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TMI Blog2017 (10) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessment framed by the Assessing Officer is barred by time as the requisite notice under section 143(2) was not served on the assessee within the time as prescribed by law. Respectfully following the judgment of the hon'ble Delhi High Court rendered in the case of CIT v. Bhan Textiles (2006 (9) TMI 129 - DELHI High Court ), the draft assessment order dated March 28, 2013 cannot be sustained, the same is hereby quashed being barred by time. - Decided in favour of assessee. - I. T. (IT) A. No. 2/JP/2014 - - - Dated:- 27-7-2017 - Kul Bharat (Judicial Member) And Vikram Singh (Accountant Member) For the Appellant : Salil Kapoor and Sumit Lalchandani, Advocates For the Respondent : D. S. Kothari, Commissioner of Income-Tax ORDER Kul Bharat (Judicial Member) 1. This appeal by the assessee is directed against the order of the learned Dispute Resolution Penal-III, New Delhi (in short the DRP ) dated December 16, 2013 pertaining to the assessment year 2010-11. The assessee has raised the following grounds of appeal. 1. That on the facts and in the circumstances of the case and in law, the impugned order passed under section 143(3) read with 144C of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. That on the facts and in the circumstances of the case and in law, the learned Assessing Officer grossly erred, and the Dispute Resolution Panel has further erred in upholding the action of the learned Assessing Officer in imputing an ad hoc profit rate of 25 per cent. which is not only arbitrary but is highly excessive and unreasonable. 7. That on the facts and in the circumstances of the case and in law, the learned Assessing Officer erred in not following the directions of the learned Dispute Resolution Panel and not allowing sufficient opportunity to the appellant to substantiate that the service tax has been actually paid by the appellant to the Government, and thus the service tax needs to be reduced from the gross receipts for the purposes of computation of profits. 8. That on the facts and in the circumstances of the case and in law: 8.1. The learned Assessing Officer erred in levying interest under section 234A of the Act ignoring the fact that the appellant filed its return before the due date. 8.2. The learned Assessing Officer erred in levying interest under section 234A of the Act without appreciating the fact that the entire income of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of R. K. Upadhyaya v. Shanabhai P. Patel [1987] 166 ITR 163 (SC). The learned counsel also placed reliance on the judgment of the hon'ble Delhi High Court in the case of CIT v. Vardhman Estate P. Ltd. [2006] 287 ITR 368 (Delhi). The learned counsel also placed reliance on the decision of the co-ordinate Bench of the Tribunal rendered in the case of Asst. CIT v. Santosh Kumar [2003] 87 ITD 107 (All). The learned counsel also placed reliance on the judgment of the hon'ble Supreme Court rendered in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC). The learned counsel for the assessee also relied on Circular No. 549 dated October 31, 1989 (See [1990] 180 ITR (St.) 1) of the Central Board of Direct Taxes. He submitted that in the light of these binding precedents when the Revenue itself has accepted that service was beyond the prescribed time of limitation, the assessment framed is thus vitiated. 2.1 On the contrary, the learned Departmental representative vehemently opposed the submissions of the assessee and submitted that admittedly the notice was issued within the prescribed time and sent by speed post. Therefore, it cannot be inferred that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the appellant on Banarsi Debi v. ITO [1964] 53 ITR 100 (SC) ; AIR 1964 SC 1742. A study of Banarsi Debi [1964] 53 ITR 100 (SC) shows that the facts of that case are completely inapposite. In that case, under section 34(1)(b) of the Indian Income-tax Act, 1922, a notice was required to be served on an assessee within eight years if the Income- tax Officer had reason to believe that income had escaped assessment. Factually, although a notice had been issued to the assessee therein within a period of eight years, it was served upon him after the eight year period was over. A learned single judge of the Calcutta High Court agreed with the submissions made on behalf of the asses see and quashed the notice. During the pendency of an appeal before the Division Bench, section 34 of the Indian Income-tax Act was amended by Amending Act No. 1 of 1959. Section 4 of the Amending Act debarred the court from questioning the validity of a notice issued under section 34 of the Act on the ground that the time for issue of such notice had expired. The Division Bench, relying upon the amendment to section 34 of the Act decided against the assessee which led him to approach the Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicate the mode. In fact, the appellant in that case did not even reply to the letter for suggesting the mode of payment. As per the practice, the Central Government sent the cheque by post. The Supreme Court held that it was reasonable for the concerned authority to have waited for the cheque to get personally collected by the payee till the last date and when the payee did not come to collect the cheque, to have dispatched it by post. The Supreme Court held that this amounted to tender of the payment to the payee when the cheque was put in the course of trans mission so that it was beyond the control of the sender from the time of its dispatch by post. It was in this context that it was observed that the post office will be the agent of the payee for the purposes of receiving payment. It was finally submitted by the learned counsel for the appellant that it cannot be said that the assessment was null and void because the notice was served upon the assessee beyond the prescribed period of one year. Reliance in this regard was placed upon CIT v. Gyan Prakash Gupta [1987] 165 ITR 501 (Raj) and CIT v. Jai Prakash Singh [1996] 219 ITR 737 (SC). It is not necessary for us t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble Delhi High Court in the case of CIT v. Bhan Textiles P. Ltd. (supra) decided the issue by holding as under (page 371 of 287) : 2. So far as the factual matrix of the case is concerned, the Revenue is in a worse position than that which obtained in CIT v. Lunar Diamonds Ltd. [2006] 281 ITR 1 (Delhi). Ms. Prem Lata Bansal, learned counsel appearing on behalf of the appellant, seeks to point out that there was some doubt in CIT v. Lunar Diamonds Ltd. [2006] 281 ITR 1 (Delhi) whether the notices had at all been sent or not. In the present case, however, it is the admitted case that the notice under section 143(2) of the Income-tax Act though issued on November 27, 1997, and dispatched on November 28, 1997, was actually received by the assessee only on December 1, 1997. The assessee had filed the return on November 20, 1996, and, therefore, the time stipulated under the proviso to section 143(2)(ii) for service of notice expired on November 30, 1997. The said proviso leaves no room for debate that the notice must be served on the assessee. In CIT v. Lunar Diamonds Ltd. [2006] 281 ITR 1 (Delhi) the Division Bench had rejected the contention that the words 'served' a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on October 5, 2011 (i.e., after the statutory limitation period of 6 months from the end of the financial year 2010-11), the proceedings are barred by limitation. 5.2. The Dispute Resolution Panel has duly considered the issue. The Assessing Officer has mentioned in his order that notice under section 143(2) was issued on September 29, 2011 and sent vide speed post on September 30, 2011. The assessee has contended that notice was served upon him on October 5, 2011. The Assessing Officer has issued the notice well within the statutory time limit. The Dispute Resolution Panel has noted that the Assessing Officer has rightly relied upon decision in the case of V. R. A. Cotton Mills (P.) Ltd. wherein the hon'ble Punjab and Haryana High Court after relying upon the hon'ble Supreme Court decision in the case of Banarsi Debi v. ITO [1964] 53 ITR 100 (SC) ; AIR 1964 SC 1742 has held that the term 'issue and service' can be used interchangeably. In view of these facts, the Dispute Resolution Panel is not inclined to accept the objection raised by the assessee. From the above finding of the learned Dispute Resolution Panel, it is evident that the authorities below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But irregular service of notice would not render the proceedings invalid, more so, if the assessee by his conduct has rendered service impracticable or impossible, (iv) In a given case when the principles of natural justice are stated to have been violated it is open to the appellate authority in appropriate cases to set aside the order and require the Assessing Officer to decide the case de novo.' In view of the said judgment, the date of receipt of notice by the addressee is not relevant to determine, as to whether the notice has been issued within the prescribed period of limitation. The expression serve means the date of issue of notice. The date of receipt of notice cannot be left to be undetermined dependent upon the will of the addressee. Therefore, to bring certainly and to avoid attempts of the addressee to evade the process of receipt of notice, the purpose of the statute will be better served, if the date of issue of notice is considered as compliance of the requirement of proviso to section 143(2) of the Act. In fact that is the only conclusion that can be arrived at to the expression 'server' appearing in section 143(2) of the Act. Thus there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee must be adopted. This is a well-accepted rule of construction recognised by this court in several of its decisions. In the light of aforementioned judicial pronouncements, we are of the considered view that the authorities below ought to have adopted the view of the hon'ble Delhi High Court. Moreover, the assessing authority is bound by Circular of the Central Board of Direct Taxes. The Central Board of Direct Taxes Circular No. 549 dated October 31, 1989 states in clear terms that the Assessing Officer is required to serve the notice on the assessee within the prescribed period, if a case is picked up for scrutiny. It follows that if an assessee, after furnishing the return of income does not receive a notice under section 143(2) from the Department within the aforesaid period, he can take it that the return filed by him has become final and no scrutiny proceedings are to be started in respect of that return. Therefore, the assessee succeeds on this ground. The assessment framed by the Assessing Officer is barred by time as the requisite notice under section 143(2) was not served on the assessee within the time as prescribed by law. Respectfully following the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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