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TMI Blog2007 (2) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... artment in. High Court has been filed by the Department which reads as under: "D.D. Chopra Chopra Bhawan Advocate B-140, Sector C Senior Standing Counsel Mahanagar, Lucknow-6 Income-tax Department Tel. Off. 2321330, Res. 2320813 1-2-2007 To, The Sr. D.R. I.T.A.T. Income-tax Deptt. Lucknow Sub: W.P. Nos. 551 of 2007 and 554 of 2007 (M.B) Anil Kumal Goyal vs. ITAT, Lko. and Others Dear Sir, By interim order dated 25-1-2007, the Hon'ble Court has been pleased to inter alia direct the learned ITAT to decide the appeals preferred by the petitioner on the next date of hearing (31-1-2007) and if not possible within two (2) weeks thereafter and till the appeals are disposed of by the Tribunal, the respondent Nos. 2 to 4 shall not take any coercive action against the petitioner on the basis of order dated 11-10-2006 and 27-12-2006 and notices dated 4-12007 and 8-1-2007. I have already applied for the copy of the order and the same is likely to be issued on 2-2-2007. In the absence of order of the Hon'ble Court you may inform the learned ITAT to comply with the above orders o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y processed under section 143(1)(a) of the Act. The notice under section 148 was issued on 20-3-2002 after recording reasons on 18-3-2002. The first ground raised by the assessee in this appeal reads as under: "1. On the undernoted facts and in law the learned CIT(A) was not justified in confirming the action of the Assessing Officer in initiating proceedings under section 148 in the present case:- (a) Because the notice under section 148 was not served on the appellant. (b) Because the ld. CIT(A) ignored the contents of the affidavit tiled by the appellant. (c) Because the appellant had raised the objection regarding non-service of notice before the Assessing Officer in assessment proceedings." 6. Since this issue goes to the root of proceedings, we proceed to decide it first. A photocopy of notice under section 148 of the Act dated 20-3-2002 is contained at page 11 of Paper Book on which there is endorsement regarding receipt of notice on 26-3-2002. The assessee's basic contention is that this notice was not served on assessee or any Authorized Representative of the assessee. The plea is that this notice was never received by assessee. This plea was taken before the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... afterwards. The reliance has been placed on the following decisions:- (1) CIT v. Bhanji Kanji Shop 68 ITR 416 (2) Gunurpur Truck Operators Union v. ITO 89 ITD 89 (Jodhpur ITAT) (3) Ramnivas Hanuman Bux v. ITO 37 ITR 329 (Bom.) (4) ITO v. Suhel Atiq 89 ITD 489 (ITAT Delhi) (5) DR. H. Rai v. CIT 145 ITR 809 (MP High Court) (6) 66 ITR 147 (7) 103 ITR 688 Thus, the Assessing Officer has validly completed assessment under section 148/143(3) as the appellant has filed return in response to notice under section 148 and participated in the assessment proceedings without protest, hence any objection in this regard in appellate proceedings is after thought and not acceptable. The case laws cited by the appellant are distinguishable on fact as in none of the cases, the appellant filed his return in response of notice which was not validly served on them. The ground of appeal No. 4 [Ground No. 3] raised by the appellant has no force, hence rejected." 8. From the aforementioned findings of the ld. CIT(A), it is evident that he has primarily inferred the service of notice on assessee or his Authorized Representative on account of participation of assessee in the proceedings. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lidity of initiation of proceedings under section 147 and issuance and service of notice under section 148, that excepting the alleged under statement of investment in construction of two complexes, no other issues could be validly raised in these proceedings. I am sanguine that justice shall be done to me and the learned Joint Commissioner of Income-tax, Range-IV, Lucknow shall be pleased to-issue directions, to drop the proceedings." 11. With reference to these documents, the ld. Counsel submitted that objection had been raised in regard to service of notice before the Assessing Officer but, he has not decided the issue as noted earlier. 12. The ld. Counsel further pointed out that assessee does not have copy of notice. He further referred to page 10 of the Paper Book wherein the statement on oath of Shri A.K. Sehgal, ITI, s/o Shri R.K. Sehgal, aged 44 years, recorded on 16-7-2003 in connection with service of notice under section 148 is contained. He pointed out that this statement has been taken from the ITI by the ITO after three months of the date of assessment order which was in pursuance of enquiry made by the ld. CIT(A) in course of appellate proceedings. He pointed ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of business. 2. That all notices for the assessment years 1997-98, 1998-99, 1996-97, assessment year 1995-96 have always been received by the deponent on one or two occasions by the deponent , counsel Sri S.K. Bansal Advocate (for the assessment years 1997-98 and 1998-99). 3. That no notice under section 148 of the Income-tax Act, 1961 for the assessment years 1995-96 and 1996-97 has been served on the deponent. 4. That all notices issued by the Income-tax Department in respect of assessment years 1995-96 and 1996-97 were received by the department himself. 5. That before and after the date 26-3-2002 all notices have been received by the deponent. 6. That on dates 15-3-2002, 18-3-2002, 21-3-2002, 22-3-2002, 26-3-2002, on 27-3-2002 in connection with as the deponent was himself present before the learned Assessing authority and the learned assessing authority could easily have served the notice under section 148 of the Income-tax Act, 1961 on the deponent instead of allegedly sending his inspector to the place 51, G.B. Marg, Lucknow for the assessment years 1995-96 and 1996-97 on dated 26-3-2002. 7. That the Inspector namely Sri A.K. Seghal served the notice under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Book wherein the reply dated 26-12-2002 of assessee is contained and pointed out that this letter was filed with reference to the queries and notice under sections 142(1) and 143(2) of the Act and in that reply it was submitted that the return filed on 31-10-1995 may be treated as return filed in response to notice under section 148. 16. The ld. Counsel further referred to page 1 of the Paper Book wherein the copy of order sheet is contained and pointed out that on 21-11-2002 the notice under section 142(1) had been issued and in response to that notice assessee attended on 26-12-2002. 17. With reference to these documents, the ld. Counsel pleaded that letter dated 26-12-2002 cannot be construed as a reply in response to notice under section 148. It is only against notice under section 142(1) dated 21-11-2002 which was accepted by the Assessing Officer in order sheet entry dated 26-12-2002. Order sheet entry dated 26-12-2002 is reproduced below: "26-12-2002: Sri Anil Kr. Goel attended along with Sri S.K. Bansal, Advocate. Furnished written reply giving answers to query No. 1 of the notice dated 21-11-2002...." 18. After referring to all the factual aspects, the ld. Coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice is a legally and factually untenable technicality on which assessee is harping upon. He submitted that service of notice is only contentious but nevertheless it has been duly attended. The ld. DR referred to pages 36 and 37 of the Paper Book wherein the order under section 144A of the Act of Addl. CIT, Range IV is contained and pointed out that proper challenge to jurisdiction was not there. The ld. DR further submitted that whenever a person goes with the notice he faces practical difficulty when assessee is not found. It is impossible to identify people. He submitted that ITI is a responsible person under section 116 of the Act and therefore, his statement, being of a Government Official, should be taken as correct. In regard to various case laws relied upon by the ld. counsel for the assessee, he referred to the decision of the Hon'ble Calcutta High Court in the case of Hindustan Tea Trading Co. Ltd. v. CIT [2003] 263 ITR 289, in which it was held that a decision becomes binding as a precedent only when the court decides a particular question of law or lays down the ratio through conscious adjudication. Agreement with the finding of the fact without adverting to the ratio l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame particularly on the ground that none of the decision was of Hon'ble Jurisdictional High Court. 23. We have considered the rival submissions and have perused the record of the case. It is not disputed that the notice under section 148 has not been served on the assessee. As per the statement of ITI, contained at page 10 of the Paper Book which was recorded in pursuance of the directions of the ld. CIT(A) dated 8-7-2003, the notice was served on a person working at the shop. It is not disputed that the business carried on at the shop was of a firm and it was not the proprietorship business of the assessee. Before dealing on the issue of service of notice, we will first deal with the pleadings of ld. Counsel for the assessee that participation in proceedings was not in pursuance of notice under section 148. The contention of assessee is that on 21-11-2002 notice under section 142(1) had been issued and the next date fixed for hearing was 2-12-2002. The ld. Counsel has referred to the contents of this notice contained at page 6 of the Paper Book and has submitted that in this notice the assessee was required to furnish explanation as to why no return had been filed in response to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the assessee is a condition precedent to the validity of any reassessment made under section 34. If no notice is issued or i the notice issued is shown to be invalid then the proceedings taken by the ITO without a notice or in pursuance of an invalid notice would be illegal and void. 27. R.K. Upadhyaya's case.-In this case it was inter alia, held that service, under the new Act, is not a condition precedent to conferment of jurisdiction on the ITO; it is a condition precedent only to the making of the order of assessment. The contention of ld. Counsel is that since valid assessment order could not be passed without proper service of notice, therefore, the assessment order is bad in law. In this regard ld. Counsel has relied on following observations of Hon'ble Supreme Court at page 165:- "The mandate of section 148(1) is that reassessment shall not be made until there has been service." 28. Prem Kumar Rastogi's case-In this case, the Hon'ble Allahabad High Court has held as under: "A person who is not an authorized agent of the assessee or an agent or manager personally carrying on the assessee's business or an adult member of his family but who has merely accepted not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Hon'ble court was that since the assessee appeared, even though after expiry of limitation and participated in the proceedings, he could not challenge it for want of notice. The learned standing counsel relied on Kalpanath Singh Suresh Saidpur v. CST [1978 U.P.T.C. 1] wherein it was held that service was invalid but on the question whether knowledge of proceedings had the effect of vitiating the procedure, it was held that the assessee was estopped. In order to decide the correctness of this decision, the Full Bench had been constituted. In this case, notice was served on one Shri Om Prakash, who had no concern with the assessee's firm. We reproduce here-in-below some important passages from the judgment: "In view of these authorities it cannot be disputed that no proceedings could be initiated without issue and service of notice. Service of a notice for purpose of initiating proceedings under section 21 is not a mere procedural requirement but is a condition precedent. If no notice is issued or the notice issued is shown to be invalid or no notice has been served on the dealer the proceedings and the consequential order under section 21 will be illegal and void irrespecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 887] I.L.R. 9 All, 191 at 203 (P.C.): Reliance was placed by the learned standing counsel on section 6 of the Act, which is analogous to section 21 of the Civil Procedure Code and debars an assessee from rising question of jurisdiction in appeal or revision. From this it was argued that once an assessee participates he cannot turn round and challenge the jurisdiction. This, according to the learned counsel, was the legislative recognition of the principle of estoppel even in taxation proceedings. The argument is correct but partially. The bar created by section 6 is in respect of territorial and pecuniary jurisdiction only. The jurisdiction exercised under section 21 without service of notice is neither territorial nor pecuniary. It is a jurisdiction which pertains to the subject-matter and if no proceedings could be taken without issue and service of notice then the assessing authority could not assume jurisdiction only because the assessee consented or participated in the proceedings. In Commissioner of Income-tax v. Thayaballi Mulla Jeevaji [1967] 66 ITR 147 at 150 (SC) it was held by the Supreme Court: 'Service of the notice under section 34(1)(a) within the period of limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004 in the case of Gorakhpur Petro Oils Ltd.-In this case one of the points of difference between the two learned Members of the Tribunal related to the validity of the notice under section 158BC of the Act and about its proper service. The ld. Third Member, after considering various case laws on this issue, held in para 54 as under: "54. The ratio of the above decisions had been consistent that acquiescence is not going to confer jurisdiction which otherwise is lacking from the very beginning. As observed earlier, the Assessing Officer can proceed to complete assessment for block period only when he issued notice and served the same on the assessee/person who was subjected to search. In the case in hand the assessee company is admittedly subjected to search but as concluded earlier, the assessee was not served with notice. In view of these findings, the Assessing Officer cannot assume jurisdiction to complete assessment for want of notice even though assessee had appeared before him and filed return, belatedly and also participated in the assessment proceedings. I am in agreement with the observation of the ld. Accountant Member that procedural irregularities can be waived off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicable on the facts of the present case. Jurisdiction to start assessment in response to notice under section 148 depends upon valid service of notice under section 148. It has been already held that no valid service of notice under section 148 has been made on the assessee. Therefore, the assessment completed cannot be held as valid assessment. In view of all these facts and circumstances, we hold that the assessment completed under section 144/148 was not a valid assessment. Accordingly, the same is quashed. 21. Since we have quashed the assessment completed by the Assessing Officer, therefore, we are not inclined to consider the aspect of validity of initiation of proceedings under section 147/148, that whether the initiation was proper or whether the necessary approval was validly taken or not. As stated above, the legal ground in regard to service has been allowed by us, therefore, we are not inclined to dispose off the grounds on merits since we have quashed the assessment itself. Therefore, the appeal of the assessee in case of firm is allowed." 39. The ratio of these judgments is that there has to be service of notice in accordance with law and mere participation in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf, yet as the notice reached the assessee and he complied with the same, the service of the notice was valid." 44. Hindustan Transport Co.'s case-In this case it was held with reference to section 124(5)(a) that the right to question the Jurisdiction is lost as soon as the assessment order is passed. 45. Hon'ble Rajasthan High Court - Jaipur Bench - decision in the case of Birla Cotton Spg. Wvg. Mills Ltd. - In this case it was held as under: "The petitioner-company appeared in the assessment proceedings in pursuance of the notice issued to the two companies by the Income-tax Officer under section 23A. Having appeared in the assessment proceedings, the petitioner-company could not complain that the assessment was illegal because of want of notice to it." 46. Hon'ble Bombay High Court decision in the case of K.C. Tiwari Sons - In this case it was held that even if there is a procedural irregularity in serving the notice [such as serving the notice on a manager, who has no written authority to accept service] if the assessee admits that he has received the notice and asked for adjournment, the assessee cannot subsequently be allowed to plead that there was no valid a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is challenge to jurisdiction of Assessing Officer on the ground of territorial or pecuniary jurisdiction but not when the jurisdiction on the very subject-matter is in dispute. 50. From the case laws relied upon by the ld. counsel for the assessee, particularly the decision of the Hon'ble Allahabad High Court [Full Bench] in the case of Laxmi Narain Anand Prakash, it is evident that Assessing Officer assumes jurisdiction to complete the assessment only after service of a legal and valid notice in accordance with law. It is a jurisdictional matter and Assessing Officer can pass assessment order only after proper and valid service of a valid notice. Mere participation in the proceedings cannot validate the assessment proceedings. 51. It is also settled law that acquiescence on the part of the assessee cannot confer jurisdiction which otherwise is lacking from the very beginning. The Assessing Officer can proceed to complete assessment only after proper service of notice in accordance with law and unless such notice had duly been served, in view of the decision of the Hon'ble Allahabad High Court decision cited supra, the Assessing Officer cannot be said to have been duly clot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by post or if not by post then in the same manner in which summons issued by the court under the Code of Civil Procedure, 1908 are to be served. As the service of notice in this case was through notice server of the Department and not by post, the procedure contemplated by the Code of Civil Procedure under Order V for service of summons should have been followed. Orders V and III of Code of Civil Procedure are relevant in this regard and we reproduce relevant rules from the said order in order to decide whether the service had been effected in accordance with law or not. Rule 6 of Order III is relevant to find out as to who may be appointed as agents to accept service of processes and how. That provision is as follows: "(1) Besides the recognized agents descried in rule 2 any person residing within the jurisdiction of the court may be appointed an agent to accept service of process. (2) Such appointment may be special or general and shall be made by an instrument in writing signed by the principal, and such instrument, or, if the appointment is general, a certified copy thereof shall be filed in court." Rule 9(1) of Order V "Where the defendant resides within the jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce is necessary either by way of special or general power given in this regard. The person should have been specifically empowered to receive notice. From the analysis of the Rules reproduced above it is evident that the mandate of Legislature is that as far as possible the service of summons should be effected on the person named in the notice and, if it is not possible, then the same should be effected on the person who is duly vested with the authority to receive such notice by the person named in the summon. The Legislature has further provided that in order to ensure proper service of notice, acknowledgement of the person served should be obtained and person serving should also record necessary details so as to avoid any dispute in this regard. 56. It is settled law that it is the duty of the revenue to establish that the service of an order or a notice was made on the assessee himself or on somebody duly authorized by him in that behalf. When the assessee pleads that he has not been properly served with any notice, it is for the department to place the relevant material to substantiate the plea that the assessee was served with proper notice. In the present case, no materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under the Act would be validly served nor would any statement made by him bind the assessee. In C.N. Nataraj v. Fifth ITO [1965] 56 ITR 250, the Mysore High Court took the view that the service of notice under section 148 on a clerk of the assessee's father who was neither an agent of the assessee nor authorized by him to accept notices on his behalf was not valid and, therefore, the assessee would not be assessed under section 147 in pursuance of such service of notice. 46. Another decision of the jurisdictional High Court is in the case of Addl. CIT v. Prem Kumar Rastogi 124 ITR 381 which is on the same point as involved in the case in hand. Their Lordships have observed as under: 'A person who is not an authorized agent of the assessee or an agent or manager personally carrying on the assessee's business or an adult member of his family but who has merely accepted notices in the past on his behalf cannot be deemed or treated to be an authorized agent of the assessee and service on him of the assessment order of the assessee is not valid.' 47. The facts of the above referred to case before the Jurisdictional High Court were better than to the factual position of the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in-terms of the provisions of section 282 of the Income-tax Act. There was no proper service of a valid notice on the assessee and in view of the decision of the Hon'ble Allahabad High Court in the case of Laxmi Narain Anand Prakash, the assessment completed in absence of a valid service is bad in law. 61. In this regard, we may further refer to the decision of the ITAT Delhi Bench in the case of Hind Book House, wherein it was held that service of notice on a person who was employed by the assessee was not valid unless such person was authorized specifically to receive notices on behalf of the assessee and fact that such person accepted service of notices and assessee acted on such notices in past, does not enable department to treat such person as an authorized agent of assessee. 62. Now, we will consider the Department's objections in brief. 63. As far as the case laws are concerned, we have earlier pointed out with reference to the case laws relied upon by the ld. counsel for the assessee as well as the ld. DR that there are clearly two schools of thoughts on this issue. All the decisions relied upon by the ld. DR are of different Hon'ble High Courts except in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . D.R. 66. The ld. Counsel has further pointed out that section 124 primarily deals with territorial jurisdiction of the Assessing Officer and not with cases where the Assessing Officer lacks inherent jurisdiction to pass the assessment order on account of not following the prescription of law. We find considerable force in this argument of the ld. counsel for the assessee because section 124 refers to the jurisdiction assigned to an Assessing Officer by the Commissioner of Income-tax under section 120(2) and it is this jurisdiction which cannot be questioned as per the provisions of sub-section (3) of section 124. Further, it is noticeable that challenge to jurisdiction referred to in section 124 can be taken before Assessing Officer as per section 124(3) itself. In the present case, we find that assessee had raised the issue regarding service of notice vide his reply dated 27-3-2003 contained at page 46 of the Paper Book the contents whereof have already been reproduced earlier in which assessee had, inter alia, raised objection regarding validity of initiation of proceedings on the basis of valid service of notice. Even otherwise, this being a jurisdictional question on the su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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