9911796707
TMI Blog1998 (4) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... year were taxable and these two assessments required revision on that account. The Income-tax Officer did not reopen the assessment at once and he required the assessee to furnish particulars regarding credits disclosed and furnished in the books of account maintained by him. The Income-tax Officer requested the assessee to produce the details. The assessee explained the credit to the extent of Rs. 1.50 lakhs arising out of debts in the accounts of the foreign firms to the extent of Rs. 1 lakh during the previous year. The Income-tax Officer noticed a similar credit of Rs. 1 lakh even in an earlier Year and found that there was no correlation in respect of a sum of Rs. 50,000 and there was not even a corresponding debit entry in respect of another amount of Rs. 50,000 in the foreign firm. The Incometax Officer directed the Inspector to enquire with the bank about the details and the Inspector of Income-tax conducted an enquiry and found that the last draft on December 26, 1973, was not even a foreign draft and the source was not traceable. The assessee furnished a certificate of the chartered accountants during the enquiry and the certificate also did not confirm that the alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls) also held that on the merits of the case, there was no satisfactory explanation produced by the assessee and the Income-tax Officer has rightly assessed the same as the income of the assessee under section 68 of the Act. In this view of the matter, the Commissioner of Income-tax (Appeals) dismissed the appeal preferred by the assessee. The assessee carried the matter further by setting an appeal before the Income-tax Appellate Tribunal and repeated the same contentions which were urged before the Commissioner of Income-tax (Appeals). The Appellate Tribunal also held that the notice under section 148 of the Act was validly served. The Tribunal noticed that different persons were acting as agents in the absence of the power agent of the assessee and there was no exclusive agent. That apart, according to the Tribunal, the service was acknowledged on March 24, 1979, by the authorised representative of the assessee asking for time to file the return and the Tribunal also noticed that the very form issued by the Income-tax Officer was returned to the officer on March 6, 1980, along with a covering letter and thus the notice was complied with. The Tribunal noticed that the contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the assessee, the assessee had one A. K. Angusamy, as his power agent, and when it is not the case that it was served on the said Angusamy who was the authorised power agent, but served on some other person, the service of notice was not valid. He submitted that the Tribunal has not recorded any finding on whom the notice was served and as the finding of the Appellate Tribunal was that different persons, viz., Angusamy, Thangarajan and Balraj, were acting as the agent and in the absence of any further finding that it was served on any one of them, the order of the Appellate Tribunal holding that there was a valid service of notice under section 148 of the Act is not sustainable in law. He referred to the principles of section 148 of the Act and submitted that there must be a valid service of notice to reopen the assessment and in the absence of any service on the assessee or on his power agent authorised in writing, the service of notice on an unauthorised person is not valid in law. He also submitted that earlier notices were notices under section 210 or 273 or 274 of the Act and they would involve no action on the part of the assessee except the payment of advance tax or to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act, 1961, would not vitiate the proceedings. Learned counsel for the assessee strongly relied upon a decision of this court in S. B. Muthumunia Mudaliar v. Commissioner of Agrl. I. T. [1972] 85 ITR 12 and submitted that mere participation in the proceedings would not be sufficient as the sine qua non for the reassessment is valid service of notice. He, therefore, submitted that merely because the assessee participated in the proceedings would not be sufficient to hold that there was a valid service of notice. He also invited our attention to the decision of a Full Bench of the Assam High Court in Tansukhrai Bodulal v. ITO [1962] 46 ITR 325, and submitted that the issue of a valid notice is not a mere procedural requirement but is a condition precedent for the exercise of the jurisdiction of the Income-tax Officer to reopen the assessment proceedings. Learned counsel for the assessee placing reliance on the decision of the Bombay High Court in the case of CIT v. Ramsukh Motilal [1955] 27 ITR 54, and held that by merely filing a return under protest, it cannot be stated that the assessee had waived his right to contend that the proceedings are without jurisdiction and illegal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice, but in the instant case, the assessee was not even aware of the reassessment notice as he was not in India and when there was no conscious acceptance of the notice, the decisions relied upon by learned counsel for the Revenue have no application to the facts of the case. Learned counsel for the assessee placed strong reliance on a decision of the Gujarat High Court in P. V. Doshi v. CIT [1978] 113 ITR 22, and submitted that the service of notice is a mandatory requirement and cannot be waived by the assessee. Before considering the rival submission, it is necessary to mention here that learned counsel for the assessee has not seriously disputed the addition made in reassessment proceedings. The facts also clearly show that the credit entry of Rs. 50,000 was found in the assessee's books of account on December 26, 1973. It was found that it was described as a draft received from A. K. Muthan Chettiar and Sons, Kuala Lumpur, and that was found to be incorrect and there was no corresponding debit entry in the books of account of the foreign firm. The Appellate Tribunal examined the entire transactions of debits and credits and found that there was no corresponding debit entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or, before the Inspecting Assistant Commissioner as to the validity of the service of notice. In this factual situation, the question that has to be considered is whether the service, of notice under section 148 of the Income-tax Act was valid and proper. There is no dispute that under section 148 of the Income-tax Act, the issue of notice as well as service of notice under section 147 on the assessee is a condition precedent to the validity of the reassessment proceedings under section 148 of the Act. The service on the assessee in a manner known to law and in accordance with the law is a sine qua non for the valid initiation of the reassessment proceedings. The decision of the Supreme Court in the case of Y. Narayana Chetty v. ITO [1959] 35 ITR 388, though rendered under the Indian Income-tax Act, 1922, would equally apply to the proceedings under section 147 of the Act. Therefore, the service of the notice prescribed under section 148 of the Act, as held by the apex court in Y. Narayana Chetty's case [1959] 35 ITR 388, is a condition precedent to the validity of any reassessment under section 34 of the Act of 1922 (corresponding to section 148 of the Incometax Act, 1961). A Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides for appointment of a recognised agent and the said sub-rule lays down that the said appointment shall be made by an instrument in writing signed by the principal, and such instrument or a certified copy thereof shall be filed in court if the appointment is general. He, therefore, submitted that only on the filing of a written instrument with the Income-tax Officer, the agent was empowered to receive notice on behalf of the assessee and, therefore, the notice served on M. R. V. was not valid at all. We are, however, unable to accept the contention of learned counsel for the assessee as under Order 5, rule 12, wherever it is practicable, service shall be made on the defendant in person, unless he has an agent empowered to accept service, in which case service on such agent shall be sufficient. Under Order 5, rule 13, in a suit relating to any business or work against a person who does not reside within the local limits of the jurisdiction of the court from which summons was issued, the service on any manager or agent, who was personally carrying on such business or work for such person within the limits of the court's jurisdiction should be deemed to be a good service. Admittedl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person had accepted notices on behalf of the assessee on previous occasions and appeared for the assessee would not constitute him an agent on whom a notice or requisition under the Act would be validly served, nor would any statement made by him bind the assessee". In our opinion, the judgment of this court in Jayanthi Talkies Distributors' case [1979] 120 ITR 576, is distinguishable as it was found that the service was effected on an unauthorised person to receive the notice. On the other hand, in the instant case, the notice has been served on a person who had been receiving notices on behalf of the assessee and the assessee in the instant case would have known the person who initialled for service of notice as M. R. V. with his name starting with the letter "S". But the assessee has not taken any step to establish before the first appellate authority the person who received the notice and whether the recipient was not authorised to receive notice. The case of the assessee was that only A. K. Angusamy was his power agent. But, the contention of the assessee was rejected by the Appellate Tribunal on the ground that there was no exclusive agent and more than one person had been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or want of proper notice. The Madhya Pradesh High Court in Dr. H. R. Rai v. CIT [1984] 145 ITR 809 has taken the same view and held that the service of notice was valid though the person on whom the notice was served was not authorised to receive notice, when the assessee participated in the reassessment proceedings without any objection and the irregularity in the service of notice would not invalidate the assessment proceedings. We are in respectful agreement with the views expressed by the Gujarat High Court, Patna High Court and Madhya Pradesh High Court in the cases cited above. The assessee in the instant case did not raise any objection at any time before the Income-tax Officer that the notice was not served on the assessee personally or was not served on the agent who was empowered to receive notices. The objection raised regarding the validity of service of notice has lost its significance when the assessee acted upon the notice, filed the return in pursuance of the reassessment notice and participated in the reassessment proceedings. We, therefore, hold that the Tribunal has come to the correct conclusion in holding that the notice under section 148 of the Act was validly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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