2017 (9) TMI 1356 - HC - Income Tax

Reopening of assessment - notice issued to minor daughter of assessee - notice sent for personal service - Held that - CIT (Appeals) after examination of the entire material and on consideration of the above report returned a finding that Assessing Officer had sent the notice through speed post, which was not returned by postal authorities, which means the same was served upon the assessee. The aforesaid service of notice upon the assessee by post is in accordance with the procedure provided for service under the Code of Civil Procedure, 1908. Section 27 of the General Clauses Act, 1897 raises a presumption that a notice sent by the registered post to the addressee at his correct address, if not returned undelivered, would be presumed to be served. In view of the above presumption, which had not been rebutted by the assessee, the authorities below have rightly treated the service of notice upon the assessee to be sufficient.The contention of Sri S.O.P. Agarwal that there could be no valid service of the notice upon the minor cuts no ice in the light of deemed service of notice by post. - Notice issued under Section 148 of the Act was validly deemed to be served upon the assessee. - Decided answered against the assessee Notices issued after the expiry of the limitation period - Held that - Applying the limitation as provided by Clause (b) of unamended Section 149 of the Act as in all the three assessment years, the income chargeable to tax escaping assessment was over ₹ 25,000/- and in one of the years above ₹ 50,000/-, the limitation to give notice under Section 148 of the Act would be a maximum of 7 years and 10 years. Thus, for the assessment year 1992-93, wherein the income chargeable to tax escaping assessment happens to be ₹ 35,052/- and for the assessment year 1993-94, where the income chargeable to tax escaping assessment happens to be ₹ 48,385/-, notice under Section 148 of the Act would have been given within 7 years from the end of the relevant years, which in the above cases would be 31st March, 2000 and 31st March, 2001. Similarly, in respect of the assessment year 1994-95 as the income chargeable to tax escaping assessment happens to be ₹ 55,440/-, the limitation for giving notice under Section 148 of the Act would be 10 years from the end of the relevant assessment year i.e. 31st March, 2005. Admittedly, the notice under Section 148 of the Act for all the three years was issued on 26.03.2001. Therefore, the notice was beyond time in so far as the assessment year 1992-93 is concerned but it is within limitation for the assessment year 1993-94 and 1994-95. The notice under Section 148 for the assessment year 1992-93 was barred by time and that for the assessment year 1993-94 and 1994-95 to be within time. - Decided partly in favour of assessee.

Summary

Issues:
Validity of notice served under Section 148 of the Income Tax Act, 1961
Time limitation for issuing notice under Section 148 of the Act

Validity of Notice Served under Section 148:
The case involved appeals related to the assessment years 1992-93, 1993-94, and 1994-95 concerning the construction of a residential house. The Assessing Officer added the estimated investment in the construction to the assessee's income under Section 69 of the Act. One ground of appeal was the validity of the notices issued after the limitation period. The Appellate Authority reduced the additions based on the cost difference declared by the assessee and the estimated value. The Tribunal affirmed the additions but reduced them further. The primary issue was the validity of the notice served under Section 148 of the Act.

The notice was sent to the assessee by speed post and personally served on the assessee's minor daughter. The Act requires the notice to be served on the assessee directly. The service of the notice on the minor daughter was deemed invalid by the appellant. However, the notice was also sent by speed post, and the authorities considered it valid. The General Clauses Act presumes a notice sent by registered post to be served if not returned undelivered. The authorities concluded that the notice served on the assessee through post was sufficient, and the argument against service on the minor was dismissed.

Time Limitation for Issuing Notice under Section 148:
Section 149 of the Act prescribes the time limit for issuing notices under Section 148. The unamended provision before 01.06.2001 outlined different periods based on the amount chargeable to tax escaping assessment. The limitation for issuing the notice in this case was governed by the unamended Section 149. The relevant assessment years were 1992-93, 1993-94, and 1994-95, with varying amounts of income chargeable to tax escaping assessment. The notice for 1992-93 was found to be beyond the time limit, while those for 1993-94 and 1994-95 were within the limit. Consequently, the addition made for the assessment year 1992-93 was deemed illegal, while those for the other years were upheld.

In conclusion, the High Court held that the notice for the assessment year 1992-93 was barred by time, while those for the subsequent years were within the time limit. The addition made under Section 69 of the Act for the assessment year 1992-93 was deemed illegal, while the additions for the other years were upheld. All three appeals were decided accordingly.