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TMI Blog2018 (6) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act, 1961?" 3. For the Assessment Year (AY) 1995-96, the respondent-assessee had filed Return of Income declaring "nil" income with the Income Tax Department, Bulandshahar on 15th May, 1997. This return being belated and beyond statutory time was treated as non est. Consequently, after recording "reasons to believe" in writing, Additional Commissioner of Income Tax, Circle Bulandshahar had issued notice dated 11th September, 1998 under Section 148 read with Section 147 of the Act, calling upon the respondent assessee to file its return for AY 1995-96. This notice was sent registered post vide receipt No. 4896 dated 15th September, 1998 and as per the Revenue also served on the respondent-assessee through Inspector of Income Tax Department on 18th December, 1998 at A-7/74/1 & 2, UPSIDC Indl. Area, Sikandarabad, Bulanshahr, Uttar Pradesh. The respondent-assessee did not file return in response to the said notice, albeit their director Mr. Rajeev Aggarwal had appeared before the Deputy Commissioner of Income Tax, Bulandshahar and on his request reasons recorded for issue of notice and a copy of the notice under Section 148 were furnished. 4. On 27th February, 2001, while t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liabilities and unsecured loans, capitalizing preoperative interest, failure to furnish confirmations from subscribers to share capital that had increased from Rs. 36,57,000/- to Rs. 317,60,500/- and also invoking Section 68 of the Act, the total income of the respondent-assessee was assessed at Rs. 2,77,83,260/-. 7. Commissioner of Income Tax (Appeals) in his order dated 22nd March, 2002 upheld the action of the Assessing Officer at Bulandshahar in issuing notice under Section 147/148 of the Act for reasons recorded in detail including filing of returns of income for AY 1994-95 and 1995-96 before ITO, Bulandshahar, letter of the respondent-assessee justifying and explaining why return for AY1994-95 was filed at Bulandshahar, issue of certificate under Section 230A on application of the respondent-assessee by the said assessing officer and filing of belated return for AY 1995-96 before ITO, Bulandshahar. Commissioner of Income Tax (Appeals), notwithstanding best judgment assessment, had also examined merits and quantum of income earned by calling upon the respondent-assessee to furnish details relating to transactions of purchases and sales above Rs. 1 lac, which were furnished. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ads that he had not been served with notice, it was for the department to place relevant material to substantiate and prove that the assessee was served. Reliance was placed on the affidavit by Mr. Rajeev Aggarwal that neither he, any of the directors nor an authorised person had received notice dated 11th September, 1998 issued under Section 148 of the Act. Consequently, when the notice under Section 147/148 of the Act was not duly served, the Assessing Officer in Delhi could not have passed a valid and legally sustainable assessment order. 9. We begin by referring to Section 282 as it was before substitution by Finance (No.2) Act,2009. Section 282 of the Act, was as under:- "Service of notice generally. 282. (1) A notice or requisition under this Act may be served on the person therein named either by post or as if it were a summons issued by a court under the Code of Civil Procedure, 1908 (5 of 1908). (2) Any such notice or requisition may be addressed- ( a) in the case of a firm or a Hindu undivided family, to any member of the firm or to the manager or any adult member of the family ; ( b) in the case of a local authority or company, to the principal officer ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad versus Bhanji Kanji's Shop, (1968) 68 ITR 416, wherein notice for re-assessment served on a temporary employee of a dissolved firm was held to be as valid service, observing that the conditions mentioned in Section 63 (2) of the Income Tax Act, 1922 similar to Section 282 of the Act, i.e. Income Tax Act, 1961, were not exhaustive and it was permissible to serve notice by way of modes not mentioned in the said section. All that mattered was whether notice was received on behalf of the assessee and was complied with. When no question about validity of service was raised before the Assessing officer or the first appellate authority but before the Tribunal for the first time, the contention loses force. Belated objection regarding service of notice before the Tribunal was adversely commented upon by the Delhi High Court. 11. Appropriate for our case would be observations of the Bombay High Court in Devidayal and Sons (supra) that provisions of Section 63 (2) of the Income Tax Act, 1922 requiring that the notice in case of a firm may be addressed to any partner of the firm merely prescribes permissive mode of service and was not intended to be either mandatory or exhaustive. Conseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been held to be valid, though the acknowledgement or service was affected on the employee or minor son or even when there was refusal. The test as laid down in Malchand Surana (supra) and Agricultural Company Rampur (supra) applies. In Commissioner of Income Tax versus Vins Overseas India Ltd., (2008) 305 ITR 320 (Del), referring to the presumption under Section 27 of the General Clauses Act, it was held that notice sent by registered post should be presumed to be served unless rebutted by the assessee. Further, when objection with regard to service of notice was not taken before the Assessing Officer but before the appellate authority, the rebuttal should not be easily accepted. Such objection should be raised at the initial stage before the Assessing Officer and not after much delay. In the said case, affidavit denying service of notice filed before the Tribunal was rejected on the ground that the assessee should not be permitted to file the affidavit as per the assessee"s choice. Similar view on the question of presumption under Section 27 of the General Clauses Act would hold good in the absence of the proof to the contrary, were made in Commissioner of Income Tax, Delhi (Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1922 in the following manner:- "2..........Section 34 conferred jurisdiction on the Income Tax Officer to reopen an assessment subject to service of notice within the prescribed period. Therefore, service of notice within limitation was the foundations of jurisdiction. The same view has been taken by this Court in J.P. Janni, ITO v. Induprasad D. Bhatt [AIR 1964 SC 1742 : (1964) 7 SCR 539 : 72 ITR 595] as also in CIT v. Robert J. Sas [AIR 1964 SC 1742 : (1964) 7 SCR 539 : 48 ITR 177] . The High Court in our opinion went wrong in relying upon the ratio of Banarsi Debi v. ITO [AIR 1964 SC 1742 : (1964) 7 SCR 539 : 53 ITR 100] in disposing of the case in hand. The scheme of the 1961 Act so far as notice for reassessment is concerned is quite different. What used to be contained in Section 34 of the 1922 Act has been spread out into three sections, being Sections 147, 148 and 149 in the 1961 Act. A clear distinction has been made out between "issue of notice" and "service of notice" under the 1961 Act. Section 149 prescribes the period of limitation. It categorically prescribes that no notice under Section 148 shall be issued after the prescribed limitation has lapsed. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not invalidate the assessment proceedings, when no confusion or prejudice is caused due to non-observance of technical formalities. The object and purpose of this Section is to ensure that procedural irregularity(ies) do not vitiate assessments. Notice/ summons may be defective or there may be omissions but this would not make the notice/summon a nullity. Validity of a summon/ notice has to be examined from the stand point whether in substance or in effect it is in conformity and in accordance with the intent and purpose of the Act. This is the purport of Section 292B. Notice/summons are issued for compliance and informing the person concerned, i.e. the assessee. Defective notice/summon if it serves the intent and purpose of the Act, i.e. to inform the assessee and when there is no confusion in his mind about initiation of proceedings under Section 147/148 of the Act, the defective notice is protected under Section 292B. In such circumstances, the defective notice/ summon is in substance and in accordance with the intent and purpose of the Act. The primary requirement is to go into and examine the question of whether any prejudice or confusion was caused to the assessee. If no pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That is the view expressed by the Judicial Committee in Mohini Mohun Das v. Bungsi Buddan Saha Das [1889] ILR 17 (Cal) 580 and by the Madras High Court in Lodd Govindoss Krishnadas Varu v. P. M. A. R. M. Muthiah Chetty, AIR 1925 Mad 660. " Learned counsel for the Revenue further cited Brahmaiah (Velivalli) v. Emperor, AIR 1930 Mad 867 ; [1930] 59 MLJ 674, where the Madras High Court held that a judgment of a Bench of Magistrates has to be signed as required by law and the requirements of public policy necessitate the writing of the full name of the Magistrate that signs the judgment and the mere putting of the initials is not sufficient compliance with the mandatory provisions of section 265 of the Criminal Procedure Code (V of 1889). At the same time, the said High Court also held that illustration to section 537 of the old Act, viz., "the Magistrate being required by law to sign a document signs it by initials only." This illustration has been omitted in the amended Act. According to the court, the omission indicates that the Legislature no longer views the initialling of the order instead of signing it as a defect affecting the validity of the proceeding." 43. In Hind Sama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of a party it will be useful to remember the distinction between misdescription or misnomer of a party and misjoinder or non-joinder of a party suing or being sued. In the case of misdescription of a party, the court may at any stage of the suit/proceedings permit correction of the cause-title so that the party before the court is correctly described; however, a misdescription of a party will not be fatal to the maintainability of the suit/proceedings. Though Rule 9 of Order 1 CPC mandates that no suit shall be defeated by reason of the misjoinder or non-joinder of parties, it is important to notice that the proviso thereto clarifies that nothing in that Rule shall apply to nonjoinder of a necessary party. Therefore, care must be taken to ensure that the necessary party is before the court, be it a plaintiff or a defendant, otherwise, the suit or the proceedings will have to fail. Rule 10 of Order 1 CPC provides remedy when a suit is filed in the name of the wrong plaintiff and empowers the court to strike out any party improperly joined or to implead a necessary party at any stage of the proceedings." 47. One of the questions, which arises for consideration, in such cases is w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... system, no party should ordinarily be denied the opportunity of participating in the process of justice dispensation. Unless compelled by express and specific language of the statute, the provisions of CPC or any other procedural enactment ought not to be construed in a manner which would leave the court helpless to meet extraordinary situations in the ends of justice. 11. The mortality of justice at the hands of law troubles a judge's conscience and points an angry interrogation at the law reformer. 12. The processual law so dominates in certain systems as to overpower substantive rights and substantial justice. The humanist rule that procedure should be the handmaid, not the mistress, of legal justice compels consideration of vesting a residuary power in the judges to act ex debito justitiae where the tragic sequel otherwise would be wholly inequitable. Justice is the goal of jurisprudence, processual, as much as substantive. (See Sushil Kumar Sen v. State of Bihar[(1975) 1 SCC 774] .) 13. No person has a vested right in any course of procedure. He has only the right of prosecution or defence in the manner for the time being by or for the court in which the case is pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inform and make the company aware that proceedings under Section 147/148 of the Act had been initiated. Initiation of proceedings under Section 147/148 of the Act was upon recording of reasons to believe and upon necessary approvals. Initiation to this extent was valid and not disputed and challenged. 22. It was submitted before us that the respondent-assessee had taken the plea and contested validity of service of notice on the security guard before the first appellate authority, i.e., Commissioner of Income Tax (Appeals). It was accepted and admitted that no such contention was raised before the Assessing Officer. In support, the respondent-assessee had relied on paragraph 2 of the order dated 22nd March, 2002 passed by the Commissioner of Income Tax (Appeals), which reads as under:- "2. The first ground of appeal is that as the notice alleged to be issued to the assessee u/s 148 could not in law be said to be served on the assessee, the assessment made, there under on the basis of such notice is bad in law. That the proceedings u/s 148 of the I.T. Act is illegal and uncalled for in view of following facts: a) The ITO, Bulandshahar did not have any jurisdiction over the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o receive notice. Pertinently, the assessee had written a letter after he was served with notice under Section 142(1) and 143(2) that he was unaware of any notice issued under Section 147/148 of the Act. The facts of the case are clearly distinguishable. Noticeably, Delhi High Court in Commissioner of Income Tax- V, New Delhi versus Regency Express Builders Private Limited, [2007] 291 ITR 55 (Del) had dealt with a situation where notice under Section 143(2) of the Act had been sent to the address given by the assessee and was served on one Gunanand. The assessee had thereafter appeared through a chartered accountant. Question arose whether there was valid service, as notice under Section 143(2) was required to be issued within the stipulated period. The appeal was allowed and the contention of the assessee was rejected, observing that the chartered accountant had appeared before the Assessing Officer, which would show that notice under Section 143(2) had been duly served. 25. In Venkat Naicken Trust and Another (supra), it was held that the burden was on the Department to substantiate the plea that the assessee was properly served. The said judgment would not be of relevance in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effected on the assessee. Revenue"s contention that the notice was served on a partner of a firm in which the assessee was a partner was rejected for several reasons. This order takes into account cumulative facts, which established prejudice. 31. In Additional Commissioner of Income-tax, Lucknow versus Prem Kumar Rastogi, [1980] 124 ITR 381 (All), the issue raised related to starting point for computation of period of limitation for appeal, and in that context it was held that the service on third person who was not an authorized agent would not matter. 32. In Commissioner of Income-tax, Kanpur versus Kanpur Plastipack Ltd., [2017] 390 ITR 381 (All), notice was served on the power of attorney holder, who was authorized to represent the assessee to conduct the case, but was not authorized to receive notice. Apparently, the assessee had not complied and entered appearance. 33. Decision of the Delhi High Court in Commissioner of Income-tax versus Lunar Diamonds Ltd., [2006] 281 ITR 1 (Del.) was on the issue whether notice under Section 143(2) of the Act was served within the prescribed limitation period. The decision relates to difference between "served" and "issued". 34. In Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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