GAJENDER SINGH JADON,NEW DELHI vs. ACIT CIRCLE-57(5), NEW DELHI
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Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI
PER YOGESH KUMAR U.S., JM:
This appeal by Assessee is filed against the order of Learned
Commissioner of Income Tax (Appeals)-19, New Delhi [“Ld. CIT(A)”, for short],
dated 31/01/2019 for Assessment Year 2006-07.
Grounds taken in this appeal are as under:
“1. That the order under section 250 of the Act dated 31 January, 2019 passed by the Commissioner of Income Tax (Appeals) -19 ["Ld. CIT(A)"] is erroneous and bad in law.
That in law and under the facts and circumstances of the case, the impugned order passed by the Income Tax Officer, Ward - 57(5),
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New Delhi ("Ld. AO") under section 144/147 of the Act is without jurisdiction and thus void ab initio.
That the Ld. CIT(A) has erred in confirming the penalty u/s 271(1)(b) of the Act of Rs.10,000/- levied on the assessee without considering and appreciating the facts and circumstances of the case and without appreciating that the Appellant had not received the notice of hearing.
That the Ld. CIT (A) has grossly erred in confirming the levy of penalty under section 271 (1) (b) amounting to Rs. 10,000/- without appreciating the fact that the appellant had a reasonable cause.
The Appellant craves for leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.
That all the grounds are without prejudice to each other.”
There is a delay of 44 days in filing the present Appeal, the assessee filed
an affidavit stating that the Appeal could not be filed on time as the Counsel
appeared before the CIT(A) has not provided the requisite documents to the
assessee in time which caused the delay of 44 days in filing the present Appeal
and prayed for condoning the same. Considering the days of delay involved in
the present Appeal and also the reasons assigned in the affidavit of the
Assessee, the delay of 44 days in filing the present Appeal is hereby condoned.
Brief facts of the case are that, the assessment order u/s 144/147 of the
Income Tax Act, 1961 (‘Act’ for short) came to be passed on 24/01/2014 by
assessing the income of the Assessee at Rs. 14,62,150/- which being cash
deposited to Assessee’s bank account. Consequent to the assessment order,
since the assessee has not responded to the statutory notices issued u/s
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142(1) of the Act, a penalty proceedings u/s 271(1)(b) of the Act were initiated
and an order of penalty came to be passed on 25/07/2014 by imposing penalty
of Rs. 10,000/-. Aggrieved by the order of the penalty, the assessee preferred
an appeal before the CIT(A) and the CIT(A) vide order dated 31/01/2019,
dismissed the Appeal filed by the Assessee. As against the order of the CIT(A)
dated 31/01/2019, the Assessee preferred the present appeal on the grounds
mentioned above. The Ld. Counsel for the assessee submitted that, the
assessee has not received the notice of hearing during the assessment
proceedings and the A.O. has not followed the proper procedure to serve the
notices. Therefore, the penalty proceedings initiated thereupon is against
natural justice and erroneous.
Per contra, the Ld. Departmental Representative relied on the orders of
the Lower Authorities, justified the action of the A.O. and the Ld. CIT(A) and
contended that the present Appeal is devoid of merit and the same is liable to
be dismissed.
We have heard both the parties and perused the material available on
record. The order of penalty came to be passed u/s 271(1)(b) of the Act on the
ground that the assessee has not complied with the notices issued by the A.O.
u/s 148/142(1) of the Act. We have gone through the assessment order dated
24/01/2014 and found that the A.O. issued a first notices on 16/08/2013 to
the assessee by fixing the hearing on 29/08/2013. Admittedly, the said notice
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has been returned unserved with the remark ‘No such person is residing in this
address’. The A.O. has not made any effort to find out the proper address of
the assessee and nothing is mentioned in the Assessment Order as to whether
the address mentioned in the notice dated 16/08/2013 was the last known
address of the assessee or the registered address of the assessee. Further, it is
found from the assessment order that since the case was time barring on 31st
January 2014, the A.O. opted for substitute service of notice by way of affixture
and a notice dated 14/01/2014 issued u/s 142(1) of the Act claimed to be
served by way of affixture through Inspector/Notice server. There is no details
mentioned regarding identification of the address of the Assessee by the
witness or drawing of Panchnama in compliance with Rules 17,19 and 20 of
Order V of Code of Civil Procedure 1908 (‘CPC’ for short). The report of the
Inspectors/Notice server has been accepted by the A.O. and held that the
assessee has not complied with the notices. The observation of the A.O. are
reproduced as under:-
“Since, neither the PAN nor bank account no. of the assessee with DELHI NAGRIK SEHAKARI BANK LTD is available on record, necessary confirmation could not be obtained from bank. The notice u/s 142(1)) issued to the assessee on 16/08/2013 for hearing on 29/08/2013 but notice was not served upon the assessee the same has return back unserved with remarks "NO SUCH PERSON IS RESIDING ON THIS ADDRESS". For the sake of justice last & final opportunity was granted to the assessee by way of Issuance of notice u/s 142(1) was issued on 14/01/2014 for compliance of
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24/01/2014 by way of affixture through Inspector /Notice Server. The same was also uncomplied with.”
Thus, we have to examine as to whether service of notice by way of affixture
was proper in terms of order V, Rule 17 to 20 of the CPC. As per provisions of
Section 282(1) of the Income Tax Act, 1961, notice under the Act is to be served
either by post or in such manner as provided under the Code of Civil Procedure
1908 for the purpose of service of summons. The Hon'ble Supreme Court after
taking into consideration of the above statutory provisions in the case of CIT
vs. Ramender Nath Ghose (1971) 82 ITR 888, held (Page No. 890 & 891) as
under:-
“Admittedly, the assessees have not been personally served in these cases. Therefore, we have to see whether the alleged service by affixation was in accordance with law. It is necessary to mention that, according to the assessees, they had no place of business at all. They claim that they have closed their business long before the notices were issued. Hence, according to them, Mr. Neogi must have gone to a wrong place. This contention of the assessees has been accepted by the Appellate Bench of the High Court. Bearing these facts in mind, let us now proceed to consider the relevant provisions of law. Section 63(1) of the Act reads: “A notice or requisition 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.(V of 1908).”
Rule 17 of Order V of the Civil Procedure Code reads:
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“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, 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 in whose presence the copy was affixed.” (emphasis applied)
As seen earlier the contention of the assessees was that at the relevant time they had no place of business. The report of the serving officer does not mention the names and addresses of the person who identified the place of business of the assessees. That officer does not mention in his report nor in the affidavit filed by him that he personally knew the place of business of the assessees. Hence, the service of notice must be held to be not in accordance with the law. The possibility of his having gone to a wrong place cannot be ruled out. The High Court after going into the facts of the case very elaborately, after examining several witnesses, has come to the conclusion that the service made was not a proper service. Hence, it is not possible to hold that the assessees had been given a proper
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opportunity to put forward their case as required by Section 33B.”
The relevant provision for effecting of service by different modes are
contained in Rules 17, 19 and 20 of Order V of CPC, which lay down the
procedure for service of summons/notice and the procedure laid down therein
cannot be surpassed because the intention of the legislature behind these
provisions is that the strict compliance of the procedure laid down therein has
to be made. The expression ‘after using all due and reasonable diligence'
appearing in Rule 17 of CPC has been considered in numerous cases and it
has been held that unless a real and substantial effort has been made to find
the party/defendant after proper enquiries, the Serving Officer cannot be
deemed to have exercised 'due and reasonable diligence'. Before taking
advantage of Rule 17 of the CPC, the Serving Officer shall make diligent search
for the person to be served with the notice, therefore, he must take pain to find
him and also to make mention of his efforts in the report. Another requirement
of Rule 17 of CPC is that the Serving Officer should state that he has affixed
the copy of Notice as per this Rule. The circumstances under which he did so
and the name and address of the person by whom the
house/premises/address were identified and in the said premises the copy of
the Notice was affixed. These facts should also be verified by an affidavit of the
Serving Officer.
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The reason for taking all these precautions is that service by affixture is
substitute service and since the same is not direct or personal service upon the
assessee to bind him by such mode of service, the mere formality of affixture is
not sufficient. Since the service, has to be done after making the necessary
efforts, in order to establish the genuineness of such service, the Serving
Officer is required to state his full action in the report and reliance can be
placed on such report only when it sets out all the circumstances which are
also duly verified by the witnesses in whose presence the affixture was done
and thus the affidavit of the Serving Officer deposing such procedure adopted
by him would also be essential.
In the instance case, the first notice dated 16/08/2013 has been
admittedly ‘not served’ and the notice was returned with remark ‘No such
person is residing in this address’. The A.O. considering the fact that the case
of the assessee is going to be time barred by limitation and has to be completed
before 31st January, 2014 opted for issuing notice u/s 142(1) of the Act by way
of substitute service of Affixture on 14/01/2104 for compliance of the same on
24/01/2014 and on the very same day i.e. on 24/01/2014 the A.O. passed the
assessment order u/s 144/147 of the Act. Apart from the same, there is no
mentioning of reasons by the A.O. in the assessment order as to why the Notice
has to be served through affixture and the A.O. has not mentioned anything
regarding efforts of ‘due and reasonable diligence to serve the notice’ on the
assessee as required under rule 17 of order V of the CPC, thus the Service of
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Notice by way of affixture on the Assessee cannot be construed as sufficient
Service of Notice. Therefore, in our considered opinion, the A.O. has
committed an error in initiating penalty proceedings. In view of the above
discussion, we find merit in the Grounds of appeal of the assessee.
Accordingly, the Grounds of Appeal of the assessee are allowed and the order of
penalty passed u/s 271(1)(b) of the Act and the impugned order of the CIT(A)
are quashed.
In the result, Appeal of the assessee is allowed.
Order pronounced in open Court on 25th August, 2023
Sd/- Sd/- (N. K. BILLAIYA) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 25/08/2023 Pk/R.N Sr ps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT
ASSISTANT REGISTRAR ITAT, NEW DELHI
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