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TMI Blog2009 (5) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the present case. The said section condones the invalidity which arises merely by reason of any mistake, defect or omission in a notice, if in substance and effect, it is in conformity with or according to the intent and purpose of the Act - Appeal is allowed - - - - - Dated:- 21-5-2009 - Member(s) : I. P. BANSAL., HARI OM MARATHA., SANJAY ARORA. ORDER-HARI OM MARATIIA, J.M.: October, 2008 This appeal of the assessee for asst. yr. 2001-02 is directed against the order of learned CIT(A}, dt. 22nd March, 2006. 2. The following grounds have been raised in this appeal: "1.1 Because the assessment made under s. 147/143(3) of the IT Act, 1961 and upheld by learned CIT(A) is erroneous, wrong, illegal and against the facts and law of the case. 1.2 Because the proceedings initiated under s. 147 and notice issued and said to be served under s. 148 is wrong and illegal. The assessment made is liable to be annulled/cancelled. 2.1 Because the learned CIT(A) has erred in confirming the income assessed under the head 'Long-term capital gains' at Rs. 35,54,840 against Rs. 3,71,800 shown by the appellant is wrong, illegal and against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had never received a notice issued under s. 148. The learned AO informed the assessee that the service of this notice issued under s. 148 was made through affixture on 24th Nov., 2003. In the light of the above facts, the assessee has disputed the very service of the notice issued under s. 148 of the Act. The learned CIT(A) has upheld the service of notice through affixture and that is why the assessee is further aggrieved. It has been submitted that the mandatory requirement of s. 148 is that the notice should be served on the assessee and after taking objections thereon, the learned AO is required to dispose them of prior to entering on to making the reassessment. The facts which emerge from the records with regard to service of notice through affixture arc that as per the learned AO the ROI was filed declaring total income of Rs. 3,71,800 on 29th Oct., 2001. A notice under s. 148, dt. 10th Nov., 2003 was issued after recording reasons in the order sheet itself. The process server has made a noting on this notice as under: "This notice was sent at the following address: Shri Arun Lal, 42A, Gough Road, Agra. This address has been provided by the appellant in the return o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lal, who admittedly were partners in the firm, M/s Ganeshi Lal Sons. Thereafter, a statement verified on oath explaining the circumstances in which the notices should not be found and the notices had to be affixed was submitted to the ITO who, as provided in r. 19, declared that the notices had been served by affixation. We are therefore, satisfied that the notices on the petitioners had been served in the manner laid down 1n the CPC and that the proceedings in none of the cases can be said to be barred by limitation." 7. According to learned Authorised Representative, the reliance on the above decision is misplaced and the learned CIT(A) has misdirected himself by relying on this decision the ratio of which is in fact in the favour of the assessee and the learned CIT(A) has not given any reasons for distinguishing the decisions relied by the assessee as has been mentioned above. On the other hand, the learned Departmental Representative has relied on the orders of the authorities below and has repeated the same in his arguments. 8. After carefully cogitating the entire evidences available on record, we observe that the provisions of s. 292BB, the newly introduced provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CPC by an affidavit of the serving officer and the AO shall examine the serving officer on oath. Likewise, the Hon'ble Punjab Haryana High Court in the case of Kunj Behari vs. ITO (1983) 139 ITR 73 (P H), has observed that it is the duty of the Department to discharge the onus by showing that the authority concerned had reason to believe that the assessee was keeping out of the way for the purpose of avoiding service or that there were other good reasons to come to a conclusion that the summons could not be served in the ordinary way. This Bench in the case of ITA No. 127/Agra/2004 asst. yr. 2000-01 order dt. 31st March, 2005 (copy on record) has also taken the same and similar view. 11. In the given case no such procedure has been followed. The process server cannot give such a certificate. He has neither filed his affidavit nor he was examined on oath by learned AO. Therefore, we are of the opinion that the Department has not followed the correct procedure as has been discussed above and, therefore, the service by affixture is not properly and correctly made in this case. We further rely on the decision of Hon'ble Punjab Haryana High Court in the case of Kunj Behari vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und, has challenged the assessment on the ground of invalid service, and which it is contended is a condition precedent for valid assessment, which stands framed in the present case on 31st March, 2005 vide order under s. 147 r/w s. 143(3) of the IT Act, 1961 ('the Act' hereinafter). 4. As such, it would be relevant to state the bare facts of the case, which find mention in the appellate order, after calling for and going through the assessment record; the assessee having not raised any objection to the service of notice under s. 148(1), dt. 10th Nov., 2003, vide which the jurisdiction to assess under s. 147 of the Act stood assumed in the instant case. The notice server in the present case went to the address as supplied by the assessee per its return of income. Not finding the assessee at the given address, rather, as it appears, of no person staying thereat, the matter stood reported by him to the AO. Thereafter, at the AO's instance, the Inspector of IT was sent along with the notice server. This time, the uncle of the appellant was found, who refused to accept the notice, and informed that the appellant was living outside India. Accordingly, the notice was served through aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the completion of such assessment or reassessment." 6. My learned Brother has also discussed the same in his order, vide para 8 thereof, though found the same as to of no consequence as the assessee had raised an objection in respect of the service of notice during the assessment proceedings, so that its case was covered by the saving clause provided by the proviso to the section. As such, agreeably, but for the said saving, the said provision would apply, so that inferably the section is otherwise applicable to the assessment for an earlier year. Though, as such, though there is a unanimity of view in the matter, I draw support for the purpose from the decision (Ahmedabad Bench) in the case of ITO vs. Varia Pratik Engineering (ITA Nos. 1226/Ahd/2007 and 104/Ahd/2008, dt. 30th Sept., 2008) [reported at (2009) 120 TTJ (Ahd) 1 : (2009) 17 DTR (Ahd)(Trib) 1-Ed.], wherein after a detailed examination of the law in the matter it stands held that in the absence of any words in the s. 292BB to the effect that the section will apply only in relation to the notices issued on or after 1st April, 2008, the legal fiction created by s. 292BB would govern all the cases involving the validit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n if in his opinion the earlier service was valid and is being unnecessarily questioned, eliminating any scope for further controversy, which is presently engaging the mind of the appellate Courts. And which, in fact, explains the rationale or the premise of the newly inserted s. 292BB, i.e., to filter all superfluous objections, while retaining the genuine ones, so that where there has indeed been a non-service or improper service of notice, causing prejudice to the assessee, the same can be addressed during the course of the said proceeding itself, and which if not done would put the onus back on the Revenue, so that by virtue of the said provision, there is no divestment of any vested right; the law only intending to weed out frivolous objections, in contradistinction to the genuine ones, and also cause the same to be adequately addressed. Coming back to our discussion regarding the assessee's claim of having raised the objection during the assessment proceedings, that no such objection stood raised is also inferable from the fact that no ground or plea in this respect, i.e., non-adjudication by the AO per his order, which is sans any such reference to the same, stands raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises, and was informed by the employees, who were not prepared to accept the notice under s. 148, that the partners had gone to their residences. The Inspector and the notice server then went to the residence of the partners, whereat, again, they were informed that the partners had gone out, and no one was prepared to accept the notice, even as there was some information of the partners being inside as well. Under these circumstances, the notices were affixed to the residences of the partners. On a challenge by way of writ to the initiation of reassessment proceedings on the ground that there has been no proper service, being by affixture, and not received by the partners either at the premises of the firm or at their residences, the Hon'ble Court, firstly, affirmed that the service of notice of the firm on its partners was valid and, secondly, the process server, having not been able to find the petitioner or any other person willing to receive the notice on their behalf, despite due diligence, affixed the notice to the residences of the partners (as well as on the gate of the business premises), so that there was a valid service. The Court examined the provisions of s. 282, sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the same being in conformity with the legal view in the matter, so that the said provision even otherwise procedural to be only clarificatory in nature. 12. The assessee, though, has challenged the finding by the learned CIT(A), has not shown us as to how the same is not tenable or not cogent and, thus, invalid, so that the same even otherwise remains, in a sense, unchallenged, as raising objection for the sake of doing so has no basis in law. 13. The next objection raised by the learned Authorised Representative, with reference to the decision in the case of Jagannath Prasad, which stood extensively relied upon by him, is that the notice-server has not issued a sworn affidavit in the matter. Such an objection stood also raised by the petitioner in the case of Ganeshi Lal Sons vs. ITO. As explained by the said Court all that has been stated in the case of Satya Narain Poddar is that where the serving officer does not file an affidavit indicating the circumstances in which he had affixed the notices, it is obligatory upon the Court to examine him on oath before declaring the service as effected. And that it does not state that even where the serving officer does make a st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being a condition precedent to the assumption of jurisdiction, an improper service, which stood in that case on a stranger, could not validate the proceedings. The assumption of jurisdiction to assess under the Act, on the other hand, it is trite, is by virtue of a valid issue of notice under s. 148(1) of the Act, and not its service, which could even be later, as stands abundantly clarified by the apex Court in the case of R.K. Upadhyaya vs. Shanabhai P. Patel (1987) 62 CTR (SC) 17 : (1987) 166 ITR 163 (SC), i.e., apart from a number of decisions, including those by the Hon'ble High Courts and Tribunal, as also, rather, by the plain reading of the relevant provisions of the Act. 16. The decision in the case of Kunj Behari vs. ITO, as would be apparent from the reading of the said decision, is not applicable in the facts of the present case; the premise of the said decision being that the onus was on the Revenue to show that the summons could not be served in the ordinary way and that the assessee was avoiding service of notice. There is no dispute to the principle as laid down by the decision, and neither has the Hon'ble jurisdictional High Court detracted therefrom in any manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and service of notice, each serving distinct purpose(s)/function(s). While the former enables assumption of jurisdiction to assess under s. 147, i.e., concerns the jurisdictional aspect (which may not necessarily obtain for each notice, even as s. 148 does entail the same), the latter (i.e., service) sets in motion the process of framing the assessment, i.e., concerns the procedural aspect of the proposed assessment. The two processes or aspects are independent of each other, even as the service could only follow the issue, and the difference between the two is basic and vital. Apart from the plain language of the statute, this position stands abundantly clarified by the decision by the Hon'ble apex Court in the case of R.K. Upadhyaya vs. Shanabhai P. Patel, bringing out the departure from the 1922 Act in the matter, as also in the case of CIT vs. Jai Prakash Singh (1996) 132 CTR (SC) 262 : (1996) 219 ITR 737 (SC). Further, the apex Court had the occasion to review and state the law in the matter, i.e., as to the purport of the notice and the import in law of an invalid issue or invalid service of notices on the consequent proceedings, i.e., apart from the jurisdictional aspect, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise the power of completing the assessment under s. 23(3). All these are steps within the overall jurisdiction vested in the ITO over the entire assessment proceeding. We are of definite opinion that the failure of the ITO to issue a notice under s. 23(2) does not call for an order by the AAC annulling the assessment. The AAC was right in merely setting aside the assessment." The above, in fact, represents the trite law, as also recently affirmed by the Tribunal (Agra Bench), after examining the case law in the matter, including by the Special Benches of the Tribunal, in the case of Virendra Dev Dixit vs. Asstt. CIT in IT(SS)A Nos. 6, 7, 14 and 15/Agra/2002, dt. 6th Feb., 2009. As such, it is abundantly clear that service of notice, even in respect of jurisdictional notice as s. 148, is a part of procedure, its whole intent and function being to put the assessee to notice of the envisaged proceedings for the proposed assessment, to enable him to present his case in the matter before the assessment authorities, i.e., to enable proper assessment. As such, any infirmity that may be found to have attended the process would thus have necessarily to be examined from the standpoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eassessment proceedings were initiated for the reasons which have been reproduced in para 2.3 of the order of the learned CIT(A). According to the said reasons the notice of reassessment was to be issued for the reason that it was found that as per Nagar Nigam fixed rate of Nehru Nagar area, the rate was Rs. 350 per sq. mtr. Hence, the cost of land worked out as on 1st April, 1981 was Rs. 5,09,600 as against the value taken by the assessee for cost index purpose at Rs. 12,50,000 and thus it has been observed in the reasons that the difference between two indexed cost, i.e., one indexed cost shown by the assessee and the other which is as per the Nagar Nigam fixed rates was the difference of Rs. 30,07,024 (cost index value worked out by the assessee at Rs. 50,75,000 minus cost index value worked out by the AO Rs. 20,68,976). Thus in the reasons it has been observed that the AO has reason to believe that the income of Rs. 30,07,024 chargeable under the head 'Capital gains' has escaped assessment for asst. yr. 2001-02. 3. Accordingly, the reassessment proceedings were initiated vide notice issued under s. 148 on 10th Nov., 2003 which as per the Department is served on the assessee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th or an affidavit to that effect. It was submitted that in view of s. 282 of the IT Act, 1961 (Act), service has to be effected in the same manner as is done under CPC. It was submitted that the AO has simply distinguished the said decisions of Hon'ble jurisdictional High Court and has wrongly placed reliance on the other decision of Hon'ble Allahabad High Court in the case of Ganeshi Lal Sons vs. ITO (1981) 130 ITR 846 (All). It was submitted that in that case the process-server despite due diligence, was not able to find the petitioners or any other person who was willing to accept the notices on their behalf. The notice-server, as provided in r. 17, affixed a copy of the same on the gate of the business premises of M/s Ganeshi Lal Sons, which premises was the place of business not of that firm only but also of the other petitioners, who were also partners in M/s Ganeshi Lal Sons. Thereafter, a statement verified on oath explaining the circumstances in which the noticees were not found and the notices had to be affixed was submitted to the AO, who, as provided in r. 19, declared that the notices had been served by affixation. In these circumstances, the Hon'ble Allahabad H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initio, and reassessment is quashed in its entirety and with these observations the learned JM has allowed the appeal filed by the assessee without going into the merits. 8. As against the above finding of learned JM, it is observed by the learned AM that notice-server in the instant case went to the address as supplied by the assessee as per his return of income and by not finding the said assessee at that given address, the matter was reported by him to the AO. It is also observed by the learned AM that it appears to him that no person was staying at that address. It is further observed that thereafter at the instance of AO, the Inspector of IT was sent along with the notice-server and at that time uncle of the assessee was found who refused to take the notice and it was informed that the assessee was living outside India. It is, therefore, the notice was served through affixture by the notice-server in the presence of the Inspector of IT on the main gate as per direction of the AO. It was further observed that the learned CIT(A) was of the view that adequate efforts were made by the Revenue to serve the notice on the assessee prior to the notice by affixture and there were su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remium Capital Market Investment Ltd. (2005) 198 CTR (MP) 680 : (2005) 275 ITR 260 (MP). 11. The learned AM has also distinguished the decision of Hon'ble Allahabad High Court in the case of Laxmi Narain Anand Prakash vs. Commr. of Sales-tax and it is observed that the said decision is in the context of another enactment, therefore, the same is not applicable to the case of assessee. Secondly, the said decision is in respect of service of notice being condition precedent to the assumption of jurisdiction. According to the learned AM the assumption of jurisdiction is by virtue of valid issue of notice under s. 148 and not in its service which could even be later as per decision of the Hon'ble Supreme Court in the case of R.K. Upadhyaya vs. Shanabhai P. Patel (1987) 62 CTR (SC) 17 : (1987) 166 ITR 163 (SC). 12. Learned AM has also made reference to the decision of Hon'ble Punjab Haryana High Court in the case of Kunj Behari vs. ITO and he observed that the said case is not applicable to the facts of the present case. Thus, it has been held by the learned AM that in the present case the service is proper. 13. Taking the discussion further, learned AM has observed that even i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted that there was no valid service of notice as found by the learned JM. It was pleaded by the learned Authorised Representative that notice of the reassessment for the first time was given by the AO on 10th Nov., 2003 and on 11th Nov., 2003 the learned AO has directed the Inspector of IT to serve the notice by affixture. It was contended that this very fact makes it clear that no effort was made by the AO to ascertain that whether or not the service can be effected by ordinary means. It was submitted that as assessment was not going to be time-barred, therefore, it was desirable from the AO that the notice should be served in the ordinary course. On the very next day of issue of reassessment notice, the AO directed the Inspector to serve the notice through affixture and this is clearly against the principles laid down by the jurisdictional High Court in the cases of Jagannath Prasad vs. CIT and CIT vs. Satya Narain Poddar. It was submitted that these two decisions have wrongly been distinguished by the AO, CIT(A) and the learned AM. It was submitted that both these decisions were existing decisions of Hon'ble jurisdictional High Court and they have not been shown to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinguished the same on the ground that the said decision has been rendered in the context of another enactment. It was submitted that later on under IT Act itself Hon'ble Allahabad High Court, in the case of CIT vs. Shital Prasad Kharag Prasad (2005) 196 CTR (All) 162 : (2006) 280 ITR 541 (All), has held that service of reassessment notice being invalid, the AO did not get jurisdiction on the basis of such invalid notice and such invalidity cannot be cured by s. 292B and also the fact that return was filed in response to such invalid notice cannot alter the position as the reassessment has to be held to be invalid. It was further submitted that the decision relied upon by the learned AM pertains to 1922 Act and on the basis of those decision it cannot be held that the reassessment proceedings were only irregular proceedings on account of defective service of notice. It was submitted that according to the latest decision of Hon'ble jurisdictional High Court in the case of Shital Prasad Kharag Prasad, in a case where service of notice is invalid, reassessment proceedings are liable to be quashed. It was submitted that it has wrongly been held that no prejudice will cause to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned AM. The question referred to me has already been reproduced in the above part of this order. According to the question my findings are limited to the issue regarding validity or otherwise of notice issued under s. 148 and also the effect thereof. 21. The notings of the notice-server have been reproduced in the above part of this order which also, as mentioned above, found place in the order of CIT(A) as well as in the order passed by the learned JM. The notice-server in his report has submitted that the service of affixture has been made as per the directions of the AO, dt. 11th Nov., 2003 in the presence of Shri S.C. Agarwal, Inspector of IT. The date of notice issued by the AO is dt. 10th Nov., 2003. Thus, on the very next day of the issue of notice, the AO has directed the notice-server to serve the notice by affixture. The impugned assessment is of asst. yr. 2001-02. It is not the case of Revenue that on 10th Nov., 2003, if notice is not served within a short span, the initiation of reassessment proceedings will be barred by time, as it has been the contention of the learned Authorised Representative that there was ample time available with the Department to initiate reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the satisfaction of the AO that the conditions required for application of order V, r. 20 were existing. Therefore, it was held that the order of the AO directing the service by affixture was based on no relevant material on record and, therefore, was to be struck down. This case of Hon'ble Allahabad High Court was later on considered by the same High Court in the decision in the case of Ganeshi Lal Sons and it was found distinguishable on the ground that there was material on record to hold that the assessee was evading service or was keeping itself out of the way for avoiding service as when the notice-processor went to the place of the business of that assessee no one was prepared to accept the notice. In this manner the said case was distinguished. Therefore, it cannot be said that the ratio of the decision in the case of Ganeshi Lal Sons is in any way different from the decision in the case of Jagannath Prasad vs. CIT. Here it win be important to mention that in the case of Ganeshi Lal Sons, it has been observed by the Hon'ble High Court that in the said case the process-server, despite due diligence, was not able to find the petitioners or any other person who was wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on: "8. WC have independently examined the findings of the Tribunal on the question of issuance of a valid notice under s. 148 of the Act and its service on Shri B.D. Agarwal, who represented Shri J.B. Gupta. It is not in dispute that Shri J.B. Gupta had died on 13th Aug., 1974. Therefore, notice under s. 148 of the Act could not be validly served on Shri B.D. Agrawal on 27th Aug., 1976. The authority of Shri B.D. Agrawal came to an end ipso facto on 13th Aug., 1974, on account of death of Shri J.B. Gupta. It is settled law that service of a valid notice under s. 148 is the foundation for the initiation of reassessment proceedings and a condition precedent for the validity of the notice. The further fact is that the notice under s. 148 was not served on the adult members of the family who were in existence at the time of the partition of the joint Hindu family. Filing of the return in consequence of illegal service of notice on Shri B.D. Agrawal will not validate the reassessment proceedings. A Full Bench decision of this Court rendered under s. 21 of the Uttar Pradesh Sales-tax Act which is in pari materia of s. 147 of the Act says no. This has been so held in Laxmi Narain Anand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice is issued. 9. In view of the above, the Tribunal has rightly held that s. 292B of the Act will have no application to the facts of the present case. The said section condones the invalidity which arises merely by reason of any mistake, defect or omission in a notice, if in substance and effect, it is in conformity with or according to the intent and purpose of the Act. The notice in question was not served on all the adult members of the family, as required under s. 283(1) of the Act. This mistake goes to the very root of the matter. It is fairly settled that an assessing authority gets jurisdiction to reopen a concluded assessment only after serving a valid notice on the assessee. A notice contemplated under s. 148 of the Act is a jurisdictional notice and is not curable under s. 292B of the Act, if it was not served in accordance with the provisions of the Act. 10. No other point was pressed or raised by the learned counsel for the Department. 11. In view of the foregoing discussion, we find that the order of the Tribunal is legally sound. We, therefore, answer the question in affirmative i.e., against the Revenue and in favour of the assessee. However, there shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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