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TMI Blog2022 (4) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... was issued. 1.3 The learned CIT(A) has erred in holding that the service of notice u/s. 148 at wrong address by affixture inspite of Notice Server's report that the assessee does not stay at the given address is a valid service. 2 The learned CIT(A) has erred in holding that the disposal of objections raised by the assessee to the reasons recorded at the time of reopening is not must and it does not hold the assessment bad. 3 That the learned CIT(A) has erred in holding that the AO acquired valid jurisdiction even if he does not issue notice u/s. 143(2) after the assessee files return in response to notice u/s. 148. 4 The learned CIT(A) is not justified in conforming the addition of Rs. 22,00,000/- made by the AO. 5. Any other ground which may be raised at the time of hearing." 2. Succinctly stated, on the basis of information available with the A.O. that the assessee had purchased 22,000 shares of Lakhanpal Designs Pvt. Ltd., Ghaziabad for a consideration of Rs. 22 lac, the case of the assessee was reopened u/s. 147 of the Act. Notice u/s. 148, dated 11.03.2015 was issued and served by affixture. 3. On a request by the assessee, copy of the reasons to believe on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdiction that was assumed by the A.O. for reopening his case u/s. 147 of the Act, inter alia, on the ground that Notice u/s. 148 was not validly served upon him. It was claimed by the assessee, that it was only when the counsel of the company, viz. M/s. Lakhanpal Designs Pvt. Ltd., Ghaziabad of which he was a shareholder, was informed by the A.O. about the reassessment proceedings that were initiated in the case of the assessee, it was only then, that the said counsel had after getting the necessary instructions from the assessee participated in the assessment proceedings, and had after obtaining the copy of the 'reasons to believe' on the basis of which the assessee's case was reopened filed his objections as regards the validity of the reassessment proceedings. Apropos the objections filed by the assessee in the course of the assessment proceedings, it was submitted by him that the A.O. had failed to dispose off the same by way of a speaking order. Also, it was the claim of the assessee that the impugned assessment order, i.e., u/s. 148 r.w.s. 143(3), dated 30.03.2016 was passed by the A.O. de hors issuance of any Notice u/s. 143(2) of the Act. 5. Elaborating on h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sustainability of the assessment order passed by him u/s. 148 r.w.s. 143(3), dated 30.03.2016, i.e., in the absence of issuance of a Notice u/s. 143(2) of the Act. Apart from that, the assessee assailed the merits of the addition of Rs. 22 lac made by the A.O. 6. Backed by the aforesaid claim of the assessee, the CIT(A) called for a 'remand report' from the A.O. In reply, the A.O. rebutting the assessee's claim that the Notice u/s. 148, dated 11.03.2015 was sent at a wrong address, viz. 1-B, Guru Teg Bahadur Nagar, Jalandhar, therein stated, that as the assessee on an earlier occasion had in compliance to summons that were issued to him at the aforesaid address by the ADIT(Inv.), Jalandhar, had attended the proceedings before the said officer, therefore, it was incorrect on his part to now claim that the very same address to which the Notice u/s. 148, dated 11.03.2015 was addressed was an incorrect address. It was further stated by the A.O., that the assessee in his reply dated 26.11.2011 that was filed in the course of the proceedings before the ADIT(Inv.), Jalandhar, had stated that the aforesaid address, viz. 1-B, Guru Teg Bahadur Nagar, Jalandhar, where the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onouncements that have been pressed into service by them in their attempt to drive home their respective contentions. Controversy involved in the case before us lies in a narrow compass, i.e., whether or not the Notice u/s. 148, dated 11.03.2015 had validly been served upon the assessee? Admittedly, the answer to the aforesaid issue would have a strong bearing on the sustainability of the assessment in hand. As noticed by us hereinabove, it is the claim of the assessee that as the A.O. without exercising his diligence as regards verifying the whereabouts of the assessee, had despite having been informed by the notice server vide his report that no person by the name as that of the assessee was residing at the property to which the aforesaid Notice u/s. 148, dated 11.03.2015 was addressed, without putting up any efforts to locate the whereabouts of the assessee, which he could have easily gathered by going no further but referring/consulting the assessment records of the assessee, had however, most arbitrarily by way of an idle formality, or, in fact, an eye wash, got the Notice u/s. 148, dated 11.03.2015 served by way of affixture at the said wrong address. Although, the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) No notice under section 148 shall be issued for the relevant assessment year,-- [(a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) [or clause (c)]; (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year;] [(c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.] Explanation.--In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section.]." Insofar the mode and manner of service of a notice issued under Sec. 148 of the Act is concerned, the same can be traced in Sec. 282 of the Act and Rule 127 of the Income-tax Rules, 1962, which reads as under: "282(1) The servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of addressee being a company, address of registered office as available on the website of Ministry of Corporate Affairs: Provided that the communication shall not be delivered or transmitted to the address mentioned in items (i) to (iv) where the addressee furnishes in writing any other address for the purposes of communication to the income-tax authority or any person authorised by such authority issuing the communication: [Provided further that where the communication cannot be delivered or transmitted to the address mentioned in items (i) to (iv) or any other address furnished by the addressee as referred to in first proviso, the communication shall be delivered or transmitted to the following address: (i) the address of the assessee as available with a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of the said Act); or (ii) the address of the assessee as available with the Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898); or (iii) the address of the assessee as available with the insu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 148, dated 11.03.2015 was issued 3 ½ years subsequent to the date of the aforesaid reply dated 26.11.2011, therefore, the same could not have been blindly acted upon by the A.O. Our aforesaid conviction is all the more fortified by the fact that the notice server having failed to effect the service of the Notice u/s. 148, dated 11.03.2015, had returned the same with a report, viz. viz. "Shrimaan Ji, is kothi mein is naam ka kohi nahin hai" (that no one by the said name is available at this address), which thus clearly did cast an obligation upon the A.O. to have made necessary verifications as regards the whereabouts of the assessee, which we are afraid he had most arbitrarily dispensed with, and instead, by way of an idle formality got the same served by way of affixture at the aforesaid wrong address. At this stage, we may herein observe, that if the A.O. would have done the bare minimum that was expected of him, i.e., consulted/referred to the assessment record of the assessee, i.e., his returns of income, PAN data, Form No. 26AS etc., then, the correct present address of the assessee could have easily been gathered by him. In fact, as per Rule 127(2)(c)(i) & (iii) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt from the judgment of the Hon'ble High court of Bombay in the case of Harjeet Surajprakash Girotra Vs. Union of India (2019) 108 taxman.com 491 (Bom), wherein the Hon'ble High Court had after relying on a host of judicial pronouncements, concluded, that in the absence of service of notice before the last date envisaged u/s. 149 of the Act, the reopening of the assessment would be invalid in the eyes of law. The Hon'ble High Court while concluding as hereinabove had after drawing support from the various judicial pronouncements observed as under: "7. As is well known, section 147 of the Act pertains to income escaping assessment. In terms of sub-section (1) of section 147, if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and any other income chargeable to tax which has escaped assessment. Section 148 of the Act pertains to the issue of notice where income has escaped assessment. Sub-section (1) of section 148 provides that before making assessment or recomputation under section 147, the Assessing Officer shall serve on the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and may proceed to reassess such income, profits or gains". The argument is that the service of the requisite notice on the assessee is a condition precedent to the validity of any reassessment made under Section 34; and if a valid notice is not issued as required, proceedings taken by the Income Tax Officer in pursuance of an invalid notice and consequent orders of reassessment passed by him would be void and inoperative. In our opinion, this contention is well-founded. The notice prescribed by Section 34 cannot be regarded as a more procedural requirement; it is only if the said notice is served on the assessee as required that the Income Tax Officer would be justified in taking proceedings against him. If no notice is issued or if the notice issued is shown to be invalid then the validity of the proceedings taken by the Income Tax Officer without a notice or in pursuance of an invalid notice would be illegal and void. That is the view taken by the Bombay and Calcutta High Courts in the CT v. Ramsukh Motilal and R.K. Das & Co. v. CT and we think that that view is right." 10. In the case of Shanabhai B. Patel vs. R.K. Upadhyaya, Income Tax Officer, Ahmedabad reported in (1974) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice". In our opinion, therefore, these words, "service of notice" or "issuance of notice", have no fixed connotation but are interchangeable, as held by the Supreme Court in Banarsi Debi's case. The Division Bench of this court in Induprasad Devshanker Bhatt v. J.P. Jani, Income-tax Officer, Circle IV, Ward-O, Ahmedabad, was dealing with a similar contention that the words "issue" and "service" as used in section 34 cannot be equated with each other and that the stage of issue of notice is a distinct and different stage from the stage of service of notice. Mr. Justice Bhagwati (as he then was) observed as under: "Now, it is undoubtedly true that, according to the decision of Desai C.J., as he then was, and Miabhoy J. in Madanlal Mathurdas v. Chunilal, Income-tax Officer, the words 'issue' and 'serve' as used in section 34 cannot be equated with each other and that the stage of issue of notice is a distinct and different stage from the stage of service of notice and ordinarily this decision being a decision of a Division Bench of this court would be binding upon us, but having regard to the subsequent decision of the Supreme Court in Banarasi Debi v. Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod under section 149 even though the same may not be served upon the assessee. He also submits that by dividing the provisions of section 34 of the 1922 Act in the 1961 Act, the intention of the legislature has become clear. We express our inability to accept the contention of the learned counsel for the Revenue. A reading of sections 148 and 149 clearly shows that the Income-tax Officer cannot assume jurisdiction to make assessment, reassessment of recomputation unless the notice has been issued and served within the time limit prescribed under the aforesaid sections. The same question came up before a Division Bench of the Gujarat High Court in Shanabhai P. Patel v. R.P. Upadhyaya, income-tax Officer, B.K. Mehta J., while speaking for the court, observed as follows: "Sections 147, 148 and 149 of the Income-tax Act of 1961 confer the power of reassessment on the Income-tax Officer. This scheme of power was originally comprehended in the provisions of section 34 of the Act of 1922. The division of the provisions contained in section 34 of the 1922 Act into sections 147, 148 and 149 in the Act of 1961 does not in any way indicate that the legislature intended to depart from or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... address. After receiving the envelope containing the notice from the postal department, till 31.3.2018 which was the last date for service of such notice, the department took no further steps. In this background, the question is can the Department contend that there was due service of the notice. 13. Section 282 of the Act pertains to service of notice generally and reads as under: "Service of notice generally. 282. (1) The service of a notice or summon or requisition or order or any other communication under this Act (hereafter in this section referred to as "communication") may be made by delivering or transmitting a copy thereof, to the person therein named,- (a) by post or by such courier services as may be approved by the Board; or (b) in such manner as provided under the Code of Civil Procedure, 1908 (5 of 1908) for the purposes of service of summons; or (c) in the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000 (21 of 2000); or (d) by any other means of transmission of documents as provided by rules made by the Board in this behalf. (2) The Board may make rules providing for the addresses (including the address ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Provided further that where the communication cannot be delivered or transmitted to the address mentioned in item (i) to (iv) or any other address furnished by the addressee as referred to in first proviso, the communication shall be delivered or transmitted to the following address:- (i) the address of the assessee as available with a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of the said Act); or...." 16. As per sub-rule (1) of Rule 127 for the purposes of sub-section (1) of section 282, the addresses to which a notice or a summons, etc. may be delivered or transmitted, shall be as per the sub-rule (2). Clause (a) of sub-rule (2) of Rule 127 includes four sources of address for such transmission. First one being the address available in PAN database of the addressee. It was at this address that the notice in question was despatched. The first proviso to sub-rule (2) provides that the said communication shall not be delivered at any of the above mentioned addresses where the assessee has furnished any other address for such purpose, which is not i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beyond the prescribed period of 6 years from the end of the relevant assessment year which had expired on 31.03.2015, therefore, respectfully following the aforesaid judgment of the Hon'ble High Court of Bombay in the case of Harjeet Surajprakash Girotra (supra), we are of the considered view, that the A.O. had invalidly assumed jurisdiction for reopening the concluded assessment of the assessee company and passed the reassessment order u/s. 148 r.w.s. 143(3), dated 30.03.2016. At the same time, we may herein observe, that our aforesaid view is subject to our observations recorded herein below. 11. In the backdrop of our aforesaid deliberations, we are of the considered view that as the A.O. had failed to validly serve the Notice u/s. 148, dated 11.03.2015 on the assessee, therefore, he had invalidly assumed jurisdiction and framed the assessment u/s. 148 r.w.s. 143(3), dated 30.03.2016. But then, we may herein observe, that as per Sec. 292BB of the Act as had been made available on the statute w.e.f. 01.04.2008, and is applicable to the case of the assessee before us, if an assessee had not raised any objection in the course of the assessment proceedings as regards the servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself it is crystal clear that the notice has been issued at an address at which I was not residing at that time and even your notice server has reported that there is no such person at the given address. It appears that the notice has been issued without going through my return of income. Had it been taken into consideration, the notice would have been issued at the proper address. It is a trite law that notice served at a wrong address is nothing but nullity and needs to be filed. The same being the case here it is prayed that the notice may please be filed." Letter dated 08.03.2016: "Had the record of the assessee been followed by the A.O., the notice under s. 148 would not have been served on wrong address and that too by affixture. Even after report of Notice Server that no one resides at the given address, the affixture was made at the same address. No effort was made to see the address of the assessee from the return and issue the notice at proper address." In so far the respective 'order sheet' entries dated 25.02.2016 and 08.03.2016 are concerned, we find that the same as reproduced at Page 16 of the order of the CIT(A) though refers to the atte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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