2025 (6) TMI 302 - AT - Income Tax

Notice under Section 148 validly served despite being returned undelivered when marked 'not available'

The ITAT Delhi held that notice under section 148 was validly served despite being returned undelivered with postal remarks indicating assessee was not ... Validity of reopening of assessment - due service of notice u/s 148 - Notice served through affixture by the Inspector who put his signature on the affixture - HELD THAT:- Notice u/s 148 of the Act was issued on the address given by the assessee in his letter which was received in the AO’s office - CIT(A) noted that the notice came back unserved with postal remarks that ‘on enquiry it was gathered that the assessee is not at home and it is not known that when he will be back’. CIT(A) has noted in her order that this notice u/s 148 of the Act was issued on 31.03.2015. A notice u/s 142(1) of the Act issued by the AO fixing the case for hearing on 18.11.2015 also came back undelivered with the postal remarks ‘bar bar jane per nahi milta wapis jaye’. Hon’ble Supreme Court in M/s Ajeet Seeds Limited vs Gopal Krishnaiah [2014 (8) TMI 464 - SUPREME COURT] noted that this Court has already held that when a notice is sent by registered post and is returned with a postal endorsement ‘refused’ or ‘not available in the house’ or ‘house locked’ or ‘shop closed’ or ‘addressee not in station’ due service has to be presumed. As stated by the Ld. DR that the assessment order u/s 144 r.w.s. 147 of the Act dated 21.03.2016 was sent on the same address on which the original notice u/s 148 of the Act dated 31.03.2015 was issued and sent by registered post and the said address in the notice u/s 148 of the Act dated 31.03.2015 was the correct address for the reason that as stated by the Ld. DR that within 20 days of the issue of the assessment order on the same address, the assessee filed an appeal on 10.04.2016 against the said assessment order before the Ld. CIT(A) as evident from the Form No.35 of the Appeal Memo. The decision of the CIT(A) in holding that the assessment order u/s 144 r.w.s. 147 in this case as invalid because of non-service of the notice u/s 148 by affixture as per law is also held to be not a valid finding because we have held that the notice u/s 148 has been presumed to have been served upon the assessee in this case. Therefore, the said finding of the ld. CIT(A) cannot be sustained and the same is set-aside. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Tribunal include:- Whether the notice issued under section 148 of the Income Tax Act, 1961, dated 31.03.2015, was validly served upon the assessee, despite the initial registered post being returned unserved with postal remarks indicating the assessee was not available at the address.- Whether the subsequent attempt at service by affixture, as claimed by the Assessing Officer (AO), was valid and sufficient to constitute proper service of notice under section 148.- Whether the re-assessment proceedings and the consequent assessment order passed under sections 144 read with 147 of the Income Tax Act, 1961, are valid and sustainable in law in the absence of proof of proper service of notice under section 148.- The applicability and interpretation of statutory presumptions under section 27 of the General Clauses Act and section 114 of the Indian Evidence Act regarding service of notice by registered post and the presumption of delivery despite return of notice.- The relevance and applicability of judicial precedents, including the decisions of the Hon'ble Supreme Court and High Courts, on the issue of service of notice by registered post and affixture, and the legal consequences of non-service or defective service.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity of Service of Notice under Section 148 of the Income Tax ActRelevant Legal Framework and Precedents: Section 148 mandates that no reassessment shall be made unless a notice under this section has been served upon the assessee. The law requires service of notice to be proved as a condition precedent to reassessment. The General Clauses Act, section 27, creates a statutory presumption that service of notice has been effected when sent to the correct address by registered post. Indian Evidence Act, section 114, allows the Court to presume delivery in the ordinary course of post. The Hon'ble Supreme Court in M/s Ajeet Seeds Limited vs Gopal Krishnaiah held that when a notice sent by registered post is returned with postal endorsements such as 'refused', 'not available in the house', 'house locked', or 'addressee not in station', due service has to be presumed. The Apex Court further clarified that it is unnecessary to aver that the addressee evaded service or had knowledge of the notice; the presumption of service stands unless rebutted.Court's Interpretation and Reasoning: The Tribunal noted that the notice dated 31.03.2015 under section 148 was sent by registered post to the address provided by the assessee in a letter received by the AO on 10.10.2012. The notice was returned unserved with postal remarks stating that on enquiry it was gathered that the assessee was not at home and it was not known when he would be back. The Tribunal relied on the Apex Court's ruling in M/s Ajeet Seeds Limited and held that such postal remarks fall within the category where service is presumed under section 27 of the General Clauses Act. The Tribunal further observed that the assessee had filed an appeal against the assessment order within 20 days of its receipt at the same address, confirming that the address was correct and the assessee was aware of the proceedings.Key Evidence and Findings: The postal department's remarks on the returned notice and the fact that subsequent notices and the assessment order were sent to the same address. The assessee's filing of appeal within the prescribed time period from the same address corroborated the correctness of the address and implied knowledge of the notice.Application of Law to Facts: Applying the presumption under section 27 of the General Clauses Act and section 114 of the Indian Evidence Act, the Tribunal held that the service of notice under section 148 of the Act must be presumed despite the physical non-receipt due to the assessee's unavailability. The Tribunal rejected the contention that the notice was not served merely because it was returned unserved.Treatment of Competing Arguments: The assessee argued that the notice was not served properly and that the AO failed to prove service by affixture. The Tribunal acknowledged the absence of proof of affixture but held that the presumption of service by registered post overrides this deficiency. The Revenue's reliance on judicial precedents was accepted, and the assessee's reliance on the requirement of strict proof of service was moderated by the statutory presumptions.Conclusions: The notice under section 148 dated 31.03.2015 was validly served on the assessee by presumption of law, notwithstanding its physical return unserved, as the assessee deliberately avoided receipt.Issue 2: Validity of Reassessment Proceedings and Assessment Order under Sections 144 and 147Relevant Legal Framework and Precedents: Section 147 permits reassessment only when notice under section 148 is served. Section 144 allows the AO to make an assessment ex parte if the assessee fails to appear or respond. The Hon'ble Supreme Court in RK Upadhyay vs Shanabhai P. Patel held that reassessment cannot be made without service of notice under section 148. However, the presumption of service under section 27 of the General Clauses Act and section 114 of the Indian Evidence Act modifies the strict requirement of proof of service.Court's Interpretation and Reasoning: The Tribunal observed that the AO issued the notice under section 148 on the correct address and that the assessee did not file the return of income for the year. The AO issued notices under section 142(1) and show cause notices, some of which were returned undelivered with remarks indicating the assessee's absence. The AO completed the assessment under section 144 read with section 147 treating the cash deposits as undisclosed income. The Tribunal held that since service of notice under section 148 is presumed, the reassessment proceedings and the assessment order are valid. The Tribunal rejected the CIT(A)'s finding that the reassessment was invalid due to lack of proof of affixture service.Key Evidence and Findings: The repeated attempts at service by registered post, postal remarks indicating deliberate avoidance, and the assessee's subsequent filing of appeal against assessment order.Application of Law to Facts: The Tribunal applied the principle that the law protects the rights of a citizen who performs corresponding duties and that the assessee's conduct in not receiving the notice cannot invalidate the proceedings. The presumption of service allows the AO to proceed with reassessment in such circumstances.Treatment of Competing Arguments: The assessee contended that the absence of proof of service by affixture invalidated the proceedings. The Tribunal found this argument untenable given the statutory presumptions and the facts indicating deliberate evasion. The Revenue's argument that the notice was served by registered post and that affixture was an additional attempt was accepted.Conclusions: The reassessment proceedings and the assessment order passed under sections 144 and 147 are valid and sustainable in law.Issue 3: Effect of Non-Proof of Service by AffixtureRelevant Legal Framework and Precedents: Service by affixture is a recognized mode of service when personal service is not possible. However, proof of affixture is necessary to establish valid service. The CIT(A) relied on judgments including RK Upadhyay that require proof of service for validity of reassessment. The Tribunal considered whether the absence of proof of affixture service invalidates the reassessment.Court's Interpretation and Reasoning: The Tribunal acknowledged the absence of proof of affixture and the CIT(A)'s reliance on this to hold the reassessment invalid. However, the Tribunal held that since the notice was sent by registered post to the correct address and service is presumed under law, the failure to prove affixture service does not invalidate the proceedings. The affixture was an additional effort by the AO after the registered post was returned unserved, and the primary mode of service remains the registered post.Key Evidence and Findings: AO's admission of lack of proof of affixture, absence of record of affixture on order sheet, and lack of signature of witnesses on the notice served by affixture.Application of Law to Facts: The Tribunal applied the principle that the statutory presumption of service by registered post is sufficient to uphold the reassessment, and the absence of proof of affixture service is not fatal in the circumstances.Treatment of Competing Arguments: The assessee's argument that affixture was not proved and hence reassessment is invalid was rejected. The Revenue's argument that affixture was an additional attempt and the registered post service suffices was accepted.Conclusions: Non-proof of affixture service does not invalidate the reassessment proceedings when service by registered post is presumed.3. SIGNIFICANT HOLDINGS- 'Section 27 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. In view of the said presumption, when stating that a notice has been sent by registered post to the address of the drawer, it is unnecessary to further aver in the complaint that in spite of the return of the notice unserved, it is deemed to have been served or that the addressee is deemed to have knowledge of the notice.'- 'This Court has already held that when a notice is sent by registered post and is returned with a postal endorsement 'refused' or 'not available in the house' or 'house locked' or 'shop closed' or 'addressee not in station', due service has to be presumed.'- 'The conduct of the assessee and the remarks of the Postal Department raises a reasonable presumption that the assessee deliberately avoided to receive the notice u/s 148 of the Act dated 31.03.2015 in this case.'- 'The law will protect the rights of a citizen if he was ready to perform his corresponding duty. In this case, the assessee was not ready to receive the said notice and therefore the notice u/s 148 of the Act dated 31.03.2015 could not be served upon him. Therefore, due service of notice u/s 148 of the Act dated 31.03.2015 is presumed in this case on the assessee.'- The Tribunal concluded that the reassessment proceedings initiated under section 148 and assessment order under sections 144/147 are valid and the order of the CIT(A) setting aside the reassessment on the ground of non-service of notice was set aside and remanded for adjudication on merits.