2008 (5) TMI 443 - HC - Income Tax

CA possessed the requisite authority to receive the notice u/s 143(2) on behalf of the assessee and in rejecting the assessee s plea against the validity of assessment on the ground of non-service of notice u/s 143(2) within the stipulated period of one year. Held that - The Tribunal being the fact finding authority should examine the material on record and give basis for coming to a conclusion that Sri G. K. Lath possessed requisite authority to receive the notice. The Tribunal has not considered Order V rule 12 of the Code of Civil Procedure. Set aside to Tribunal.

Summary

Issues Involved:
1. Authority of Chartered Accountant to Receive Notice
2. Validity of Service of Notice under Section 143(2)
3. Onus of Proving Service of Jurisdictional Notice

Comprehensive, Issue-Wise Detailed Analysis:

1. Authority of Chartered Accountant to Receive Notice
The primary issue in this case was whether Shri G.K. Lath, a chartered accountant, had the requisite authority to receive the notice under section 143(2) on behalf of the assessee. The Tribunal and the Commissioner of Income-tax (Appeals) both held that the service of the notice on Shri G.K. Lath was valid. It was noted that Shri G.K. Lath was not only the company auditor but also represented the assessee in assessment proceedings for the relevant and earlier years. The Tribunal concluded that Shri G.K. Lath possessed the requisite authority, thus validating the service of notice within the stipulated period.

2. Validity of Service of Notice under Section 143(2)
The appellant contended that the notice under section 143(2) was not served within the mandatory period of one year, rendering the assessment invalid. The first notice was issued on November 21, 2001, and served on Shri G.K. Lath on November 23, 2001. The second notice dated December 2, 2001, was beyond the stipulated time. The Tribunal upheld the validity of the service of the first notice, asserting it was within the stipulated period and thus, the assessment order dated March 28, 2003, was valid.

3. Onus of Proving Service of Jurisdictional Notice
The appellant argued that the service of notice was not in accordance with law as Shri G.K. Lath was neither an employee nor an authorized agent. The Tribunal did not explicitly address the basis on which it concluded that Shri G.K. Lath had the requisite authority. The High Court noted that the Tribunal failed to consider the provisions of Order V, rule 12 of the Code of Civil Procedure, which mandates service on the defendant in person or on an agent empowered to accept service.

Detailed Judgment Analysis:
The High Court emphasized the mandatory nature of serving notice within the prescribed period under section 143(2). It referred to various case laws and a Board Circular which underscored the necessity of serving the notice within the stipulated time. The High Court found that the Tribunal did not provide a clear basis for its finding that Shri G.K. Lath possessed the requisite authority. Additionally, the High Court observed that the issue of service was not raised before the assessing authority but was introduced at the appellate stage without any reason for the delay.

The High Court directed the Tribunal to re-examine the material on record and provide a clear basis for its conclusion regarding Shri G.K. Lath's authority. The Tribunal was also instructed to consider the procedural requirements under the Code of Civil Procedure and address the observations made by the Commissioner of Income-tax (Appeals) regarding the timing of the appellant's challenge to the service of notice.

Conclusion:
The High Court allowed the appeal, set aside the Tribunal's order, and remanded the matter back to the Tribunal for fresh adjudication in light of the observations made. The Tribunal was directed to thoroughly examine whether Shri G.K. Lath had the requisite authority to receive the notice and to address the procedural aspects of service under the Code of Civil Procedure.