (P) LTD. VS. DEPUTY COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE II (2), CHENNAI', (2017) 85 TAXMANN.COM 131 (MADRAS)', M/S RENUKA INDUSTRIES VS. ITO IN ITA NO.187/2003 DATED 28.11.2007. 6. On the other hand, learned counsel for the revenue submitted that two notices dated 22.03.2011 were dispatched to the business premises and the residential premises of the assessee. The notice issued to the business premises of the assessee was served on 25.03.2011, whereas, the notice issued to the

7 residential premises of the assessee was served on 06.04.2011 and since, the service of notice on the residential premises of the assessee was a valid service, therefore, the authorities have rightly treated the date of service of notice as 06.04.2011. It is urged that the decisions relied upon by learned Senior counsel for the assessee do not apply to the fact situation of the case as in the instant case, two notices were issued on the same dated i.e., 22.03.2011 and the instant case is not a case of issuance of different notices on different dates. It is further stated by learned counsel for the revenue that the records of the case are not available as the same have been destroyed. 7. We have considered the submissions made by learned counsel for the parties and have perused the record. Section 153(2) of the Act provides that no order of assessment, re-assessment or re-computation shall be made under Section 147 after expiry of nine months where the notice under Section 148 of the Act was

8 served on the assessee on or after 1st day of April, 2005 but before 1st day of April, 2011. 8. Section 282 of the Act provides that notice can be served on an assessee in the manner mentioned therein viz., (a) by post or by such courier service approved by the board; (b) in such manner as provided under the Code of Civil Procedure, 1908 for the purpose of service of summons; (c) in the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000; or (d) by any other means of transmission of documents as provided by rules made by the Board in this behalf. Thus, service of notice will be complete if it is served on the assessee in person. 9. In the instant case, the notice was served on the assessee on 25.03.2011, which is evident from the order of assessment as well as the communication dated 05.05.2011 sent by the Assessing Officer to the assessee. The relevant extract reads as under:

9 ORDER OF ASSESSMENT The assessee late Sri.Chikanna is represented by L/H Sri. H.C.Byregowda. Notice u/S 148 was issued on 22.03.2011 which was served on the assessee on 25.03.2011 for the Assessment Year 2004-05. further, one more notice u/s 148 dated 22.03.2011 was served on the assessee on 06.04.2011. As per your letter you have mentioned that he notice u/s 148 for Assessment Year 2005-06 was served on 06.04.2011. 10. Thus, it is evident that admittedly the notice was served on the assessee on 25.03.2011 and therefore, the time for completion of assessment proceeding in respect of Assessment Year 2004-05 and 2005-06 is 31.12.2011 i.e., nine months from the date of financial year in which notice under Section 148 of the Act was served. However, the order of assessment has been passed beyond the aforesaid period i.e., on 28.03.2013. Therefore, the proceeding for re- assessment were completed beyond the period of

10 limitation as prescribed under Section 153(2) of the Act. Admittedly, the first notice which was served on the business premises of the assessee was existing and was not withdrawn. Therefore, the same continued to subsist and the finding of the tribunal that Assessing Officer could issue two notices is perverse. For the aforementioned reasons, the substantial question of law is answered in the affirmative and in favour of the assessee. The order dated 17.06.2016 passed by the tribunal pertaining to Assessment Years 2004-05 and 2005-06 is hereby quashed. In the result, the appeal is allowed. Sd/- JUDGE Sd/- JUDGE ss