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TMI Blog2015 (9) TMI 756X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Section 153 (2) of the Act is a jurisdictional pre-condition to finalizing the reassessment. The onus is on the Revenue to show that proper service of notice has been effected under Section 148 of the Act on the Assessee or an agent duly empowered by him to accept notices on his behalf. In the present case, the Revenue has failed to discharge that onus. The mere fact that an Assessee or some other person on his behalf not duly authorised participated in the reassessment proceedings after coming to know of it will not constitute a waiver of the requirement of effecting proper service of notice on the Assessee under Section 148 of the Act. Reassessment proceedings finalised by an AO without effecting proper service of notice on the Assessee under Section 148 (1) of the Act are invalid and liable to be quashed. Section 292 BB is prospective. In any event the Assessee in the present case, having raised an objection regarding the failure by the Revenue to effect service of notice upon him, the main part of Section 292 BB is not attracted. On the facts of the present case, the Court finds that the ITAT was right in its conclusion that since no proper service of notice h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had disclosed income from house property on account of his half share in a property in Delhi and some interest income. The AO therefore concluded that the Assessee had not fully and truly disclosed all material facts for the AY in question. The AO noted that in a statement dated 24th September 2007, recorded by the ADIT (Inv.), Ludhiana, the Assessee denied knowledge of the names appearing in the pen drive although he failed to deny that the pen drive was recovered from his possession. The AO drew a presumption that the information in the pen drive found in his possession was true and that the primary onus to establish the identity, genuineness and creditworthiness of the creditors whose names appeared therein was on the Assessee. The AO accordingly concluded that he had reason to believe that the income for the AY in question had been under-assessed to the extent of the sums mentioned hereinbefore and had therefore escaped assessment within the meaning of Section 147(b) of the Act. The re-assessment proceedings 5. On 28th March 2008, the Assistant Commissioner of Income Tax (ACIT) Circle 3, Chandigarh issued a notice under Section 148 of the Act. The notice was add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ACIT on 19th December, 2008, as under: Dear Sir, This is with reference to your letter dated 12.12.08 and our earlier reply dated 12.12.08. It is again submitted that notice u/s 148 was not received by the assessee. However, without prejudice to the above submissions, it is respectfully submitted that the copy of information mentioned in the reason recorded as received from ADIT (Investigation Unit), VI(1) may please be supplied to us so that reply may be filed. It is further submitted that pen drive was never recovered from the possession or control of the assessee and therefore there is no question of any explanation from the assessee. Assessee never did any money lending as alleged in the reason recorded. Therefore, the reopening of the present assessment is with great respect unjustified. The assessee has already declined to have any knowledge as well as recovery from him, the said pen drive before the ADIT (Inv.), Ludhiana and Delhi. It is further requested that copy of the pen drive and its printouts as referred in the reasons recorded may please be supplied to us. Further, in the reason recorded for the reopening of the case, it has been mentioned tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spective operation and further that the Assessee had in any event raised an objection in that regard prior to the completion of re-assessment by the AO. 15. The CIT(A) rejected the above contentions by observing that the Assessee was silent on the issue as to why notices in the case of family members and other group cases were received at the address of Kiran Cinema. The CIT (A) concluded that it appeared that the Assessee and his group for their own convenience prefer to receive notice at this place instead of so called address of care of Jagat Theatre. The purpose of the notice was to make the Assessee aware of the proceedings and that purpose had been fulfilled. Further, Section 292BB was a procedural provision which had come into effect from 1st April, 2008 whereas the notice was issued thereafter and assessment had been made on 29th December, 2008. Accordingly, the above ground was rejected. Thereafter the CIT (A) proceeded to discuss the merits of the additions made and upheld it. The impugned order of the ITAT 16. Aggrieved by the above order the Assessee filed an appeal being ITA No.1891/Del/2012 before the ITAT urging more or less the same grounds of challe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncipal may not have given that person such authority, his conduct was such that it could be inferred. According to Mr. Singh, in terms of Section 282 (1) of the Act read with Order 9 Rule 12 CPC, invoking the doctrine of implied authority, service of notice upon Mr. Ved Prakash should be construed as proper service of notice upon the Assessee. Further the Assessee had nowhere denied that in other proceedings Mr. Ved Prakash had in fact represented the Assessee. Once the Revenue had taken such a stand, the burden according to Mr. Singh shifted to the Assessee to show that Ved Prakash was not his agent. 22. Mr. Singh also referred to Section 292 BB of the Act. Reliance was also placed on the decision in CIT v. Shital Prasad Kharag Prasad 280 ITR 541 (All); CIT v. Hotline International Pvt. Ltd. 296 ITR 333 (Del); Sri Nath Suresh Chand Ram Naresh v. CIT 280 ITR 396 (All); P.N. Sasikumar v. CIT (1988) 170 ITR 80 (Ker) ; Venad Properties (P) Limited v. Commissioner of Income Tax (2012) 340 ITR 463 (Del) and Mayawati v. CIT (2010) 321 ITR 349 (Del). 23. In reply, Mr. Ajay Vohra submitted that notice to an Assessee under Section 148 and 143 (2) of the Act was different f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct,: The notice prescribed by section 34 of the Income tax Act for the purpose of initiating reassessment proceedings is not a mere procedural requirement; the service of the prescribed notice on the assessee is a condition precedent to the validity of any reassessment made under section 34. If no notice is issued or if the notice issued is shown to be invalid then the proceedings taken by the Income- tax Officer without a notice or in pursuance of an invalid notice would be illegal and void. 26. This was also the basis for the decision in Banarasi Debi v. ITR (1964) 53 ITR 100 . However, under the 1961 Act the procedural requirement has been spread over three sections, being Sections 147, 148 and 149. The period of limitation within which notice under Section 148 has to be issued is specified in Section 149. Section 153 (2) of the Act stipulates that no order of re-assessment can be passed beyond the period of one year from the expiry of the financial year in which service of the notice was effected. Section 148 (1), however, is clear that no reassessment can take place without service of notice being effected on the Assessee or his authorised representative. 27. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the cases on his behalf earlier before the income tax authorities. The High Court held: the object of issuance the notice or summons is to intimate the concerned person to appear and answer the queries or the question sought to be clarified by a Court or the authorities. As serious consequences are likely to follow, a notice or summons must necessarily be issued and served in the form and in the manner prescribed by law. 31. The High Court in Dina Nath ( supra ), referred to Order V Rule 12 CPC as well as Order III Rule 6 CPC. It thereafter concluded that notice must be served personally upon the individual or upon his agent duly authorized in terms of Order III Rule 6 CPC. The contention of the Assessee was upheld and the reassessment proceeding was quashed. 32. In Jayanthi Talkies Distributors v. Commissioner of Income-tax (1979) 120 ITR 576 (Mad) the notice was served by the notice-server of the Department on the Manager of the Assessee-firm. The Manager wrote to the ITO seeking time. Since no return was filed by the Assessee within the time granted, the ITO completed the reassessment under Section 144 of the 1961 Act. On appeal the High Court found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he period of limitation being a condition precedent to the existence of jurisdiction, if the Income-tax Officer was unable to prove that the notice was duly served upon the Respondent within the prescribed period, any return filed by the Respondent after the expiry of the period of eight years will not invest the Income-tax Officer with authority to reassess the income of the Respondent pursuant to such return. On the facts of that case it was held that the Revenue had sufficiently discharged the onus by producing the affidavit of the process server. 35. Under Section 282 (1) of the Act, service of notice may be made by delivering or transmitting a copy thereof to the person to whom the notice is addressed by more than on mode. One of the modes is in such manner as provided under the Code of Civil Procedure, 1908 ( CPC‟) . For the purpose of service of summons under Order V Rule 12 CPC, service can be taken to complete, if it is effected, on person to whom his address or to another person who is empowered to receive such notice on his behalf. Besides the appointment of such agent by the Assessee has to be in writing in order to meet the requirement of Order III Rules 2 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chandigarh and nothing more. 38. It was not as if the Revenue was not made aware of the lapse. Vipin Aggarwal Associates, the Chartered Accountants (CAs) of the Assessee, by their letter dated 12th December 2008 informed the ACIT that the Assessee had not till then received the notice dated 28th March 2008 under Section 148 of the Act. They made a specific request to the ACIT that a copy of notice under Section 148 along with basis and reason of opening the above mentioned case under Section 148 be provided to them to enable them to comply with the same. However, the ACIT in his reply of the same date continued to show the addresses of the Assessee as c/o Kiran Cinema, Sector-22, Chandigarh and c/o M/s. Vipin Aggarwal Associates CA and insisted that notice had been validly served on Shri Ved Prakash, accountant of Kiran Cinema (who also receives other notices of the concerned group concerns). The CAs for a second time on 19th December 2008 pointed out that that notice u/s 148 was not received by the assessee and again asked for a copy thereof along with the reasons for reopening the assessment. However, no attempt was made by the ACIT to ascertain the correct a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Allahabad High Court in Laxmi Narain Anand Prakash v. Commissioner of Sales Tax, Lucknow AIR 1980 All 198 it was held that the notice of initiation proceeding under Section 21 of U.P. Sales Tax Act, 1947 was a condition precedent and not only a procedural requirement. The mere fact that the Assessee had obtained knowledge of the proceeding and participated could not validate the proceeding being initiated without jurisdiction. It is subsequently held that it is firmly established that where a Court or Tribunal has no jurisdiction, no amount of consent, acquiescence or waiver can create it. Decisions referred to by the Revenue 42. The cases referred to by Mr. Singh do not appear to be relevant to the case on hand. The general observations in Venad Properties (P) Limited ( supra ) to the effect that the failure to comply with a procedural requirement should not defeat substantive justice may not be apposite in the present context where the failure to serve notice under Section 148 is a jurisdictional and not merely a procedural requirement. 43. Also, the observations in Mayawati v. CIT ( supra ) to the effect that the requirement of service of notice un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II Rule 6 CPC. (iii) Although there is change in the scheme of Sections 147, 148 and 149 of the Act from the corresponding Section 34 of the 1922 Act, the legal requirement of service of notice upon the Assessee in terms of Section 148 read with Section 282 (1) and Section 153 (2) of the Act is a jurisdictional pre-condition to finalizing the reassessment. (iv) The onus is on the Revenue to show that proper service of notice has been effected under Section 148 of the Act on the Assessee or an agent duly empowered by him to accept notices on his behalf. In the present case, the Revenue has failed to discharge that onus. (v) The mere fact that an Assessee or some other person on his behalf not duly authorised participated in the reassessment proceedings after coming to know of it will not constitute a waiver of the requirement of effecting proper service of notice on the Assessee under Section 148 of the Act. (vi) Reassessment proceedings finalised by an AO without effecting proper service of notice on the Assessee under Section 148 (1) of the Act are invalid and liable to be quashed. (vi) Section 292 BB is prospective. In any event the Assessee in the present case, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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