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Income Tax Appellate Tribunal, F Bench, Mumbai
Before: Shri Jason P. Boaz & Shri Sandeep Gosain
This appeal by the assessee is directed against the order of the CIT(A)- 22, Mumbai dated 16.07.2010 for A.Y. 2005-06.
The facts of the case, briefly, are as under: - 2.1 The assessee, engaged in the business of manufacture of containers and sale of factory land, filed its return of income for A.Y. 2005-06 on 24.10.2005 declaring loss of `11,38,17,975/-. The return was process under section 143(1) of the Income Tax Act, 1961 (in short 'the Act'). The case was subsequently taken up for scrutiny and the assessment was completed under section 143(3) of the Act vide order dated 29.11.2007; wherein the loss was assessed at `16,07,100/- in view of the following disallowances: - `11,07,57,156/- (i) Interest ` 1,86,998/- (ii) Legal expenditure (iii) Factory taxes ` 4,48,929/- M/s. Vidyavihar Containers Ltd. 2.2 Aggrieved by the order of assessment dated 29.11.2007 for A.Y. 2005- 06, the assessee preferred an appeal before the CIT(A)-22, Mumbai challenging the aforesaid three disallowances (supra), non allowance of carry forward of business loss of earlier years and the existence of/and the validity of the notice issued under section 143(2) of the Act for A.Y. 2005- 06. The learned CIT(A) disposed off the assessee’s appeal allowing the assessee partial relief.
Aggrieved by the order of the CIT(A)-22, Mumbai dated 17.07.2010 for A.Y. 2005-06, the assessee has preferred this appeal and raised the following grounds: - “I. VALIDITY OF THE NOTICE UNDER SECTION 143(2) OF THE ACT AND THE ASSESSMENT THEREUNDER: 1.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) [CIT (A)] erred in upholding the assessment for the above year framed by the learned Assessing Officer without complying with the relevant provisions of the law. 1.2 It is respectfully submitted that no notice under Section 143(2) of the Act was served on the Appellant within the time limits prescribed under Section 143(2) of the Act. Accordingly, the learned Assessing Officer had no jurisdiction to proceed with scrutiny assessment under Section 143(3) of the Act. Thus the assessment is bad in law and deserves to be quashed and struck down as null and void. In view of the above, the Appellant prays that the assessment be set aside as bad in law and struck down as null and void. II. DISALLOWANCE OF INTEREST PAYABLE TO MUKAND LIMITED RS. 11,07,57,156: 2.1 On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in confirming the disallowance of the claim of the Appellant for interest of Rs.11,07,57,156 payable by the Appellant to its holding company, namely Mukand Limited. 2.2 The learned CIT (A) and the Assessing Officer failed to appreciate the explanations given by the Appellant. The learned CIT (A) and the Assessing Officer failed to appreciate that the Appellant has not closed down its business completely and was exploring the possibility of developing its land. 2.3 The Appellant prays that all the conditions prescribed for claiming the deduction of interest payable to Mukand Limited have been complied with and hence the learned Assessing Officer be directed to allow deduction in respect of such interest in terms of provisions of Section 36(1)(iii) of the Act.
M/s. Vidyavihar Containers Ltd. In view of the above the Appellant prays that the disallowance made by the learned Assessing Officer be deleted and the loss for the year be increased accordingly. III. DISALLOWANCE OF RATES AND TAXES RS. 29,06,197: 3.1 On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in confirming disallowance of a sum of Rs.29,06,197 in respect of rates and taxes incurred by the Appellant on the ground that the same are not for the purposes of the business of the Appellant. 3.2 The learned CIT (A) and the learned Assessing Officer failed to appreciate the explanations given and details placed on record in respect of rates and taxes incurred by the Appellant. It is submitted that such expenses were wholly and exclusively for the business of the Appellant and be allowed as revenue expenditure. In view of the above, the Appellant prays that the learned Assessing Officer be directed to allow deduction for rates and taxes incurred by the Appellant and increase the loss accordingly. IV. CARRY FORWARD OF BUSINESS LOSS OF EARLIER YEARS: 4.1 On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in holding that losses of the earlier years cannot be allowed to be carried forward as there are no business activities and the losses are not from business. 4.2 The learned CIT(A) and the Assessing Officer failed to appreciate that the issue of allowing carry forward of business loss had already been settled in earlier years and having complied with the relevant provisions of the law, the Appellant is eligible to carry forward and set off of such losses. 4.3 It is submitted that the learned CIT(A) and the Assessing Officer exceeded his jurisdiction while dwelling upon the issue.”
Ground No, I (1.1 to 1.2) – Validity of Notice under section 143(2) of the Act and the assessment thereunder 4.1.1 In this ground, the assessee assails the impugned order of the learned CIT(A) in upholding the validity of the assessment for A.Y. 2005-06 framed by the Assessing Officer (AO) in violation of the relevant provisions of law. It is further contended therein that no notice under section 143(2) of the Act was served on the assessee within the time limit prescribed under section 143(2) of the Act. Therefore, since the AO had no valid jurisdiction to proceed with the scrutiny assessment under section 143(3) of the Act, the resultant order of assessment for A.Y. 2005-06 is bad in law and requires to be struck down as null and void.
M/s. Vidyavihar Containers Ltd. 4.1.2 According to the Sr. Counsel for the assessee, the facts of the matter are that admittedly as per the order of assessment the assessee filed its return of income for A.Y. 2005-06 on 24.10.2005 and therefore in order to take up the assessee’s case for scrutiny, notice under section 143(2) is required to be served on the assessee within 12 months from the end of the month in which the return of income was furnished i.e. on or before 31.01.2006. It is submitted that since the first notice under section 143(2) received by the assessee was on 05.09.2007, the assessee vide letter dated 07.09.2007, duly filed in the office of the AO on the same date as per acknowledgement thereon; objected that the said notice was illegal and bad in law as it was served beyond the time limit prescribed under section 143(2) of the Act. The Sr. Counsel invited the attention of the Bench to the order of assessment which shows that the AO simply ignored this objection raised by the assessee and proceeded to complete the assessment stating that notice under section 143(2) of the Act was issued on 23.10.206 and duly served on the assessee. 4.1.3 On appeal, before the learned CIT(A), it is submitted that the assessee contended that though it had denied service of any notice dated 23.10.2006, the AO neither furnished any proof of service of this notice nor addressed the objections raised in assessee’s letter dated 07.09.2007. In this regard, an affidavit was executed by Director of the assessee company (copy placed at pg. 23 & 24 of paper book) denying service of notice under section 143(2) of the Act dated 23.06.2006 on the assessee. It was pointed out that the assessee had intimated the AO of shift of both its Registered Office as well as Administrative Office vide letter dated 19.06.2006 served on the department on the same day (copy placed at pg. 19 & 20 of the paper book). In the light of the above contentions, the learned CIT(A) called for a remand report from the AO in the matter. In the remand report dated 15.06.2010 (copy placed at pg. 15 to 18 of paper book), it is claimed that the AO had issued notice under section 143(2) of the Act on 23.10.2006 and that the same was allegedly served by affixture by the Inspector of Income Tax on 31.10.2006 at Nathani Road, Vidyavihar (W), Mumbai 400086, as given in the return of income for A.Y. 2005-06. It is submitted that this place is the M/s. Vidyavihar Containers Ltd. assessee’s old Registered Office, the shifting of which was intimated to the AO vide letter dated 19.06.2006. In this regard, it was pointed out that the order of assessment for A.Y. 2004-05 dated 24.10.2006 was served on the assessee on 06.12.2006 at the new address of its Registered Officer at Bajaj Bhawan, Nariman Point, Mumbai; indicating that the intimation for charge of address was available on the records of the Department. 4.1.4 Adverting to the AO’s remand report, it was contended that it appears that the Inspector who furnished the report of service of notice by affixture to the AO, had visited the old office of the assessee at Vidyavihar from which it has shifted earlier for this purpose. As submitted earlier, the assessee had discontinued its manufacturing business long back and commenced real estate business years ago and in consequence of a development agreement entered into with Gamon Neelkanth Realty Corporation, the said old office land at Vidyavihar was a construction site. It is contended that it is evidently clear from the facts on record that the notice dated 23.10.2006 was sought to be served on the ‘previous address’ of the assessee, ignoring the details of change of address to the new premises, intimated by the assessee vide letter dated 19.06.2006 on the records of the Department. The report of the Inspector does not specify the enquiries made to ascertain the correct address on which the said notice was to be served. No attempt was made by Revenue to ascertain facts and whereabouts of the assessee by making contact with the assessee on the telephone number 25148936 given in the return of income or with the Chartered Accountant whose number was given in the covering letter attached to the return of income for A.Y. 2005-06. 4.1.7 According to the Sr. Counsel, service of notice by affixture cannot be resorted to in a routine manner without records evidencing any efforts being made by Revenue to serve the notice on the assessee as required. Affixture is usually used as a measure of last resort. Such a procedure requires witnessing of the incident by two independent witnesses from the locality. In the case on hand the Inspector’s report of service of notice by affixture, as extracted in the remand report, does not contain signatures of M/s. Vidyavihar Containers Ltd. any such independent witnesses. Rather, it is clear that the said Inspector signed the report on his own along with another Inspector. It is further submitted that the AO’s statement in the remand report dated 15.06.2010 that the copy of the assessee’s letter dated 07.09.2007 to the AO, objecting to the non-receipt of notice under section 143(2) of the Act within the time stipulated under the Act (i.e. on or before 431.10.2006) was received by him only alongwith submission dated 22.01.2010 in remand proceedings was factually erroneous. That the said letter dated 07.09.2007 itself, on receipt of the first notice under section 143(2) of the Act, was received by Department is evidenced by the acknowledgement stamp of the Department thereon on 07.09.2007 itself (copy at pg. 14 of the paper book). The AO has brushed aside and ignored this vital legal contention put forth by the assessee both at the time of passing of the order of assessment for A.Y. 2005-06, as also in the remand report dated 15.06.2010 (copy placed at pg. 15 to 18 of the paper book). 4.1.8 It is contended that the alleged notice under section 143(2) of the Act dated 23.10.2006 has been allegedly served at the previous Registered Office of the assessee instead of the new Registered Office, the address of which was intimated and received by the Revenue office on 19.07.2006 (copy at pg. 19 & 20 of the paper book). Further, the said notice was allegedly served by “affixture’; apparently without making any efforts to trace the assessee at the new premises, the details of which were part of Revenue’s records, and without the signatures of two independent witnesses of the locality, as is required in such cases. It is also evident from the report that the alleged service of the notice under section 143(2) by affixture has only been witnessed by a colleague of the Inspector making the affixture. According to the learned Sr. Counsel, the alleged service of the notice under section 143(2) of the Act by ‘affixture’ in the above manner was highly irregular, unwarranted, unjustified and is invalid/bad in law. In support of the proposition that the service of notice under section 143(2) of the Act by affixture in the manner carried out as above being bad in law, in the factual matrix of the case, the Sr. Counsel placed reliance on the following judicial pronouncements: - M/s. Vidyavihar Containers Ltd. (i) CIT vs. Ramendra Nath Ghosh (1971) 82 ITR 888 (SC) (ii) CIT vs. Godavari Electrical Conductors (2015) 120 DTR (AP) 84 (iii) Arun Lal vs. ACIT (2010) 124 ITD 85 (Agra) (TM) (iv) CIT vs. Mascomptel India Ltd. (2013) 345 ITR 58 (Delhi) 4.1.9 It is submitted that as per the law laid down in this regard, service of notice by affixture must be preceded by adequate efforts by the Revenue to serve the notice on the assessee to be held as valid service of notice in terms of section 282(i) of the Act. The assessee argues that this is absolutely lacking in the case on hand, as the facts show that the notice allegedly served on 23.10.2006 was sought to be served only on 31.10.2006. The said notice was served by affixture on 31.01.2006 itself, without bringing on record to show as to what efforts were made by the Inspector to ascertain the whereabouts of the assessee or from its own records, before service of the notice by affixture. It is contended that notice by affixture can be resorted to only in very exceptional circumstances and cannot be resorted to in a routine manner as has been done in the case on hand. Revenue has failed to establish that any reasonable efforts whatsoever have made by it to serve the said notice on the assessee or that the assessee evaded service of the notice and therefore service by affixture would be only available option left. 4.1.10 The Sr. Counsel submits that the provisions of section 292BB of the Act are not attracted to the case on hand. The assessee is squarely covered by the proviso to section 292BB of the Act, in as much as, the assessee has raised the objection at the first instance immediately on receipt of the notice under section 143(2) of the Act dated 20.08.2007, vide letter dated 07.09.2007 (copy placed at pg. 14 of the paper book), which is well before the completion of the assessment proceedings under section 143(3) of the Act vide order dated 29.11.2007. Even otherwise, it is now settled legal position that the provisions of section 292BB of the Act would operate prospectively from A.Y. 2008-09 and onwards. 4.1.11 It is submitted that the limitation prescribed in the provisions of section 143(2) of the Act are mandatory. It is trite law that if the M/s. Vidyavihar Containers Ltd. requirements of a statute which prescribes the manner in which something is to be done are expressed in negative language; i.e. if the statute enacts that it shall be done in such manner and not in any other way, then such requirements in all cases are absolute and infraction of the same will invalidate the whole proceedings. Since the alleged service of the notice under section 143(2) of the Act by affixture in the case on hand is not in accordance with the law prescribed, it is bad in law. Therefore the AO has no jurisdiction to take up scrutiny assessment of the assessee for A.Y. 2005-06 and consequently, the order of assessment framed on the basis of such invalid notice is bad in law and liable to be quashed as null and void as initio. In support of this proposition, reliance was placed on the following judicial pronouncements: - (i) CIT vs. Blue Moon (2010) 321 ITR 362 (SC) (ii) CWT vs. HUF of late Shri J.M. Scindia (2008) 300 ITR 193 (iii) Arunlal vs. ACIT (2010) 124 ITD 85 (Agra) (TM) (iv) Abacus Distribution Systems (I) P. Ltd. vs. DCIT (2014) 29 ITR (Trib) 1 (Mumbai) 4.2 Per contra, the learned D.R. for Revenue supported the finding of the learned CIT(A) in the impugned order on this issue. The learned D.R. placed reliance on the following decisions in support of Revenue’s case: - (i) V.R.A. Cotton Mills (P) Ltd. vs. Union of India and Ors. (2011) 359 ITR 495 (P & H) (ii) CIT vs. Vision Inc. (2012) 208 Taxman 153 (Del) 4.3.1 We have heard the rival contentions and perused and carefully considered the material on record, including the judicial pronouncements cited by both the sides. The issue for consideration is whether the notice under section 143(2) of the Act was served on the assessee in the case on hand within the time prescribed under the provisions of section of Section 143(2) of the Act and as per the requirements laid down by law and procedure. The contention of the assessee is that since no notice under section 143(2) of the Act was served on the assessee within the time prescribed and in accordance with the legal procedure laid down, the AO had no jurisdiction to proceed with the scrutiny assessment and M/s. Vidyavihar Containers Ltd. consequently the resultant order of assessment for A.Y. 2005-06 is bad in law and required to be struck down as null and void. 4.3.2 In the case on hand, the assessee admittedly filed its return of income for A.Y. 2005-06 on 24.10.2005 and therefore the initial notice under section 143(2) of the Act ought to have been served on the assessee within 12 months from the end of the month in which the return of income was filed, i.e. on or before 31.10.2006. According to the assessee the first notice under section 143(2) of the Act was served on it on 05.09.2007 and in this regard it had filed letter dated 07.09.2007 on the same date in the office of the AO as per acknowledgement thereon (copy of letter dated 07.09.2007 with acknowledgement placed at pg. 14 of paper book); placing its objection that the said notice was belated, illegal and bad in law as it was beyond the time limit prescribed under section 143(2) of the Act. We find from a perusal of the order of assessment that these objections of the assessee have not been addressed by the AO as there is not a whisper of this letter containing the assessee’s objection and find that the AO has merely mentioned the notice under section 143(2) of the Act was issued on 23.10.206 and served on the assessee. 4.3.3 Before the learned CIT(A), the assessee submitted that it had denied receipt of any notice dated 23.10.2006 under section 143(2) of the Act by way of its letter dated 07.09.2007. This was supported by Affidavit of Director of the assessee company (copy placed at pg. 23 & 24 of the paper book) contending that the AO had neither furnished any proof of service of notice dated 23.10.2006 nor addressed its objections raised in letter dated 07.09.2007 that, since the said notice was never served on the assessee in the time prescribed under section 143(2) of the Act, the AO had no authority to assume jurisdiction for taking up scrutiny assessment in the case on hand, for A.Y. 2005-06. 4.3.4 It is seen from the remand report dated 15.06.2010 (copy placed on pg. 15 to 18 of paper book), called for by the learned CIT(A) that it was reported that the AO had issued notice under section 143(2) of the Act dated 23.10.2006 which was allegedly served by affixture by the Inspector M/s. Vidyavihar Containers Ltd. of Income Tax (‘ITI’) on 31.10.2006 at Nathari Road, Vidyavihar (W), Mumbai 400086 as per the address given by the assessee in the return of income, since no one from the assessee’s side was present. In respect of the fact that the assessee had intimated the Department of the change of address of its Registered and Administrative offices vide letter dated 19.06.2006, the learned CIT(A) brushed this aside stating that the said letter was addressed to Income Tax Officer, Ward 10(2)(3) /Addl. CIT, Range 10(2) with respect to proceedings for A.Y. 2004-05 and since the proceedings for A.Y. 2005-06 was before the DCIT-10(2), the said letter dated 19.06.2006 ought to have been filed before him only. In that view of the matter, the learned CIT(A) brushed aside the assessee’s contentions and upheld the validity of the service of notice under section 143(2) of the Act for A.Y. 2005-06. In our view, the fact of the matter is that whether or not the AO for different assessment years in the case on hand is an Income Tax Officer/DCIT/or Additional CIT, this is different on the basis of income bracket in which the assessee falls for that particular year, which is an internal administrative arrangement of the Department; the assessment records remain in the same Ward/Range-10, Mumbai and therefore once the assessee has intimated the Department vide letter dated 19.06.2006 of the change of the place/address of its Registered Office/ Administrative Office, it was incumbent for the Department to have its records suitably rectified. How was the assessee on 19.06.2006 to know which officer was to take up its assessment for A.Y. 2005-06 and therefore rightly filed the said letter with the AO for A.Y. 2004-05 in which assessment proceedings were ongoing. We observe that the Department was well aware of the change of address as intimated by the assessee’s letter dated 19.06.2006, for the order of assessment for A.Y. 2004-05 dated 24.10.2006, was passed on the assessee’s new Registered Office at Bajaj Bhavan, 3rd Floor, 226, Nariman Point, Mumbai. One day after notice under section 143(2) of the Act was issued and strangely, a week later, on 31.10.2006 the Department serves the notice under section 143(2) of the Act by affixture on the old address of the assessee; where obviously even as per their records, the assessee could not have been present.
M/s. Vidyavihar Containers Ltd. 4.3.5 We have perused the remand report dated 15.06.2010 (placed at pg. 15 to 18 of the paper book) in which it is reported that the notice under section 143(2) of the Act dated 23.10.2006 was served on the assessee by affixture by ITIs of the AO’s office. The ITI’s report in this regard is also extracted therein. From the details in the ITI’s report on service of notice under section 143(2) dated 23.10.2006 by affixture clearly shows that the following defects are apparent: - (i) the service by affixture of the said notice under section 143(2) on 31.10.2006 was at the wrong place, i.e. at the old address of the assessee at Vidyavihar and not at the new Registered Office address at Bajaj Bhavan, 3rd Floor, 226, Nariman Point, Mumbai. The change of address was intimated by the assessee vide letter dated 19.06.2006 and in the knowledge of the Department, (ii) The ITI’s report establishes that the affixture of notice was witnessed by a colleague of the ITI making the report, whereas it is necessary that the service of notice by affixture should have been witnessed and signed by two independent witnesses from the locality, which has not been done, (iii) the ITI’s report in our view established that there is no evidence to show that any enquiry was made by the ITI to ascertain the whereabouts or the correct address of the assessee on which the notice under section 143(2) dated 23.10.2006 was to be served. Further, it appears that no attempt was made in the period 23.10.2006 to 31.10.2006 to serve the notice by post or to ascertain the new address from the given telephone numbers of the company in the return of income for A.Y. 2005-06 before service of notice by affixture was taken up as a means of least resort. Before us, Revenue was not able to controvert the aforesaid observations at (i), (ii) and (iii) above. These defects listed above, are in the clear violation of the procedure laid down by the Hon'ble High Court of Andhra Pradesh in the case of Godavari Electrical Conductors (2015) 120 DTR – (AP) 84 at paras 9 to 13 thereof:-
M/s. Vidyavihar Containers Ltd. 4.3.6 One of the contentions put forth by the assessee in respect of the service of notice under section 143(2) of the Act by affixture the ITIs in the case on hand, since the due process of law has not been followed by the Department, it has thereby rendered the said service as not a valid service. In this regard we find that similar issue of procedures to be followed by Revenue for service of notice by affixture; applicability or otherwise of section 292BB of the Act and the validity of assessment proceedings on the basis of participation of the assessee when there has been no valid service of notice, etc. was examined at length by the ITAT, Agra Bench in the case of Arun Lal vs. ACIT (2010) 124 ITD 85 (Agra) (TM). The Third Member at paras 20 to 25 of his order rendered in the context of notice under section 148 of the Act held as under that since there was no valid service of notice, the assessment proceedings are void ab initio and liable to be quashed: - “20. I have carefully considered the submissions of both the parties and also carefully gone through the assessment order, order of CIT(A) and both the orders passed by the learned JM and the learned AM. The question referred to me has already been reproduced in the above part of this order. According to the question my findings are limited to the issue regarding validity or otherwise of notice issued under s. 148 and also the effect thereof.
The notings of the notice-server have been reproduced in the above part of this order which also, as mentioned above, found place in the order of CIT(A) as well as in the order passed by the learned JM. The notice-server in his report has submitted that the service of affixture has been made as per the directions of the AO, dt. 11th Nov., 2003 in the presence of Shri S.C. Agarwal, Inspector of IT. The date of notice issued by the AO is dt. 10th Nov., 2003. Thus, on the very next day of the issue of notice, the AO has directed the notice-server to serve the notice by affixture. The impugned assessment is of asst. yr. 2001-02. It is not the case of Revenue that on 10th Nov., 2003, if notice is not served within a short span, the initiation of reassessment proceedings will be barred by time, as it has been the contention of the learned Authorised Representative that there was ample time available with the Department to initiate reassessment proceedings. Thus, it is clear that the AO had no exigency to issue and serve the notice under s. 148 on 11th Nov., 2003 itself so as to bring the same within the period of limitation. When a notice is issued on 10th Nov., 2003, and it was ordered to be served by affixture on 11th Nov., 2003, the Revenue will be under legal obligation to show that between the period of 10th Nov., 2003 and 11th Nov., 2003 what efforts were made by the Revenue to effect the service of notice in a normal manner. The record is silent about it. There is no material on record to show or to suggest that any M/s. Vidyavihar Containers Ltd. effort was made by the AO to serve the notice in normal course before issuing the directions to serve the same by way of alternative mode, i.e., by way of affixture. The jurisdictional High Court in the case of Jagannath Prasad vs. CIT (supra) has held that before action under order V, r. 20 can be taken, two conditions must exist, one; that the Court has reason to believe that the defendant is keeping out of the way for the purpose of avoiding service and, two; that for any other reason the summons cannot be served in the ordinary way. Nevertheless, there must be material on record on the basis of which a reasonable person might come to the conclusion that either of these conditions are satisfied. It was observed that the satisfaction of the Court contemplated by order V, r. 20 is an objective satisfaction and it is not a subjective one. Therefore, relevant material must exist on record to justify that conclusion. In that case the report was given by process-server to the effect that he made enquiries at number of places but he could not find out the assessee. After such report, the AO passed an order for affixture. It was observed by the Hon’ble High Court that the mere fact that the processor-server could not find out the assessee would not lead to the conclusion that the assessee was keeping out of the way for the purpose of avoiding service or that for any other reason the summons cannot be served. It was observed that the report of the process-server itself does not indicate that more than one attempt was made by the process-server and on the contrary it was indicating that one single attempt of enquiry was made at number of places but notice-server could not find out the assessee. That factor, according to the Hon’ble High Court could not constitute sufficient material for the satisfaction of the AO that the conditions required for application of order V ,r. 20 were existing. Therefore, it was held that the order of the AO directing the service by affixture was based on no relevant material on record and, therefore, was to be struck down. This case of Hon’ble Allahabad High Court was later on considered by the same High Court in the decision in the case of Ganeshi Lal & Sons (supra) and it was found distinguishable on the ground that there was material on record to hold that the assessee was evading service or was keeping itself out of the way for avoiding service as when the notice-processor went to the place of the business of that assessee no one was prepared to accept the notice. In this manner the said case was distinguished. Therefore, it cannot be said that the ratio of the decision in the case of Ganeshi Lal & Sons (supra) is in any way different from the decision in the case of Jagannath Prasad vs. CIT (supra). Here it will be important to mention that in the case of Ganeshi Lal & Sons (supra), it has been observed by the Hon’ble High Court that in the said case the process-server, despite due diligence, was not able to find the petitioners or any other person who was willing to accept the notice on behalf of the assessee and in that circumstance the service by affixture was made. Therefore, in that case there was material on record to show that attempts were made by the Department to effect service in normal mode and those attempts were not successful, resultantly, service was made though affixture.
M/s. Vidyavihar Containers Ltd. However, in the impugned case there is no material on record to suggest or to hold that any sincere attempt was made by the Revenue to make the service through normal mode. For the reasons discussed above, the decision in the case of Jagannath Prasad vs. CIT (supra) will have square application to the present case and relying on the decision in the case of Ganeshi Lal & Sons (supra), it cannot be held that service of notice by affixture in the present case was a valid service.
So far as it relates to the applicability or otherwise of s. 292BB, irrespective of the fact that whether or not the case of the assessee is covered by the proviso, it is found that this issue does not remain res integra as that issue is covered by the decision of Special Bench in the case of Kuber Tobacco Products (P) Ltd. vs. Dy. CIT (supra), wherein it has been held that s. 292BB inserted by Finance Act, 2008, w.e.f. 1st April, 2008 has no retrospective operation and applies to and from to asst. yr. 2008-09 only. Therefore, the assessee is not barred to challenge the validity of block assessment in appellate proceeding on the ground of non-issuance of notice under s.
148. The assessment year in the instant case being 2001-02, provisions of s. 292BB shall have no application.
So far as it relates to the question of validity of reassessment proceedings on the basis of participation of the assessee in the reassessment proceedings, reference can be made to the decision of CIT vs. Shital Prasad Kharag Prasad (supra) wherein the issue regarding validity or otherwise and service of notice under s. 148 was considered by their Lordships of jurisdictional High Court and it was held that a notice contemplated under s. 148 of the Act is a jurisdictional notice and is not curable under s. 292B of the Act. It was observed that this issue is now fairly settled that an assessing authority gets jurisdiction to reopen its concluded assessment only after serving a valid notice on the assessee. It will be relevant to reproduce the following observations of their Lordships from the said decision : "8. We have independently examined the findings of the Tribunal on the question of issuance of a valid notice under s. 148 of the Act and its service on Shri B.D. Agarwal, who represented Shri J.B. Gupta. It is not in dispute that Shri J.B. Gupta had died on 13th Aug., 1974. Therefore, notice under s. 148 of the Act could not be validly served on Shri B.D. Agrawal on 27th Aug., 1976. The authority of Shri B.D. Agrawal came to an end ipso facto on 13th Aug., 1974, on account of death of Shri J.B. Gupta. It is settled law that service of a valid notice under s. 148 is the foundation for the initiation of reassessment proceedings and a condition precedent for the validity of the notice. The further fact is that the notice under s. 148 was not served on the adult members of the family who were in existence at the time of the partition of the joint Hindu family. Filing of the return in consequence of illegal service of notice on Shri B.D. Agrawal will not validate the M/s. Vidyavihar Containers Ltd. reassessment proceedings. A Full Bench decision of this Court rendered under s. 21 of the Uttar Pradesh Sales-tax Act which is in pari materia of s. 147 of the Act says no. This has been so held in Laxmi Narain Anand Prakash vs. Commr. of Sales-tax (supra). In this case the High Court has relied upon number of cases relating to service of reassessment notice under the IT Act including Bhagwan Devi Saraogi & Ors. vs. ITO (1979) 118 ITR 906 (Cal) and quoted following passage from it : ‘If the authority concerned does not acquire jurisdiction in absence of a valid notice being served, the entire proceedings will be without jurisdiction and void and even the consent on the part of the assessee would confer no jurisdiction on the ‘ITO’.’ The Kerala High Court in P.N. Sasikumar & Ors. vs. CIT (1988) 69 CTR (Ker) 78 : (1988) 170 ITR 80 (Ker) has held that the issue of a notice under s. 148 of the IT Act, 1961, is a condition precedent to the validity of any assessment order to be passed under s. 147 of the Act. It is also settled law that if no such notice is issued or if the notice is invalid or is not in accordance with law or is not served on the proper person in accordance with law, the assessment would be illegal and without jurisdiction. The notice should specify the correct assessment year and should be issued to particular assessee. The notice issued to the assessee in that case did not specify the capacity in which it was issued to one S, whether as individual or as ‘principal officer’ or as a member of association or BOI. The assessment was completed by the ITO in the status of an AOP consisting of S and some others. It was held that before assessing an AOP, notice should be addressed to the ‘principal officer’ or a ‘member’ thereof as required by s. 282(2)(c), which was not done. Such a fundamental infirmity, it was held, could not be called a ‘technical objection’ or a mere irregularity; such vital infirmity could not be cured or obliterated by placing reliance on s. 292B. A Division Bench of this Court in the case of Madan Lal Agarwal vs. CIT (1983) 32 CTR (All) 179 : (1983) 144 ITR 745 (All) has held that a notice contemplated by s. 148 is a jurisdictional notice for initiating proceedings for making an assessment under s. 147 and any defect in that notice cannot be cured by anything done by the ITO subsequently. A vague notice is an invalid notice and in such a case vagueness cannot be removed by reference to the other documents on the record. If a notice itself is otherwise bad in law, invalidity thereof cannot be cured by any act of the assessee to whom the said notice is issued.
In view of the above, the Tribunal has rightly held that s. 292B of the Act will have no application to the facts of the present case. The said section condones the invalidity which arises merely by reason of any mistake, defect or omission in a notice, if in substance and effect, it is in conformity with or according to the M/s. Vidyavihar Containers Ltd. intent and purpose of the Act. The notice in question was not served on all the adult members of the family, as required under s. 283(1) of the Act. This mistake goes to the very root of the matter. It is fairly settled that an assessing authority gets jurisdiction to reopen a concluded assessment only after serving a valid notice on the assessee. A notice contemplated under s. 148 of the Act is a jurisdictional notice and is not curable under s. 292B of the Act, if it was not served in accordance with the provisions of the Act.
No other point was pressed or raised by the learned counsel for the Department.
In view of the foregoing discussion, we find that the order of the Tribunal is legally sound. We, therefore, answer the question in affirmative i.e., against the Revenue and in favour of the assessee. However, there shall be no order as to costs."
Respectfully following the above decision of Hon’ble jurisdictional High Court, it has to be held that the participation of the assessee in the reassessment proceedings cannot cure the defect in the reassessment notice, i.e., the notice issued under s. 148 as the said notice is jurisdictional notice. Therefore, invalid issuance or service of notice under s. 148 cannot be said to be a procedural defect and it cannot be cured either by the participation of the assessee in the reassessment proceedings or by setting aside the same to the file of the AO.
In view of the above discussions, in my humble opinion, the view taken by the learned JM appears to be a correct view which has to be adopted in the present case and by adopting the same it has to be held that there was no valid service of notice under s.
The reassessment proceedings are void ab initio and are liable to be quashed.” 4.3.7 From a perusal of the finding rendered by Agra ITAT (TM) in the case of Arun Lal (supra), we find that in the case on hand, Revenue has not been able to prove that it fulfilled its legal obligations to show what efforts Revenue made between the date of issue of notice on 23.10.2006 to date of service of notice by affixture i.e. 31.10.2006 to effect the service of the said notice under section 143(2) of the Act in a normal manner. No material was placed on record before us to show that any effort was made by the AO to serve the notice in a normal manner before service by affixture was done on 31.10.2006. The Hon'ble Courts have held that before service of notice by affixture can be undertaken: - (i) there must be reason to believe that the assessee is keeping out of the way to avoid service thereof; M/s. Vidyavihar Containers Ltd. (ii) that of any other reason the notice cannot be served on the normal way. In the case on hand we find there is no material on record to show that any attempt was made by Revenue to serve the notice under section 143(2) of the Act dated 23.10.2006 through the normal mode. 4.3.7 In so far as the applicability or otherwise of section 292BB of the Act to the case on hand is concerned, the ITAT Special Bench Delhi in the case of Kuber Tobacco Products (I) Ltd. (2009) 117 ITD 273 (Delhi) has held that section 292BB of the Act inserted by Finance Act, 2008 w.e.f. 01.04.2008 is not retrospective and would apply prospectively for and from A.Y. 2008-09. Further, in the case on hand, this section would not apply in view of the proviso to section 292BB of the Act, since the assessee has raised its objection to the validity of notice under section 143(2) of the Act vide letter 07.09.2007, admittedly filed with the AO on 07.09.2007 itself (copy placed at pg. 14 of the paper book) before completion of assessment proceedings on 29.11.2007. 4.3.8 Taking into consideration the factual and legal matrix of the case on hand as discussed from para 4.1.1 to 4.3.7, we are of the considered view that since the alleged affixture of notice under section 143(2) of the Act dated 23.10.2006 on 31.10.2006 is not in accordance with the law and procedure laid down by the Hon'ble Courts, the said notice is rendered bad in law and therefore the AO had no power to assume jurisdiction to take up the assessee’s case for scrutiny. Consequently, the order of assessment framed under section 143(3) of the Act vide order dated 29.11.2007 for A.Y. 2005-06 on the basis of such invalid notice under section 143(3) of the Act is bad in law and ab initio void and is liable to be quashed. In coming to this decision, we draw support from the decision of the Hon'ble Courts in the cases of CIT vs. Ramendra Nath Ghosh (supra), CIT vs. Godavari Electrical Conductors (supra), CIT vs. Mascomptel India Ltd. (supra) and of the Special Bench of ITAT Agra in Arun Lal vs. ACIT (2010) 124 ITD 85 (Agra) (TM). We hold and direct accordingly. Consequently ground No. 1 of the assessee’s appeal is allowed.
In view of allowing ground No. 1 of the assessee’s appeal, on our finding that the service of notice under section 143(2) of the Act on M/s. Vidyavihar Containers Ltd. 31.10.2006 was invalid and consequently quashing the order of assessment for A.Y. 2005-06 under section 143(3) of the Act dated 29.11.2007 as void ab initio, since the AO had no valid reason to assume jurisdiction to take up scrutiny assessment in the case on hand for this year, the other grounds at II to IV are not required to be adjudicated at this stage.