2017 (4) TMI 776 - HC - Income Tax

Non service of notice u/s 143(2) - Period of limitation - Held that - The word served used in Section 143(2) of the Act is very significant and very clear. However in appropriate case being made out within the four corners of the General Clauses Act, if the notices are issued before reasonable time of the prescribed period of limitation and it has been dispatched /sent for delivery within the reasonable time, in that case, there can be presumption under Section 27 of the General Clauses Act. However, in the facts and circumstances of the case, as the notice dated 29/09/2009 was given to the postal authority for speed post delivery on 30/09/2009, as observed hereinabove, there is no question of any presumption that the same must have been delivered to the assessee on the very day i.e. 30/09/2009. It cannot be said that the learned tribunal has committed any error in confirming the order passed by the learned CIT(A) quashing and setting aside the assessment order under Section 143(3) of the Act on the ground that the notice under Section 143(2) of the Act was not served upon the assessee and /or was not served upon the assessee within the prescribed period of limitation provided under Section 143(2) of the Act. We are in complete agreement with the view taken by the learned tribunal. - Decided in favour of assessee

Issues Involved:
1. Validity of service of notice under Section 143(2) of the Income Tax Act.
2. Presumption of service of notice under Section 143(2) based on dispatch date.
3. Impact of the assessee’s premises being sealed and frequent address changes on the service of notice.
4. Applicability of Section 27 of the General Clauses Act.
5. Relevance of judicial precedents cited by the revenue.

Detailed Analysis:

1. Validity of Service of Notice under Section 143(2):
The core issue in this case is whether the notice under Section 143(2) of the Income Tax Act was served within the prescribed period of limitation. The assessee filed the return on 30/09/2008, and the notice under Section 143(2) was issued on 29/09/2009 but dispatched to the postal authority on 30/09/2009. There is no record of the notice being served on or before 30/09/2009. The CIT(A) quashed the assessment order under Section 143(3) due to the notice not being served within the statutory limits. The tribunal upheld this decision, leading to the revenue's appeal.

2. Presumption of Service Based on Dispatch Date:
The revenue argued that since the notice was issued on 29/09/2009 and dispatched on 30/09/2009, it should be presumed to have been served within the limitation period. However, the court noted that there is no acknowledgment or evidence of service on or before 30/09/2009. The court emphasized that the mere dispatch of notice does not equate to service, and there can be no presumption of service within 24 hours of dispatch.

3. Impact of Assessee’s Premises Being Sealed and Address Changes:
The revenue contended that the assessee’s premises were sealed by the High Court since 25/02/2009 and that the assessee frequently changed addresses without informing the department. The court observed that the Assessing Officer was unaware of the premises being sealed when the notice was issued. Subsequent notices under Section 142(1) were served at different addresses. The court concluded that these factors do not justify the failure to serve the notice within the prescribed period.

4. Applicability of Section 27 of the General Clauses Act:
The revenue relied on Section 27 of the General Clauses Act to argue for a presumption of service. However, the court held that this section does not apply in this case, as there is no basis to presume that the notice dispatched on 30/09/2009 was served on the same day. The court referenced the Delhi High Court's decision in Nulon India Ltd. vs. Income-tax Officer, which held that there is no presumption of delivery within 24 hours for notices sent by speed post.

5. Relevance of Judicial Precedents:
The revenue cited the Supreme Court's decision in Banarsi Debi vs. The Income-tax Officer and the Punjab & Haryana High Court's decision in V.R.A. Cotton Mills (P) Ltd. vs. Union of India. The court distinguished these cases, noting that Banarsi Debi involved different statutory language, and V.R.A. Cotton Mills dealt with service by affixation, which is not applicable here. The court disagreed with the interpretation that "serve" and "issue" have the same meaning.

Conclusion:
The court dismissed the revenue's appeal, affirming the tribunal's decision that the assessment order under Section 143(3) was invalid due to the failure to serve the notice under Section 143(2) within the prescribed period. The court found no substantial questions of law warranting further consideration and upheld the quashing of the assessment order.

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