9911796707
TMI Blog2007 (2) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel of the Department 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offices at Second and Third floors. ------------------------------------------------------------ (b) Jagat Complex: It was proposed to be set up at 80/17, Gurdwara Road, Naka Hindola, Lucknow, as per Builders' Agreement. ------------------------------------------------------------ 5. Relying on the accounting standards laid down by the Institute of Chartered Accountants of India, the assessee had not returned any profit/loss as the projects were under progress. Prior to the said activities, the assessee had been carrying on the business of dealing in Rallis Fans in his proprietary concern named as "Goel Electric Co. (Agencies)" from a different address known as 21-A, Pratap Market, Aminabad, Lucknow. However, owing to closure of the manufacturing activities of the said company, the business of the proprietary concern of the assessee also got suspended and the stocks thereof were disposed off during the previous year relevant to ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act on 26-3-2002 to persons at the shop of M/s. Goel Electric Co. Works situated at 51, Gautam Budh Marg, Lucknow. It has further been stated that the person to whom the notice had been handed over by Shri A.K. Sehgal was supposed to be looking after the shop at that time. The assessee's contention is that even by this statement of Shri A.K. Sehgal it is not established that the notice was served on the assessee or on a person authorized to receive the notice on behalf of Shri Anil Kumar Goel, the assessee. The ld. CIT(A) rejected this ground of appeal by observing as under: "3.4 The appellant has filed a letter dated 26-12-2002 during the assessment proceedings and stated that the return filed on 31-10-1995 may be treated in compliance to notice under section 148 of Income-tax Act, 1961. Thus, it is clear that the notice under section 148 was served on appellant or his authorized representative, therefore, he has filed letter dated 26-12-2002 with the Assessing Officer to treat the return filed on 31-10-1995 in compliance of notice under section 148. The appellant has never raised this objection during the assessment proceedings that the notice under section 148 has not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a very short period of only 5 working days are available for deciding the objections and completing the assessment. However, I leave it to the assessee to explain it at any later stage why and with what intentions he has raised the objection at such a late stage. With these comments I now proceed to decide the objections as under." 9. In order to further substantiate his argument, the ld. Counsel referred to page 4 of the Paper Book wherein the order sheet dated 24-3-2003 before the Assessing Officer is contained, in which, it is stated as under: "24-3-2003: Shri S.K. Bansal, Advocate attended along with Shri Anil Kr. Goel. Filed written reply. Produced books of account and vouchers which were examined. He was required to furnish the explanation on the following points: (a) You have never made any objection against limitation of proceedings under section 147 but in today's reply you have stated that you have been contending that the very intimation of proceedings under section 147 is not valid. Why it is so ?..." 10. Thereafter, the ld. Counsel referred to page 46 of the Paper Book wherein the letter dated 27-3-2003 addressed to the ITO-IV(4) is contained para 2 of which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which summons issued by a court under the Code of Civil Procedure, 1908, are to be served. In this regard, the ld. Counsel pointed out that Rules 10 to 18 of Code of Civil Procedure deals with mode of service of notice. He referred to the order dated 31-5-2005 of ITAT in the case of Dy. CIT v. Kunj Behari Pandey [IT Appeal No. 631 (Lucknow) of 2001] for assessment year 1996-97 and pointed out that in this case since the ld. DR failed to establish who was the person who accepted the notice, the Tribunal quashed the assessment order, inter alia, observing in para 7 as under: "7...During the course of hearing, the ld. DR has filed the photocopies of some documents suggesting that on all the notices issued by the Assessing Officer the same person has acknowledged various letters of the Department who has acknowledged the notice under section 148. However, on our query, he failed to establish who is this person...." 13. The ld. Counsel further referred to page 12 of the Paper Book wherein the affidavit of Shri Anil Kumar Goel dated 10-10-2003 filed before the ld. CIT(A) is contained. As the contents of this affidavit are material for deciding this issue, we reproduce the same:- "I, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department. In this regard, he relied on the decision of the Hon'ble Supreme Court in the case of Mehta Parekh & Co. v. CIT [1956] 30 ITR 181 wherein it was, inter alia, held as under:- "(ii) as the cash book of the appellants was accepted, and the entries therein were not challenged, and neither further accounts nor vouchers were called for, and the persons who gave the affidavits were not cross-examined, it was not open to the Revenue to challenge the correctness of the cash book entries or the statements made in the affidavits;" The ld. Counsel referred to the order sheet for assessment years 1997-98 and 1998-99 contained from pages 14 to 23 of the Paper Book and referred to page 18 of the Paper Book wherein the order sheet entry noting dated 26-3-2002 is contained to point out that assessee Shri Anil Kumar Goel appeared before the Assessing Officer on the said date as is evident from the order sheet and therefore, notice under section 148 could be served on the assessee himself on 26-3-2002. 15. The ld. Counsel further pointed out that both the Assessing Officer as well as the ld. CIT(A) have not passed speaking order on this issue. He further submitted that the ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hind Book House v. ITO [2005] 92 ITD 415 (Delhi). 19. The ld. DR submitted that the objective of notice is to provide opportunity to assessee to represent his case. He submitted that since the assessee participated in the proceedings, no prejudice is caused to the assessee. The ld. DR referred to the Department's Paper Book for assessment year 1995-96 which contains the order sheet starting from 20-3-2002 for issuance of notice under section 148. The ld. DR pointed out with reference to this order sheet that assessee as well as his Authorized Representative attended the proceedings on various dates and filed return in pursuance of notice under section 148 and also filed applications for adjournment. In this regard, he referred to page 9 of the Paper Book wherein the Power of Attorney in the name of Shri Sushil Kumar Bansal. Advocate is contained and he referred to pages 10 to 13 of the Paper Book wherein the copies of letters of authorized representative of assessee seeking adjournments are contained. Thereafter, he referred to page 17 of the Paper Book wherein copy of notice under section 142(1) of the Act dated 13-3-2003 along with detailed questionnaire issued to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment. He also referred to section 124(3) to submit that objection to jurisdiction is time barred. The ld. DR further referred to following case laws in support of his proposition that service of notice on unauthorized persons does not invalidate the assessment proceedings: Mahendra Kumar Agrawalla v. ITO [1976] 103 ITR 688 (Pat.) CIT v. Bhanji Kanji's Shop [1968] 68 ITR 416 (Guj.) Dr. H.R. Rai v. CIT [1984] 145 ITR 809 (MP) ITO v. Shahid Atiq [2004] 89 ITD 489 (Delhi) Birla Cotton Spg. & Wvg. Mills Ltd v. ITO [1994] 209 ITR 434 (Raj.) K.C. Tiwari & Sons v. CIT [1962] 46 ITR 236 (Bom.) Sumerpur Truck Operators Union v. ITO [2004] 89 ITD 89 (Jodh.). 21. The ld. DR referred to pages 54 and 55 of the Paper Book wherein the copy of order sheet noting of proceedings before the ld. CIT(A) in the case of assessee for assessment years 1995-96 and 1996-97 are contained and pointed out that a statement of ITI was recorded in pursuance of directions of ld. CIT(A). In this regard, he referred to order sheet entry dated 8-7-2003 before ld. CIT (Appeals), Sl. No. 4 of which reads as under: "8-7-2003... The Statement of Sri A.K. Sehgal for service of notice may related for under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uance of notice under section 148 dated 20-3-2002. We are, therefore, not inclined to accept the assessee's plea that there was no participation in the proceedings under section 148. 24. Now coming to the main issue regarding service of notice under section 148. We find that there are two schools of thoughts on this issue. The first school of thought clearly holds that if notice is not served as per the requirements of law then the proceedings would be void ab initio. The second school of thought holds that if there is participation in the proceedings then it is purely an irregular exercise of jurisdiction, but the assessment proceedings cannot be invalidated. The ld. Counsel has naturally relied on the decisions rendered by first school of thought and the ld. DR relied on the decisions relied upon by second school of thought. First we will deal with the case laws relied upon by the ld. counsel for the assessee and also some other relevant decisions in this regard:- 25. In the case of Sivagaminatha Moopanar & Sons v. CIT [1964] 52 ITR 591 (Mad.), it was held that notice giving less time than prescribed by law is not a valid notice under section 34 and participation of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of the case?" 30. Section 21 of the UP Sales Tax Act reads as under: "21.(1) If the assessing authority has reason to believe that the whole or any part of the turnover of a dealer, for any assessment year or part thereof, has escaped assessment to tax or has been under assessed or has been assessed to tax at a rate lower than that at which it is assessable under this Act, or any deductions or exemptions have been wrongly allowed in respect thereof, the assessing authority may, after issuing notice to the dealer and making such inquiry as it may consider necessary, assess or reassess the dealer or tax according to law: Provided that the tax shall be charged the rate at which it would have been charged had the turnover not escaped assessment, or full assessment, as the case may be. (2) No order of assessment under sub-section (1) or under any other provision of this Act shall be made for any assessment year after the expiry of four years from the end of such year." 31. Sub-section (2) of section 148 of the Income-tax Act, dealing with issue of notice where income has escaped assessment reads as under: "148(1).............. (2) The Assessing Officer shall, before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning, namely, 'sent' will exclude from the operation of the provision a class of cases and introduce anomalies. In the circumstances, by interpretation, we accept the wider meaning the word 'issued' bears. It cannot, therefore, be said that mere issue of notice was sufficient. The jurisdiction to proceed under section 21 could be exercised only if the condition precedent was satisfied and notice for assessment or re-assessment under section 21 was not only issued but validly served on the assessee. To this extent there appears to be no difficulty and even the Division Bench held that if a notice is not served properly then such service is invalid and contrary to law. It, however, digressed from more or less settled view and attempted to carve out a new approach by invoking the principle of estoppel in taxation proceedings. The question, therefore, that boils down for consideration is whether by participation of an assessee the invalidity of notice was cured and the assessing authority was clothed with jurisdiction to proceed under section 21. Jurisdiction is understood as the authority or power of a Court or Tribunal to entertain and decide in any judicial or quasi-judicial pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atute. Estoppel is only a rule of evidence and not a cause of action. In any event, estoppel is not a basis of liability to assessment under the Indian Income-tax Act, and, therefore, the assessment of a person for an amount of income to which he is a stranger cannot be based on the ground that he himself wanted to be assessed on it.' In the result, this revision succeeds and is allowed. The question of law raised by the assessee it decided by saying that the notice under section 21 having been improperly served the initiation of proceedings was without jurisdiction and it could not be validated by participation of the assessee in the proceedings." 33. In the present case; ITI has stated that he served the notice on a person managing the affairs at the shop but he has not been identified by ITI, therefore, it is almost akin to the service of notice on stranger as in the case of Laxmi Narain Anand Prakash. 34. Bhagwan Devi Saraogi's case-In this case it was held that if no valid notice of re-assessment has been issued or if the notice issued is illegal or invalid, the entire re-assessment proceeding would be without jurisdiction and would be void and illegal. 35. ITAT Allahabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The procedure of service through affixture has already been discussed above, along with the ratio of various decisions of Supreme Court and various High Courts and after going through the provisions regarding service by affixture, we found that there is no valid service either on the assessee firm or on its partners. Therefore, the assessment completed by the Assessing Officer under section 144/148 cannot be held as valid assessment. The jurisdiction under section 148 was not properly assumed, therefore, the assessment cannot be held as valid assessment. As we have already discussed that there was no service of notice under section 148, accordingly, there was no jurisdiction to make assessment at the end of Assessing Officer. The finding of CIT (Appeals) that one of the partners had participated in the assessment proceedings, therefore, this was a technical irregularity in issuing notice under section 148, cannot be sustained because once the proper jurisdiction has not been assumed, then assessment proceedings cannot be held as valid proceedings. 20. In the case of Baradakanta Mishra, the Hon'ble Supreme Court has held that if the order of the initial authority is void, an orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in pursuance of the notice served on his temporary employee was proper and the re-assessment proceedings were properly instituted. 43. Hon'ble M.P. High Court decision in the case of Dr. H.R. Rai-In this case it was held as under: "The assessee did not file his return under section 139(1) of the Income-tax Act, 1961. The ITO issued a notice under section 148 which was not served on the assessee personally. The assessee filed his return. The assessee also complied with notices under sections 142(1) and 143(2) and participated in the assessment proceedings. The ITO completed the assessment. On appeal to the AAC, the assessee contended that there was no proper service of notice on him and the proceedings were illegal and bad in law, as the signatures on the office copy for receipt of the notice were not his signatures and that the receipt of the notice was by a person not authorised by him. The AAC rejected the contention of the assessee on the ground that the statement of the assessee was made at a late stage. On further appeal, the Tribunal held that the notice had in fact reached the assessee and he had filed a return in compliance with it, that the assessee also complied with no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the deceased person. In fact, the ratio of the decision in the case of CIT v. Jai Prakash Singh [1996] 219 ITR 737/85 Taxman 407 (SC) was applicable to the facts and circumstances of the instant case. Thus, the order of the Commissioner (Appeals) was set aside." 48. ITAT Jodhpur Bench decision in the case of Sumerpur Truck Operators Union. In this case it was held as under: "It was also contended by the assessee that there was no valid service of notice under section 148, as the same was served on its employee and referring to the provisions of section 282 submitted that the notice should have been addressed to the principal officer or any member of the union. Sub-section (1) of section 282 provides for service of notice on a person therein named, either by post or as if it were a summon issued by a court under the Code of Civil Procedure, 1908. The assessee had never objected on that ground before the Assessing Officer and the assessee had been receiving notices through the employee and all the notices had voluntarily been complied with. Therefore, the service on the employee was a valid service." 49. The ratio laid in aforementioned decisions relied upon by ld. DR is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew was affirmed by the Supreme Court in Narayana Chetty v. Income-tax Officer. 52. Now, we will refer to relevant statutory provisions in this regard. Firstly, we refer to sub-section (1) of section 148 which reads as under: "148(1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period. as may be specified in the notice a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be apply accordingly as if such return were a return required to be furnished under section 139. 53. Thus, the mandate of section 148 is that notice should be served on the assessee. In regard to service of notice, we have to refer to section 282. Section 282 prescribes specific mode of service of notice. This section reads as under: "282(1) A notice or requisition under this Act may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness or work for such person within such limits, shall be deemed good service. 15. Where service may be on an adult member of defendant's family - Where in any suit the defendant is absent from his residence at the time when the service of summons is sought to be effected on him at his residence and there is no likelihood of his being found at the residence within a reasonable time and he has no agent empowered to accept service of the summons on his behalf service may be made on any adult member of the family, whether male or female, who is residing with him. 16. Person served to sign the acknowledgement - Where the service officer serves or tenders a copy of the summons to the defendant personally, or to an agent or to other person on his behalf, he shall require the signature of the person to whom the copy is so delivered or tendered to an acknowledgement of service endorsed on the original summons. 18. Endorsement of time and manner of service - The serving officer shall, in all cases in which the summons has been served under Rule 16, endorse or annex, or cause to be endorsed or annexed, on or to the original summons, a return stating the time when and the manner in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contents of the notice. It has been held in Nagry Rasappa Setti v. Hamburi Venkataratnam [1913] MWN 1029 (Mad.) that where the summons has not been personally served on the party but was served on his gumastha, it must be shown that the requirements of Order 5, rule 12 or rule 13 have been complied with and that it cannot be assumed without further enquiry, that service on the gumastha was sufficient. In Papamma Rao v. Revenue Divisional Officer AIR 1918 Mad. 589, a Division Bench of this court while dealing with the manner of service contemplated by section 45(2) of the Land Acquisition Act, which also attracts the provisions of the Code of Civil Procedure, in the matter of service of notices; expressed the view that unless a person is appointed as agent to accept service of processes by an instrument in writing signed by the principal, the service on him cannot be said to be valid. The view taken in that case was that an oral authority is not sufficient but there should be a written authority. Similar view has been taken in CIT v. Baxiram Rodmal [1934] 2 ITR 438 (Nag.), CIT v. Dey Brothers [1935] 3 ITR 213 (Rang.) and C.N. Nataraj v. Fifth ITO [1965] 56 ITR 250 (Mys.). In CIT v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument sake, it is to be held that implied authority is sufficient for service of notice, then that too is not present in the present case. 58. It is also noteworthy that the person on whom the service has been effected has not duly been identified which was necessary as per Rule 18 of Order V of Code of Civil Procedure reproduced above. In the case of Chandra Agencies, it was, inter alia, held that notice served by affixture on old address when new address was available with the department was not a valid service of notice. 59. As per Order V, Rule 20, it is the duty of the department to discharge its onus by showing that the authority concerned has reason to believe that the assessee was keeping out of the way for the purpose of avoiding service or that otherwise there were other good reasons to come to the conclusion that the summons could not be served in the ordinary way. 60. As noted above, on 26-3-2002, the assessee personally appeared before the Assessing Officer and took part in the assessment proceedings for assessment years 1997-98 and 1998-99. When the assessee was present before the Assessing Officer, notice under section 148 could easily be served upon him. Under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er alia, observed that once a notice is issued within the period of limitation, jurisdiction becomes vested in the Income-tax Officer to proceed to reassess. Section 148(1) provides for service of notice as a condition precedent to making the order of assessment. Service, under the new Act, is not a condition precedent to conferment of jurisdiction on the Income-tax Officer; it is a condition precedent only to the making of the order of assessment. Therefore, in our opinion, the decision of Hon'ble Supreme Court is not applicable to the facts of the case. 64. The ld. DR has submitted that in view of the provisions of section 124, the objection in regard to jurisdiction cannot be raised at this stage. In this regard ld. DR has relied on the decision of Hon'ble Allahabad High Court in the case of Hindustan Transport Co. In this regard, we may first refer again the following observations noticed by Hon'ble Allahabad High Court in Laxmi Narain Anand Prakash's case:- "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
