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Facts
Cross appeals were filed by the assessee and the Revenue against the order of the Commissioner of Income-tax (Appeals). The assessee raised an additional ground that notice u/s 143(2) of the Act was not issued. The Revenue argued that since the assessee complied with the notice, it can be presumed that the notices were served.
Held
The Tribunal held that the issuance and proper service of statutory notices are fundamental to any Income Tax Act proceeding. In this case, there was no evidence of issuance or service of notice u/s 143(2) on record.
Key Issues
Whether the assessment/reassessment order is valid without proper issuance and service of notice u/s 143(2) of the Income Tax Act, especially when the assessee raises this as an additional ground.
Sections Cited
143(3), 147, 271(1)(c), 143(2), 148, 139, 282, 127, 292BB
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Income Tax Appellate Tribunal, DELHI BENCHES: F : NEW DELHI
Before: SHRI ANUBHAV SHARMA
ORDER PER ANUBHAV SHARMA, JM:
& 5823/Del/2017 are cross appeals filed by the assessee as well as the Revenue against the order dated 09.06.2017 of the Commissioner of ITAs No.5485 & 3382/Del/2017 Income-tax (Appeals)-30, New Delhi (hereinafter referred to as the ld. First Appellate Authority or ‘the Ld. FAA’ for short) in Appeal No.97/16-17/2759 arising out of the appeal before it against the order dated 26.12.2016 passed u/s 143(3)/147 of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the DCIT, Circle 24(2), New Delhi (hereinafter referred to as the Ld. AO) and the 16.03.2017 of the Ld. FAA in Appeal No.242/14-15 arising out of the appeal before it against the order dated 10.03.2014 passed u/s 271(1)(c) of the Act by the Ld. AO.
On hearing both the sides, we find that on 05.10.2023, the Bench has mentioned of the fact that the assessee has raised an additional ground on 30.03.2022 stating that the notice u/s 143(2) of the Act has not been issued and the ld. DR was given time to file a report from the ld. AO on this issue. A report has been filed mentioning that notice u/s 148 was issued on 23.03.2016 and notice u/s 143(2) of the Act was issued on 15.07.2016. As per the report filed, the proof of service is not available on record. Reasserting the plea of the AO, the ld. DR has submitted that as the assessee has made compliance to the said notice, it may be presumed that the notices were served on him. Reliance is placed on the copy of the letter filed by the assessee dated 25.07.2016 in which it is mentioned that the return filed u/s 139 on 01.10.2009 may be treated as the return in response to notice. A copy of the letter filed by the assessee dated ITAs No.5485 & 3382/Del/2017 23.08.2016 vide which objections were filed and copy of the letter dated 18.11.2016 disposing of the objections to the notice u/s 148 of the Act have been filed. The ld. DR has relied the decision of the Hon’ble J&K High Court in PCIT vs. Broadway Shoe Co. (2018) 99 taxmann.com 83 (J&K) to submit that when no return is filed in pursuance of notice u/s 148 of the Act, issue of notice u/s 143(2) of the Act was not required for making assessment.
It is countered by the ld. counsel relying the decision of the Hon’ble jurisdictional Delhi High Court in the case of CIT vs. Jai Shiv Shankar Traders Pvt. Ltd. in order dated 14.10.2015, wherein relying the decision of the Hon’ble Supreme Court in ACIT vs. Hotel Blue Moon (2010) 321 ITR 362, the order of the Tribunal concluding that for completing the assessment u/s 148 of the Act compliance with the procedure u/s 143(2) of the Act was mandatory, was upheld. In that case also, the return originally filed was sought to be treated as the return filed pursuant to the notice u/s 148 of the Act.
At outset we admit this issue raised by assesse vide ground no. 5 as additional ground, being legal question which can be adjudicated on admitted facts.
Now Revenue cannot dispute that issue and service of statutory notices forms an important part of all the proceedings under the Income-tax Act. The proceedings are initiated by issue of proper notice and valid service of that ITAs No.5485 & 3382/Del/2017 notice and end with proper service of order. In case of any deficiencies in the issue or service of notice, the order may be scrapped on technical grounds by the appellate authority without going into the merits of the order. A notice functions as a tool for ensuring natural justice by giving the assessee, in respect of whom any proceeding is proposed to be initiated, an opportunity of being heardthe original notice is to be served upon the person concerned and copy of the same should be kept in the file. As per the provisions of section 282 of Income Tax Act,1961, the service of notice of summon or requisition or order or any other communication under the I.T.Act may be made by delivering or transmitting a copy thereof, to the person therein named by the following modes: (a) by post or by such courier services as may be approved by the Central Board of Direct Taxes :- Sub-rule (1) of the Rule 127 of the Income Tax Rules, 1962 provides that for the purposes of sub-section (1) of section 282, the addresses (including the address for electronic mail or electronic mail message) to which a notice or summons or requisition or order or any other communication under the may be delivered or transmitted shall be as per sub-rule (2). Clause (a) of sub-rule (2) of Rule 127 states the following:
ITAs No.5485 & 3382/Del/2017 “The addresses referred to in sub-rule (1) shall be- (a) for communications delivered or transmitted in the manner provided in clause (a) or clause (b) of sub-section(1) of section 282- (i) the address available in the PAN database of the addressee; or (ii) the address available in the income-tax return to which the communication relates; or (iii) the address available in the last income-tax return furnished by the addressee; or (iv) in the case of addressee being a company, address of registered office as available on the website of Ministry of Corporate Affairs Provided that the communication shall not be delivered or transmitted to the address mentioned in item (i) to (iv) where the addressee furnishes in writing any other address for the purposes of communication to the income-tax authority or any person authorized by such authority issuing the communication;” (b) as such manner as provided under the Code of Civil Procedure, 1908 (5 of 1908) for the purposes of service of summons:- The Code of Civil Procedure (Order V), 1908 specifies the manner of Issue and service of court summons. It specifies that a notice can be served in the following manner:
ITAs No.5485 & 3382/Del/2017 i. Personal service ii. By registered post acknowledgement due (RPAD) iii. Speed post iv. Courier service approved by High Court v. Other means of transmission of documents (including fax message or electronic mail service) provided by the rules made by the High Court. (c) in the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000 (21 of 2000) :- Clause (b) of sub-rule (2) of Rule 127 states the following: “ For communications delivered or transmitted electronically- (i) email address available in the income-tax return furnished by the addressee to which the communication relates; or (ii) the email address available in the last income-tax return furnished by the addressee; or (iii) in the case of addressee being a company, email address of the company as available on the website of Ministry of Corporate Affairs; or (iv) any email address made available by the addressee to the income-tax authority or any person authorised by such income-tax authority”. (d) by any other means of transmission of documents as provided by rules made by the Board in this behalf.
ITAs No.5485 & 3382/Del/2017 ITA No.5823/Del/2017
It is settled law that it is the duty of the revenue to establish that the service of an order or a notice was made on the assessee himself or on somebody duly authorized by him in that behalf. When the assessee pleads that he has not been properly served with any notice, it is for the Department to place the relevant material to substantiate the plea that the assessee was served with prior notice. Now as a matter of fact, in the case of the assessee, in the assessment order, although it is mentioned that notice u/s 143(2) of the Act was issued to the assessee, however, no date of issuance and more of service is mentioned. Specially if it was served personally or any substituted services. Then as per the report filed by the Ld. DR, there is no evidence of issuance of the notice for its service in the assessment record. Hon'ble Jurisdictional High Court in the case of CIT vs. Hotline International Pvt. Ltd. 296 ITR 333 has held that section 282 of the Income Tax Act, 1961 lays down the mode of service of notices. According to it, any notice under the Income Tax Act has to be served on the person named therein either by post or summons issued by the court under the Code of Civil Procedure, 1908 order V, Rule 19A of the Code of Civil Procedure provides for simultaneous service by post in addition to personal service.
Now with regard to service by post, there is some presumption of service as is given in section 27 of the General Clauses Act, 1897 but that is dependent on establishing requirements for valid service by showing there was proper ITAs No.5485 & 3382/Del/2017 addressing, prepaying stamps, sending by registered post with acknowledgment due. In the context of issuance of notice to be served by post, Hon’ble Gujarat High Court has held in the case of Kanubhai M. Patel Vs. Hiren Bhatt 2011 334ITR 5 (Guj) that “the expression to issue in the context of issuance of notices, writs a process, has been attributed the meaning, to send out to place in the hands of the proper officer for service.
8. Thus where department cannot even establish from its records that notice was actually issued and served, then by merely keeping on record a copy of notice, cannot expect to pass the judicial scrutiny on the basis of any presumption arising out of official acts being done in due course or that there is presumption to be drawn under General Clauses Act 1897. Section 292BB of the Act merely provides that notice is deemed to be valid in certain circumstances but there is no presumption of issuance and then service. In B. Johar Forest Works vs. CIT, 107 ITR 409 (J&K), it was held that the notice must be served in one of modes provided in the Act before an assessee could be considered to be default. However, acquisition of knowledge in regard to issuance of a notice, the Hon’ble Court held, could not be considered as equivalent to, or a substitute for, the service of the notice on the assessee. A similar view was taken in CIT vs. Dey Brothers, 3 ITR 213 (Rang.), where the Court held that the mere fact that the notice had in some way or other reached ITAs No.5485 & 3382/Del/2017 the person upon whom it was to be served was not sufficient to comply with a requirements of a proper service of notice.
The reasoning adopted by the Hon’ble Delhi High Court in the case of Principal CIT v. Silver Line [2016] 65 taxmann.com 137/383 ITR 455 with regard to issue of notice-vis-a-vis participation on behalf of the assessee in the proceedings without issue of 143(2) notice is worth noticing as could be seen from the following- "The proposal to reopen an assessment under section 147 of the Income- tax Act, 1961, is to be based on reasons to be recorded by the Assessing Officer. Such reasons have to be communicated to the assessee. Merely because the assessee participates in the proceedings pursuant to such notice under section 148 of the Act, it does not obviate the mandatory requirement of the Assessing Officer having to issue to the assessee a notice under section 143(2) of the Act before finalising the order of reassessment. A reassessment order cannot be passed without compliance with the mandatory requirement of notice being issued by the Assessing Officer to the assessee under section 143(2). The requirement of issuance of such notice is a jurisdictional one. It does go to the root of the matter as far as the validity of the reassessment proceedings under section 147 / 148 of the Act is concerned. Section 292BB was inserted in the Income-tax Act, with effect from April 1, 2008. It talks of the drawing of a presumption of service of notice on an assessee and is basically a rule of evidence. It introduces a fiction that once the assessee appears in any proceeding or has co-operated in any enquiry relating to assessment or reassessment it shall be deemed that any notice under any provision of the Act that is required to be served has 9 ITAs No.5485 & 3382/Del/2017 been duly served upon him in accordance with the provisions of the Act and the assessee in those circumstances would be precluded from objecting to that a notice that was required to be served upon him under the Act was not served upon him or not served in time or was served in an improper manner. The failure of the Assessing Officer, in reassessment proceedings, to issue notice under section 143(2) of the Act, prior to finalising the reassessment order, cannot be condoned by referring to section 292BB of the Act. Where no evidence or disputed facts are sought to be brought on record and the issue being purely one of law, the Appellate Tribunal can permit the assessee to raise such a point before it."
Thus we are inclined to sustain this ground no. 5 raised by assesse. The appeal ITA 5485/Del/2017 succeeds and impugned assessment is quashed. Consequential appeals of revenue and of assesse arising out of penalty proceedings become infructuous and thus dismissed on that count. Order pronounced in the open court on 17.09.2025. Sd/- Sd/- (AMITABH SHUKLA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 17th August, 2025. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 10 ITAs No.5485 & 3382/Del/2017 ITA No.5823/Del/2017