TaxTMI 
TaxTMI 
2007 (2) TMI 260
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....tment, but a letter from Ld. Standing Counsel of the Department in. High Court has been filed by the Department which reads as under: "D.D. Chopra Chopra Bhawan Advocate B-140, Sector C Senior Standing Counsel Mahanagar, Lucknow-6 Income-tax Department Tel. Off. 2321330, Res. 2320813 1-2-2007 To, The Sr. D.R. I.T.A.T. Income-tax Deptt. Lucknow Sub: W.P. Nos. 551 of 2007 and 554 of 2007 (M.B) Anil Kumal Goyal vs. ITAT, Lko. and Others Dear Sir, By interim order dated 25-1-2007, the Hon'ble Court has been pleased to inter alia direct the learned ITAT to decide the appeals preferred by the petitioner on the next date of hearing (31-1-2007) ....
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....sp; offices at Second and Third floors. ------------------------------------------------------------ (b) Jagat Complex: It was proposed to be set up at 80/17, Gurdwara Road, Naka Hindola, Lucknow, as per Builders' Agreement. ------------------------------------------------------------ 5. Relying on the accounting standards laid down by the Institute of Chartered Accountants of India, the assessee had not returned any profit/loss as the projects were under progress. Prior to the said activities, the assessee had been carrying on the business of dealing in Rallis Fans in his proprietary concern named as "Goel Electric Co. (Agencies)" from a different address known as 21-A, Pratap Market, Aminabad, Lucknow. However, owing to closure of the manufacturing activities of the said company, the business of the proprietary concern of the assessee a....
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....TI, dated 16-7-2003 is on record in which he has stated that he had served the alleged notice under section 148 of the Act on 26-3-2002 to persons at the shop of M/s. Goel Electric Co. Works situated at 51, Gautam Budh Marg, Lucknow. It has further been stated that the person to whom the notice had been handed over by Shri A.K. Sehgal was supposed to be looking after the shop at that time. The assessee's contention is that even by this statement of Shri A.K. Sehgal it is not established that the notice was served on the assessee or on a person authorized to receive the notice on behalf of Shri Anil Kumar Goel, the assessee. The ld. CIT(A) rejected this ground of appeal by observing as under: "3.4 The appellant has filed a letter dated 26-12-2002 during the assessment proceedings and stated that the return filed on 31-10-1995 may be treated in compliance to notice under section 148 of Income-tax Act, 1961. Thus, it is clear that the notice under section 148 was served on appellant or his authorized representative, therefore, he has filed letter dated 26-12-2002 with the Assessing Officer to treat the return filed on 31-10-1995 in compliance of notice under section 148. The appell....
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....time that the objections have been raised on 24-3-2003. The assessment proceedings are to be completed by 31-3-2003. Thus, it can be seen that a very short period of only 5 working days are available for deciding the objections and completing the assessment. However, I leave it to the assessee to explain it at any later stage why and with what intentions he has raised the objection at such a late stage. With these comments I now proceed to decide the objections as under." 9. In order to further substantiate his argument, the ld. Counsel referred to page 4 of the Paper Book wherein the order sheet dated 24-3-2003 before the Assessing Officer is contained, in which, it is stated as under: "24-3-2003: Shri S.K. Bansal, Advocate attended along with Shri Anil Kr. Goel. Filed written reply. Produced books of account and vouchers which were examined. He was required to furnish the explanation on the following points: (a) You have never made any objection against limitation of proceedings under section 147 but in today's reply you have stated that you have been contending that the very intimation of proceedings under section 147 is not valid. Why it is so ?..." 10. Thereafter, ....
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....pointed out that as per sub-section (1) of section 282, the notice is to be served on the person therein named either by post or in the same manner in which summons issued by a court under the Code of Civil Procedure, 1908, are to be served. In this regard, the ld. Counsel pointed out that Rules 10 to 18 of Code of Civil Procedure deals with mode of service of notice. He referred to the order dated 31-5-2005 of ITAT in the case of Dy. CIT v. Kunj Behari Pandey [IT Appeal No. 631 (Lucknow) of 2001] for assessment year 1996-97 and pointed out that in this case since the ld. DR failed to establish who was the person who accepted the notice, the Tribunal quashed the assessment order, inter alia, observing in para 7 as under: "7...During the course of hearing, the ld. DR has filed the photocopies of some documents suggesting that on all the notices issued by the Assessing Officer the same person has acknowledged various letters of the Department who has acknowledged the notice under section 148. However, on our query, he failed to establish who is this person...." 13. The ld. Counsel further referred to page 12 of the Paper Book wherein the affidavit of Shri Anil Kumar Goel dated ....
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....was working." 14. The ld. Counsel submitted that the contents of this affidavit have not been controverted by the Department and therefore, the same stand duly accepted by the Department. In this regard, he relied on the decision of the Hon'ble Supreme Court in the case of Mehta Parekh & Co. v. CIT [1956] 30 ITR 181 wherein it was, inter alia, held as under:- "(ii) as the cash book of the appellants was accepted, and the entries therein were not challenged, and neither further accounts nor vouchers were called for, and the persons who gave the affidavits were not cross-examined, it was not open to the Revenue to challenge the correctness of the cash book entries or the statements made in the affidavits;" The ld. Counsel referred to the order sheet for assessment years 1997-98 and 1998-99 contained from pages 14 to 23 of the Paper Book and referred to page 18 of the Paper Book wherein the order sheet entry noting dated 26-3-2002 is contained to point out that assessee Shri Anil Kumar Goel appeared before the Assessing Officer on the said date as is evident from the order sheet and therefore, notice under section 148 could be served on the assessee himself on 26-3-2002. 1....
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....) MTC 1101 (All.) Gorakhpur Petro Oils Ltd v. Addl. CIT [IT Appeal No. 1951 (All.) of 1996] Chandra Agencies v. ITO [2004] 89 ITD 1 (Delhi) Duli Chand Laxmi Narain v. CIT [2004] 89 ITD 426 (Delhi) Hind Book House v. ITO [2005] 92 ITD 415 (Delhi). 19. The ld. DR submitted that the objective of notice is to provide opportunity to assessee to represent his case. He submitted that since the assessee participated in the proceedings, no prejudice is caused to the assessee. The ld. DR referred to the Department's Paper Book for assessment year 1995-96 which contains the order sheet starting from 20-3-2002 for issuance of notice under section 148. The ld. DR pointed out with reference to this order sheet that assessee as well as his Authorized Representative attended the proceedings on various dates and filed return in pursuance of notice under section 148 and also filed applications for adjournment. In this regard, he referred to page 9 of the Paper Book wherein the Power of Attorney in the name of Shri Sushil Kumar Bansal. Advocate is contained and he referred to pages 10 to 13 of the Paper Book wherein the copies of letters of authorized representative of assessee seeking....
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....further referred to the Hon'ble Allahabad High Court decision in the case of Hindustan Transport Co. v. IAC [1991] 189 ITR 326, to submit that objection to jurisdiction cannot be raised after completion of assessment. He also referred to section 124(3) to submit that objection to jurisdiction is time barred. The ld. DR further referred to following case laws in support of his proposition that service of notice on unauthorized persons does not invalidate the assessment proceedings: Mahendra Kumar Agrawalla v. ITO [1976] 103 ITR 688 (Pat.) CIT v. Bhanji Kanji's Shop [1968] 68 ITR 416 (Guj.) Dr. H.R. Rai v. CIT [1984] 145 ITR 809 (MP) ITO v. Shahid Atiq [2004] 89 ITD 489 (Delhi) Birla Cotton Spg. & Wvg. Mills Ltd v. ITO [1994] 209 ITR 434 (Raj.) K.C. Tiwari & Sons v. CIT [1962] 46 ITR 236 (Bom.) Sumerpur Truck Operators Union v. ITO [2004] 89 ITD 89 (Jodh.). 21. The ld. DR referred to pages 54 and 55 of the Paper Book wherein the copy of order sheet noting of proceedings before the ld. CIT(A) in the case of assessee for assessment years 1995-96 and 1996-97 are contained and pointed out that a statement of ITI was recorded in pursuance of directions of ld. CIT(A....
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....hereafter, on various dates directions have been issued for issuance of notice under section 142(1)/143(2). Therefore, it cannot be accepted that notice under section 142(1) dated 21-11-2002 was issued de hors the proceedings in pursuance of notice under section 148 dated 20-3-2002. We are, therefore, not inclined to accept the assessee's plea that there was no participation in the proceedings under section 148. 24. Now coming to the main issue regarding service of notice under section 148. We find that there are two schools of thoughts on this issue. The first school of thought clearly holds that if notice is not served as per the requirements of law then the proceedings would be void ab initio. The second school of thought holds that if there is participation in the proceedings then it is purely an irregular exercise of jurisdiction, but the assessment proceedings cannot be invalidated. The ld. Counsel has naturally relied on the decisions rendered by first school of thought and the ld. DR relied on the decisions relied upon by second school of thought. First we will deal with the case laws relied upon by the ld. counsel for the assessee and also some other relevant decisions ....
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....der section 21 of the U.P. Sales Tax Act on a stranger would be deemed to have been properly and validly effected on the petitioner and the learned Sales Tax Officer would acquire the jurisdiction to finalise the proceedings under section 21 under the circumstances of the case?" 30. Section 21 of the UP Sales Tax Act reads as under: "21.(1) If the assessing authority has reason to believe that the whole or any part of the turnover of a dealer, for any assessment year or part thereof, has escaped assessment to tax or has been under assessed or has been assessed to tax at a rate lower than that at which it is assessable under this Act, or any deductions or exemptions have been wrongly allowed in respect thereof, the assessing authority may, after issuing notice to the dealer and making such inquiry as it may consider necessary, assess or reassess the dealer or tax according to law: Provided that the tax shall be charged the rate at which it would have been charged had the turnover not escaped assessment, or full assessment, as the case may be. (2) No order of assessment under sub-section (1) or under any other provision of this Act shall be made for any assessment year af....
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....iven to the expression 'issued'. The Dictionary meaning of the expression 'issued' takes in the entire process of sending the notice as well as the service thereof. The said word used in section 34(1) of the Act itself was interpreted by courts to mean 'served'. The limited meaning, namely, 'sent' will exclude from the operation of the provision a class of cases and introduce anomalies. In the circumstances, by interpretation, we accept the wider meaning the word 'issued' bears. It cannot, therefore, be said that mere issue of notice was sufficient. The jurisdiction to proceed under section 21 could be exercised only if the condition precedent was satisfied and notice for assessment or re-assessment under section 21 was not only issued but validly served on the assessee. To this extent there appears to be no difficulty and even the Division Bench held that if a notice is not served properly then such service is invalid and contrary to law. It, however, digressed from more or less settled view and attempted to carve out a new approach by invoking the principle of estoppel in taxation proceedings. The question, therefore, that boils down for consideration is whether by participati....
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....ioner of Income-tax [1953] 24 ITR 576 at 581, it was held: 'I do not, however, see how if the Act does not authorize the assessment of the assessee for the income which had neither been received by him nor received by the executors on his behalf, there could be an estoppel against the statute. Estoppel is only a rule of evidence and not a cause of action. In any event, estoppel is not a basis of liability to assessment under the Indian Income-tax Act, and, therefore, the assessment of a person for an amount of income to which he is a stranger cannot be based on the ground that he himself wanted to be assessed on it.' In the result, this revision succeeds and is allowed. The question of law raised by the assessee it decided by saying that the notice under section 21 having been improperly served the initiation of proceedings was without jurisdiction and it could not be validated by participation of the assessee in the proceedings." 33. In the present case; ITI has stated that he served the notice on a person managing the affairs at the shop but he has not been identified by ITI, therefore, it is almost akin to the service of notice on stranger as in the case of Laxmi Narain....
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....of Dy. CIT v. Oman International Bank SAOG [2006] 100 ITD 285 (Mum.), that sanctity of a Third Member decision and Special Bench decision is of the same nature and hence it is binding on the Tribunal. 38. ITAT Delhi Bench decision in the case of Chandra Agencies. In this case, it was held as under: "19. The procedure of service through affixture has already been discussed above, along with the ratio of various decisions of Supreme Court and various High Courts and after going through the provisions regarding service by affixture, we found that there is no valid service either on the assessee firm or on its partners. Therefore, the assessment completed by the Assessing Officer under section 144/148 cannot be held as valid assessment. The jurisdiction under section 148 was not properly assumed, therefore, the assessment cannot be held as valid assessment. As we have already discussed that there was no service of notice under section 148, accordingly, there was no jurisdiction to make assessment at the end of Assessing Officer. The finding of CIT (Appeals) that one of the partners had participated in the assessment proceedings, therefore, this was a technical irregularity in iss....
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.... service of notice of re-assessment, if the assessee admits that he had received the notice, or from the facts it can be found that he must have received the notice, the contention on behalf of such an assessee that the notice was improperly served must be rejected. Thus, it was held that a return filed by the assessee in pursuance of the notice served on his temporary employee was proper and the re-assessment proceedings were properly instituted. 43. Hon'ble M.P. High Court decision in the case of Dr. H.R. Rai-In this case it was held as under: "The assessee did not file his return under section 139(1) of the Income-tax Act, 1961. The ITO issued a notice under section 148 which was not served on the assessee personally. The assessee filed his return. The assessee also complied with notices under sections 142(1) and 143(2) and participated in the assessment proceedings. The ITO completed the assessment. On appeal to the AAC, the assessee contended that there was no proper service of notice on him and the proceedings were illegal and bad in law, as the signatures on the office copy for receipt of the notice were not his signatures and that the receipt of the notice was by a pe....
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....ed in the assessment proceedings, such a plea could not be raised at the appellate stage. The legal heir filed the appeal against the order of the Assessing Officer and other legal heirs did not challenge that order. The assessment order was passed on the legal heir of the deceased-assessee who was representing the deceased and not against the deceased person. In fact, the ratio of the decision in the case of CIT v. Jai Prakash Singh [1996] 219 ITR 737/85 Taxman 407 (SC) was applicable to the facts and circumstances of the instant case. Thus, the order of the Commissioner (Appeals) was set aside." 48. ITAT Jodhpur Bench decision in the case of Sumerpur Truck Operators Union. In this case it was held as under: "It was also contended by the assessee that there was no valid service of notice under section 148, as the same was served on its employee and referring to the provisions of section 282 submitted that the notice should have been addressed to the principal officer or any member of the union. Sub-section (1) of section 282 provides for service of notice on a person therein named, either by post or as if it were a summon issued by a court under the Code of Civil Procedur....
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....ner of Income-tax v. Ramsukh Motilal, Chidambaram Chettiar v. Commissioner of Income-tax, R.K. Das & Co. v. Commissioner of Income-tax and Commissioner of Income-tax v. Maharaja Pratap Singh it was held that the issue of a notice is a condition precedent to the exercise of jurisdiction under section 34(1) and that there can be no waiver of it. This view was affirmed by the Supreme Court in Narayana Chetty v. Income-tax Officer. 52. Now, we will refer to relevant statutory provisions in this regard. Firstly, we refer to sub-section (1) of section 148 which reads as under: "148(1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period. as may be specified in the notice a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be apply accordingly as if such re....
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....case service on such agent shall be sufficient. 13. Service on agent by whom defendant carries on business - (1) In a suit relating to any business or work against a person who does not reside within the local limits of the jurisdiction of the Court from which the summons is issued, service on any manager or agent, who, at the time of service, personally carries on such business or work for such person within such limits, shall be deemed good service. 15. Where service may be on an adult member of defendant's family - Where in any suit the defendant is absent from his residence at the time when the service of summons is sought to be effected on him at his residence and there is no likelihood of his being found at the residence within a reasonable time and he has no agent empowered to accept service of the summons on his behalf service may be made on any adult member of the family, whether male or female, who is residing with him. 16. Person served to sign the acknowledgement - Where the service officer serves or tenders a copy of the summons to the defendant personally, or to an agent or to other person on his behalf, he shall require the signature of the person to whom th....
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....ce had in some way or other reached the assessee. We are not inclined to agree. When the statute provides that a notice should be served in a particular mode, it is not possible to hold that there has been a proper service of notice merely from the fact that the person to whom the notice had been addressed had received the notice through some other source or that he has become aware of the contents of the notice. It has been held in Nagry Rasappa Setti v. Hamburi Venkataratnam [1913] MWN 1029 (Mad.) that where the summons has not been personally served on the party but was served on his gumastha, it must be shown that the requirements of Order 5, rule 12 or rule 13 have been complied with and that it cannot be assumed without further enquiry, that service on the gumastha was sufficient. In Papamma Rao v. Revenue Divisional Officer AIR 1918 Mad. 589, a Division Bench of this court while dealing with the manner of service contemplated by section 45(2) of the Land Acquisition Act, which also attracts the provisions of the Code of Civil Procedure, in the matter of service of notices; expressed the view that unless a person is appointed as agent to accept service of processes by an inst....
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....zation issued by the assessee company in favour of that Advocate who received notice, the notice cannot be taken as served on the assessee company." 57. Thus, in order that there should be a valid service, the person on whom service is effected must have a valid authorization given to him in writing to receive such notice and mere implied authority will not be enough. Alternatively, if for argument sake, it is to be held that implied authority is sufficient for service of notice, then that too is not present in the present case. 58. It is also noteworthy that the person on whom the service has been effected has not duly been identified which was necessary as per Rule 18 of Order V of Code of Civil Procedure reproduced above. In the case of Chandra Agencies, it was, inter alia, held that notice served by affixture on old address when new address was available with the department was not a valid service of notice. 59. As per Order V, Rule 20, it is the duty of the department to discharge its onus by showing that the authority concerned has reason to believe that the assessee was keeping out of the way for the purpose of avoiding service or that otherwise there were other goo....
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.... colour from the context in which it is delivered. In the case of R.K. Upadhyaya, the issue was that if a notice under section 148 was issued within period of limitation but served on assessee beyond the period of limitation then whether the assessment would be valid or not. This clearly shows that the facts before the Hon'ble Supreme Court were entirely different and even in this context also the court, inter alia, observed that once a notice is issued within the period of limitation, jurisdiction becomes vested in the Income-tax Officer to proceed to reassess. Section 148(1) provides for service of notice as a condition precedent to making the order of assessment. Service, under the new Act, is not a condition precedent to conferment of jurisdiction on the Income-tax Officer; it is a condition precedent only to the making of the order of assessment. Therefore, in our opinion, the decision of Hon'ble Supreme Court is not applicable to the facts of the case. 64. The ld. DR has submitted that in view of the provisions of section 124, the objection in regard to jurisdiction cannot be raised at this stage. In this regard ld. DR has relied on the decision of Hon'ble Allahabad High C....