ACIT, CIRCLE vs. MOHAN DAIRY,,

At the very outset, it is pertinent to mention that the ITAT set aside the appeal to the file of CIT(A) for afresh adjudication and the CIT(A) granted part relief to the assessee. Consequently, the assessee filed this appeal agitating the issues on which the assessee could not get relief and the Revenue has also filed appeal agitating the issues on which the CIT(A) granted relief to the assessee. At the same time, the assessee has also filed cross-objections against the said order. Further, during appellate proceedings before the Tribunal, the assessee pleaded to raise additional ground challenging the validity of assessment order on the ground of no service of notice u/s 143(2) of the income-tax Act, 1961 (for short ‘the Act’) but this prayer was rejected by the Tribunal vide order dated 26.05.2005. The assessee carried the issue before Hon’ble Jurisdictional High Court of Allahabad in Civil Misc. Writ Petition No.1071 of 2005 which was allowed by order dated 25.01.2006 and the Hon’ble High Court directed this Tribunal to permit the petitioner/assessee to add additional ground No.7, which reads as under:-

“That the assessment proceedings and consequential assessment order is without jurisdiction and barred by limitation in view of non service of statutory notice under 3 ITA-4979/Del/2004 & 2 others

We have heard arguments of both the sides and carefully perused the relevant material placed on record, inter alia, paper books of the assessee, paper book of the department, affidavit of the assessee, affidavit of notice server Shri Lal Singh and orders/judgments relied by both the sides and written synopsis of the assessee dated 02.07.2015 spread over 16 pages.

The learned Assessee’s Representative (AR) submitted that the return for assessment year 1998-99 was filed on 31.10.1998 and as per Section 143(2) of the Act, the notice should have been issued and served on or before 31.10.2009 and the assessee has filed affidavit supporting the fact of non-service of notice u/s 143(2) of the Act till 31.10.1999 (assessee’s paper book page 37) dated 23.03.2005. The learned AR vehemently contended that the Department has verified the assessment folder wherein, no trace of any notice u/s 143(2) issued or/and served till 31.10.1999 and the assessment order is also silent about service of the notice on the assessee on or before 31.10.1999. The learned AR further pointed out that service of notice u/s 143(2) of the Act is necessary within allowed time limit for valid assumption of jurisdiction for framing assessment. Reliance has been placed on following orders/judgments :-

The learned AR further contended that if service of notice is denied by the assessee by filing affidavit then onus stands shifted on the Assessing Officer/Department to rebut the same and to establish valid and proper service of notice within prescribed time limit and documents submitted by the Department in its paper book including affidavit of the so called notice server does not establish the fact of proper or valid service of notice and the Department had failed in proving the service of the notice within prescribed time limit. To support this contention, reliance has been placed on following judgements of Hon'ble Delhi High Court :-

The learned AR vehemently pointed out that admittedly no acknowledgement receipt and even no copy of such notice is available with the Department to prove service u/s 143(2) of the Act and the Department has to prove valid and proper service of notice with positive evidence and in which it has failed. The learned AR submitted that in this situation, viz., failure of the Department to show proper service of the notice, it shall be presumed that the notice was not served upon the assessee within prescribed limitation.

The learned AR lastly submitted that the Department has filed a paper book containing some documents including affidavit of Shri Lal Singh, so called notice server, but this claim does not stand proved from these documents as the affidavit of Shri Lal Singh does not mention as to on whom the service had been made. It simplicitor states that service effected on the assessee which is a partnership firm and as per Section 282(2)(a) of the Act, service has to be either on the partner or on manager/authorized person. The partner of the assessee firm has submitted his affidavit to support the part of non- service either on him or on other partner or authorized person thus it was much necessary to state the name and authority of the person on whom service of the said notice has been claimed by the Department. The learned AR also contended that in the absence of name, authority and particulars of the person on whom service has been claimed, no credence or weightage and beneficial use of the affidavit of Shri Lal Singh can be assigned in favour of the Department. Hence, when Department has filed to prove proper and valid service of notice u/s 143(2) of the Act within the prescribed time limit neither on any partner or any authorized representative or manage of the assessee partnership firm as required by Section 282(2)(a) of the Act, within prescribed time limit, then impugned assessment order should be quashed and annulled.

Replying to the above, the learned Departmental Representative (the DR) submitted that as per letter of ACIT, Circle Bulandshahr dated 25.05.2006 (Department’s paper book (DPB) Page-1), affidavit of the notice server Shri Lal Singh affirming service of the notice (DPB- page 2), copy of the notice server’s register showing details of notice at Serial No.26 (DPB page 3-6), copies of the six other notices served by the same notice server to show that he (Shri Lal Singh) knew the authorized person (DPB pages 7-12), letter of the ACID, Bulandshahr

Replying to the above, the learned AR further reiterated relevant part of the assessee’s written synopsis and submitted that the onus of assessee stood discharged by way of giving affidavit of assessee’s partner Shri Brij Mohan dated 23.03.2005 and all 20 documents submitted by the department in its paper book do not establish proper service of notice within prescribed limit viz. on or before 31.10.1999 either on the partner or authorized person or manager of the assessee partnership firm and therefore, the onus was shifted on the Department/Assessing Officer to establish valid and proper service of the notice u/s 143(2) of the Act which has not been discharged by way of reliable and positive evidence, hence, impugned assessment order may kindly be quashed and additional ground No.7 of the assessee may kindly be allowed.

On careful consideration of rival submissions, at the very outset, we respectfully take cognizance of the dicta laid down by Hon'ble Delhi High Court in the case of CIT Vs. Lunar Diamonds Ltd. (supra) wherein it was held that the assessee had filed an affidavit stating that it did not receive the notice and the Tribunal rightly held that under these circumstances, the burden was upon the Department to prove that the notice was served upon the assessee within the prescribed time. Their Lordships further held that in the eventuality when the Department had failed to prove its case in this regard, then the Tribunal was right in setting aside the order of assessment.

In the light of the above proposition, when we realize the facts and circumstances of the present case, firstly, we note that on behalf of the assessee Shri Brij Mohan has filed an affidavit stating that the assessee has not received any notice u/s 143(2) of the Act till 31.10.1999. However, we further observe that the department has also filed an affidavit of the notice server Shri Lal Singh which states that he served the notice upon the assessee on 17.08.1999 and entry of the service of the said notice was placed at page 1 Sr.No.8 of the service register and receipt/acknowledgement was returned to the related staff member of the department. We further observe that on behalf of the Revenue, another affidavit of Shri Tej Singh, Tax Assistant deposed on 19.05.2006 has also been filed which states that he received acknowledgement/receipt of the service of the notice u/s 143(2) of the Act from Shri Lal Singh, notice server on 20.03.1999 which was enclosed to the respective file of the assessee. At the same time, when we peruse departmental paper book page 3 viz., page 1 entry 8 of the process service register, then from the last column, it is ample clear that the date of service of the notice has been mentioned as 16.08.1999 whereas the notice server Shri Lal Singh in his affidavit

When we further peruse the letter of ACIT, Circle Bulandshahr dated 01.06.2006 available at page 13 of the departmental paper book, then it is ample clear that the Assessing Officer himself has informed to the learned DR that the notice server Shri Lal Singh served five notices to various assessees including the assessee of the present case M/s Mohan Dairy and the acknowledgements of service were placed on record and as per available records, four acknowledgements are available except acknowledgment of present assessee i.e. M/s Mohan Dairy. In these circumstances, merely affidavits of Notice Server Shri Lal Singh and Tax Assistant Shri Tej Singh state that the notice was served upon the assessee and acknowledgement was placed on record but this notice and acknowledgement have not been found in the relevant assessment records and if these actually existed and placed in the file and later on not available in the file, then the Assessing Officer should have taken departmental action on the erring staff and we are unable to see any show cause memo or inquiry notice or any other investigation in this regard which proves that the officials are quite clear in their notions that such so called notice and so called receipt never existed. Since no such notice was prepared and served, the same could not have been available in the assessment records. It is also relevant to mention that as per notice service register page 1 Sr.No.8, notice was served on the assessee on 16.08.1999 whereas the notice server Shri Lal Singh in his affidavit states the date of service as 17.08.1999 which is not reliable. It is also observed that the letter of the Assessing Officer dated 25.05.2006 states that in the notice service register, entry of service is at Sr.No.26 on page 2 for the service on 17.08.1999 and the notice server Shri Lal Singh in his affidavit says that entry of service of notice in his service register is 9 ITA-4979/Del/2004 & 2 others mentioned at page 1 Sr.No.8. As per contention of the Assessing Officer, in the register of notice server Shri Lal Singh, the service entry is appearing at Sr.No.26 while the notice server Shri Lal Singh in his affidavit states that the service entry was placed at page 1 Sr.No.8. Both these registers are separate and explain different dates of alleged service of notice and in the totality of facts and circumstances, we are unable to accept the contention/version of the department that Shri Lal Singh served notice on the assessee and copy of the notice and acknowledgement were returned to the Tax Assistant Shri Tej Singh who placed the same in the relevant assessment records and subsequently, copy of the notice and acknowledgment were missing and on the basis of copies of the service of notice on other four assessees, presumption of valid and proper service of notice should be inferred.

At the same time, we are in agreement with the contention of the learned AR that the assessee being a partnership firm, the notice should have been served either on partner of the firm or authorized representative of the firm or manager of the firm as required u/s 282(2)(a) of the Act and notice server Shri Lal Singh in his affidavit simply states that he served the notice on the assessee but it is highly improbable, therefore, valid and proper service of notice cannot be inferred in favour of the department.

On the basis of the foregoing discussion and logical discussion of the departmental affidavit and other documentary evidence, we are inclined to hold that the assessee discharged its onus by submitting affidavit of the partner of the assessee firm stating that no notice u/s 143(2) of the Act was served till 31.10.1999 which was the last day of prescribed limit for the return which was filed on 31.10.1998. At the same time, when as per dicta of Hon'ble Delhi High Court in the case of 10 ITA-4979/Del/2004 & 2 others Lunar Diamonds Ltd. (supra), the onus shifted on the Revenue to show proper and valid service of the notice, then we decline to accept the contention and circumstances of the Revenue that Shri Lal Singh, notice server served the notice upon the assessee and returned the copy of the notice and acknowledgement to Tax Assistant Shri Tej Singh who, in turn, kept these documents in the relevant assessment record file and the same were misplaced subsequently and hence, on the basis of proof of service of other four assessees during the same period, inference of valid service of notice should be inferred. We further make it clear that the Revenue miserably failed to discharge its onus to show that the notice u/s 143(2) of the Act was validly and properly served upon the assessee within the prescribed limit and hence, the contention of the Revenue is rejected. We are, therefore, of the considered opinion that it is a clear case of non-service of notice u/s 143(2) of the Act within the statutory period as per proviso to Section 143(2) of the Act as existed in the statutory provisions of the Act prior to substitution of new sub-section (2) to Section 143 w.e.f. 01.06.2002 and, therefore, the assessment order cannot be held as sustainable and we quash the same. Accordingly, additional ground No.7 of the assessee is allowed.

Since by earlier part of this order, we have held that in the present case the Revenue could not establish this fact that notice as per proviso to Section 143(2) of the Act was properly and validly served on either partner or authorized representative or manager of the assessee partnership firm as required u/s 282(2)(a) of the Act, as existed in the statute prior to 31.08.2009 applicable for assessment

Since by earlier part of this order we have quashed the impugned assessment order dated 30.03.2001 for assessment year 1998-99 being framed without valid and proper service of notice as per proviso u/s 143(2) of the Act, the grounds raised by the Revenue in and remaining grounds of the cross-objection No.68/Del/2005 of the assessee have become academic and infructuous and accordingly, we dismiss the same.

In the result, the additional legal ground No.7 of the assessee’s appeal and ground No.1 of the cross-objection of the assessee are allowed and the impugned assessment order dated 30.03.2001 for assessment year 1998-99 is quashed. Revenue’s appeal and other grounds of cross-objection of the assessee are dismissed being infructuous. Decision pronounced in the open Court on 30.10.2015.