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TMI Blog2020 (2) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... ee company to the said Shri Anand Sharma, CA. The ld. CIT (A) has also pointed out that in the completed order sheet there no indication of the fact that any point of time any Power of Attorney or Authorization was filed by the assessee company in favour of Shri Anand Sharma on or before 14.03.2014 for the year under consideration. D/R submission before us that the service of notice was effected on Shri chandan but the fact remains that the said Shri Chandan was neither the employee of the assessee nor was authorized to received such notice and, therefore, in such a situation we cannot treat the said alleged service on Shri Chandan to be a valid service in view of the provisions of section 282 of the Act read with Order 5 of the Code of Civil Procedure 1908. Service of notice issued under section 148 of the Act is a mandatory as well as jurisdictional requirement and thus without valid service of notice, the reassessment order passed is liable to be quashed. Even in the order passed by Hon ble Delhi High Court in case of CIT vs. Chetan Gupta [ 2015 (9) TMI 756 - DELHI HIGH COURT] it has been held that section 292BB is prospective in nature and the main part of section 292BB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s passed on 24.03.2015 determining total income at ₹ 3,64,16,430/-. 3. Aggrieved by the order of the AO, assessee filed appeal before the ld. CIT (A) and the ld. CIT (A) during the course of hearing noted that vide order dated 20th July, 2015 the assessee company was dissolved by the Registrar of Companies, Rajasthan (ROC) and its name has been struck off from the Register by the ROC. Since the assessee company was not in existence on the date of passing of the order by ld. CIT (A), therefore, the order was passed by ld. CIT (A) in the name of M/s. Mahla Real Estate Pvt. Ltd. (since dissolved) through its Director Shri Aman Gupta and Shri S.N. Gupta. The ld. CIT (A) had allowed the appeal filed by the assessee by holding that the impugned assessment order passed by the AO was without jurisdiction and bad in law and thus quashed the same. 4. Aggrieved by the order of the ld. CIT (A), the revenue has filed the appeal before us on the ground mentioned herein above. Ground nos. 1 to 4 raised by the revenue are inter-related and inter-connected and relates to challenging the order of the ld. CIT (A) in quashing the order of assessment passed by the AO. 5. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valid: - (i) Chandan: - In the assessment order the Learned Assessing Officer has dealt the issue of service of notice in para 4.1. The Learned Assessing Officer has observed as under: - The first contention of the assessee that the notice u/s 148 has not been served upon the assessee is not factually correct. As the company was not found traceable at the address given in the return of income filed on 22.11.2007, it was gathered from the market enquiry that the assessee company is sister concern of M/s Durga Motor Company, M.l Road, Jaipur, therefore, one copy of notice was got served at M/s Durga Motor Company by the notice server. In the above regard it is submitted that the Learned Assessing Officer is wrong in observing that the company was not traceable at given address. It is submitted that since the formation of company and to its closure the address of the company was one and the same i.e. Mahla Real Estate Private Limited, 12-13, Patel Colony, Laxmi Path, Sardar Patel Marg, Jaipur-302001, Rajasthan. The assessee is filing a copy of letter dated 20.07.2015 from the Registrar of the Company to the above address. The same is available on paper b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is case none of these conditions are fulfilled. Notice has not been served on directors or on the Principal Officer of the company. Shri Chandan was not an authorized person on behalf of the company to receive such notice. An affidavit to this effect of Shri Aman Gupta director of the company is available on paper book page no. 7 to 8. It is submitted that considering these facts the service of notice upon Shri Chandan is not a valid service. The Learned Assessing Officer could not assume jurisdiction on the basis of such invalid service of notice u/s 148. The assessment proceedings are therefore ab-initio void. Further as per Rule 6 of Order Ill, it is evident that written authority to receive notice is necessary either by way of special or general power given in this regard. The person should have been specifically empowered to receive notice, From the Rules it is evident that the mandate of Legislature is that as far as possible the service of summons should be effected .on the person named in the notice and, if it is not possible, then same should be effected on the person who is duly vested with the authority to receive such notice by the person named in the summon. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the person on whom service is effected must have valid authorization given to him in writing to receive such notice and mere implied authority will not be enough. It was fundamental requirement to get the notice served on the assessee before proceeding to complete the reassessment and as it is lacking, this jurisdictional defect cannot be cured and thus assessment is liable to be quashed on this point. Notice under section 148 is a jurisdictional notice. Therefore, invalid service of notice under section 148 cannot be said to be a procedural defect and it cannot b cured by the participation of the assessee in the re-assessment proceedings. Since the assessee raised this issue and questioned the service of notice during the course of the assessment proceedings hence the section 292BB is of no help. This provision is applicable only in the facts and circumstances when the assessee has not raised the issue of service and has not questioned the same during the course of assessment proceedings. The appellant company relies upon the following decisions for the proposition that proper service of notice u/s 148 is mandatory for assuming valid jurisdiction to re-assess the escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, therefore any service upon him is invalid. The assessee further quotes the following decision in support: - (x) Singar Gutkha vs. Deputy Commissioner of Income Tax (2011) 138 TTJ 318 (Lucknow) Service of notice under s. 148 on a chartered accountant who was not empowered to receive such notice on behalf of the assessee company or on another person who was not authorized to receive a notice was not a valid service of notice on the assessee, more so when it was not shown that the assessee was keeping out of way for the purpose of avoiding service of notice or that there was any other reason that the notice could not be served on the assessee in the ordinary way and, therefore, assessment completed pursuant to said notice was bad in law. (xi) Ariun Singh vs. ADIT (Inv.) [20001 246 1TR 363 (MP) Service of notice on the counsel of the petitioners and service through IT Inspector is not in consonance with the requirement of s. 282. (xii) Assessment completed without first deciding the objection: - It is further submitted that it is settled position of law upto the stage of the Apex Court that any objection raised regarding the issue/service of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding with the assessment-Writ petition right dismissed as premature The ratio of aforesaid decisions is fully applicable to the facts of the case. The objections raised by the assessee remained unattended by the Learned Assessing Officer. The assessee had challenged the very root of the assessment proceedings. The service of notice u/s 148 was challenged. The Learned Assessing Officer has disposed this objection in the composite order passed by him on 24.0.2015 which is an assessment order also. In this assessment order in para 4 he has dealt with the objections raised by the assessee which should have been disclosed off earlier before completion of assessment. (IV) Notice u/s 148 issued without application of mind: - It is further submitted that in this case the Learned Assessing Officer erred in issuing notice u/s 148 mechanically without application of mind. The Learned Assessing Officer has mentioned in the assessment order that soon on receipt of information DDIT (Inv.)-l1 that Shri Hitesh Garg had deposed that land was purchased for ₹ 4,82,13,900/- instead of ₹ 1,25,00,000/- as shown in the sale deed, decision was taken fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of IT (Inv.) that the assessee had introduced unaccounted money by way of an accommodation entry being extremely scanty and vague cannot be regarded as a material or evidence that prima facie establishes escapement of income, more so as the AO did not apply his own mind to the information to arrive at the belief as to whether or not any income had escaped assessment; proceedings under s. 147 are quashed. (II) CIT Vs. SFIL Stock Broking Ltd. (2010) 41 DTR 98 (Del) Mere information received from the Dy. Director of IT (Inv,) and directions of the said officer and the Addl. CIT to initiate proceedings under s, 147 cannot constitute valid reasons for initiating reassessment proceedings in the absence of anything to show that the AO has independently applied his mind to arrive at a belief that income has escaped assessment, (IV) SARTHAK SECURITIES CO. (P) LTD. vs. INCOME TAX OFFICER (2010) 329 ITR 110 HIGH COURT OF DELHI Where the identity of the companies whO had invested in the shares of petitioner-company was not disputed and neither the reasons in the initial notice nor the communication providing reasons remotely indicated independent application of mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act. However, the findings of the Tribunal on such fact are also vulnerable as they may require reconsideration. If answers in respect of each of the questions are indicated in the absence of reasonable opportunity being afforded to the assessee, they would be of academic interest inasmuch as the answers against the assessee would become vulnerable on account of the need to undo the absence or reasonable opportunity. A clear and conclusive finding binding cn the parties can be given only after reasonable opportunity is given to the assessee as found by the Tribunal. No answer should be given in advisory jurisdiction which would not finally decide the issue since final finding can be arrived at only after giving reasonable opportunity to the assessee and explanation given by the assessee would have material bearing on the finding. It is necessary that the Assessing Officer gives opportunity to the assessee. Tribunal has not considered the evidence in its proper perspective while rendering the decision in appeal and accordingly, the findings of the Tribunal are vitiated in law. As the final fact-finding forum, the Tribunal has to consider the same again. Since Tribunal has recorded a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the three partners- Relying on the statement of R and the retracted statement of K, AO made addition of ₹ 8,78,358 under s. 68 in the hands of assessee also and the same was confirmed by CIT(A) and Tribunal-Not justified- Apparently, there was a violation of principles of natural justice as the statement of one of the important witnesses, namely, R on which heavy reliance was placed by the AO is neither referred to in the assessment order nor copy thereof was given to the assessee nor the assessee was given an opportunity of cross-examining the said R-Authorities could not be absolved from doing so on the ground that the facts stated by R were admitted by the assessee-K had not only retracted his earlier statement but also made a voluntary disclosure, along with two other partners of DCI, in the sum of ₹ 11 lacs which included the amount of pronote of ₹ 8,78,358-Legal effect of the statement recorded behind the back of the assessee and without furnishing the copy thereof to the assessee or without giving an opportunity of cross-examination, is that if the addition is made, the same is required to be deleted on the ground of violation of the principles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Assessing Officer on the date of hearing i.e. on 09.03.2015 that assessee in protest filed return on 14.03.2015 declaring Nil income. Thus it would be seen that assessee did not file the return voluntarily in compliance to any notice u/s 148 as there was no valid service of notice u/s 148. It may also be appreciated that before filing the return on 14.03.2015 the assessee had objected to the service of notice u/s 148 of the Income Tax Act, 1961. 4. It is submitted that in the notice issued u/s 148 on 14.03.2014 the Learned Assessing Officer had granted time of 30 days only for filing return of income. Any return filed thereafter is a nullity in the law of law. It is further submitted that it is settled position of law that all subsequent and follow up proceedings which originate in consequence to an invalid service of notice u/s 148 are sou-moto and ab-initio invalid. Therefore no cognizance should be taken of return filed on 14.03.2015 and other proceedings when the assessee well in time objected and challenged the validity of service of notice u/s 148. 5. Soon after filing return of income on 14.03.2015 the assessee again flashed reply stating that there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .06.2014 and notice under sec. 142(1) dated 09,02.2015 was served upon Shri Anup Gupta on 10.02.2015 and show cause notice under sec. 144 along with the notice under sec. 142(1) was served upon Shri Chandan on 04.03.2015 and apart from that notice under section 142(1) dated 13.03.2015 was served upon Shri S.L. Poddar, Senior Advocate on 13.03.2015. 8. On these factual findings, assessee had also filed rejoinder which contained at pages 26 to 36 of the order of the ld. CIT (A) and the same is reproduced below :- Rejoinder to the remand report: 1. Introduction: - Before submitting para wise comments on the remand report of the Learned Assessing Officer it is the submission of the assessee that valid service of notice u/s 148 is mandatory before assuming jurisdiction. It is settled proposition of law that any illegality or any infirmity in complying with the provisions of section 282 resulting in the non service of the notice divests the Learned Assessing Officer from jurisdiction to assess or reassess the assessee. Further such non compliance of the provisions of section 282 is fatal to the legality of the assessment/re-assessment and renders it invalid. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the notice u/s 148. The Learned Assessing Officer has not deemed it appropriate to examine Shri Aman Gupta regarding his averment in the affidavit. Therefore the facts narrated by him in the affidavit remained uncontroverted. In his report the Learned Assessing Officer has mentioned that before serving notice Shri Chandan made a telephonic talk with Shri Aman Gupta and thereafter notice was served upon him. The story is just a made believe and is unsupported by any evidence. Further it is settled position of law that oral authority is not sufficient and the law requires a written authority for receiving notices. In Paparruna Rao v. Revenue Divisional Officer AIR 1918 Mad. 589, a Division Bench of Madras High court while dealing with the manner of service contemplated by section 45(2) of the Land Acquisition Act, which also attracts the provisions of the Code of Civil Procedure, in 1- hp, matter of service of notices, expressed the view that unless a person is appointed as agent o accept service of processes by an instrument in writing signed by the principal, the service on him cannot be said to be valid. The view taken in that case was that an oral authority is not sufficient bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er as ITO, Ward - 2(2), Jaipur. He issued notices as under: - i) Notice u/s 142(1) on 09.02.2015 ii) Notice u/s 142(1) on 02.03.2015 along with letter asking to show cause why assessment should not be completed u/s 144. The makes it clear that hardly two effective opportunities were granted to the assessee within a small period of one month and in view of this the Learned Assessing Officer cannot allege that assessee intentionally delayed in filing the objection. In fact not a single notice was served upon the assessee except the one dated 09.02.2015. It was only and only after this notice that assessee came to know about the proceedings and approached his counsel and thereafter filed the objection under letter dated 09.03.2015. Thus the assessee cannot be alleged of any tactic delay in filing the objection. In fact the reverse is true the department after issuing notice u/s 148 on 14.03.2014 slept for a long period and woke up only on 09.02.2015 and issued notice on this date. It is submitted that in view of the objection of the assessee the Learned Assessing Officer was required to dispose of the same before completion of assessment in view of the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtually no additional evidence has been furnished by the assessee. The assessee has furnished affidavit of Shri Chandan and of Shri Aman Gupta in support of the contention that there was no valid service of notice u/s 148. This issue was raised during the course of assessment proceedings. But the Learned Assessing Officer did not pay due regard to the contention of the assessee and did not seek any additional evidence. In fact the Learned Assessing Officer did not take the issue of service of notice seriously. The notice u/s 148 were served in a very causal manner, A first upon one Shri Mukesh and then upon Shri Chandan and lastly upon Shri Anand Sharma. The service upon all thps4g. persons was I made one after another as the Assessing Officer had a lurking doubt in his mind regarding the validity of service. The assessee has also produced a certificate of the Area Patwari as well as Vice Chairman Nagar Palika Mandal Bagru regarding the land is situated beyond 8 km from Municipal limit. This contention was also raised before the Learned Assessing Officer during the course of assessment proceedings. Further it is submitted challenging the jurisdiction/ service of notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) Shahrukh Khan Vs. Dv. CIT (2007) 13 SOT 61 (Mum) The assessee in an appeal against addition made by the Assessing Officer, filed additional evidence before the Commissioner (Appeals). The Commissioner (Appeals) called for a remand report on such evidence from the Assessing Officer and after going through remand report, concluded that sufficient opportunities were granted to the assessee and his case did not fall in any of exceptions available in sub-rule (1) of rule 46A. The Commissioner (Appeals), therefore, refused to admit additional evidence and confirmed the addition. Held that in the instance case, though from the record it was not discernible whether permission to adduce additional evidence was granted by recording reasons in writing, but impliedly it was discernible that after filing the additional evidence, the commissioner (appeals) took steps provided in sub-rule (3) of rule 46A. So it gave an inference that the additional evidence sought to be produced by the assessee was a relevant material and the commissioner (Appeals) had entertained additional evidence and only thereafter sent it to the Assessing Officer under sub-rule (3) for verificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he seal of Durga Motor Company validate the service of notice u/s 148 is not understandable. The Learned Assessing Officer has not substantiated his contention in any way. In view of this the submission of the Learned Assessing Officer regarding service upon Chandan are of no avail. (B) Case laws quoted by the Learned Assessing Officer :- The Learned Assessing Officer has quoted certain case laws to support his contention that service upon Shri Chandan was valid. In this regard it is submitted that the assessee had quoted the following decisions while making earlier submission before your goodself: - (i) CIT vs. Vardhman Estate P. Ltd. 287 ITR 368 (Del) (ii) CIT vs. Bhan Textiles P. Ltd. 287 ITR 370 (Del) (iii) CIT vs. Lunar Diamonds Ltd. 281 ITR 1 (Del) (iv) Venkat Naicken Trust v. ITRO 242 ITR 141 (Mad) (v) Sudev Industries Ltd. v. ITO 98 TTJ 97 (Del) (vi) Hind Book House v. ITO 92 lTD 415 (Del) (vii) Dulli Chand Laxmi Narain v. ACTT 89 lTD 426 (Del) (viii) Dina Nath v. CIT 204 ITR 667 (J K) (ix) Jayanthi Talkies Distributors v. CIT 120 ITR 576 (Mad) None of the above decisions have been discusse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not a valid service of notice on the assessee, more so when it was not shown that the assessee was keeping out of way for the purpose of avoiding service of notice or that there was any other reason that the notice could not be served on the assessee in the ordinary way and, therefore, assessment completed pursuant to said notice was bad in law. (iii) Arjun Singh vs. ADIT (Inv.) [20001 2461TR 363 (MP) Service of notice on the counsel of the petitioners and service through IT Inspector is not in consonance with the requirement of s. 282. 7. Assessment completed without first deciding the objection: - The Learned Assessing Officer has submitted that the assessee filed the objection at the 11th hours which did not leave time to him for deciding the objection and in any case he has met the objections in the assessment order. In this regard it is submitted that the assessee objected to the service of issue of notice u/s 148 well in time. The assessee ,was not served any notice except the one dated 09.02.2015 soon thereafter the assessee contacted his counsel and filed the objections vide letter dated 09.03.2015. The assessment has been completed on 24.03.2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer had more than a year to complete the assessment at his disposal but hardly a month and a half was given to the assessee. These facts established that proper opportunities were granted to the assessee. (iii) The Learned has based the assessment order and has made the addition on the basis of statement of Shri Hitesh Garg recorded at the time of survey. The principles of natural justice required that before utilizing the statement of Shri Hitesh Garg assessee should have been furnished the copy of his statement and also allowed an opportunity for cross examining Shri Hitesh Garg, this was not done. This renders the assessment void. The Learned Assessing Officer has mentioned that assessee was in possession of the statement of Shri Hitesh Garg. In this regard it is submitted that no authority of department i.e. either the DDIT or the Learned Assessing Officer ever supplied the copy of statement of State of of Shri Hitesh Garg. The allegation of the Learned Assessing Officer is false. The Learned Assessing Officer has not spelt out the reasons for not affording opportunity for cross examining Shri Hitesh Garg. In the remand report the submissions of the Learned Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mention here that Shri Chandan while receiving the notice dated 14.03.2014 affixed the stamp of M/s Durga Motor Company meaning thereby that the saic notice issued in the name of the appellant company was received on behalf of M/s Durga Motor Company and by no stretch of imagination, it could be presumed that it was serves upon the appellant company. (v) It may be mentioned that in the case of CIT vs. Chetan Gupta [2015] 62 taxmann.com 249 (Delhi), the Hon'ble High Court of Delhi has considered a number of judicial pronouncements on the issue and it was held by the Hon'ble High Court of Delhi that: To summarize the conclusions: (i) Under section 148, the issue of notice to the assessee and service of such notice upon the assessee are jurisdictional requirements that must be mandatorily complied with. They are not mere procedural requirements. (ii) For the Assessing Officer to exercise jurisdiction to reopen on assessment,, notice under section 148 (1) has to be mandatorily issued to the assessee. Further the Assessing Officer cannot complete the reassessment without service of the notice so issued upon the assessee in accordance with section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice on the essessee under section 148 of the Act. These facts are identical with the facts of the instant case under consideration and therefore the decision of Hon'ble High Court of Delhi in the case of CIT Vs Chetan Gupta (Supra) is squarely applicable to the instant case under consideration. (vi) It may be mentioned here that section 292BB of the Act has been inserted w.e.f. 01.04.2008 and as it was held by the Hon'ble Delhi High Court in the case of CIT vs. Chetan Gupta (Supra) that section 292BB is prospective in nature, therefore, it is not applicable to the AY 2007-08 which is the year under consideration. Moreover, in the instant case under consideration, the appellant has challenged the service of notice issued u/s 148 of the Act at the first available opportunity itself before the AO during the course of assessment proceedings and even if, the appellant attended the proceedings before the AO, the provisions of section 292BB of the Act are not applicable as the provisions of section 292BB of the Act were held to be prospective in nature by the Hon'ble High Court of Delhi. (vii) It may be mentioned that in a recent decision in the case of ITO Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such that the same are to be admitted. (viii) Therefore, in view of the facts of the instant case under consideration and the judicial pronouncements as discussed above, it is held that the notice issued u/s 148 of the Act on 14.03.2014 was not served upon the appellant and thus the AO has assumed the jurisdiction to assess the income of the appellant without the authority of law as non service of notice issued u/s 148 of the Act is not a mere procedural irregularity but the service of notice issued u/s 148 of the Act in a valid manner is a mandatory requirement. Hence, it is held that the impugned assessment order passed by the AO is without jurisdiction and is bad in law and thus hereby quashed. 9. After having heard the ld. Counsels for both the parties at length and after going through the facts of the present case, we find that there are certain undisputed facts in this case i.e. the AO has not admittedly sent any notice issued under section 148 of the IT Act to the registered office address of the assessee company at 12-13, Patel Colony, Laxmi Path, Sardar Patel Marg, Jaipur either through registered post or speed post and further the AO has made no effo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 148 of the Act upon the assessee, then any consequential order of reassessment passed by the AO needs to be set aside. The ld. A/R has also drawn our attention to the decision of the Coordinate Bench of the Tribunal in case of Charan Singh vs. ITO in ITA No. 906/JP/2018 wherein also the above legal proposition has been reiterated by relying upon the decision in the case of CIT vs. Chetan Gupta (supra). Therefore, we are also of the considered view that service of notice issued under section 148 of the Act is a mandatory as well as jurisdictional requirement and thus without valid service of notice, the reassessment order passed is liable to be quashed. Even in the order passed by Hon ble Delhi High Court in case of CIT vs. Chetan Gupta (supra) it has been held that section 292BB of the Act is prospective in nature and the main part of section 292BB was not applicable and thus participation by the assessee or some other person on his behalf not duly authorized in the reassessment proceedings, will not constitute a waiver of the requirement of effecting proper service of notice on the assessee under section 148 of the Act. Since the facts contained in the present case are al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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