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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI G.S.PANNU & SHRI JOGINDER SINGH
ORDER PER G.S.PANNU,A.M:
The captioned appeal filed by the assessee pertaining to assessment year 2000-01 is directed against an order passed by CIT(A)-V, Mumbai dated 04/10/2004, which in turn, arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 10/11/2003.
2 (Assessment Year 2000-01) 2. In this appeal, although assessee has raised multiple Grounds of appeal, but at the time of hearing, the solitary grievance raised was in terms of Ground of appeal No.2, contained in the Memo of appeal, which is to the effect that the assessment order was void ab-initio as no notice under section 143(2) of the Act was issued and served upon the assessee within the stipulated period prescribed in the proviso thereof. Both the counsels have been heard with respect to the aforesaid Ground and the relevant material perused.
In brief, the relevant facts are that the appellant it a company incorporated under the provisions of the Companies Act, 1956 and is engaged in the business of blending and bottling of Indian Made Foreign liquor. For the assessment year under consideration, it field a return of income on 30/11/2000, declaring an income of Rs.52,380/-, which have been subject to scrutiny assessment under section 143(3) of the Act, wherein the total income has been assessed at Rs.47,53,290/-, after making various additions/ disallowances. The assessee company had carried the matter in appeal before the CIT(A), who has allowed certain relief to the assessee with respect to the additions/disallowances, but so far as the legal point raised by the assessee pertaining to the issue of wrong assumption of jurisdiction of the Assessing Officer under section 143(2) of the Act is concerned, the same has been held against the assessee. The said decision of the CIT(A) is being agitated before us on the basis of Ground of appeal No.2, which we have referred above.
The factual matrix in relation to the stand of the assessee on wrong assumption of jurisdiction by the Assessing Officer under section 143(2) of the Act is as follows. The return of income was filed by the assessee on 3 (Assessment Year 2000-01) 30/11/2000 and in para-1 of the assessment order, it is recorded by the Assessing Officer that the case has been selected for scrutiny assessment by issuing a notice dated 29/11/2001 under section 143(2) of the Act which was served by affixture at assessee’s premises at 1/C, Happy Home, Napean Sea Road, Mumbai 400 006 on 29/11/2001. It is further recorded by the Assessing Officer that on 29/11/2001, the premises was found to be closed and another notice was issued on 23/06/2003 and also served by affixture on 23/06/2003 at the registered office of the assessee, since the premises at 1/C, Happy Home, Napean Sea Road, Mumbai 400 006 was found to be closed.
In the background of the aforesaid fact-situation, the case of the assessee can be understood as follows. As per the assessee, having regard to the proviso to section 143(2) of the Act , the notice under section 143(2) of the Act was to be served within a period of 12 months from the filing of return of income i.e. on or before 30/11/2001. According to the assessee, the notice issued by the Assessing Officer on 29/11/2001 and served by affixture on the same date is invalid as it has not been issued in terms of the requirements of section 282(1) of the Act. According to the assessee, section 282(1) of the Act mandatorily requires that the notice is to be issued either by post or as if it was a summons issued by the Court under the Code of Civil Procedure, 1908 ( 5 of 1908). According to the assessee, the Assessing Officer has not bothered to follow the mandatory requirement of service of notice and has straightway resorted to substitute mode of service(i.e. by affixture), which is impermissible in law. Before the CIT(A) as well as before us, assessee has pointed out that for substituting the service by affixture, the requirement of law is that the Assessing Officer must be satisfied that assessee was keeping out of the way for the purpose of avoiding service or that for any other reason the summon
4 (Assessment Year 2000-01) cannot be served in the ordinary way. According to the appellant, in the present case, no such valid reasons have been brought out by the Assessing Officer so as to resort to the substituted mode of service and, therefore, the notice under section 143(2) of the Act cannot be said to have been validly served and consequently, the assessment order is void ab-inito.
On the other hand, the Ld. Departmental Representative has relied upon the order of the CIT(A) in this regard and pointed out that the Assessing Officer had chosen to serve the notice by affixture in order to avoid a time lag as the issuance of notice was getting time barred and that in any case, adopting the method of service by affixture was wholly within the power of the Assessing Officer. Apart there from, the Ld. Departmental Representative also pointed out that it is not the case of the assessee that the notice under section 143(2) was never served because assessee had appeared before the Assessing Officer on 6/12/2001 and sought adjournment. It has also been argued that the assessee has not objected to such service of notice during the course of assessment proceedings and, therefore, the notice is deemed to be valid in terms of section 292BB of the Act.
We have carefully considered the rival submissions. The grievance of the assessee is essentially arising from the provisions of section 282 of the Act dealing with provisions relating to the service of notice. It is sufficient to note for the present, that sub-section (1) of section 282 of the Act prescribes that a notice under this Act may be served on the person therein named either by post or as if it were a summons issued by a Court under the Code of Civil Procedure, 1908 ( 5 of 1908). Factually speaking, para-1 of the assessment order makes it clear that the notice under section 143(2) of the Act issued on 5 (Assessment Year 2000-01) 29/11/2001 has been served on 29/11/2001 by affixture. The plea raised by the assessee is that service of notice by affixture could have been resorted to only when the Assessing Officer discharges his initial onus by showing that he had reason to believe that assessee was intentionally hiding itself for the purpose of avoiding service or there were other good reasons to come to the conclusion that the notice could not be served in the ordinary way.
7.1 At the time of hearing, the Ld. Representative for the assessee had relied upon the judgment of the Hon'ble Delhi High Court in the case of CIT vs. Hotline International Pvt. Ltd., 296 ITR 333(Del), which upholds the proposition that service of notice by affixture can be done only when assessee or his agent refuses to sign acknowledgement or could not be found. In the case before the Hon'ble Delhi High Court, the Assessing Officer issued notice under section 148 of the Act on the assessee company through the Inspector, who found that the factory was closed due to Holi festival holidays. As security guard refused to receive notice, it was served by affixture and notice was also sent by registered post which remain uncomplied with. The assessment so completed was sought to be challenged on the ground as being bad in law as no proper service of notice under section 148 was effected by the Assessing Officer on the assessee. In this background, the Hon’ble High Court examined the provisions of section 282 of the Act and also Order –V, rule 12 of the Code of Civil Procedure 1908 and observed that wherever it is practicable the service has to be effected on an assessee in person or an agent. Further, it has been observed that under Order-V, rule 17 of Code of Civil Procedure 1908 service by affixture can be done only when the assessee or his agent refuses to acknowledge the notice or assessee could not be found. Further, the Hon'ble Delhi High Court, in the case of CIT vs. Chandra Agencies, 202 Taxman 106(Del)
6 (Assessment Year 2000-01) has observed that the service of notice by affixture can be resorted to only when Revenue has discharged initial onus by showing that there was reason to believe that the assessee was intentionally avoiding the authorities for the purpose of avoiding service of notice or that there were other good reasons to come to the conclusion that summons could not be served in the ordinary way. Before us, the Ld. Representative for the assessee has also relied upon the judgment of the Hon’ble High Court of Andhra Pradesh in the case of CIT vs. Godavari Electrical Conductors, ITA No.249 of 2003 dated 29/10/2014, wherein the decision of the Tribunal, inter-alia, holding that the issuance of notice straightway through affixture was not proper, has been approved.
7.2 In the background of the aforesated legal position, we may now examine the fact position in the instant case. In the present case, it is undeniable that the notice under section 143(2) dated 29/11/2001 has been directly served through affixture. The CIT(A) has observed that there was good reason for the Assessing Officer to take this step because of the need to avoid time lag as otherwise the service of notice was becoming time barred. In our considered opinion, the aforesaid cannot be considered to be a reason to justify the service of notice by affixture after by-passing the normal procedure of service of notice. In fact, in the context of such plea of the CIT(A), the judgment of the Hon'ble Delhi High Court in the case of CIT v. Dewan Kraft System (P) Ltd., 165 Taxman 139(Del) has been relied upon. In this case, the notice was served on the assessee by affixture and it was the case of the Assessing Officer that the notice under section 143(2) sent by speed post could not be served and, therefore, an Inspector was deputed, who went to the office premises of the assessee and on finding the same locked, the notice was served by affixture. The assessee contended that the notice was invalidly served and the Tribunal
7 (Assessment Year 2000-01) took note of the fact that the notice was issued at the very last minute to ensure that the case did not become time barred and no efforts were made by the Assessing Officer to find out the whereabouts of the assessee to serve the notice, but a short cut was taken by the Inspector by resorting to service by affixture. The Tribunal upheld the plea of the assessee and observed that the Revenue had failed to discharge the onus to prove that the notice was in fact served upon the assessee within the prescribed period. The Hon'ble Delhi High Court upheld the decision of the Tribunal by making the following discussion. “ 11. We have examined the copies of the notices issued by the Assessing Officer and find that the notices was issued at the last minute. Since the office of the assessee was closed, no efforts were made by the Assessing Officer to find out the whereabouts of the assessee to serve it but a short cut was taken by the Inspector who resorted to affixation, which was carried out in the absence of any independent witness. It appears to us that the entire exercise of sending the Inspector and resorting to affixation was carried out only to ensure that the case does not become time-barred, knowing fully well that the notices have been issued at the very last minute and could not have been served on the assessee without undertaking some out of the ordinary exercise as has been done in the present case.”
7.3 In the present case too, there is nothing to suggest that the assessee was intentionally hiding from the authorities for the purpose of avoiding service or there was any other good reason to conclude that the notice could not be served in an ordinary way. The inaction or delay on the part of the Assessing Officer in issuing notice under section 143(2) of the Act cannot be a ground to straightway effect service by affixture. Thus, in the instant case, the ordinary process not having been exhausted or carried out by the Assessing Officer, he was not justified in directly resorting to service of notice by an affixture merely because he had issued the notice at the last minute i.e. on 29//11/2011 so as to avoid the limitation expiring on 30/11/2001. Under these circumstances, we find ample force in the plea of the assessee on the 7.4 Before us, another plea raised by the Revenue is that the assessee had appeared before the Assessing Officer on 10/12/2001 and that on that basis it is sought to be canvassed that, in any case, assessee was aware of the notice under section 143(2) of the Act having been served on 29/11/2001. On this aspect, the Ld. Representative for the assessee pointed out that the appearance by the assessee on 10/12/2001 was in compliance of notice issued by the Assessing Officer on 06/12/2001 in the name of the Director of the assessee company, a copy of which has been placed in the paper book at page 1. It was therefore, contended that it is wrong on the part of the Revenue to contend that assessee attended before the Assessing Officer on 10/12/2001 in response to the notice issued under section 143(2) of the Act dated 29/11/2001. We find the aforesaid plea of the assessee quite potent and is in fact supported by the material on record. The Ld. Representative for the assessee had referred to a communication dated 10/12/2001 addressed to the Assessing Officer, wherein it has been communicated that the notice was received on 10/12/2001 itself, which ostensibly is the notice dated 6/12/2001 addressed to the Director of the company. Therefore, the aforesaid plea of the Revenue is misplaced and is hereby rejected.
7.5 Apart therefrom, the Ld. Representative for the assessee pointed out that the defect in the service of notice namely non-service of notice by proper means and directly by affixture is not a curable defect and he has assailed the reliance placed by the Ld. Departmental Representative on the provisions of section 292BB of the Act in this regard. In our considered opinion, section 9 (Assessment Year 2000-01) 292BB, in any case, does not come to the rescue of the Revenue in the present case because it has been introduced by Finance Act, 2008 w.e.f. 01/04/2008 and it would not apply in the instant case. The Hon'ble Bombay High Court in the case of CIT v. Salman Khan, Income Tax Appeal (L) No.2362 of 2009 dated 1st December, 2009 has held that section 292 BB of the Act introduced w.e.f. 01/04/2008 is prospective in nature and would not apply to the assessment years earlier than assessment year 2008-09. Therefore, the aforesaid plea of the Revenue is also misplaced and is rejected.
7.6 Before parting, we may also refer to reliance placed by the Ld. Departmental Representative on the judgment of the Hon’ble Delhi High Court in the case of CIT vs. Vision Inc., 21 taxmann.com 515 (Del) to emphasize that once assessee has participated in assessment proceedings in pursuance to the notice issued for hearing, it amounted to a valid service of notice. In the case of Vision Inc.(supra), the relevant facts were that in the absence of partners of assessee firm notice under section 143(2) of the Act was served on the employee of the firm at official address. In the appellate proceedings, assessee raised an objection that in the absence of proper service of notice under section 143(2) of the Act, assessment order deserves to be set-aside. The aforesaid stand of the assessee did not prevail with the Hon'ble Delhi High Court. The Hon'ble High Court noted that notice has been served at the assessee’s premises and since at the relevant point of time the partners were out of station, notice was served on employee of the firm. The Hon'ble High Court specifically noted that assessee has participated in assessment proceedings pursuance to the notice being disputed by the assessee. In this background, the Hon'ble High Court noted that even if one was to proceed on the assumption that notice was served neither on the two partners of the 10 (Assessment Year 2000-01) assessee firm and that it was served on some person, who was not specifically authorized to receive the notice, yet service of notice could not be invalidated because the very same notice had been complied with by the assessee. Notably, the Hon'ble High Court noticed that the notice issued on 30/12/2004 had fixed the hearing on 05/01/2005 before the Assessing Officer. On 05/01/2005 assessee participated in the proceedings before the Assessing Officer and according to the Hon'ble High Court such participation was to be attributed to the service of the notice on 30/12/2004 albiet upon a person not authorized to receive the same. This fact-situation lead the Hon'ble High Court to conclude that the service of notice could not be invalidated. In our considered opinion, the said judgment of the Hon'ble Delhi High Court does not help the case of the Revenue herein because the fact-situation in the present case stands on an entirely different footing. In the present case, it is quite clear that the appearance by the assessee on 10/12/2001 was not in compliance of the notice issued by the Assessing Officer on 29/11/2001, but it was in compliance of a notice issued by the Assessing Officer on 06/12/2001 in the name of the director of the assessee company . Therefore, to say that the assessee company had come to know about the assessment proceedings in on terms of the notice issued under section 143(2) of the Act dated 29/11/2001 is facts a misnomer Therefore, in our view, the ratio of the judgment of the Hon'ble Delhi High Court in the case of Vision Inc. (supra) is not applicable to the facts of the present case.
7.7 In conclusion, it has to be held that the notice under section 143(2) of the Act has not been served within the time and the mode prescribed under the Act and as a consequence, the impugned assessment framed under section 7.8 In the result, the plea of the assessee is allowed and since assessment order has been quashed, all other Grounds raised by the assessee relating to merits of the addition become academic and are dismissed as infructuous.
Resultantly, appeal of the assessee is allowed, as above.
Order pronounced in the open court on 30/11/2016