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TMI Blog2005 (3) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... s)-I has also erred in holding that, under section 147, it is sufficient to confer jurisdiction notice if it is issued within the period of limitation. (b) Because Commissioner of Income-tax (Appeals)-I has erred in considering section 147 in isolation with section 148(1) which provides that before making the assessment or re-assessment that shall serve on the assessee a notice. (c) Because notice under section 148 confers jurisdiction and has to validly served on the assessee or on his authorized agent. 4. (a) Because the Learned Commissioner of Income-tax Appeals-I has also erred in interpreting the provision of section 282 only on the basis of head note which uses the word 'Generally'. (b) Because sub-section (1) of section 282 statutorily provide the manner in which the notices may be served and in the assessee's case notice under section 148 had not been served in the manner provided. 5.(a) Because the Learned Commissioner of Income-tax Appeals-I has also erred in holding the ex parte assessment valid, as notice under section 142(1) had been served. (b) Because the service of notice under section 142(1) does not confer jurisdiction or cure the defect in the foundational ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this fact. 4.3 Thereupon the Assessing Officer issued a notice under section 148 of the Act on 15-9-1998 for the assessment year 1988-89, which, admittedly, was served on one Shri M.K. Tyagi, Chartered Accountant, who put his signatures in the capacity of 'AR' (Authorized Representative). The service effect was on Shri M.K Tyagi on 9-11-1998. As per this notice, the assessee was required to file its return of income for the assessment year 1988-89 within a period of 30 days from the date of service. But, admittedly, this notice also remained uncomplied with. Thereafter, the Assessing Officer issued notice under section 142(1) of the Act on 8-3-2001 and was sent to the assessee by registered post. Another notice under section 142(1) of the Act dated 12-3-2001 was also issued at the assessee's local address, whereby the date of hearing was fixed for 16-3-2001, but both these notices under section 142(1) also remained uncomplied with However, an application dated 22-3-2001, alongwith Vakalatnama in favour of Shri Anupam Sinha, was received in Assessing Officer's office asking for Xerox copies of the documents available on record, which were made available to the assessee's Authorized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to by the CIT(A) in para 3.8 of the appellate order. However, the ld. CIT(A) again considered the issue in presence of the Assessing Officer and accepted the Assessing Officer's stand that he had seen a power of attorney executed by the assessee in favour of Mr. M.K. Tyagi, Chartered Accountant. The relevant observations of the ld. CIT(A) as contained in para 3.13 are again reproduced below:- "The Assessing Officer pointed out that there was a power of attorney in favour of Shri M.K. Tyagi, CA signed by the assessee, particularly for the year under consideration. Even though it Was not challenged by the learned representative of the appellant in the written rejoinder filed, the same was vehemently denied to be present on the case records during the course of hearing in presence of the present Assessing Officer. The Assessing Officer before me, in presence of the counsel of the appellant, stated that he had seen the letter of authority with his own eyes before sending his report dated 20-2-2002. I am inclined to agree with the Assessing Officer. He had no reason to mention any fact, which was not correct. The Assessing Officer had taken over the charge of this case quite recently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural requirement. It was a condition precedent to the initiation of a proceeding for the assessment under section 147. The appellant has relied on the following decisions: (i) CIT v. Thayaballi Mulla Jeevaji Kapasi [1967] 66 ITR 147 (SC) (ii) CIT v. Iskwar Singh & Sons [1981] 131 ITR 256 (Cal.) (iii) Madan Lal Agarwal v. CIT [1983] 144 ITR 745 (All.) (iv) CIT v. Har Prasad [1989] 178 ITR 591 (Punjab) (v) P.N. Sasikumar v. CIT [1988] 170 ITR 80 (Ker.) (vi) Kunj Bihari v. ITO [1983] 139 ITR 73, 76 (Punjab) (vii) Addl. CIT v. Prem Kumar Rastogi [l986] 124 ITR 381 (All.) (viii) CIT v. Girdhari Lal [1984] 147 ITR 379 (Raj.) 3.3 The Assessing Officer in his comments has submitted as under: '...It is not correct that determined share of the assessee in the firm for the assessment year 1988-89 was Rs. 36,390. In this respect it is submitted that the assessee has not disclosed before your honour the factual position correctly. Originally the assessment of the firm was completed under section 143(3) in which share of the assessee was determined at Rs. 36,390 but later on assessment of the firm was revised under section 251 and thereafter finally under section 143(3)/154/251 on 31-3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irection to file Income-tax return on 20-3-2001. Nobody attended on 20-3-2001. However, on 22-3-2001 Shri Anupam Sinha, advocate attended with authority and requested for inspection of file. Inspection was allowed and the case was adjourned to 23-3-2001. On 23-3-2001 also no body attended the hearing nor any application seeking adjournment was received. It was under these circumstances that the assessment was completed under section 144 as the assessment was getting barred by limitation. The Assessing Officer has pointed out that the assessee and his firm were being assessed to tax since long and his share in the firm was determined above the taxable limits and therefore he must have been expecting action under section 148 but he intentionally avoided filing of return both before the receipt of the show-cause notice and after the receipts of the show-cause notice as well the notice under section 148. 3.6 The learned representative of the appellant in his rejoinder has made no comments on the facts of the case as given by the Assessing Officer. The appellant has again challenged the service of the notice and quoted the following case laws in his support: (i) Fatehchand Agarwal v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the learned representative of the appellant and the facts as pointed out by the Assessing Officer and not disputed by the learned representative of the appellant. The facts of the case are that the appellant is a partner in the firm M/s. Doneria Cold Storage & Ice Factory, Agra. The assessment in the case of the firm was completed under section 143(3) in which the share of the assessee was determined at Rs. 36,390. The assessment of the firm was however, later on revised and finally determined share of the appellant came to Rs. 76,787. Thus, the claim of the appellant that the determined share was Rs. 36,390 is only giving the facts partly and thus misleading. The Assessing Officer has clarified this matter and the appellant has not challenged this. It is also argued by the appellant that the period of 9 years had elapsed before the notice under section 148 was issued. In fact the order under section 143(3)/154/251 was passed on 31-3-1997 in the case of the firm determining the income at Rs. 3,90,970. Thus, the appellant was very much aware about its determined share. The matter was not as old as the learned representative of the appellant would like me to believe. The Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; -sd- 22-3-2001. 3.10 From these facts it is clear that the notice was properly served on the authorized representative of the assessee. In Response to notice under section 142(1) Shri Anupam Sinha, Advocate attended. It would have been a very embarrassing situation if the Assessing Officer had asked him to come and appear only after filing proper Vakalatnama. I am emphasizing this fact to derive home the point that the regular counsel of the appellant are generally heard and entertained by the Officers of the department even without the Vakalatnama being filed. The assessment orders are not passed ex parte on taking technical grounds of non-compliance. The appellant was aware of its liability to file the return of Income-tax for the assessment year 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, Agra which is the jurisdictional ITAT has held as under: 'The service of notice under section 148 on the son of the assessee was a valid service. It was not a case of granting concession of jurisdiction to a person where the conditions necessary for invoking the provisions of section 148 were not complied with. There was another reason for such view. Section 282 which provides for procedure for service of notice has its title "service of notice generally". The use of the word "generally" indicates that it is not mandatory that notice has to be served on the assessee itself. It can be served on others in the special circumstances. The purpose for issue of such notice is that the assessee must be aware of its responsibility and liabilities. So that he can defend himself from the impending action. Section 282 has used the word "may". This word gives certain leverage to the Assessing Officer regarding service of notice. Section 282 also has not indicated the procedure for service of notice in case of an individual. If somebody went by the logic of the assessee, no notice could be served on the employees of the individual. That was never the intention of section 282.' 3.13 While gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions quoted by the appellant have been considered by the ITAT in the case of Chandra Bhan Bansal v. DCIT reported above. I will discuss some of the other cases to show as to how the facts of those cases are difference from the facts of the present case. I start with the decision in the case of P.N. Sasi Kumar v. CIT 170 ITR 80 (Ken). In this case notice of reassessment of an A.O.P. was issued to a member without specifying where it was on the member or principal officer of A.O.P. It was on these facts that the following question was referred before the Hon'ble High Court 'Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was justified in coming to the conclusion that the proceedings vide notice dated September 2, 1977 were validly initiated. (2) whether on the facts and in circumstances of the case the Appellate Tribunal had material to come to the conclusion that the notice issued to the individual was only a mistake curable and not one which affects the jurisdiction although the assessment was made in the status of an "Association of persons".' The facts of the present case are totally different there is no doubt regarding the identity or the status of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal. The question before the Hon'ble High Court was whether the appeal was within time. The Hon'ble High Court in this case decided that the ITAT was justified in holding that the appeal was within time. Thus, the question referred to the High Court pertained to the service of the assessment order and the delay in filing the appeal. In the present case no prejudice has been caused to the appellant in the matter of any of its legal rights. The Assessing Officer had been given enough opportunities to present its case. The assessment has been completed on a determined share about which there is no dispute. Thus, the assessment order passed by the Assessing Officer is valid and also the service of notice is held to be valid. 3.16 In the case of CIT v. Girdhari Lal [1984] 147 ITR 379 (Raj.) the question before the Hon'ble High Court was whether the authorized representative was authorized to appear in the proceedings under section 263 when normal assessment proceedings were completed. In the present case the facts are different. The proceedings are under section 148 for reassessment. These are, therefore, assessment proceedings and, thus, the facts of the case relied upon by the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal, Room No. 314, Ayakar Bhawan, Agra. Phone: 2155866 Dated: 14-1-2003 To The Asstt. Registrar, Income-tax Appellate Tribunal, Agra. Sir, Subject: ITA Nos. 151 & 152/Agra/02 - Appellate proceedings in the case of Rajeev Kumar Doneria C/o M/s. Doneria Cold Storage & Ice Factory, F-19, Kamla Nagar, Agra. Assessment year 1988-89: The above appeals have been fixed for hearing on 24-1-2003. In connection with the same kindly find enclosed affidavit of Shri S.H. Rizvi, Central Circle, Agra [the then ACIT-4(1)] dated 23-12-2002 in support of the submissions made by the Assessing Officer before the ld. CIT(A)-II, Agra. The affidavit may kindly be placed on record for kind consideration of the Hon'ble Members. Yours faithfully &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; Agra Bench, Agra." Affidavit: "Before the Income-tax Appellate Tribunal, Agra Bench, Agra. Affidavit of S.H. Rizvi, Assistant Commissioner of Income-tax, Central Circle, Agra. I, S.H. Rizvi son of Late Sri Abdul Jabbar Rizvi aged 49 years resident of Flat No. 1, Block No. 25, Sanjay Place, Agra, solemnly affirm as under: 1. That during the financial year 2001-02 I was posted as Assistant Commissioner of Income-tax 4(1), Agra. 2. That in the case of Sri Rajeev Kumar Doneria Partner of M/s. Doneria Cold Storage & Ice Factory, Fatehabad, Agra R/o F-19 Kamla Nagar, Agra for the assessment year 1988-89 an appeal was pending before the learned CIT (Appeals), Agra. 3. That the learned CIT (Appeals) required my comments on the written submission filed by the assessee during the hearing of appeal and, therefore, the case record for the assessment year 1988-89 was put up before me and comments based on the documents available on records were forwarded by me to the learned CIT (Appeals), Agra. 4. That when I signed the report containing my comments a power of attorney in favour of Sri M.K. Tyagi, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our Sir, as could be seen from the impugned order of the Ld. CIT(A) great importance has been attached to Sri M.K. Tyagi appearance before the CIT(A) in the case of erstwhile firm of the assessee as late as on 23-4-1998. It has also been said that assessee is one of the partner in that firm and the proceedings are said to be the same assessment year. (v) Your Honour Sir, it is submitted that Power of Attorney has limited application and though it is said to for the same assessment year yet it cannot be extended to any other proceedings for the same assessment year in respect of a different assessee. (vi) That the Income-tax Act recognizes the dual capacity of the assessee one as a partner in the firm and the other one as an individual. That further a Power of Attorney authorizes to represent the assessee before authorities, it does not authorizes to receive notices of any other proceedings that may be taken up by the department in future. (vii) That your Honour Sir, as could be appreciated from the facts of the case that there is no whisper in the order of CIT(A) that Sri M.K. Tyagi ever appeared before the Assessing Officer in connection with the proceedings under section 148 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional notice and which gives jurisdiction to the Assessing Officer to make the assessment. When the jurisdiction was not properly acquired by the Assessing Officer further incidental powers if exercised if without jurisdiction and as such any order passed in furtherance of a notice which is proved to have never been served any such order is void ab initio. Section 149 of the IT Act as referred by the CIT(A) has no relevance to the controversy in question. (xiii) That further the CIT(A) has held that since assessees counsel has attended the proceedings before the Assessing Officer and also carried out inspection of file so the very purpose of serving notice is to bring the proposed proceedings to the knowledge of the assessee is fulfilled and now the issue of service of notice cannot be challenged. (a) With respect to above observation of the CIT(A), the ld. Counsel submitted that in this connection It was submitted before the authorities below that assessee attended the proceedings in compliance with notice dated 22-3-2001 under section 142 and such compliance cannot be equated with having knowledge of the proceeding under section 148, and in this connection, your Honour's attent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble ITAT, Agra Bench, Agra has confirmed to settle the legal position that service of notice on major son is a valid service. It was upon these facts that the service of notice in the case of Chandra Bhan Bansal was held to be a valid service. (xvi) That further the authorities below has relied upon the judgment of Chandra Bhan Bansal's case in which it has been held that notice need not be served on the assessee himself, it can be served on others, in these special circumstances. (xvii) It would be highly improper to place reliance to this part of the order as though the Hon'ble Bench, has authorized that notice can be served on others but a condition is attached to it and that is it can be but in the special circumstances. That so far no special circumstances, is brought on records so as to necessitate service of notice on an authorized person. It is pertinent to mention here that prior to and post issuance of notice under section 148, all notices/letters were either been served in person or through registered post. So in the circumstances, reliance place to the judgment of Chandra Bhan Bansal is misplaced. (xviii) That further the authorities below has relied to the judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reliance can be placed to the above referred authorities. 6.2 Reliance was further placed on the following decisions - specially the observations extracted thereunder:- (i) Addl CIT v. Prem Kumar Rastogi [1980] 124 ITR 381 (All.) Observations: "The fact that in the past notices used to be served on R and the assessee never took any objection that the services of notices on R were improper and invalid shall not make R an authorized or recognized agent of the assessee. On the findings, R was neither a recognized nor an authorized agent, nor an agent who was carrying business of the assessee. He was not an adult member of the assessee family. Delivery of notice to R was not valid according to the provisions of CPC. That delivery of the Notice on R was not a valid service." (ii) CIT v. Girdharilal [1984] 147 ITR 379 (Raj.) Observations: "Revision - Opportunity of being heard - Power of Attorney given contemplated powers relating to assessment and appellate proceedings - After completion of assessment or for that matter after decision in appeal from the same, the assessee could not contemplate any proceedings for revision under section 263 -Notice was served on the assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for and on behalf of the defendant is such person who has been fully authorized in that behalf in terms of order III, r 6, CPC. Under sub-r (2) of r 6 'Such appointment may be special or general and shall be made by an instrument in writing signed by the principal and such instrument or if the appointment is general, a certified copy thereof shall be filed in court.' A combined reading of order 3, r 6 and order 5, r 9, CPC leaves no doubt that the empowering of an agent can be made only in the manner detailed in order 3, r 6 and verbal authorities is not enough." (vi) Y. Narayana Chetty v. ITO [1959] 35 ITR 388 (SC) Observations: "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 ITO in pursuance of invalid notice and consequent order of reassessment passed by him would be void and inoperative. The notice prescribed by section 34 cannot be regarded as a mere procedural requirement; it is only if the said notice is served on the assessee as required then the ITO would be justified in taking proceedings against him. If n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xman 388 (Gauhati) Observations: "Service of notice prescribed by section 148 for the purpose of initiating the proceeding for re-assessment is not a mere procedural requirement it is a condition precedent to the initiation of a proceeding for the assessment under section 147. Mere issuance of notice is not sufficient. There was no material to show that the employee appeared in pursuance of notice under section 148. He appeared only in response to a notice under section 142(1). Section 142(1) deals with enquiry before assessment and the appearance of the employee in terms of this notice to produce such accounts or documents as the Assessing Officer may require could not be deemed to be the knowledge of the proceeding under section 147. That being the position, no notice was served under section 148 and the appearance of a person in response to a notice under section 142(1) could not be deemed to be the knowledge of proceeding under section 147." (xi) B. Johar Forest Works v. CIT [1997] 107 ITR 409 (J & K) Observations: "Knowledge about the assurance of a notice otherwise then by its Service on the person concerned is one thing and the service of the notice on the person is ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to of which assessment year the appeal was pending with which CIT(A). For the sake of arguments it is submitted that when the affidavit was executed there was no appellate proceedings pending before CIT(A)-I, Agra. 5. That the first contents of part of Para 3 is a matter of records and cannot be commented, and the later part is denied by the deponent for want of knowledge. However, it is admitted that a report under the signature of Shri S.M. Rizvi was provided to the appellant by CIT(A). 6. That contents of Para 6 are denied. Deponent has not given any power of attorney authorizing Shri M.K. Tyagi, C.A. to appear in assessment proceedings for assessment year 1988-89, arising out of service of notice under section 148 of IT Act. Even, otherwise the contents of this Para executed by Sri S.H. Rizvi are very vague. Verification: The deponent hereby verifies that the contents of Para Nos. 1 to 6 true and correct to the best his knowledge and belief. Nothing has been concealed or misstated therein. Verified this on 21st day of October, 2004 at Agra. Deponent" 6.5 In view of the above affidavit and Revenue's request, the Id. Counsel for the assessee submitted that for the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or assessee prayed for being allowed to file evidence in support of his statement - In these circumstances, there was no justification to rule 29 of ITAT Rules, 1946 - Evidence must be excluded from consideration." (v) CIT v. Rao Raja Hanut Singh [2001] 252 ITR 528 (Raj.) Observations: "Reference - Question of law - Production of additional evidence before Tribunal - Revenue's application for permitting to lead additional evidence disallowed by Tribunal on the ground that apart from the pleading interest of justice, no other cause was pleaded for adducing additional evidence - Admission of additional evidence - Admission of additional evidence at the appellate stage is absolutely within the discretion of the Tribunal and cannot be claimed as a matter of right - Question whether discretion has been exercised judiciously or not cannot be ordinarily a question of law unless it can be disputed or found that in exercising that discretion, Tribunal has ignored some well-settled legal principles - No contention has been raised that the Tribunal has not correctly enunciated principle on the basis of which the discretion is to be exercised - No question of law arises out of its appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the decision in the following cases specially pointing out to various observations extracted in relevant order for various pleas considered hereunder:- (i) Since the conduct of assessee shows contempt of law and hence, reluctance to pay tax, so deserves no favour. Reliance was placed on the decision of Hon'ble Supreme Court in McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148, where the Hon'ble Court has observed as under: "The evil consequences of tax avoidance are manifold. First there is substantial loss of much needed public revenue, particularly in a welfare state like India. Next there is the serious disturbance caused to the economy of the country by the piling up of mountains of black money, directly causing inflation, then there is 'the large hidden loss' to the community by some of the best brains in the country being involved in the perpetual war waged between the tax-avoider and his expert team of advisers, law years and accountants on one side and the tax gatherer and perhaps not so skilful, advisers on the other side. Then again there is the 'sense of injustice and inequality which tax avoidance arouses in the breasts of those who are unwilling or unable to profit by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he extent of following observations:- "The lack of a notice does not amount to the Revenue authority having had no jurisdiction to assess, but that the assessment was defective by reason of notice not having been given to her. An assessment proceeding does not cease to be a proceeding under the Act merely by reason of want of notice. It will be a proceeding liable to be challenged and corrected." (iv) With respect to the service of notice under section 148 on Shri M.K. Tyagi, C.A., it was submitted that (i) first of all, he was duly authorized by the assessee to appear in Income-tax proceedings in assessee's case for the assessment year 1988-89 and for that purpose relied on the Assessing Officer's remand report sent to CIT(A). Proceeding further, it was submitted that even Mr. M.K. Tyagi, being regularly appeared in past - in assessee's case and in the group cases including firm, where assessee was partner, the service was valid. Reliance in this respect was placed on the following decisions: (a) A.K.M. Govindaswamy Chettiar v. ITO [2000] 244 ITR 559 (Mad.), to the extent of following observations:- "148 notice issued on various agents (acting)- compliance made. Service held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 994] 209 ITR 434 (Raj.):- "Having participated in assessment proceedings the petitioners cannot complain the assessment was illegal because of want of notice to it." (vi) CIT v. Bhanji Kanji's Shop [1968] 68 ITR 416 (Guj.):- "Followed Bombay H.C. Judgment in K.C. Tewari & Sons v. CIT [1962] 6 ITR 236- procedural irregularities in notices service of reassessment but assessee admits the receiving or conduct shows-service of notice valid." (vii) Mahendra Kumar Agrawalla v. ITO [1976] 103 ITR 688 (Pat.):- "Reassessment proceedings not invalid for want of proper service-service on clerk not authorized to receive." (viii) CIT v. Jai Prakash Singh [1996] 219 ITR 737 (SC):- "an omission to serve or any defect in the service of notices provided by procedural provisions does not efface or erase the liability to pay tax where such liability is created by distinct substantive provision [charging sections]. Any such omission or defect may render the order made irregular depending upon the nature of the provision not complied with but certainly not void or illegal." 7.2 The ld. D.R., further, while supporting the request for admission of the affidavit relied upon the decision of Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, the counsel submitted that for assuming jurisdiction under section 148 service of notice under section 148 of the Act or provisions of Civil Procedure Code and for this purpose relied upon the decision in the cases of ITO v. Mukesh Kumar [2002] 123 Taxman 55 (Punj. & Har.), Dina Nath v. CIT [1993] 204 ITR 667 (J&K), Shree Changdeo Sugar Mills Ltd v. ITO [1984] 18 TTJ (Bom.) 201 and Jayanthi Talkies Distributors v. CIT [1979] 120 ITR 576 (Mad.). (iv) With respect to Sr. D.R.'s claim that the assessee having appeared before the Assessing Officer in response to notice under section 142(1) of the Act, he was aware of proceedings under section 147/148 of the Act and therefore, the service in question was valid, the assessee relied upon various observations made by various courts in the following decisions as under: (a) CIT v. Mintu Kalita [2001] 117 Taxman 388 (Gauhati) Observations: "Service of notice prescribed by section 148 for the purpose of initiating the proceeding for re-assessment is not a mere procedural requirement it is a condition precedent to the initiation of a proceeding for the assessment under section 147. Mere issuance of notice is not sufficient. There was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural requirement; it is only if the said notice is served on the assessee as required then the ITO 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 proceedings taken by ITO without a notice or in pursuance of an invalid notice would be illegal and void." (b) Madan Lal Agarwal v. CIT [1983] 144 ITR 745 (All.) Observations: "Issuing of a valid notice to the assessee under section 148 within the period specified under section 149 of the Act is a condition precedent to the validity of any assessment to be made against such assessee under section 147. Accordingly, where no such notice has been issued or if the notice issued is not valid or the same has not been served on the assessee in accordance with law, it will not be possible to sustain the eventual assessment made under section 147 on the basis of such notice." (c) Laxmi Narain Anand Prakash v. CST [1980] UPTC 125 (All.)(FB) Observations: "Section 21, U.P. Sales Tax Act, 1948 - Scope - Service of notice on stranger - Improve service - Assessee participating in assessment proceedings - Notice having been improperly served, initiati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove, the counsel submitted that this decision is not applicable to the assessee's case. 9. We have considered the rival submissions, facts and circumstances of the case and various decisions, referred to and relied upon by both the parties. 9.1 After having considered the totality of facts and circumstances, first of all, we are of the opinion that one of the vital issues raised in this appeal for our consideration is as to whether the revenue's affidavit should be admitted or not and since the question of rejection or acceptance of affidavit arises only after its admission, the decision of Hon'ble Allahabad High Court in the case of L. Sohan Lal Gupta v. CIT [1958] 33 ITR 786 cannot be said to be applicable only if the affidavit is admitted. 9.2 After having considered the totality of facts and circumstances of the case and also the provisions of Indian Evidence Act, 1872, we are of the opinion that though normally, the Income-tax Proceedings are not governed by the Indian Evidence Act, and are also aware that the Income-tax Proceedings except for the purpose specified under section 136 of the I.T. Act, are not judicial proceedings, but at the same time, it is settled law that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s; (3) Copies made from or compared with the original; (4) Counterparts of the documents as against the parties who did not execute them; (5) Oral accounts of the contents of a document given by some person who has himself seen it. Section 64: Proof of documents by primary evidence.-Documents must be proved by primary evidence except in the cases hereinafter mentioned. Section 65: Cases in which secondary evidence relating to documents may be given.-Secondary evidence may be given of the existence, condition or contents of a document in the following cases: (a) When the original is shown or appears to be in the possession or power-of the person against whom the document is sought to be proved, or Of any person out of reach of, or not subject to, the process of the Court, or Of any person legally bound to produce it, And when, after the notice mentioned in section 66, such person does not produce it; (b) When the existence, condition or contents of the original have been proved to be admitted in writing by the person against whom it is proved or by his representative in interest; (c) When the original has been destroyed or lost, or when the party offering evidence of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding to these provisions, to establish the proof of document by considering the same as primary evidence^ the documents must be proved except in the case mentioned in other provisions of the Act. 9.6 So far as section 65 is concerned, it prescribes the circumstances under which the existence of a document, can be established by way of secondary evidence-when it cannot be proved by way of primary evidence. 10.1 So far as the present case is concerned, the admitted facts are that it is the claim of the Assessing Officer that he had seen a Power of Attorney in favour of Mr. M.K. Tyagi for the assessment year 1988-89 executed by the assessee, but since the same was not found available on record at the time of examination of the records by the CIT(A), we are of the opinion that the revenue has right to establish the existence of the same by way of secondary evidence as provided under sections 61 to 65 of the Indian Evidence Act and if we consider the various eventualities specified under section 65, we are of the opinion that only sub-clause, which can come to the rescue of the revenue, should be the sub-clause (c) of section 65, which speaks that "when the original had been destroye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry so as to fix the responsibility of the person, from whose custody, the relevant document got destroyed or lost or stolen. In view of the above admitted fact and circumstances, we are of the opinion that there was no power of attorney executed by the assessee in favour of Mr. M.K. Tyagi, which Mr. Rizvi could see. (ii) Without prejudice to our above findings, even if we assume for a moment, for the sake of discussion, that there was such power of attorney when the Assessing Officer opened the file, but got destroyed or lost or stolen during the period the Assessing Officer closed the file and was opened by the CIT(A), then the same has happened for the default or neglect on the part of the revenue itself and it is so because the revenue has neither intimated the offence to the police nor has conducted any departmental enquiry to fix the liability and penalize the concerned person. Consequently, benefits of section 65(c) of the Indian Evidence Act are also not available to the revenue. (iii) Further, an affidavit is to be filed only on the requirement of the Court or the Tribunal and not of its own. In the present case, the Tribunal had not required the revenue to establish the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therefore, request of the ld. Sr. D.R. dated 14-1-2003 for the admission of affidavit of Mr. S.H. Rizvi, cannot be acceded to and consequently, the affidavit in question is not admitted. 12.1 Coming to the merits of the case, we are of the opinion that:- (i)(a) First of all we, in view of foregoing facts and circumstances that the assessee had not executed any power of attorney in favour of Shri M.K. Tyagi, Chartered Accountant, as has been claimed by the revenue and this finding of ours gets support from other supporting facts such as non-compliance by the assessee of Assessing Officer's letter dated 7-3-2002, which was served on the assessee on 29-3-2001. (b) In the present case it is an admitted fact that the first action taken in assessee's case by the Assessing Officer was by way of a letter dated 7-3-2002, which, admittedly, remained un-complied with and therefore, there could not be any reason for the assessee to execute a power of attorney in favour of Mr. M.K. Tyagi for the assessment year 1988-89. (c) The second proceeding taken in the present case was by way of issuance of a notice under section 148 on 19-9-1998, which also admittedly remained un-complied with. Und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 148. (v) The decisions in the cases of R.K. Upadhyaya v. Shanabhai P. Patel [1987] 166 ITR 163 (SC), CIT v. Major Tikka Khuswant Singh [1995] 212 ITR 650 (SC) and CIT v. Sheo Kumari Devi [1986] 157 ITR 13 (Pat.) (FB) were relating to the limitation, during which a notice under section 148 could be issued as provided under section 149 of the Act, but not with respect to the service of the said notice and therefore, the reliance on these decisions is also of no help to the revenue. (vi) The Revenue's reliance on the decision in the case of Birla Cotton Spg. & Wvg. Mills Ltd. v. ITO [1994] 209 ITR 434 (Raj.) is also not of any help to the Revenue because in the present case, the assessee had not participated in the proceedings and moreover, the issue in that case was not with respect to validity of service of notice under section 148 of the Act. (vii) The decision in the case of CIT v. Bhanji Kanji's Shop [1968] 68 ITR 416 (Guj.) is also not of any help to the revenue because in that case the assessee had filed the return in response to the notice under section 148, whereas in the instant case, the assessee did not file any return. (viii) The decision in the case of Mahendra Kum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the distillery without paying excise duty on such liquor. (c) The buyers of assessee's liquor were getting distillery passes for release of liquor after making payment of excise duty, which was not reflected in assessee's books of account. (d) The assessee paid Sales Tax under the Andhra Pradesh Sales Tax Act on its turnover without including Excise Duty paid by the purchasers. (e) Assessments were completed, but later on the Taxing Authorities called upon the assessee by way of a show-cause notice, as to why the Excise Duty paid by the buyers/purchasers be not Considered as part of assessee's turnover and assessments be re-opened. (f) The assessee challenged the show-cause notice before the Hon'ble High Court but failed. On appeal by the assessee, the Hon'ble Supreme Court as per decision dated 25-10-1996 in McDowell & Co. Ltd v. CTO [1977] 39 STC 151 held as under:- "We hold that intending purchasers of the Indian Liquor who seek to obtain distillery passes are also legally responsible for payment of the excise duty which is collected from them by the authorities of the excise department." This Court then proceeded to determine whether excise duty paid directly to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice to the assessee for inclusion of Excise Duty since paid by the purchasers in its turnover. (ix)(iii) The assessee went before the Hon'ble High Court for quashing of the notice by way of writ but the Hon'ble High Court after considering the amended rules and also earlier decision, dismissed the writ petition. (ix)(iv) On appeal by the assessee, Hon'ble Supreme Court dismissed the appeal and the relevant part of the order of the Hon'ble Supreme Court reads as under:- "We think that the time has come for us to depart from the Westminster Principle as emphatically as the British courts have done and to dissociate ourselves from the observations of Shah J. and similar observations made elsewhere. The evil consequences of tax avoidance are manifold. First, there is substantial loss of much needed public revenue, particularly in a welfare state like ours. Next, there is the serious disturbance caused to the economy of the country by the piling up of mountains of black money, directly causing inflation. Then there is "the large hidden loss" to the community (as pointed out by Master Sheatcroft in 18 Modern Law Review 209) by some of the best brains in the country being involved in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Burma Oil and Dawson, to expose the devices for what they really are and to refuse to give judicial benediction." 12.2 After having carefully considered the decision of Hon'ble Supreme Court in the case of McDowell & Co. Ltd. word by word, sentence by sentence and para by para, we are of the opinion that so far as the proposition of law laid down by the Hon'ble Supreme Court is concerned, there is no dispute, but so far as the observations of Hon'ble Supreme Court, which have been relied upon by the ld. D.R. in the present case, are concerned, we, with all respect to the Hon'ble Apex Court, are of the opinion that there cannot be any conflict with the proposition of law propounded by the Hon'ble Apex Court, but while applying the same, care has to be taken with respect to the facts and the context, in which, the law has been propounded and so far as case of McDowell & Co. Ltd. is concerned, the law was propounded with respect to the theory of "Tax Planning". In other words, the law was propounded with respect to the issue as to which tax planning comes within the ambit of "tax avoidance" and which comes within the ambit of "tax evasion". This was in the facts and in the context of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 ITR 505 (SC), decision in the case of A.K.M. Govindaswamy Chettiar v. ITO [2000] 244 ITR 559 (Mad.), decision in the case of Himmatram v. CIT 5 ITC 133, decision in the case of Rex v. Ismail 1 ITC 192, decision in the case of Mithoo Lal Tek Chand v. CIT [1967] 64 ITR 377 (All.) and the decision in the case of Kangi v. CIT 3 ITC 418, are of no help to the revenue because the issues and the context involved in all these decisions were different than the issue involved in appeal before us - meaning thereby that these decisions are distinguishable on facts as well as in law and therefore, are of no help to the Revenue. 14. The last decision, relied on by the Revenue in support of their claim that the service of notice under section 148 for the assessment year 1988-89 on Shri M.K. Tyagi, the Chartered Accountant, who admittedly had not been authorized by the assessee to act on behalf of the assessee or to deal with the assessee's income-tax matters relating to assessment year 1988-89, was valid service, is the decision of ITAT, Agra in the case of Chandra Bhan Bansat v. Dy. CIT [200l] 79 ITD 639 (Agra) and therefore, we consider it necessary to discuss this decision. 15. From the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Allahabad High Court in the cases of Madan Lal Agarwal v. CIT [1983] 144 ITR 745, Addl. CIT v. Prem Kumar Rastogi [1980] 124 ITR 381, CIT v. Jagannath Pd. Nankoo Pd. [1996] 222 ITR 58 (All), in the case of Laxmi Narain Anand Prakash v. CST [1980] UPTC 125 (All.) (FB) and various other decisions of Hon'ble Supreme Court as well as other High Courts, we would like, even for the sake of repetition; to discuss, at least, the decisions of Hon'ble High Court of Allahabad as under:- (i) Decision of Addl. CIT v. Prem Kumar Rastogi [1980] 124 ITR 3812 (All.): (a) In this case, the Hon'ble High Court has held that; "The fact that in the past notices used to be served on R and the assessee never took any objection that the services of notices on R were improper and invalid shall not make R an authorized or recognized agent of the assessee. On the findings, R was neither a recognized nor an authorized agent, nor an agent who was carrying business of the assessee. He was not an adult member of the assessee family. Delivery of notice to R was not valid according to the provisions of CPC. That delivery of the notice on R was not a valid service." (b) The aforesaid decision refutes the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sory jurisdiction that we may also refer to a decision of this Court in the case of Addl CIT v. Shri Prem Kumar Rastogi [1980] 124 ITR 381, where it has been held that notice on an unauthorized person is not valid." (b) In view of the above decision of Hon'ble Allahabad High Court, we have no hesitation to hold that the issue involved in the present case is squarely covered in assessee's favour and against the Revenue - meaning thereby that the service of notice under section 148 for the assessment year 1988-89 on Shri M.K. Tyagi, Chartered Accountant, who admittedly had not been authorized by the assessee to deal with assessee's income-tax matters for the assessment year 1988-89, was not valid service in the eyes of law. (iv) Madan Lal Agarwal v. CIT [1983] 144 ITR 745 (All.): (a) In this case the Hon'ble High Court has held as under:- "Issuing of a valid notice to the assessee under section 148 within the period specified under section 149 of the Act is a condition precedent to the validity of any assessment to be made against such assessee under section 147. Accordingly, where no such notice has been issued or if the notice issued is not valid or the same has not been served ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1959] 35 ITR 388, 392 (SC), CIT v. Thayaballi Mulla Jeevaji Kapasi [l967] 66 ITR 147 (SC), in the case of CIT v. Kurban Hussain Ibrahimji Mithiborwala [1971] 82 ITR 821 (SC), Madan Lal Agarwal v. CIT[l983] 144 ITR 745 (All.), Vijay Kumar Jain v. CIT [1975] 99 ITR 349, 353 (Punj. & Har.), CIT v. Ishwar Singh & Sons [1981] 131 ITR 480 (All.) and many more. 19.3 Under the aforesaid provisions of section 148 of the Act, it is not enough that a notice issued under section 148 some how finds its way to the proper assessee or that the proper assessee appeared and filed an objection to the proceedings. Unless, the notice is served on the proper person in the manner prescribed under section 282, the service is insufficient and the Assessing Officer does not have jurisdiction to re-assess the escaped income. This proposition of law is supported by the decisions of Madras High Court in the case of Thangam Textiles v. First ITO [1973] 90 ITR 412 by decision of Mysore High Court in the cases of Lakshmibai v. ITO [1972] 86 ITR 804 and C.T. Rajagopal v. State of Mysore [1972] 86 ITR 814 and by the decision of Bombay High Court in the case of S.K. Manekia v. CST [1977] 39 STC 426 (Bom.) and in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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