TaxTMI 
TaxTMI 
2009 (5) TMI 598
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....ains' at Rs. 35,54,840 against Rs. 3,71,800 shown by the appellant is wrong, illegal and against the facts and law of the case. 2.2 Because the estimate value as on 1st April, 1981 taken by the DVO/AO at Rs. 4,66,000 against Rs. 12,50,000 shown by the appellant is unjust, arbitrary and in any view wrong and illegal. 3. Because the interest charged under s. 234B on the 'assessed income' is wrong and illegal. 4. Because in any view the additions made, interest charged in/and the assessment order passed and confirmed by learned CIT(A) are wrong, illegal and against the facts and law of the case." 3. Ground No. 1 is in two parts. Its Part 1.1 challenges legality of action under s. 147 r/w s. 148 of the IT Act, 1961 (hereinafter referred to as 'the Act' for short) The 2nd part taken via ground No. 1.2 challenges the very proceedings by contending that the requisite notice issued under s. 148 was never served on the assessee, therefore, the entire reassessment made is liable to be annulled/cancelled. 4. We have heard the rival submissions and have carefully perused the entire evidences on record in this regard. 5. Briefly stated, the facts of the case are that the asses....
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.... Shri Arun Lal, 42A, Gough Road, Agra. This address has been provided by the appellant in the return of income himself. The AO has made following notings below the notings made by the notice server. There are following notings made by the notice server and Inspector of IT: 'notice was served by affixtures at above premises in my presence'. Sd/- S.C. Agarwal, Inspector of IT, 14th Nov., 2003 I visited the above premises but could not find the assessee. On the above address Shri Jawahar Lal uncle of the assessee found and who refused to receive the notice and told that Shri Arun Lal is out of India. Hence I served the notice by affixing the same on main gate of the said house as p....
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....relying on this decision the ratio of which is in fact in the favour of the assessee and the learned CIT(A) has not given any reasons for distinguishing the decisions relied by the assessee as has been mentioned above. On the other hand, the learned Departmental Representative has relied on the orders of the authorities below and has repeated the same in his arguments. 8. After carefully cogitating the entire evidences available on record, we observe that the provisions of s. 292BB, the newly introduced provision in the IT Act, are not attracted in the given case because the assessee had raised objection to initiation of the proceedings that no notice was served under s. 148 of the Act, at the very first instance, during the assessment proceedings. As per s. 292BB when the assessee raises the objection with regard to service of notice before the AO, the deeming clause of this newly added provision does not apply to that case, as is evident from the saving clause given in this section. Having held so, we now proceed to the contention with regard to service of notice, if it is properly made by the Department as per the law as has been alleged or not. 9, Admittedly, reassessment....
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....same and similar view. 11. In the given case no such procedure has been followed. The process server cannot give such a certificate. He has neither filed his affidavit nor he was examined on oath by learned AO. Therefore, we are of the opinion that the Department has not followed the correct procedure as has been discussed above and, therefore, the service by affixture is not properly and correctly made in this case. We further rely on the decision of Hon'ble Punjab & Haryana High Court in the case of Kunj Behari vs. ITO and of Hon'ble Kerala High Court in the case of M.O. Thomas vs. CIT (1963) 47 ITR 775 (Ker) and also on Full Bench decision of the Hon'ble Allahabad High Court in the case of Laxmi Narain Anand Prakash vs. CST 1980 UPTC 125 (All) in which it has been held as under: "Sec. 21, Uttar Pradesh Sales-tax Act, 1948-Scope-Service of notice on stranger-Improper service-Assessee participating in assessment proceedings-Notice having been improperly served, initiation of proceeding, held, was without jurisdiction-Proceedings cannot be validated by assessee's participation in proceedings-Service of notice-Is condition precedent to assume jurisdiction-Jurisdiction explaine....
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....the Act stood assumed in the instant case. The notice server in the present case went to the address as supplied by the assessee per its return of income. Not finding the assessee at the given address, rather, as it appears, of no person staying thereat, the matter stood reported by him to the AO. Thereafter, at the AO's instance, the Inspector of IT was sent along with the notice server. This time, the uncle of the appellant was found, who refused to accept the notice, and informed that the appellant was living outside India. Accordingly, the notice was served through affixture by the notice server in the presence of the Inspector of IT on the main gate of the said house, as directed to him by the AO, the notings in respect of which stand reproduced at pp. 4 and 5 of the appellate order. Under these circumstances, the learned CIT(A) was of the view that adequate efforts stood made by the Revenue to locate and serve the notice on the assessee, prior to the service of notice by affixture, and sufficient grounds for serving the notice thus, i.e., as if it was a summons issued by the Court under the CPC, 1908, existed and, as such, there was a valid service in terms of s. 282(1) of th....
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.... the matter, I draw support for the purpose from the decision (Ahmedabad Bench) in the case of ITO vs. Varia Pratik Engineering (ITA Nos. 1226/Ahd/2007 and 104/Ahd/2008, dt. 30th Sept., 2008) [reported at (2009) 120 TTJ (Ahd) 1 : (2009) 17 DTR (Ahd)(Trib) 1-Ed.], wherein after a detailed examination of the law in the matter it stands held that in the absence of any words in the s. 292BB to the effect that the section will apply only in relation to the notices issued on or after 1st April, 2008, the legal fiction created by s. 292BB would govern all the cases involving the validity of the service of notices irrespective of whether the notices were issued/served before or after 1st April, 2008, and also irrespective of the fact that an assessee has participated in any proceeding or co-operated in any enquiry related to any assessment for asst. yr. 2008-09 or any preceding or succeeding assessment year. 7. The next question that arises is whether the assessee's case is indeed covered by the saving clause provided by the section itself, and which would only be if the assessee had in fact raised an objection qua the service of notice under s. 148(1) of the Act dt. 10th Nov., 2003 dur....
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....enue, so that by virtue of the said provision, there is no divestment of any vested right; the law only intending to weed out frivolous objections, in contradistinction to the genuine ones, and also cause the same to be adequately addressed. Coming back to our discussion regarding the assessee's claim of having raised the objection during the assessment proceedings, that no such objection stood raised is also inferable from the fact that no ground or plea in this respect, i.e., non-adjudication by the AO per his order, which is sans any such reference to the same, stands raised by the assessee in first appeal. In fact, rather, the assessee requested for and stood provided the reasons for the reopening of its case, and which would again denote his compliance with the proceedings. 8. In view of the foregoing, the assessee having not raised any such objection before the AO during the assessment proceedings, the onus for, and to show, which is squarely on it; the provisions of s. 292BB being applicable to its case, the assessee's objection in the appellate proceedings is not legally maintainable and, as such, warrants being rejected and dismissed at the threshold in view of the said....
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....no proper service, being by affixture, and not received by the partners either at the premises of the firm or at their residences, the Hon'ble Court, firstly, affirmed that the service of notice of the firm on its partners was valid and, secondly, the process server, having not been able to find the petitioner or any other person willing to receive the notice on their behalf, despite due diligence, affixed the notice to the residences of the partners (as well as on the gate of the business premises), so that there was a valid service. The Court examined the provisions of s. 282, sub-ss. (1) and (2), rr. 17, 19 and 20 of Order 5 of the CPC, 1908 in deciding the issue before it, which had been the subject-matter of the earlier decision as well, and which stood also discussed by it. In the present case the notice server first went at the assessee's stated address, only to find that no one was staying there. In this regard, it needs to be clarified that the information to the notice server would be only as given by the persons available at the address or in the surroundings, so that the same may not be precise, even as the process server has to give due cognizance to the same by the ve....
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....tensively relied upon by him, is that the notice-server has not issued a sworn affidavit in the matter. Such an objection stood also raised by the petitioner in the case of Ganeshi Lal & Sons vs. ITO. As explained by the said Court all that has been stated in the case of Satya Narain Poddar is that where the serving officer does not file an affidavit indicating the circumstances in which he had affixed the notices, it is obligatory upon the Court to examine him on oath before declaring the service as effected. And that it does not state that even where the serving officer does make a statement on oath, the ITO is bound to examine him before holding the service to be sufficient. In other words, what is required is a satisfaction of the Court (ITO/AO) that there were sufficient reasons warranting the service by way of affixture. In the present case, the AO himself directed the notice-sever to serve the notice by affixture in case of non-location of the assessee or if for any other reason he could not be found by him, having been earlier informed that the assessee is not available at the stated address; also sending along with the Inspector of IT for the purpose, who has also in confi....
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....bunal, as also, rather, by the plain reading of the relevant provisions of the Act. 16. The decision in the case of Kunj Behari vs. ITO, as would be apparent from the reading of the said decision, is not applicable in the facts of the present case; the premise of the said decision being that the onus was on the Revenue to show that the summons could not be served in the ordinary way and that the assessee was avoiding service of notice. There is no dispute to the principle as laid down by the decision, and neither has the Hon'ble jurisdictional High Court detracted therefrom in any manner; the matter in all cases being one of factual inference and, thus, factual finding, to the satisfaction of the Court (ITO), that service in the ordinary way could not be effected on the assessee, so that substituted service by affixture stood taken recourse to. In the facts of the present case, the assessee was confirmed by a close relative to be not in India, so that there is no question of any onus on the Revenue to show further that the assessee was avoiding service. 17. In view of the foregoing, I find no substance in the assessee's case and consider the service in the present case as pro....
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....lain language of the statute, this position stands abundantly clarified by the decision by the Hon'ble apex Court in the case of R.K. Upadhyaya vs. Shanabhai P. Patel, bringing out the departure from the 1922 Act in the matter, as also in the case of CIT vs. Jai Prakash Singh (1996) 132 CTR (SC) 262 : (1996) 219 ITR 737 (SC). Further, the apex Court had the occasion to review and state the law in the matter, i.e., as to the purport of the notice and the import in law of an invalid issue or invalid service of notices on the consequent proceedings, i.e., apart from the jurisdictional aspect, delineating the various aspects as well as the functions that a notice serves in the context of legal proceedings, and which it propounded as under: "Emerging principles in relation to 'notice'.-These are: (1) non-issue of notice or mistake in the issue of notice or defective service of notice does not affect the jurisdiction of the AO, if otherwise reasonable opportunity of being heard has been given. (2) Issue of notice as prescribed in the statute constitutes apart of reasonable opportunity of being heard. (3) If prejudice has been caused by non-issue or invalid service of notice the procee....
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....irendra Dev Dixit vs. Asstt. CIT in IT(SS)A Nos. 6, 7, 14 and 15/Agra/2002, dt. 6th Feb., 2009. As such, it is abundantly clear that service of notice, even in respect of jurisdictional notice as s. 148, is a part of procedure, its whole intent and function being to put the assessee to notice of the envisaged proceedings for the proposed assessment, to enable him to present his case in the matter before the assessment authorities, i.e., to enable proper assessment. As such, any infirmity that may be found to have attended the process would thus have necessarily to be examined from the standpoint of the prejudice that stands caused to the assessee. No prejudice whatsoever stands caused, which it would be observed is, completely missing in the present case, and the assessee being well aware of the initiation of proceedings in its case, participating therein. As such, even independent of the recently co-opted provisions of s. 292BB, it would be said that in the present case the assessment would not fail on account of defect in the service of notice under s. 148, which would, thus, at best be an irregular service. This, it would be observed becomes patently clear from the several de....
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....r cost index purpose at Rs. 12,50,000 and thus it has been observed in the reasons that the difference between two indexed cost, i.e., one indexed cost shown by the assessee and the other which is as per the Nagar Nigam fixed rates was the difference of Rs. 30,07,024 (cost index value worked out by the assessee at Rs. 50,75,000 minus cost index value worked out by the AO Rs. 20,68,976). Thus in the reasons it has been observed that the AO has reason to believe that the income of Rs. 30,07,024 chargeable under the head 'Capital gains' has escaped assessment for asst. yr. 2001-02. 3. Accordingly, the reassessment proceedings were initiated vide notice issued under s. 148 on 10th Nov., 2003 which as per the Department is served on the assessee on 24th Nov., 2003 by way of an affixture. The process-server who has served the notice by affixture has made the following notings on the said notice which has been reproduced in the order of the CIT(A) in para 2.1 as well as in the order of the learned JM. The same are also being reproduced hereinbelow: "This notice was sent at the following address: Shri Arun Lal, 42A, Gough Road; Agra. This address has been provided by the app....
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....ct. It was submitted that in view of s. 282 of the IT Act, 1961 (Act), service has to be effected in the same manner as is done under CPC. It was submitted that the AO has simply distinguished the said decisions of Hon'ble jurisdictional High Court and has wrongly placed reliance on the other decision of Hon'ble Allahabad High Court in the case of Ganeshi Lal & Sons vs. ITO (1981) 130 ITR 846 (All). It was submitted that in that case the process-server despite due diligence, was not able to find the petitioners or any other person who was willing to accept the notices on their behalf. The notice-server, as provided in r. 17, affixed a copy of the same on the gate of the business premises of M/s Ganeshi Lal & Sons, which premises was the place of business not of that firm only but also of the other petitioners, who were also partners in M/s Ganeshi Lal & Sons. Thereafter, a statement verified on oath explaining the circumstances in which the noticees were not found and the notices had to be affixed was submitted to the AO, who, as provided in r. 19, declared that the notices had been served by affixation. In these circumstances, the Hon'ble Allahabad High Court was satisfied that th....
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....quashed in its entirety and with these observations the learned JM has allowed the appeal filed by the assessee without going into the merits. 8. As against the above finding of learned JM, it is observed by the learned AM that notice-server in the instant case went to the address as supplied by the assessee as per his return of income and by not finding the said assessee at that given address, the matter was reported by him to the AO. It is also observed by the learned AM that it appears to him that no person was staying at that address. It is further observed that thereafter at the instance of AO, the Inspector of IT was sent along with the notice-server and at that time uncle of the assessee was found who refused to take the notice and it was informed that the assessee was living outside India. It is, therefore, the notice was served through affixture by the notice-server in the presence of the Inspector of IT on the main gate as per direction of the AO. It was further observed that the learned CIT(A) was of the view that adequate efforts were made by the Revenue to serve the notice on the assessee prior to the notice by affixture and there were sufficient ground for serving ....
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....vestment Ltd. (2005) 198 CTR (MP) 680 : (2005) 275 ITR 260 (MP). 11. The learned AM has also distinguished the decision of Hon'ble Allahabad High Court in the case of Laxmi Narain Anand Prakash vs. Commr. of Sales-tax and it is observed that the said decision is in the context of another enactment, therefore, the same is not applicable to the case of assessee. Secondly, the said decision is in respect of service of notice being condition precedent to the assumption of jurisdiction. According to the learned AM the assumption of jurisdiction is by virtue of valid issue of notice under s. 148 and not in its service which could even be later as per decision of the Hon'ble Supreme Court in the case of R.K. Upadhyaya vs. Shanabhai P. Patel (1987) 62 CTR (SC) 17 : (1987) 166 ITR 163 (SC). 12. Learned AM has also made reference to the decision of Hon'ble Punjab & Haryana High Court in the case of Kunj Behari vs. ITO and he observed that the said case is not applicable to the facts of the present case. Thus, it has been held by the learned AM that in the present case the service is proper. 13. Taking the discussion further, learned AM has observed that even if it is taken that serv....
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....ere was no valid service of notice as found by the learned JM. It was pleaded by the learned Authorised Representative that notice of the reassessment for the first time was given by the AO on 10th Nov., 2003 and on 11th Nov., 2003 the learned AO has directed the Inspector of IT to serve the notice by affixture. It was contended that this very fact makes it clear that no effort was made by the AO to ascertain that whether or not the service can be effected by ordinary means. It was submitted that as assessment was not going to be time-barred, therefore, it was desirable from the AO that the notice should be served in the ordinary course. On the very next day of issue of reassessment notice, the AO directed the Inspector to serve the notice through affixture and this is clearly against the principles laid down by the jurisdictional High Court in the cases of Jagannath Prasad vs. CIT and CIT vs. Satya Narain Poddar. It was submitted that these two decisions have wrongly been distinguished by the AO, CIT(A) and the learned AM. It was submitted that both these decisions were existing decisions of Hon'ble jurisdictional High Court and they have not been shown to be overruled. It was sub....
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....ame on the ground that the said decision has been rendered in the context of another enactment. It was submitted that later on under IT Act itself Hon'ble Allahabad High Court, in the case of CIT vs. Shital Prasad Kharag Prasad (2005) 196 CTR (All) 162 : (2006) 280 ITR 541 (All), has held that service of reassessment notice being invalid, the AO did not get jurisdiction on the basis of such invalid notice and such invalidity cannot be cured by s. 292B and also the fact that return was filed in response to such invalid notice cannot alter the position as the reassessment has to be held to be invalid. It was further submitted that the decision relied upon by the learned AM pertains to 1922 Act and on the basis of those decision it cannot be held that the reassessment proceedings were only irregular proceedings on account of defective service of notice. It was submitted that according to the latest decision of Hon'ble jurisdictional High Court in the case of Shital Prasad Kharag Prasad, in a case where service of notice is invalid, reassessment proceedings are liable to be quashed. It was submitted that it has wrongly been held that no prejudice will cause to the assessee. It was subm....
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....tion referred to me has already been reproduced in the above part of this order. According to the question my findings are limited to the issue regarding validity or otherwise of notice issued under s. 148 and also the effect thereof. 21. The notings of the notice-server have been reproduced in the above part of this order which also, as mentioned above, found place in the order of CIT(A) as well as in the order passed by the learned JM. The notice-server in his report has submitted that the service of affixture has been made as per the directions of the AO, dt. 11th Nov., 2003 in the presence of Shri S.C. Agarwal, Inspector of IT. The date of notice issued by the AO is dt. 10th Nov., 2003. Thus, on the very next day of the issue of notice, the AO has directed the notice-server to serve the notice by affixture. The impugned assessment is of asst. yr. 2001-02. It is not the case of Revenue that on 10th Nov., 2003, if notice is not served within a short span, the initiation of reassessment proceedings will be barred by time, as it has been the contention of the learned Authorised Representative that there was ample time available with the Department to initiate reassessment procee....
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....tion of the AO that the conditions required for application of order V, r. 20 were existing. Therefore, it was held that the order of the AO directing the service by affixture was based on no relevant material on record and, therefore, was to be struck down. This case of Hon'ble Allahabad High Court was later on considered by the same High Court in the decision in the case of Ganeshi Lal & Sons and it was found distinguishable on the ground that there was material on record to hold that the assessee was evading service or was keeping itself out of the way for avoiding service as when the notice-processor went to the place of the business of that assessee no one was prepared to accept the notice. In this manner the said case was distinguished. Therefore, it cannot be said that the ratio of the decision in the case of Ganeshi Lal & Sons is in any way different from the decision in the case of Jagannath Prasad vs. CIT. Here it win be important to mention that in the case of Ganeshi Lal & Sons, it has been observed by the Hon'ble High Court that in the said case the process-server, despite due diligence, was not able to find the petitioners or any other person who was wining to accept ....
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.... have independently examined the findings of the Tribunal on the question of issuance of a valid notice under s. 148 of the Act and its service on Shri B.D. Agarwal, who represented Shri J.B. Gupta. It is not in dispute that Shri J.B. Gupta had died on 13th Aug., 1974. Therefore, notice under s. 148 of the Act could not be validly served on Shri B.D. Agrawal on 27th Aug., 1976. The authority of Shri B.D. Agrawal came to an end ipso facto on 13th Aug., 1974, on account of death of Shri J.B. Gupta. It is settled law that service of a valid notice under s. 148 is the foundation for the initiation of reassessment proceedings and a condition precedent for the validity of the notice. The further fact is that the notice under s. 148 was not served on the adult members of the family who were in existence at the time of the partition of the joint Hindu family. Filing of the return in consequence of illegal service of notice on Shri B.D. Agrawal will not validate the reassessment proceedings. A Full Bench decision of this Court rendered under s. 21 of the Uttar Pradesh Sales-tax Act which is in pari materia of s. 147 of the Act says no. This has been so held in Laxmi Narain Anand Prakash vs.....
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.... issued. 9. In view of the above, the Tribunal has rightly held that s. 292B of the Act will have no application to the facts of the present case. The said section condones the invalidity which arises merely by reason of any mistake, defect or omission in a notice, if in substance and effect, it is in conformity with or according to the intent and purpose of the Act. The notice in question was not served on all the adult members of the family, as required under s. 283(1) of the Act. This mistake goes to the very root of the matter. It is fairly settled that an assessing authority gets jurisdiction to reopen a concluded assessment only after serving a valid notice on the assessee. A notice contemplated under s. 148 of the Act is a jurisdictional notice and is not curable under s. 292B of the Act, if it was not served in accordance with the provisions of the Act. 10. No other point was pressed or raised by the learned counsel for the Department. 11. In view of the foregoing discussion, we find that the order of the Tribunal is legally sound. We, therefore, answer the question in affirmative i.e., against the Revenue and in favour of the assessee. However, there shall be no o....