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TMI Blog2019 (4) TMI 2020X X X X Extracts X X X X X X X X Extracts X X X X ..... omputation. Upon careful perusal of chronology of events as enumerated in the preceding paragraphs, we find that there was no service of notice u/s 148 by the revenue on assessee in the present case and the primary condition to invoke reassessment jurisdiction, against the assessee, remained unfulfilled. The non-service of notice, in our opinion, was not merely a curable procedural defect but primary requirement under law, without fulfilment of which the revenue could not be empowered to trigger re-assessment proceedings against the assessee. Thus we hold that in the absence of service of notice u/s 148, reassessment jurisdiction as acquired by Ld. AO could not be sustained in law which left us with no option but to quash the reassessment proceedings. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant during the reassessment proceedings. (f) The CIT(A) erred in confirming the action of AO in issuing the notice u/s 148 of the Act after expiry of four years from the end of relevant assessment year. The Appellant submits that in its case assessment proceedings has been completed u/s 143(1) of the Act after considering full details/disclosure filed by the Appellant; hence, the same cannot be reopened after expiry of four years from the end of relevant assessment year. 2.3 The effective grounds raised by the revenue read as under: - (i) Whether on the facts and circumstances of the case and in Law, the CIT(A) erred in ignoring the findings of survey, materials gathered there-from and the statement of directors etc. admitting that only accommodation entries were provided, more so when such findings got strengthened by findings of AO during assessment? (ii) Whether, on the facts and circumstances of the case and in Law, the CIT(A) was justified in directing the deletion of the sum brought to tax by AO as unexplained income under section 68 of the Income Tax Act, 1961 in respect of moneys credited in the books as share capital, including share premium of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubjected to an assessment u/s 143(3) read with Section 147 on 31/03/2016 by Ld. Assistant Commissioner of Income Tax-1(3)(1), Mumbai [AO] wherein the income was determined at ₹ 393.38 Lacs after sole addition u/s 68 for ₹ 395 Lacs as against returned loss of ₹ 1.61 Lacs filed by the assessee on 30/09/2008. The original return of income was processed u/s 143(1). 3.2 The reassessment proceedings got triggered by issuance of notice u/s 148 on 10/03/2015 which was beyond 4 years but within 6 years from the end of relevant AY i.e. 2008-09. However, the notice was returned back unserved by postal authorities on 16/03/2015. As per revenue, the notice was affixed at the address of the assessee on 09/07/2015 as per the report of the notice-server of the ward. This was followed by issuance of notice u/s 142(1) on 23/07/2015 through post requesting the assessee to file a return in response to notice issued u/s 148 on 10/03/2015. However, the same was also returned back with the remarks not known. Subsequently, notice u/s 142(1) was finally hand served to the office of the assessee on 30/07/2015. 3.3 The assessee, vide submissions dated 06/08/2015, objected to reassessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as addressed to the following incomplete / incorrect address: - Court Chambers, 35, Sir V.T. Marg Mumbai - 400 020 As against the same, the correct address of the assessee was as follows: - 1B, Court Chambers, 35, Sir Vithaldas Thackersey Marg, New Marine Lines, Mumbai - 400 020 In support of correct address, copy of relevant extracts of this address as registered with Registrar of Companies was placed on record. It was submitted that the building Court Chambers was an office building housing a large number of commercial offices related to various businesses and the assessee was occupying a single office unit in this large complex. Mere writing of the name of building & without mentioning the proper and correct office number or even the floor number, it could possibly not lead to delivery of any correspondence to assessee's office. The attention was also drawn to the fact that in earlier years, the income tax returns were duly filed with proper and correct address and despite having full and complete address, Ld. AO kept on sending notices at incomplete address and the communications / notices were returned undelivered many times and could not be served to the assessee wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncements to support the same, which have already been extracted in the quantum assessment order. The attention was also drawn to the fact that investment made by the stated share applicant viz. M/s Deevee Commercial Ltd. was genuine and supported by cogent documentary evidences. 3.7 However, not convinced with assessee's submissions, Ld. AO proceeded to reassess the income of the assessee and issued notice u/s 142(1) along with questionnaire on 28/01/2016 directing assessee to file the requisite information / explanations in support of the transactions. The assessee pointed out that the persons whose statements were being relied upon by the revenue to draw adverse inference against the assessee was retracted subsequently and therefore, the same alone could not form the basis to make additions. The assessee also submitted that details of share applicant along with their respective address, number of shares issued, face value per share and share premium received against the same. These details have already been extracted in para 12.1 on page No. 24 of the quantum assessment order. Notices u/s 133(6) were issued to all 10 share applicants, out of which 8 parties responded to the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribers showing payment towards share subscribed ix) NBFC registration certificate of share subscribers wherever applicable x) Bank statement of Appellant Company reflecting share capital received during the year xi) Return of Allotment in Form-2 filed with Registrar of Companies Reliance was placed on various judicial pronouncements in support of the submissions. It was also reiterated that the additions were being made merely on the basis of third-party statements made during survey proceedings which were retracted later on in view of the fact that the statement was given under pressure and to buy peace of mind. 4.2 The Ld. first appellate authority concurred with assessee's stand on merits that Ld. AO heavily relied upon third-party statements who were later on retracted and therefore, the same alone were not sufficient to invoke Section 68 against the assessee. It was further observed that Ld. AO failed to demonstrate as to how unaccounted money was brought in to the channel and how the transactions were not genuine. No independent inquiries were made to bring out any evidence on record to establish the dubious character of the said cash credit. Since the assessee d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the position of notice stated to be served by affixture on 09/07/2015. Therefore, the jurisdictional requirement of Section 149 was not complied with by the revenue and therefore, the proceedings were bad in law. Reliance has been placed on the following judicial pronouncements in this regard: - i) Hon'ble Chhattisgarh High Court in Ardent Steel Ltd. Vs ACIT 405 ITR 422 ii) Hon'ble Delhi High Court in PCIT Vs Atlanta Capital Pvt. Ltd. ITA 665-666 of 2015 5.2 Coming to service of notice, it has been emphasized that Section 148 envisages service of notice before making assessment, reassessment or re-computation u/s 147. The notice, as per Ld. AR, was never served upon assessee since the notice issued on 10/03/2015 was undisputedly returned back by postal authorities with remarks incomplete address / not known. Thereafter, the revenue adopted the mode of affixture for service of notice as per Section 282(1)(b) of the Act i.e. in the manner prescribed under the Code of Civil Procedure, 1908 for the purposes of serving of summons. Accordingly, ward inspector was deputed to affix the notice at assessee's premises and as per inspector's report, the notice is alleged to have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s before lower authorities. 5.4 Per contra, Ld. Departmental Representative, through oral submissions as well as on the strength of written submissions, pleaded that the letter dated 23/07/2015 was received by the assessee on the same address as given in notice dated 10/03/2015 and therefore, the notice was validly issued as well as served upon assessee as per law. On merit, reliance has been placed, inter-alia, on the recent decision of Hon'ble Apex Court rendered in PCIT Vs. NRA Iron & Steel Private Limited [Civil Appeal No. 29855 of 2018 dated 05/03/2019] to submit that deletion of additions by Ld. first appellate authority was not justified. 6.1 We have carefully heard the rival submissions and perused relevant material on record including judicial pronouncements cited before us. Since the assessee's appeal contest the very jurisdiction of Ld. Assessing Officer and goes to the root of the matter, we take up the same first. After perusal of material on record, the undisputed position that emerges is that notice issued u/s 148 for the first time on 10/03/2015 was returned back by postal authorities on 16/03/2019 with remarks incomplete address / not known after two unsuccessf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not been substantiated with signatures of any independent witness. Thereafter, notice sent u/s 142(1) at the same address has also been returned back, as it would have been. 6.3 The only communication, which is shown to have been served on the assessee on 30/07/2015, is the letter dated 23/07/2015, the contents of which has been reproduced below: - GOVERNMENT OF INDIA OFFICE OF THE Asst. COMMISSIONER OF INCOME TAX, CIRCLE l(3)(l), MUMBAI. Room No. 540, M. K. Road, Aayakar Bhavan, Mumbai - 400 020. ------------------------------------------------------------------------------------------------------------------------------ No. DCIT-l(3)(l)/Req./2015-16 Date: 23.07.2015 PAN-AALCS2054 G To, The Principal Officer M/s Sweet Memories Properties Pvt. Ltd, Court Chambers, 35, Sir V.T. Marg Mumbai 400020 Sub: Request to file the return in response to the Notice u/s 148 of the Act. Sir/Madam, Notice under section 148 of the Income Tax Act was issued to you on 10.03.15, however this office has not received any proper reply from your side in response to the said notice as to filing Return of Income for the assessment year 2008-09. Kindly note that thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering catena of judgment on the subject, has succinctly dealt with identical issue in the following manner: - Service of notice a jurisdictional requirement 24. The Court first would like to deal with the question whether notice under Section 148 of the Act is a jurisdictional requirement. The relevant portion of Section 148 (1) reads as under: "148. Issue of notice where income has escaped assessment. - (1) Before making the assessment, reassessment or recomputation under Section 147, the Income-tax Officer shall serve on the Assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of Section 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section." 25. The Supreme Court in R.K. Upadhyaya (supra), explained that there was a distinct shift in the scheme of the provisions of the 1961 Act in comparison with the corresponding provision i.e. Section 34 under the 1922 Act under which the mandatory requirement was that both the issuance and service of notice had to be completed within the prescribed period. Consequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the father of the Assessee who was neither an agent of the Assessee nor authorized to accept notices on their behalf. The Court, relying on the decision in N. Narayana Chetty (supra) observed: "There is no doubt that a notice prescribed under section 148 of the Act for 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 147. 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." 29. In Hotline International (P) Ltd. (supra) this Court held that affixation of notice on an address at which the security guard of the Assessee-company refuses to receive such notice cannot be construed to be a proper service of notice under Section 148 of the Act. The security guard was not an agent of the Assessee and therefore, the reassessment proceedings were held to be bad in law. 30. In Dina Nath v. CIT [1994] 72 Taxman 174 (J. & K.) the notice under Section 143 (2) of the 1961 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiation of reassessment proceedings and a condition precedent for the validity of the notice." It was held that the Tribunal was not right in holding that the notices under Section 148 addressed as 'SCR' and the karta 'S' were valid notices for reassessing the income of the HUF 'MM' or 'MS' or its successors. Onus on Revenue to prove service of notice 34. There is sufficient judicial authority for the proposition that the burden of showing that service of noticed has been effected on the Assessee or his duly authorized representative is on the Revenue. These include Fatechand Agarwal v. CWT [1974] 97 ITR 701 (Ori.) and Venkat Naicken Trust v. ITO [1999] 107 Taxman 391/[2000] 242 ITR 141 (Mad). In CIT v. Thayaballi Mulla Jeevaji Kapasi [1967] 66 ITR 147 (SC), the Respondent to whom the notice was directed was not in town. The only information which the process server had was that the Respondent was either in Bombay or Ceylon. Thereafter, the process server affixed the notice on the business premises of the Respondent. The Supreme Court affirmed the essential principle that "if no notice was served within the period, the Income-tax Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on made by the principal to third parties." On the facts of the case, the said doctrine was held not to bind the LIC against third parties who may have been unaware of the lack of authority of the agent to whom they handed over the premium cheques. In the present case, however, the Revenue has not been able to show that the Assessee held out Mr. Ved Prakash to be his employee or agent. 37. No attempt appears to have been made by the Revenue to serve the Assessee at the address provided by him i.e. "c/o Jagat Theatre, Sector 17, Chandigarh". All the notices were addressed to him at the address "C/o Kiran Cinema, Chandigarh" which was in Sector-22. Therefore, this is not a case where an attempt was made by the Revenue to serve the Assessee at his known address, and upon not finding him there the Revenue learnt of the address where he would be found. Merely because other notices sent to the 'Assessee group' were received by the employees of Kiran Cinema it does not automatically lead to the inference that the Assessee's place of business was also Kiran Cinema. In any event, there could not be an inference that Mr. Ved Prakash was duly empowered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee who was not authorized to accept such notice. Subsequently, the General Manager of the Assessee applied for extension of time for filing the return, which was allowed by the ITO. However, the return was not filed within the extended time and an ex parte order was passed. Before the High Court it was contended that the employee on whom the service of the notice was found to have been made was not duly authorized to accept such notice and that the mere fact that the General Manager of the firm applied for time, would not render the service of notice on the employee a valid and a legal service. It is contended that the Assessee had not denied service of notice on such employee. The High Court however negatived the plea of the Revenue and held that in the absence of finding by the Tribunal that the employee of the Assessee was authorized to accept such service on behalf of the Assessee, notice could not be said to have been duly served upon the Assessee. It was held that "acquisition of knowledge in regard to the issuance of a notice under Section 22 (2) of 1922 Act could not be considered to be equivalent to, or a substitute for, the service of the notice on the Assessee." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial year "in which the notice under Section 148 was served." Therefore, the service of notice is a pre-condition to finalising the reassessment. Section 292 BB not attracted 45. In the present case, prior to the completion of the reassessment, the Assessee has raised an objection that he has not been duly served in accordance with Section 148 of the Act. Consequently, the proviso to Section 292 BB is attracted and Revenue cannot take advantage of the main portion of Section 292 BB. In any event, as rightly pointed out by Mr. Vohra, and as held by the Special Bench of the Tribunal in Kuber Tobacco Products (P.) Ltd. v. Dy. CIT [2009] 28 SOT 292 (Delhi) (SB), Section 292 BB which was introduced with effect from 1st April 2008 and is prospective. Conclusions 46. To summarize the conclusions: (i) Under Section 148 of the Act, 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 AO to exercise jurisdiction to reopen an assessment, notice under Section 148 (1) has to be mandatorily issued to the Assessee. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal stand allowed in terms of our above order. 7. Since the assessee succeeds on legal grounds and we have already quashed the re-assessment proceedings against the assessee, considering the revenue's appeal, on merits would become merely academic in nature and we see no fruitful reason to delve into the same. Therefore, the appeal stands dismissed, being infructuous. 8. In nutshell, the assessee's appeal stands allowed whereas the revenue's appeal stands dismissed. Cross Appeals: M/s Stroll Properties Pvt. Ltd. & M/s Sitilite Properties Pvt. Ltd. 9. Both the representatives converge on the point that the facts in cross-appeals in the case of these two assessee are quite identical in all respect. Identical arguments have been sought to be raised under these appeals. The assessment order as well as impugned order is on identical lines. The assessee as well as revenue are in appeal with identical worded grounds of appeal. The address of all the assessee is common. Therefore, our observations, conclusion, adjudication as given in main appeal mutatis mutandis applies to these cross appeals also. Resultantly, the appeal of both the assessee's stand allowed whereas the two ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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