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Income Tax Appellate Tribunal, DELHI BENCH “E”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI ANADI N. MISHRA
Date of Hearing: 25-07-2016 Date of Order : 30-08-2016
ORDER PER H.S. SIDHU, JM This appeal by the Assessee is directed against the Order of the Ld.
Commissioner of Income Tax (Appeals)-IX, New Delhi dated 24.2.2014 pertaining to assessment year 2001-02 on the following grounds:-
“1. Any notice u/s. 143(2) of the Income Tax Act, 1961 was not served upon the assessee within the time permitted by proviso to section 143(2) of the Act and without prejudice the same were also not addressed to the "the principal Officer" as required by section 282(2)(b) of the Act and therefore, the same and consequential assessment is null and void ab initio.
2. Selection of the case for scrutiny with prior approval of the ld. Commissioner of Income Tax is bad in law and therefore the assessment is null and void ab initio.
Shri R.K. Meena, purportedly acting as the Income Tax Officer, Ward 6(3) who made the original assessment had no jurisdiction over the case of the Assessee and therefore the assessment is null and void ab initio.
The Ld. Income tax Officer, Ward 6(4) who made the remanded assessment had no jurisdiction over the case of the Assessee and therefore the assessment is null and void ab initio.
5. The ld. Commissioner of Income Tax ( Appeals)-IX New Delhi [ hereafter the CIT(A)] erred in no allowing electricity expenses of Rs.5,07,33,033( on mercantile basis of accounting) against claim/debit to profit and loss account of Rs.4,91,77,188( on cash basis of accounting). Without prejudice and alternatively, the ld. CIT(A) erred in upholding the addition of Rs.10,72,022 being prior period, and without prejudice the same is excessive .
6. The Ld. CIT(A) erred in upholding the addition ofRs.7,35,000 being unsecured loans. ,
7. The Ld.CIT(A) erred in upholding charging of interest uls234B. 234D and 244A of the Act and without prejudice the same are excessive. The Ld. CIT(A) failed to appreciate that section 234D was introduced with effect from 01.06.2003 and being prospective is applicable from A.Y. 2004-05, as has been held in the case of (a) ITO vs. Ekta Promoters (P) Ltd, 113 ITD 719(Delhi) (SB) and (b) Glaxo Smithkline Asia ( P ) LtC! vs. ACIT (2005) 97 TTJ (Del) 108. 2
The Id. CIT(A) erred in not admitting the additional evidence.
The observations as well as the order passed by the ld. Assessing Officer and the Ld. CIT(A) are against the facts as well as law and are without providing proper opportunity of hearing to the appellant.
The brief facts of the case are that the assessee company during the year is engaged in the business of manufacturing of MS Ingots and riser/ runner and the business of Liaison etc. and had declared turnover of Rs. 7.71 Crore against which it claimed manufacturing expenses of Rs. 10.02 Crores. In this case return of income for the assessment year 2001-02 was filed on 31.10.2001 declaring a loss of Rs. 1,84,404/-. This assessment was earlier completed u/s. 144 of the Act, vide order dated 19.3.2004, against which assessee company filed an appeal before the then CIT(A), which was decided on 2.10.2004.
Against the order dated 2.10.2004 of the CIT(A), Department as well as the assessee company further filed appeals before the ITAT, which was disposed by the ITAT with the following directions:-
“We think it appropriate that the matter regarding validity of notices ought to be restored to the file of the AO, before the assessee will file an affidavit containing averments regarding all facts so that he may take a decision as per law about the validity of the notices against hearing the assessee. Therefore, after if he find that any notice had been served within the statutory prescribed time, he shall make a fresh assessment taking all the evidence filed before the Ld. CIT(A) into account. The AO will be free to bring any further evidence on record in this behalf and even the assesse will be free to file any evidence in regard to determination of the income.”
2.1 Subsequently, the AO completed the assessment u/s. 143(3)254 of the I.T. Act on 31.12.2009 and made the following additions:-
A) Prior period expenses on account of electricity : Rs. 10,72,022/-
B) Unexplained unsecured loan : Rs. 7,35,000/-
3. Aggrieved with the above, Assessee appealed before the Ld. CIT(A) who vide his impugned order dated 24.2.2016 has partly allowed the appeal of the assessee.
4. Against the order of the Ld. CIT(A) assessee is again before the Tribunal.
At the time of hearing, Ld. A.R. of the Assessee stated that notice u/s. 143(2) of the Income Tax Act, 1961 was not served upon the assessee within the time permitted by proviso to section 143(2) of the Act and without prejudice the same were also not addressed to the "the principal Officer" as required by section 282(2)(b) of the Act and therefore, the same and consequential assessment is null and void ab initio. In this regard, he stated that the return for AY 2001-02 was filed on 31.10.2001; the period of limitation for service of notice u/s 143(2) expired on 31.10.2002, hence, such notice had to be mandatorily served by 31.10.2002; however, admittedly, the first notice was issued on 16.09.2002; the said notice was sent by regd. post and admittedly returned back unserved on 21.9.2002 without any postal remark; according to A.O., another notice was issued and served through process server and inspector on 26.9.2002; but there is no entry in the order sheet to this effect; according to A.O., another notice was issued and served through process server and inspector on 28.10.2002; but there is no entry in the order sheet to this effect also; the next notice is dated 7.7.2003 which is beyond statutory period and therefore not relevant; the jurisdiction of AO to assess u/s 143(2) was challenged in appeal before CIT(A) without success. On further appeal, the tribunal noticed that the assesee had not filed any affidavit before the lower authorities regarding non service of notice; hence, the matter was restored to the file of A.O. for fresh adjudication after taking on record the affidavit of the assessee. As per the direction of the tribunal, the affidavit dated 29.12.2009 was filed before AO but service of notice was held to be valid by AO vide order dt. 23.12.2009; the assessment was completed vide order dated 31.12.2009.
The said assessment was again challenged before the CIT(A) on jurisdictional ground as well as on merits. The CIT(A) dismissed the jurisdictional ground by observing that the notice by regd. post might have been refused by the assessee and the service by affixture was valid. Aggrieved by the same, the present appeal is before the Tribunal. Ld. Counsel for the assessee further submitted that according to Section 282 of the Income Tax Act read with order V Rule 20 of CPC, if the service of notice through process server returned back with the postal Report and the service of notice is not possible through an ordinary way then the AO has to pass an order in writing satisfying himself that the service of notice is not possible as the assessee is intentionally avoiding the service and the notice cannot be served in an ordinary way and AO will pass the order of affixture. The process server has to fix the notice on the last known address of the assessee. He further stated that according to Order V Rule 17 & 20 of CPC which is dealing with the service of notice by Affixture and the notice should be affixed on the last known address of the assessee in the presence of two independent witnesses while whom the house was identified or business premises was identified and in whose presence the copy was affixed. In the present case the procedure prescribed u/s. 282 of the I.T. Act read with order V Rule 17 & 20 of CPC has not been complied with by the AO. Therefore, the notice in question issued u/s. 143(2) is not valid and assessment framed therefrom is void abinito. In support of these arguments, Ld. Counsel for the assessee has filed the Small Paper Book containing pages 1 to 11 in which he has specifically draw our attention towards the order sheet of the assessment records and established that AO has not adopted the prescribed procedure for serving the notice u/s. 143(2) through affixture. He has also cited the various case laws of the Hon’ble Supreme Court of India and the Hon’ble High Courts and especially draw the attention towards the judgment of the Hon’ble Supreme Court of India in the case of CIT vs. Ramendra Nath Ghosh 82 ITR 888 SC and CIT Vs. Naveen Chander 323 ITR 242 (P&H). In view of the above, he requested that assessment in dispute may be cancelled by accepting the appeal filed by the assessee.
On the contrary, Ld. DR opposed the aforesaid request of the Ld. A.R. of the Assessee. He relied upon the orders of the authorities below and requested that the same may be upheld.
We have heard both the parties and perused the relevant records available with us. We find that Ld. CIT(A) has adjudicated the issue as under:-
“4.6 I have examined the affidavit filed by Sh. Prem Chabbra, director of the appellant company. The affidavit does not speak as to what was the address of the appellant company & how and in what manner the notices served by AO through affixture were not received by assessee. The affidavit filed shows that the Director only contended that notices dated 16.9.2002 and 28.10.2002 were never affixed at the business premises.
4.6.1 In the present case appellant company filled return of income on 31-10-2001 & therefore, the statutory notices u/s 143(2) was required to be served by AO within 12 months from the end of the month in which the return was filled. Therefore, the AO was required to serve the notice u/s 143(2) on or -before 31-10-2002. The first notice sent by AO dated 16-09-2002 was received back unserved. Therefore, the AO served another notice u/s 143(2) through affixture on 26-09-2002 and also on 28-10-2002 to which no compliance was made by the assessee company. It has no where been denied by the assessee company that the address on which the notice served through affixture by AO was not the address of the assessee company which proves that notices were duly served on assessee company and assessee company intentionally did not comply to the notices issued by the then AO which were serve through affixture, and as such the AO was compelled to pass an ex-parte order uls. 144 of the Income Tax Act. The appellant never stated that the address to which original notice was sent by registered post is a wrong address. It might have come back unserved for several reasons. It may be due to assessee or due to fault of the Postal department. Thus, notice sent by registered 'post to the last known address is valid even if it has come back unserved. The appellant might have refused to receive it.
4.6.2 I have also examined the order sheet of AO dated 24-12-2009 which clearly stipulates that the notices u/s 143(2)(ii) have been validly served to the assessee within the stipulated time limit for the previous year under consideration. I have also examined the services made through affixture for notices u/s 143(2)(ii) for service of notice dated 16-09-2002 served through affixture on 26-09-2002 & notice dated 28-10-2002 served through affixture on 28-10-2002. These notices have been served through affixture at address G-4A, Gupta Apartments, 138, Kalkaji New Delhi-19, and these. have duly been served through process server. Service of these notices have duly been confirmed by the Inspector of the ward and the service through affixture if has also been duly validated by the then AO. Therefore, I do not find that there was any default in service of notice u/s 143(2)(ii) by the AO which was validly served on the assessee.
4.6.3 It is also observed that similar ground was raised by the appellant in appeal filled before my predecessor which was disposed by him vide order dated 21-10-2004 observing as under:
"5.4 I have considered the submission of the Appellant and have perused the assessment record. I find the submissions of the Appellant are devoid of merits. The Income Tax Officer sent the notice by registered post, which is a permissible mode of service. The Appellant has not denied the fact of dispatch of notice by registered post; rather the Appellant has accepted this fact. The Income Tax Officer, through not required, served the notice by affixture non only once but twice. I, therefore, reject this ground of appeal. "
4.6.4 After considering the averments made by the AO in the assessment order, Submission made by the appellant, remand report of the AO & rejoinder filed by the appellant and after examining the notices served through affixture, I do not find any substance in the submissions made by the appellant, as these notices have been found duly served through affixture which were within the statutory period of limitation and therefore, the assessment was rightly completed by the AO, which are found in accordance with law.
The issue of notice and the jurisdiction are only procedural lapses that should not hamper the applicability of other sections of the Act leading to actual taxability. The Hon’ble ITAT in the case of City Garden vs. ITO (2012) 21 Taxman.com 373 (Jodh) held that,
“Any grievance in relation to the jurisdiction of the AO proceeding to assess any person, is not appellable and, in fact not justiciable, being only a defect of procedure not invalidating the end action; the Act not treating the allocation of functions to various authorities as one of the substance but as one of procedure.”
Even if the appellant did not received the first notice, the appellant got ample opportunities to explain the disallowances.
In view of these observations, this ground of appeal is dismissed.”
7.1 For the sake of clarity, we are reproducing hereunder the Section 282 of the I.T. Act, 1961:-
[Service of notice generally. 282. (1) The service of a notice or summon or requisition or order or any other communication under this Act (hereafter in this section referred to as "communication" ) may be made by delivering or transmitting a copy thereof, to the person therein named,— (a) by post or by such courier services as may be approved by the Board; or (b) in such manner as provided under the Code of Civil Procedure, 1908 (5 of 1908) for the purposes of service of summons; or (c) in the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000 (21 of 2000); or (d) by any other means of transmission of documents as provided by rules made by the Board in this behalf. (2) The Board may make rules providing for the addresses (including the address for electronic mail or electronic mail message) to which the communication referred to in sub-section (1) may be delivered or transmitted to the person therein named.
7.2 We further reproduce herebelow the Order V Rule 17 of the CPC:
Procedure when defendant refuses to accept service, or cannot be found.- Where the defendant or his agent or such other person as aforesaid refuses to sign the acknowledgment, or where the serving officer, after using all due and reasonable diligence, cannot find the defendant, who is absent from his residence at the time when service is sought to be effected on him at his residence and there is no likelihood of his being found at the residence within a reasonable time and there is no agent empowered to accept service of the summons on his behalf, nor any other person on whom service can be made, the serving officer shall affix a copy of the summons on the outer door or some other conspicuous part of the house in which the defendant ordinarily resides or carries on business or personally works for gain, and shall then return the original to the court from which it was issued, with a report endorsed thereon or annexed thereto stating that he has so affixed the copy, the circumstances under which he did so, and the name and address of the person (if any) by whom the house was identified and ‘whose presence the copy was affixed.
7.3 We further reproduce herebelow the Order V Rule 20 of the CPC:
Substituted service.- (1) Where the court is satisfied that there is reason to believe that the defendant is keeping out of the way for the purpose of avoiding service, or that for any other reason the summons cannot be served in the ordinary way, the court shall order the summons to be served by affixing a copy thereof in some conspicuous place in the court house, and also upon some conspicuous part of the house (if any) in which the defendant is known to have last resided or carried on business or personally worked for gain, or in such other manner as the court thinks fit.
(1A) Where the court acting under sub-rule (1) orders service by an advertisement in a newspaper, the newspaper shall be a daily newspaper circulating in the locality in which the defendant is last known to have actually and voluntarily resided, carried on business or personally worked for gain.