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TMI Blog2009 (1) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... ings are taken against him and in case of invalid notice the whole proceedings taken pursuant to that notice would be void ab initio (subject to provisions of s. 292B) and will have no legal consequences. To overcome some of such situations s. 292BB has been brought on the statute as explained in the Memorandum Explaining the Provisions as well as Notes on Clauses. It has already been pointed out that the applicability of s. 292BB is not strictly restricted to issue of notice u/s.143(2) but it is in respect of other notices relating to any provisions of the Act which include notice to initiate reassessment proceedings and other proceedings also. It has been the contention of the ld AR that in his case notice was not issued at all. Therefore, there was no question of valid service thereof and, hence, provisions of s. 292BB are not applicable. With regard to this contention of ld AR, it may be mentioned that if provisions of s. 292BB are held to be applicable to the case of assessee, then the question of considering the issuance of notice separately will become irrelevant according to well established rule of interpretation explained by Hon'ble Supreme Court in the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Having arrived at the conclusion that s. 292BB has no retrospective effect and is to be construed prospectively, it has to be held that prior to 1st April, 2008, i.e., up to 31st March, 2008, as per s. 292BB, the assessee is not precluded from taking any objection (hereinafter referred to as 'such objection') regarding invalidity of assessment/reassessment on the ground of improper/invalid issuance/service of a notice. The second aspect which requires to be considered is that when assessee can be said to be precluded from taking such objection s. 292BB has been made applicable w.e.f. 1st April, 2008 by the Finance Act, 2008. As per well established law as explained by Hon'ble Supreme Court in the case of Karimtharuvi Tea Estate Ltd. vs. State of Kerala [ 1965 (12) TMI 35 - SUPREME COURT] (which is a decision rendered by five Judges of Hon'ble Supreme Court) that the IT Act as it stands amended on the first day of any financial year must apply to the assessments of that year. Summarising our findings, we hold as follows: (i) Sec. 292BB even if it is procedural it is creating a new disability as it precludes the assessee from taking a plea which could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was referred to Special Bench for its opinion: "Whether the assessee who has participated in the block assessment proceedings is precluded from taking any objection that notice under s. 143(2) was not served upon him or was not served upon him in time in view of the provisions of s. 292BB inserted by the Finance Act, 2008 w.e.f. 1st April, 2008 and if so, since when he can be said to be so precluded?" 4. Parties were heard on 11th Nov., 2008 by the Special Bench. The intervenors were represented by Shri Ashwini Taneja and Shri Tarun Kumar, advocates. 5. Shri Raj Kumar Gupta, chartered accountant along with Shri Saurav Rohatgi, chartered accountant who appeared on behalf of the assessee pleaded that the grievance of the assessee is not represented by the question referred to the Special Bench. According to him, as per facts of his case no notice under s. 143(2) was issued at all. It was pleaded that issue of notice and service of notice are two separate and distinct things and such distinction has been clearly spelt out in the following decisions: (1) CIT vs. Bhan Textiles (P) Ltd. (2007) 208 CTR (Del) 253 : (2006) 287 ITR 370 (Del); (2) CIT vs. Lunar Diamonds Ltd. (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be held invalid for the reason that notice under s. 143(2) was never issued for framing the assessment under s. 158BC. 8, Shri Ashwini Taneja, who appeared on behalf of the interveners pleaded that the provisions of s. 292BB are inserted by Finance Act, 2008 w.e.f. 1st April, 2008 and are applicable prospectively and not retrospectively. For contending so he relied upon the following two decisions of Tribunal, Delhi: (i) Cebon India Ltd. vs. Addl. CIT, 'I' Bench, order dt. 27th June, 2008 [reported at (2008) 12 DTR (Del) 402-Ed.], copy placed at pp. 1 to 12 of the paper book. He invited our attention to the following observations: "7. Coming to the introduction of s. 292BB, w.e.f. 1st April, 2008, in the Act, it was argued that the assessee had not participated in the assessment proceedings, which was clear from the fact that the assessment was framed under s. 144 of the Act. This provision came into effect from 1st April, 2008 and, therefore, was not applicable to the proceedings for asst. yr. 1996-97. In this connection, reliance was placed on the decision of Hon'ble Supreme Court in the case of Virtual Soft Systems Ltd. vs. CIT (2007) 207 CTR (SC) 733 : (2007) 289 ITR 83 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e view taken by the Hon'ble Gauhati High Court nor there is any decision of any other High Court contrary to the decision of Hon'ble Gauhati High Court. Thus, this decision has binding authority and is to be followed. In view of this authority, the block assessment order passed by the AO without giving notice under s. 143(2) is liable to be quashed. 11. Hence, we quash the assessment order on this ground. Consequently, ground Nos. 1 and 2 taken by the assessee are allowed." 9. He further pleaded that s. 292BB is a substantial provision. Initiation of assessment proceedings requires issuance of notice under s. 143(2) which is a right vested in the assessee and the said right has been taken away by the provision of s. 292BB and, thus, in a case where some right has been taken away, the provisions are substantive in nature and they cannot be held to be retrospective unless specifically so stated by the legislature. He contended that by the introduction of s. 292BB, the assessee is precluded from taking a plea which is the right of the assessee and, therefore, this provision cannot be held to be retrospective. 10. Shri Ashwani Taneja further submitted that s. 292BB was introduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terated in several decisions of this Court as well as English Courts is that all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospective and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only." 12. Reliance was also placed on the following decisions: (i) R. Rajagopal Reddy Ors. vs. Padmini Chandrasekharan (1995) 124 CTR (SC) 311 : (1995) 213 ITR 340 (SC); (ii) M.G. Pictures (Madras) Ltd. vs. Asstt. CIT (2003) 185 CTR (Mad) 185 : (2003) 263 ITR 83 (Mad); (iii) Gem Granites vs. CIT (2004) 192 CTR (SC) 481 : (2004) 271 ITR 322 (SC). 13. Shri Taneja further submitted that if a notice which is required to be served on or after 1st April, 2008 and if not so served that notice only can be considered as deemed to have been served under s. 292BB of the Act. The proviso r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is passed without giving notice to the assessee, assessment is only vitiated but not warranting annulment as held in the case of C.G.G. Panicker vs. CIT (1998) 148 CTR (Ker) 114 : (1999) 237 ITR 443 (Ker). He further submitted that where the assessee for the first time filed an affidavit before the Tribunal in which it denied receipt of notice under s. 143(2), the Hon'ble Delhi High Court held that the presumption of service of notice not being successfully rebutted by the assessee, the Tribunal erred in placing reliance on such belated affidavit as held in the case of CIT vs. Bins Overseas (P) Ltd. (2007) 163 Taxman 95 (sic). The Hon'ble Delhi High Court also held in the case of CIT vs. Shanker Lal Ved Prakash (2007) 212 CTR (Del) 47 : (2008) 300 ITR 243 (Del) that burden is on the assessee to prove that there is no service of notice under s. 143(2) within time. It was submitted that the liability to tax arises by virtue of charging section alone and the machinery (procedural) provision cannot be interpreted in such a way as to restrict the scope of charging section. This was held in the case of CWT vs. Pachigolla Narasimha Rao (1980) 18 CTR (AP) 122 : (1983) 134 ITR 640 (AP). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill apply even to the pending proceedings. 18. Summarizing his arguments Shri Durga Charan Dash submitted that: (a) Sec. 292BB is procedural in nature and hence is applicable to all pending proceedings; (b) That the same would apply to all pending appellate proceedings; (c) That non-issuance of notice under s. 143(2) being a supervening irregularity; however, in view of the participation of the assessee in the assessment proceedings cannot be sought recourse to by assessee in Tribunal proceedings to defeat the charging section and administration of justice by thwarting the machinery and is in fact a stalling tactics on part of the assessee as the Revenue had granted a fair opportunity to assessee as per audi alteram partem rule. (d) That in the instant case there has been no prejudice caused to assessee by non-issue of s. 143(2) notice since opportunity of being heard has been granted to the assessee. 19. In reply, the learned counsel for the assessee submitted that s. 292BB is a deeming provision. The deeming provision cannot be made applicable with retrospective effect and cannot curtail the existing right. The Hon'ble Delhi High Court in IT Appeal No. 1203 of 2008 by o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking any objection in any proceeding or inquiry under this Act that the notice was, (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner. This amendment will take effect from 1st April, 2008". 22. It will also be relevant if the Memorandum Explaining the Provisions warranting the insertion of above section is also reproduced: "Service of notice and the time-limit for issuance of notice under s. 143(2) of the IT Act. Sub-s. (2) of s. 143 of the IT Act provides that the notice under this sub-section shall be served on the assessee within a period of 12 months from the end of the month in which the return is furnished. Further, the service of such notice must be effected in a manner laid down in ss. 282, 283 and 284 of the IT Act, read with General Clauses Act. Instances have come to the notice of the Department, where notices under sub-s. (2) of s. 143, though issued by registered post within 12 months from the end of the month in which the return was furnished, have been held 'invalid' on the ground that the notice was actually received by the assessee after the limitation date and there was no 'service' as postulated under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the notice was- (a) not served upon him; (b) not served upon him in time; and (c) served upon him in any improper manner. 24. Thus, simple reading of the section covers any notice under any provisions of the Act and not just the notice under s. 143(2). Sec. 282 in the same Chapter-XIII relates to "Service of notice generally". Sec. 282 reads as under: "282. Service of notice generally-(1) 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 (5 of 1908). (2) Any such notice or requisition may be addressed- (a) in the case of a firm or a Hindu undivided family, to any member of the firm or to the manager or any adult member of the family; (b) In the case of a local authority or company, to the principal officer thereof; (c) In the case of any other association or body of individuals, to the principal officer or any member thereof; (d) In the case of any other person (not being an individual), to the person who manages or controls his affairs." 25. According to s. 282, any notice under IT Act has to be served on the person named th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to accept the service, at the place where the defendant, or his agent, actually and voluntarily resides or carries on business or personally works for gain: Provided that nothing in this sub-rule shall require the Court to issue a summons for service by registered post, where, in the circumstances of the case, the Court considers it necessary. (2) When an acknowledgement purporting to be signed by the defendant or his agent is received by the Court or the postal article containing the summons is received back by the Court with an endorsement purporting to have been made by a postal employee to the effect that the defendant or his agent had refused to take delivery of the postal article containing the summons, when tendered to him, the Court issuing the summons shall declare that the summons had been duly served on the defendant: Provided that where the summons was properly addressed, prepaid and duly sent by registered post, acknowledgement due, the declaration referred to in this sub-rule be made notwithstanding the fact that the acknowledgment having been lost or mislaid, or for any other reason, has not been received by the Court within 30 days from the date of the issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal was right in taking the view that the notices which have been served for both the assessment years on 2nd March, 1961 are on the individual non-resident, and not upon the firm of M/s Naraindas Dwarkadas as in that case proceedings for reassessment are adopted against the firm of M/s Naraindas Dwarkadas without a proper notice as contemplated by s. 34, the entire proceedings are ab initio void and orders and reassessment proceedings passed as a result of such notices are also liable to be set aside. (iv) In the case of CIT vs. Hotline International (P) Ltd. (2007) 211 CTR (Del) 207 : (2008) 296 ITR 333 (Del), it was held that there was no valid service of notice under s. 148 where it was not tendered to the assessee or his agent nor refused by them, no effort was made by serving officer to locate the assessee before affixation of notice and notice sent by registered post was not accompanied by acknowledgement, hence, reassessment was bad in law. 30. From the above decisions, it can be noted that assessee has a right of being served with the notice in case proceedings are taken against him and in case of invalid notice the whole proceedings taken pursuant to that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that the failure to send an estimate is to be deemed to be a failure to send a return necessarily involves the fiction that notice had been issued under s. 22, and that had not been complied with. It is a rule of interpretation well-settled that in construing the scope of a legal fiction it would be proper and even necessary to assume all those facts on which alone the fiction can operate. The following oft-quoted observations of Lord Asquith in East End Dwellings Co. Ltd. vs. Finsbury Borough Council may appropriately be referred to: 'If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in ' fact existed, must inevitably have flowed from or accompanied it. One of these in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain state of affairs: it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs.' The fiction under s. 18A(9)(b) therefore, that failure to send an es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illustrative though not exhaustive which will cover the ambit and scope of Amending Act and its retrospective operation: "(i) A statute which affects substantive rights is presumed to be prospective in operation, unless made retrospective, either expressly or by necessary intendment, whereas a statute which merely affects procedure, unless such a construction is textually impossible is presumed to be retrospective in its application, should not be given an extended meaning, and should be strictly confined to its clearly defined limits. (ii) Law relating to forum and limitation is procedural in nature, whereas law relating to right of action and right of appeal, even though remedial, is substantive in nature. (iii) Every litigant has a vested right in substantive law, but no such right exists in procedural law. (iv) A procedural statute should not generally speaking be applied retrospectively, where the result would be to create new disabilities or obligations, or to impose new duties in respect of transactions already accomplished. (v) A statute which not only changes the procedure but also creates new rights and liabilities, shall be construed to be prospective in operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spective operation, the said enactment cannot be construed to have retrospective operation and when amendment relating to a procedural provision results into creating a new disability or obligation and which imposes new duty in respect of transactions already completed, then, the said procedural provision also cannot be applied retrospectively. Similar is the position where a statute which not only changes the procedure, but also creates new rights and liabilities which shall be construed to be prospective in operation unless otherwise provided either expressly or by necessary implication. 39. Now, we proceed to examine that whether s. 292BB can be construed to be retrospective in the light of the above principles. It is also observed that s. 292BB has been made effective by the legislature from 1st April, 2008 and there is nothing in the enactment to show that s. 292BB has retrospective operation. If it is so, according to rule of interpretation described above, s. 292BB cannot be construed retrospectively. 40. According to above-mentioned principles laid down by the Hon'ble Supreme Court, every litigant has a vested right in substantive law, but no litigant has such right in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch, 2008, as per s. 292BB, the assessee is not precluded from taking any objection (hereinafter referred to as 'such objection') regarding invalidity of assessment/reassessment on the ground of improper/invalid issuance/service of a notice. 43. The second aspect which requires to be considered is that when assessee can be said to be precluded from taking such objection s. 292BB has been made applicable w.e.f. 1st April, 2008 by the Finance Act, 2008. As per well established law as explained by Hon'ble Supreme Court in the case of Karimtharuvi Tea Estate Ltd. vs. State of Kerala (1966) 60 ITR 262 (SC) (which is a decision rendered by five Judges of Hon'ble Supreme Court) that the IT Act as it stands amended on the first day of any financial year must apply to the assessments of that year. The facts in that case were that for asst. yr. 1957-58 the company was assessed to agricultural income-tax under the Kerala Agrl. IT Act, 1950 and in the assessment surcharge @ 5 per cent on the agricultural income-tax and super-tax was levied and collected from the assessee under the provisions of Surcharge Act. The levy of surcharge was agitated by the assessee on the ground that Surcharge Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e into force. In Scindia Steam Navigation Co. Ltd. vs. CIT, a Division Bench of the Bombay High Court consisting of Chagla, C.J. and Tendolkar J., has considered the question as to the effect of an amendment which came into force after the commencement of the financial year. The facts in that case were these. The assessee's ship was lost as a result of enemy action. The Government paid the assessee in 1944 a certain amount as compensation which exceeded the original cost of the ship. The ITO included the difference between the original cost and the WDV of the ship in the total income of the assessee for the asst. yr. 1946-47. The Tribunal upheld that decision and referred the question, whether the sum representing the difference between the original cost and the WDV was properly included in the assessee's total income computed for the asst. yr. 1946-47. It was argued that the fourth proviso to s. 10(2)(vii) of the IT Act (inserted by the Amendment Act of 1946 w.e.f. 4th May, 1946) under which the inclusion of the amount was justified by the Department, had no application to the case. The learned Judges held that as it was the Finance Act of 1946 that imposed the tax for the asst. y ..... X X X X Extracts X X X X X X X X Extracts X X X X
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