TaxTMI 
TaxTMI 
2009 (8) TMI 808
X X X X Extracts X X X X
X X X X Extracts X X X X
....e not justified in not occupying the same. 3. Because the assessee received a gift of Rs. 2,75,000 from Shri T.K. Agarwal S/o Shri Om Prakash Agarwal, Rio 3, Jindal Ganj, Firozabad, through account payee cheque. The party is the assessee. He was produced in person before the AO and he has admitted the making of gift to the assessee. The authorities below are not justified in not accepting the gift received by the assessee. 4. Because the disallowance of Rs. 71,451 in respect of interest is bad in law." 3. Briefly stated, the facts of the case are that the assessee filed his return of income on 18th Oct., 2001 declaring an income of Rs. 1,63,890 and also showed net agricultural income of Rs. 1,65,260. 4. During the assessment proceedings for asst. yr. 2002-03 (subsequent assessment year) it was noticed that the assessee has claimed deduction on account of interest payment on the loans raised and it was found that the said loans were not utilised in earning of the income disclosed by him and hence the interest was disallowed. In this year (2001-02) also the assessee has claimed deduction of Rs. 71,451 being interest on loans against the income derived from M/s Krishna Bul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; ITO, 5(1), Firozabad." 5. Since the assessee did not appear before learned AO and did not file return of income in response to notice under s. 148, the learned AO made assessment under s. 144 r/w s. 147 on 23rd June, 2006. Before learned CIT(A), the assessee preferred first appeal by taking various grounds and learned CIT(A) allowed part relief to the assessee after calling for the remand report from learned AO and by observing and accepting the fact that the assessee was ill throughout this period and this was precisely the reason why the assessee could not appear before learned AO. 6. Now the assessee is before us being further aggrieved and has raised legal grounds as well as grounds on merits. Through the legal grounds the appellant has challenged the very notice issued under s. 148 that it was never served on the assessee which is required to be served as per law and hence the learned AO did not assume a valid jurisdiction, and since this notice is not a valid notice being vague and non-specific and irrelevant so, the AO cannot proceed further on the basis of an invalid notice. Because the very assumption of jurisdiction under s. 148 is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f a local authority or company, to the principal officer thereof; (c) in the case of any other association or BOI, to the principal officer or any member thereof; (d) in the case of any other person (not being an individual), to the person who manages or controls his affairs." 8. It is evident from the above that generally two modes of service of a notice are recognized-(i) by post or (2) in the same manner in which the summons issued by a Court under the Code of Civil Procedure, 1908 (5 of 1908) (CPC in short). Thus under IT Act notice has to be served on the person named therein either by post or as if it were a summons issued by a Court under the CPC. But in any case the intention of the legislators can be gathered from the cumulative reading of the method of service as provided under CPC even if the service is by post. The CPC details the varied modes and methods of service by post even. The meaning of the expression service by post has to draw its colour from the service of summons under CPC. The order 5, r. 12 of CPC provides that wherever possible the service shall be made on the defendant in person or on his agent. For income-tax purposes word "assessee" has to be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....business or personally works for gain. Sec. 282 imports the mode of service from CPC and the above rule provides that when a service is to be effected by post it should be by registered post acknowledgement due (RPAD in short). The other requirements are that it should be in the name of the assessee and should be sent on a correct address, as stated above. As per the terms of s. 282 of the IT Act we have to fall back upon CPC provision for effecting 'service of notice'. The requirements of service by post have been narrated above. 11. There is another Act namely the General Clauses Act, 1897, which supplies life and meaning to certain 'words', 'phrases' and 'expressions' which are not specifically found defined in a particular enactment. The s. 27 of the General Clauses Act which falls under the chapter "Miscellaneous", provides meaning of service by post. The meanings of words given in this Act apply to all Central Acts by way of supplementing and not supplanting. This section reads as under: "Meaning of service by post-Where any/Central Act/or regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... maxims do or do not apply to the particular case before it; As to illustration (a)-A shopkeeper has in his till a marked rupee soon after it was stolen, and cannot account for its possession specifically but is continually receiving rupees in the course of his business. As to illustration (b)-A, a person of the highest character is tried for causing a man's death by an act of negligence in arranging certain machinery. B, a person of equally good character, who also took part in the arrangement, describes precisely what was done, and admits and explains the common carelessness of A and himself; As to illustration (b)-A crime is committed by several persons. A, Band C three of the criminals are captured on the spot and kept apart from each other. Each gives an account of the crime implicating D and the accounts corroborate each other in such a manner as to render previous concert highly improbable; As to illustration (c)-A, the drawer of a bill of exchange was a man of business, B the acceptor, was young and ignorant person, completely under A's influence; As to illustration (d)-It is proved that a river ran in a certain course five years ago, but it is known that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by s. 27 of the General Clauses Act and when question of service is in dispute s. 114 of the Indian Evidence Act comes into play, which provides rebuttable presumption of a fact. There are plethora of judicial pronouncements on the issue of 'service of notice by post', which were rendered as per the facts and the circumstances of that case. A caution has to be struck before applying the ratio of that particular case which was rendered under a given set of facts. In some cases the service of notice is accepted but the date of service is disputed, so in that case decision would centre around the presumption regarding date of service only and s. 27 of the General Clauses Act and s. 114 of the Indian Evidence Act then would be more relevant. But in cases where the service of notice is disputed that it was never made and the notice was never served upon the assessee, the provisions of order 5, r. 19A and r. 12 would come into picture in addition to the above provisions. Therefore, the fact of each case has to be examined separately and only the relevant decisions have to be applied. Having discussed the scheme of various enactments which are relevant to decide the question of 'service o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ompleted under s. 144 of IT Act, 1961 and the date fixed for the purpose was 14th June, 2005. On the date fixed again none attended. Accordingly on 16th June, 2005 a show-cause notice was issued to the assessee requiring him to show cause as to why penalty under s. 271(1)(b) of IT Act, 1961 may not be imposed and the date fixed for the purpose was 30th June, 2005. On this date again nobody attended. Accordingly on 12th Aug., 2005 penalty order under s. 271(1)(b) was passed levying a penalty of Rs. 10,000. On 17th June, 2005 a questionnaire was issued to the assessee asking him to furnish the following information under s. 142(1) of IT Act, 1961 and the date fixed was 30th June, 2005 when nobody attended as mentioned above. This notice was received personally by Shri Naveen Agarwal, chartered accountant, authorised counsel of the assessee. (i) You have shown income from Krishna Bulk Movers at Rs. 70,406. Please justify the same. A perusal of P&L a/c shows that you debited a sum of Rs. 12,330 on account of interest to party bank interest. Please give details of the loans raised, prove their genuineness, justify use of the loans and claim of interest. (ii) Justify the income ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1961 was issued requiring personal attendance of the assessee on 19th Dec., 2005 and this notice was duly received by Shri Naveen Agarwal, FCA on 13th Dec., 2005. On the date fixed again nobody attended. On 22nd Dec., 2005 again summons under s. 131 and notice under s. 142(1) were issued fixing the hearing on 3rd Jan., 2006 when again nobody attended not any application seeking adjournment was received. Again on 16th Jan., 2006 following show-cause notice was issued to the assessee fixing the hearing on 25th Jan., 2006: (1) A notice under s. 148 of IT Act, 1961 dt. 4th April, 2005 was issued to you requiring you to deliver this office within 30 days from the date of service of this notice a return of income in the prescribed form of your income for the said assessment year. Till 20th May, 2005 no compliance was made to the notice under s. 148 fixing the hearing on 31st May, 2005. On this date none attended nor was any application seeking adjournment. (2) Again on 7th June, 2005 a letter was sent to you requiring you to show cause as to why your assessment may not be completed under s. 144 of IT Act, 1961 and the date fixed for the purpose was 14th June, 2005 on the date fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as to why your assessment may not be completed under s. 144 of IT Act, 1961 and penal proceedings be not started for non-compliance of the above notices. It may be mentioned here that: (i) In the capital account you have shown income from agriculture at Rs. 1,65,260 for which no evidence is available on record. (ii) Gift of Rs. 2,75,000 for which no proof of genuineness is available on record. (iii) Similarly, the profit shown at Rs. 70,406 and income from tanker at Rs. 1,41,332 remains unexplained and unjustified. (iv) Interest on loan at Rs. 71,451 claimed is also not allowable as the loans are not used for your business purpose. (v) Computer rent of Rs. 24,000 claimed to have been paid is not explained and remains unproved. (vi) In the tanker P&L a/c you have shown tanker freight at Rs. 17,81,948 whereas freight account KBM shows freight paid to you at Rs. 25,03,792. The difference remains unexplained. The expenses debited to tanker P&L ales are not proved. Date fixed for the purposes is 24th Jan., 2006 at 11.30 a.m. On the date fixed none attended. Again on 12th April, 2006 a letter was written to the assessee fixing the case on 24th April, 2006 when ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....comment at all on service of notice. The relevant portion of the written submission sent to learned AO reads as under: "In this regard, it is submitted that the notice under s. 148 in this case was not served on the assessee or any representative of the assessee. Moreover, the reasons for initiating the proceedings under s. 148 also does not authorize the AO to reopen the assessment as no information has come to the possession of AO entitling him to reopen the assessee (sic-assessment) or to hold that the income disclosed by the assessee was not true and correct. As per s. 282 of the IT Act, the notice under s. 148 has to be served on the person named either by post or as a summon issued under the CPC. In this case, the Department did not serve the notice on the assessee at any time nor any other subsequent notice has been served on the assessee. In view of these facts, the entire proceedings continued or started under s. 148 are illegal and bad in law. The reference to the counsel of the assessee Shri Naveen Agarwal, chartered accountant is also illegal and bad in law as the notice has not been served on Naveen Agarwal, chartered accountant nor he was authorized to represent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xt, the Hon'ble Judges have accepted that the presumption in question although rebuttable but could not be rebutted. In that case service of notice was proved as it was accepted by the assessee but the date of receipt was disputed. The statutory requirement was accomplished by the Department. In this given case before us the question is entirely different and distinct. In this case the AO (Department) has not been able to prove the service of notice except by drawing presumptive benefit. In Shanker Lal's case, the assessee had acquiesced to the statement that this envelope has reached Civil Lines Post Office on the next day. The facts of this case do not at all match with the Shanker Lal Ved Prakash's case. Insofar registered post with acknowledgment due (RPAD) post is concerned, the provisions of r. 19A of Order V were not referred to by any party before the Hon'ble Court in that case as the natural issue was different. Moreover, the Hon'ble High Court was dealing with a notice issued under s. 143(2) and has dwelt upon the nature of this notice by referring to the decision of Hon'ble Rajasthan High Court in the case of CIT vs. Gyan Prakash Gupta (1986) 54 CTR (Raj) 69 for the prop....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Division Bench differs from the judgment of another Division Bench, it has to refer the case to a Full Bench. A Single Judge cannot differ from a decision of a Division Bench except when that decision or a judgment relied upon in that decision is overruled by a Full Bench or the Supreme Court, or when the law laid down by a Full Bench or the Supreme Court is inconsistent with the decision. It may be noticed that a precedent case to be binding-(i) if it is reversed or overruled by a higher Court; (ii) when it is affirmed or reversed on a different ground; (iii) when it is inconsistent with the earlier decisions of the same rank; (iv) when it is sub silentio; and (v) when it is rendered per incuriam. A judgment can be said to be per incuriam if it is rendered in ignorance or forgetfulness of the provisions of a statute or a rule having statutory force or a binding authority. But if the provision of the Act was noticed and considered before the conclusion was arrived at, merely on the ground that it has erroneously reached the conclusion, the judgment cannot be ignored as being per incuriam. The rule of per incuriam is of limited application." The Hon'ble Gujarat High Court in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that may be raised either under s. 114 of the General Clauses Act. A statement on oath of a party to the proceedings is a piece of oral evidence like statement of any other witness and there is no rule of law that such a statement should not be accepted merely because it is made by a person who is interested in the proceedings nor is there any requirement of law that the statement on oath of a party, the proceedings must always be corroborated by any independent Court of law. Once the presumption is raised, the manner of rebuttal need not be limited to the instance given in the counter illustration (f) to s. 114. Case referred: AIR 1973 Del 39 = 1972 Ren. CR 960 2.5 AIR 1971 J&K 20 = 1970 Ren. CJ 940 4" 21. The Hon'ble Supreme Court has also held in the case of R.K. Vashist vs. Union of India 1993 Supp (1) SCC 431 that the registered post should be sent along with AD. Even when the AD is received back signed, the party can rebut the service with the help of evidences. It was so held by Hon'ble Supreme Court in the case of Green View Radio Service vs. Laxmibai Ramji & Anr. (1990) 4 SCC 497. The Hon'ble Lucknow Bench of Tribunal had an occasion to deal with similar issue ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The reasons for reopening recorded by learned AO read as under: "The return of income for the asst. yr. 2001-02 has been filed by the assessee on 8th Oct., 2001 disclosing an income of Rs. 1,63,890 and agricultural income of Rs. 1,65,260. During the course of assessment proceedings of the assessee for the asst. yr. 2002-03 it came to notice that the assessee has claimed deduction on account of interest payment on loans raised and it was noticed that said loans have not been utilized in earning the income disclosed by him and hence the interest claimed was disallowed. This year also the assessee has claimed deduction of interest of loans at Rs. 71,451 and the income shown by the assessee is from M/s Krishna Bulk Movers, Firozabad, income from taxi plying and income from tankers plying as also income on sale of cadmium metal. This year also the interest claimed is not allowable as the loans have not been used for the purpose of earning the income as above. Besides above, in the capital account there are credits of Rs. 1,65,260 on account of agricultural income and Rs. 2,75.000 on account of gift from R.K. Agarwal. No confirmation letter or address of Shri T.K. Agarwal is avail....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l expenditure and not allowable. The Tribunal, however, held that the entire expenditure was allowable as revenue expenditure in the year in which it was incurred. On 30th March, 2001, the petitioner received notices for the asst. yrs. 1990-91 to 1996-97 alleging that the income of the petitioner for the said assessment years had escaped assessment. The reasons for reopening the assessments for all the seven years were identical. The reason was that there was under-assessment due to the treatment of this expenditure as deferred revenue expenditure. The expenditure was capital in nature. On a writ petition to quash the notice: Held, that it could be seen from the recorded reasons that there was no allegation whatsoever of any fact not being disclosed by the assessee in any of the assessments. It was evident that on account of the changed view of the AO in the asst. yr. 1998-99 the proceedings had been sought to be reopened. In the balance sheets which were filed along with the returns, all the facts relating to the expenses incurred on repair were fully disclosed in several assessment years for more than a decade and the AO after considering such facts had allowed the deduction f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the assessment, or the initiation of the proceedings by issue of notice under s. 148, is bad in law, This is contended on the basis that the recorded reasons are not specific or relevant, and do not have a direct proximity or nexus with the formation of belief as to the escapement of the relevant income for the relevant assessment year. The said reasons stand reproduced at p. 20 of the proposed order by my learned Brother, and specify three separate grounds for the issue of the notice, as: (a) the assessee had claimed deduction of interest on loans raised. A similar deduction stood also claimed by the assessee per its return for the subsequent assessment year, in the course of assessment proceedings for which it was found the said loans had not been utilized for the purpose of earning any income and, consequently, stood disallowed. A consequent action by the issue of notice under s. 148 thus followed for the current year; (b) the capital account of the assessee for the year, accompanying the return of income, exhibited a credit of Rs. 1,65,260 on account of agricultural income and another amount of Rs 2.70 lacs by way of gift from one Shri T.K. Agarwal. However, no agricul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessed, is sought to be impugned, and on the basis of the said findings. The only basis for a valid initiation of proceedings under s. 147 is the existence of valid reasons, and as long as it is so, the proceedings are maintainable, and cannot be subject to or assailed on the basis of the result of the said proceedings: (i) Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 210 CTR (SC) 30 : (2007) 291 ITR 500, 512 (SC); (ii) Raymond Woollen Mills Ltd. vs. ITO & Ors. (1999) 152 CTR (SC) 418 : (1999) 236 ITR 34 (SC); (iii) ITO vs. Selected Dalurband Coal Co. (P) Ltd. (1996) 132 CTR (SC) 162 : (1996) 217 ITR 597 (SC); (iv) Central Provinces Manganese Ore Co. Ltd. vs. ITO (1991) 98 CTR (SC) 161 : (1991) 191 ITR 662 (SC); (v) CIT vs. Anupam Kapoor (2007) 212 CTR (P&H) 491 : (2008) 299 ITR 179 (P&H); (vi) Ratnachudamani S. Utnal vs. ITO (2004) 190 CTR (Kar) 132 : (2004) 269 ITR 272 (Kar); (vii) Raunaq Finance Ltd. vs. Jt. CIT (2004) 191 CTR (Raj) 215 : (2005) 272 ITR 210 (Raj). 5. In the present case the assessee has been found during the course of assessment proceedings for the immediately succeeding year to have not utilized the said loans, on which i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ITO vs. Purushottam Das Bangur & Anr. (1997) 139 CTR (SC) 32 : (1997) 224 ITR 362 (SC). A recent decision by the Hon'ble Delhi High Court in the case of CIT vs. Highgain Finvest (P) Ltd. (2008) 214 CTR (Del) 441 : (2008) 304 ITR 325 (Del) is also on the point. The facts of the said case ITO vs. Purushottam Das Bangur & Anr. are telling and thus would only be in order, to examine, as the same exhibit the requirement in law that the apex Court held necessary and relevant for the purpose of a valid reopening: "Held, reversing the decision of the High Court that the letter of the Dy. Director referred to the statement containing financial information regarding the company in question which was annexed to the letter. The statement contained information derived from the Bombay Stock Exchange Directory indicating that during the period 1965-70, the company had prospered, that the book value per equity share had risen from Rs. 318.55 for the year ending 31st Dec., 1965, to Rs. 401 for the year ending 31st Dec., 1970, the earning per share had risen from Rs. 8.37 per share to Rs. 44 per share and that the dividend percentage had also risen from 2 per cent to 10 per cent for the same peri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ested by the assessee. In other words, the presumption of service as available in law would not hold as the same is not accompanied by an acknowledgement due, the requirement of which is to be necessarily read along with that of remittance per registered post. This constitutes the bone of contention between the two parties in the instant case, with my learned Brother finding the assessee's contention as valid in law. 7. To begin with, it would be relevant to reproduce the relevant provision of law: "282. Service of notice generally.-(1) A notice or requisition under this Act may be served on the person therein named either by post or as if it were a summons issued by a Court under the CPC, 1908 (5 of 1908). (2)............" 8. Sec. 27 of the General Clauses Act, 1897 and s. 114 of Indian Evidence Act, 1872, are equally relevant in the matter, though are not being reproduced, form as they do, part of the proposed order by my learned Brother. While s. 27 of the General Clauses Act provides for the meaning of the different words, phrases and expressions, which stand not specifically defined under the relevant enactment, s. 114 of the Indian Evidence Act concerns itself wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee along with his memo of appeal before the first appellate authority. By all accounts, the said objection stood raised for the first time by the assessee only in the appellate proceedings vide his written submissions dt. 23rd Nov., 2006. In fact, even the learned Authorised Representative before us did not state so, only stating of the assessee's non-participation in the assessment proceedings as the reason for the non-application of s. 292BB of the Act in the facts and circumstances of the present case, so that the same (non-participation) be construed as the raising of an objection by the assessee. 10. In this regard, the facts are not in dispute, so that what remains to be seen is whether s. 292BB, which stands inserted on the statute of the Finance Act, 2008 w.e.f. 1st April, 2008, would be applicable in the instant case or not. The same itself, as would be apparent, has two limbs thereto; firstly, whether the provision, being co-opted on the statute w.e.f. 1st April, 2008, would be applicable to the appellate proceedings in respect of an assessment for an earlier assessment year, being 2001-02 in the instant case, i.e., is a part of procedure and, secondly, the applica....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessment, i.e., concerns the procedural aspect-of the proposed assessment. The two processes or aspects are independent of each other, even as the service could only follow the issue, and the difference between the two is basic and vital. Apart from the plain language of the statute, this position stands abundantly clarified by the decision of 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 docs not affect the jurisdiction of the AO, if....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ight in merely setting aside the assessment." The above, in fact, represents the trite law, as also recently affirmed by the Tribunal (Agra Bench), after examining the case law in the matter, including by the Special Benches of the Tribunal, in the case of Virendra 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 ease 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, even though well aware of the initiation of proceedings in its case, avoiding and eschewing compliance and, rather, obstructing the due process of law. A....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Act, and application of which section, it may be emphasized, is not under challenge, so that the same stands accepted by the assessee. Further, this is, even as is the fact of the relevant proceedings being on in its case was only in the knowledge of the assessee. How could, it may be asked, did the assessee; its return for the relevant year having been processed earlier under s. 143(1) and as far back as on 20th June, 2002, execute a power of attorney in favour of his counsel Shri Navin Agarwal, chartered accountant on 9th April, 2005, i.e., a few days after the issue of notice under s. 148(1) and sent per registered post of even date, i.e., even if we consider that the said counsel did not actually visit the AO on that date (9th April, 2005), being not borne out by the record. Not only that, there is no dispute as regards the service of each of the notices under s. 142(1), which stood issued aplenty, the first dt. 20th May, 2005, and the last one being dt. 12th June, 2006, being served either on the assessee's counsel aforesaid or the assessee, and both by post and by hand. Even the assessment order, together with notice of demand and all other subsequent notices, again sent at ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... could the same be considered as an irregular or defective service. The second question assumes relevance in view of Courts making a clear distinction between a non-service and improper or defective service. 16. As stated earlier, the matter would require an interpretation of the provision of s. 282 of the Act, apart from s. 27 of General Clauses Act and s. 114 of the Indian Evidence Act. Again, I do not find any ambiguity in the matter, each of the provisions of law being abundantly clear in itself. Sec. 282 clearly gives an option of service to the issuing authority, and which should be either by post or as if it were summons issued by Court under CPC, 1908. The meaning of the words or the expression 'service by post' stands statutorily clarified by s. 27 of the General Clauses Act, which has necessarily to be applied in situations as the present one; the said words/expression having not been specifically defined or clarified by or under the Act. The same clearly deems the service to have been effected when the same has been done in a regular manner by registered post. Neither is there any mention of the AD therein nor would the absence thereof along with make it any less a re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....114 of the Indian Evidence Act. As such, even going by the strict rules of the Evidence Act which are normally not applicable to the provisions of the Act, the presumption of service of notice under s. 148(1) of the Act gets validated in law. 18. There is, as such, no question of any infirmity in law for the said presumption, so that the notice has to be necessarily deemed as properly served. No doubt, the presumption is a rebuttable one, but the onus for the same is clearly on the assessee, and who has, apart from averment, not been able to show with any material or circumstantial evidence of having in fact not been served. All it needed to do is, the registered envelope bearing the distinctive number, was to procure a certificate from the postal authorities that the said registered envelope, containing the assessee's notice, stood not delivered at the stated address, and which it failed to. Or, who, as per the said Department received the delivery, so that there is scope for bringing positive evidence on record to support its claim, and which it has failed to do at any stage. It may be clarified that the postal authorities are bound to deliver each registered post, and in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ances that it is dealt with. Per its said decision, rendered is in an entirely different context, i.e., meaning of the word 'issue' under s. 18(2A) of the WT Act, 1957, it stood held with reference to its earlier decision in the case of Banarsi Debi & Anr. vs. ITO (1964) 53 ITR 100 (SC) , that the word 'issue' as occurring in s. 18(2A) meant 'served'. There is a material departure between provisions of 1922 Act and the Act in this respect, and which issue stands clarified by the apex Court long back per its decision in the case of R.K. Upadhyaya vs. Shanabhai P. Patel, holding that there is a clear distinction between the 'issue of notice' and a 'service of notice' under the 1961 Act and for which its earlier decision in the case of Banarsi Debi stood distinguished by it holding that the scheme of the 1961 Act, so far as the notice of reassessment is concerned, is quite different, even as indicated earlier, while this is even otherwise borne out by a mere perusal of the relevant provisions of the Act, so that the same must necessarily be considered as trite law. While the assumption of jurisdiction for making the assessment to assess the income under s. 147 of the Act is on the bas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. Madhsy Films (P) Ltd. which is dt. 25th March, 2008, so that it is in fact the latest decision in the matter on the subject by the decision in the case of Eqbal Singh Sindhana being dt. 3rd April, 2007, and also by the same constitution, so that apart from other factors, it would prevail on grounds of being latest as well as stare decisis. The decision by the Hon'ble Delhi High Court in the case of CIT vs. Hotline International (P) Ltd., which is of even date as its decision in the case of Eqbal Singh Sindhana, and by the same Bench, is, again, with reference to the provisions of the CPC, 1908, so that the interpretation accorded in terms of the rules thereunder and again without review of the precedents in the matter, and which are binding. Further, as would be presently seen, the decision in the case of CIT vs. Eqbal Singh Sindhana as well as in the case of CIT vs. Hotline International (P) Ltd. are, in fact, totally distinguishable on facts, so that they are in any case not applicable in the present case. Vide paras 23 and 24 the matter stands discussed in conjunction with other case law relied upon by the assessee. The discussion in the preceding part of this para was und....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the letter stood rebutted. In the case of CIT vs. Eqbal Singh Sindhana, the notice was returned undelivered by the postal authorities with the remark "plot No. 226 docs not exist". In the case of Keshab Narayan Banerjee vs. CIT, the postal cover sent through registered post stood received back by the Revenue from the postal authorities with the endorsement regarding refusal. In CIT vs. Hotline International (P) Ltd., the admitted facts are that security guards refused to receive the notice, informing of the factory being closed for Holi festival upto 31st March, 2002, which was found as a matter of fact by the Inspector, and ultimately the notice stood served by affixation. Clearly, there was not even a claim on behalf of the Revenue of service by post and the decision in that instant case stood rendered by the Hon'ble Court with respect to the provisions of the CPC, 1908, which are applicable only in respect of service by affixation, which is the second option that the AO can exercise in the matter of service of notice. In Megighi Kamchi Patel vs. Kundan Mal Chaman Lal Mehtari AIR 1968 Bom 387, the summons of the suit sent by registered post came back unserved through the postal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt, insist upon service through a letter sent by registered post acknowledgement due. As such, there is no question of the said decision, which stands rendered in the context of the specific provision of another enactment by a Single Judge Bench, to the present case. Again, the service has only been considered as not proper. The decision by the Tribunal in the case of ITO vs. Bedi Enterprises, as would be apparent from the facts of the case, stands rendered under the circumstance where the service was sought to be made by the Department personally and, thus, is not applicable to the present case. The notice under s. 148 was itself undated and the Revenue, as apparent from the report of the Inspector, could not state the person (lady) on whom the notice was served by the Inspector. It was under these circumstances that the service was considered by the Tribunal as invalid. 26. In the case of Green View Radio Service vs. Laxmibai Ramjibai, the issue involved was totally different. In that case, the acknowledgement due stood received back signed, bearing the Signature of the addressee himself, who though later appeared as a witness, stating on oath that the acknowledgement due did ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Reliance for the same, apart from the foregoing decisions, is also placed on the decisions in the case of CIT vs. Shital Prasad Kharag Prasad (2005) 196 CTR (All) 162 : (2006) 280 ITR 541 (All). Needless to add, there is no question of grant of opportunity in the present case with the assessee himself being responsible for not participating in the proceedings of which he was only well aware of, as apparent from a plethora of notices under s. 142(1) issued and served and the adjournment granted on several occasions, last of which stood requested by him personally. As such, even a restoration, assuming an improper service, is not warranted in the facts and circumstances of the case, so that the assessment as framed merits being upheld. Further, in this context, it may also be clarified that the assessee has neither before us nor before the first appellate authority challenged the invocation of s. 144 in its case and which is only, as would be evident, in consequence to his own conduct. As such, even a finding of improper service, i.e., assuming so, would be of no assistance, whatsoever, to the assessee in the facts and circumstances of the present case. 28. Ground Nos. 2, 3 and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rs. 5,11,711 (Rs. 71,451 + 1,65,260 + 2,75,000). 3. It has further been mentioned in the assessment order that till 20th May, 2005, no compliance of notice under s. 148 was made and notice under s. 142(1) of the Act to produce the books of accounts etc. was issued on 31st May, 2005, on which date none attended on behalf of the assessee and no application for seeking adjournment was filed. Again on 7th June, 2005, a letter was sent to the assessee requiring him to show cause as to why his assessment may not be completed under s. 144 of the Act and the date fixed was 14th June, 2005. On the said date also, nobody attended. For non-compliance, show-cause notice was issued under s. 271(1)(b) on 16th June, 2005 asking the assessee to show cause as to why penalty may not be imposed of Rs. 10,000. On 17th June, 2005, a questionnaire was issued under s. 142(1) of the Act for producing certain information/documents on 30th June, 2005. Despite the fact that the said notice was personally received by Shri Naveen Agarwal, chartered accountant authorized by the assessee, no compliance was made. Again on 5th July, 2005, notice under s. 142(1) was issued for 18th July, 2005 when also nobody at....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is no mention in Form No. 35 regarding statement of facts. 5. Challenging the validity of reassessment proceedings, it was submitted before the CIT(A) that no notice under s. 148 was served on assessee, as at the relevant point of time, the assessee was seriously ill and he was hospitalized for intensive treatment. It was submitted that the assessee's chartered accountant was also not properly authorized to represent his case at the relevant time, therefore, the proceedings remained unrepresented. It was submitted that as notice under s. 148 was not served on the assessee or on any representative of the assessee, the reassessment proceedings are not valid. It was submitted that the reasons for initiating the proceedings under s. 148 are not such so as to authorize the AO to reopen the assessment, as no information has come to the possession of the AO which entitled him to reopen the assessment to hold that the income shown by the assessee was not true and correct. Reference was made to CPC and s. 282 of the Act to contend that the notice is required to be served either by post or as a summons and as the Department did not serve the notice on assessee, the entire proceedings cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat respect and also the agricultural income was included in the return despite the fact that the assessee was never engaged in the agricultural activities and thus, the reasons for reopening were sufficient to initiate reassessment proceedings. With regard to the contention of the assessee that the AO could have initiated scrutiny proceedings, the learned CIT(A) has observed that mere fact that the AO could have initiated scrutiny proceedings does not preclude the AO to initiate reassessment proceedings. In this manner, the learned CIT(A) has upheld the validity of reassessment proceedings. He has also decided the issues on merits. However, in the questions proposed for the opinion of Third Member, there is no mention regarding the merits, therefore, the same is not discussed being not relevant for the purpose of deciding these questions. 8. During the course of hearing before the Tribunal, it was argued by the learned Authorised Representative that notice issued under s. 148 was never served on the assessee. Therefore, the AO did not assume the valid jurisdiction. Thus, the AO could not proceed to reassess the income of the assessee on the basis of invalid notice. Considering ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... made to the assessment order in which it was mentioned that notice under s. 148 of the Act was issued to assessee on 4th April, 2005 to assess the escaped income of Rs. 5,11,711 and it was also mentioned that till 20th May, 2005, no compliance of notice under s. 148 was made. Noting the attempts of AO to issue notice to the assessee for the purpose of making reassessment, it is observed by learned JM that when the learned AO has put so much labour in issuing notice, he could have taken care to serve the same by using his power for extraordinary service by way of affixture which has not been done by him. The relevant notice was the notice dt. 4th April, 2005 issued under s. 148 of the Act which was sent by speed post and there was no dispute with regard to that fact. It was noticed that copy of notice along with receipt of post office was annexed at p. 87 of the paper book. It was observed that the dispute was only that whether this notice ever reached the assessee or whether it was not served upon the assessee. It was observed that the Department is drawing presumptive benefit of s. 114 of the Indian Evidence Act and s. 27 of the General Clauses Act, which presumption is rebuttabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld be sufficient to dislodge the presumption and shifts the onus on other side to establish by evidence that the service had been duly effected. Thus, it was held that where a presumption is rebutted by way of an oath, then validity of service could not be presumed. Taking into account all these reasons, it has been held by learned JM that the service of notice under s. 148 is not proved and the presumption has been rebutted. There is no proof on record to prove the service except by way of presumption. The AO has failed to prove the service of notice, which is condition precedent for passing reassessment order. Therefore, reassessment order cannot survive. 11. Coming to the reasons, it is observed that in view of the decision of Agra Bench in the case of Asstt. CIT vs. Tarun Goel in ITA No. 407/Agr/2006 the reason of gift was not a valid reason. For the other reasons, it has been pointed out that the same is based on findings given in subsequent year and referring to the decision of Calcutta High Court in the case of India Steamship Co. Ltd. vs. Jt. CIT & Anr. (2005) 194 CTR (Cal) 386 : (2005) 275 ITR 155 (Cal) wherein it has been held that the reasons recorded by the AO are no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her, reference is made to s. 282 of the Act, s. 27 of the General Clauses Act and s. 114 of the Indian Evidence Act to say that service has to be deemed to have been effected, if the notice is sent by registered post at the correct address. The acknowledgement due is not sacrosanct to the service of notice as it does not specifically find place in s. 282 of the Act. Reference is made to various decisions of Hon'ble Delhi High Court, which have been referred to in the order of learned JM and it is held that valid service was made as the notice was sent at the correct address by way of registered post. 13. It is further observed that in view of so many notices issued and served on the assessee, even the restoration, assuming improper service, is not warranted as the assessment has been framed on merits to be upheld, which fact is also evident from the fact that the assessee neither before the CIT(A) nor before the Tribunal has challenged the invocation of s. 144 of the Act. It is in this manner, the learned AM has held that initiation of reassessment proceedings was valid. He has also observed that ground Nos. 2, 3 and 4 were not pressed. However, these grounds are not concerned w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(1), as noted by the AO in para 4 of the order and which were received sometime on 30th June, 2005 as pointed out in the assessment order. It was submitted that the assessee was ill and hospitalized for the long period and therefore, there was no question of service of notice and this issue has been discussed by the learned CIT(A) in his order at p. 2 para 2 quoting the assessee's reply and thus, illness of the assessee is not in dispute by any authority. Further reference is made to the order of learned JM wherein in paras 14 to 15 this issue is discussed and it was observed that from the income-tax records no evidence was found on record to show that on which date the power of attorney of the chartered accountant came on record of the AO. It was submitted that according to the order of learned JM, power of attorney does not lead to any presumption of service. It was submitted that the statement of facts enclosed with the appeal file before the CIT(A) clearly stated that no notice under s. 148 was served and which is in the shape of oath, as there is a verification in Form No. 35 and thus, the said denial is rebuttal of presumption against the service. For this purpose, reliance i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wrong in holding that these reasons were not reasons to suspect and these reasons were valid ground for reopening by relying on the decision of Hon'ble Supreme Court in the case of ITO vs. Purushottam Das Bangur & Anr. (1997) 139 CTR (SC) 32 : (1997) 224 ITR 362 (SC). It was submitted that according to the decision of Third Member in the case of Asstt. CIT vs. O.P. Chawla (2008) 116 TTJ (Del)(TM) 755 : (2008) 114 ITD 69 (Del)(TM), the reassessment cannot be held to be valid merely on the ground that earlier assessment was framed under s. 143(1)(a) and the balance sheet of the assessee revealed that he had received certain amount of gift from NRI for which no details were submitted. It was held that the reasons recorded by the AO were a pretence and were recorded to enquire the gift received by the assessee and the CIT(A) was right in holding that reopening of assessment was void ab initio. Similarly reliance is placed by him on the decision of Third Member in the case of K.G. Hotel (P) Ltd. vs. Asstt. CIT (2008) 116 TTJ (Agra)(TM) 455 (2008) 8 DTR (Agra)(TM)(Trib) 283 : (2008) 113 ITD 99 (Agra)(TM) wherein it has been held that in the absence of any specific information in the hand....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the decision of Delhi High Court in the case of CIT vs. Rajesh Kumar Sharma (2008) 214 CTR (Del) 547 : (2009) 311 ITR 235 (Del), a decision rendered by Delhi High Court on 13th Aug., 2007, to contend that when a person is not authorized to receive the notice, no valid service can be done on that person. It was held that where notice was sent through speed post and it was not addressed to assessee, then the burden will lie on the Department to prove that such notice was properly served particularly when the assessee had categorically denied the receipt of the notice and as the Revenue failed to discharge its onus, no valid service can be presumed. The learned Authorised Representative pleaded that in the present case also, the assessee has denied receipt of notice. Therefore, the onus lies on the Department to prove that there was a valid service. Thus, it was pleaded by the learned Authorised Representative that initiation of reassessment proceedings should be held invalid. 21. On other hand the learned Departmental Representative submitted that the Revenue is placing strong reliance on the order of learned AM. He pleaded that the proceedings under s. 147 are based on the exis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sh Kumar Singh S/o Shri Harish Chandra Verma R/o 76, Chaubey Ji Ka Bagh, Firozabad do hereby authorize to Shri Naveen Kumar Agrawal (chartered accountant) to produce income-tax proceeding of my scrutiny case for the asst. yr. 2001-02. He is also authorized to produce all documents to give settlement, to file statements and take back them. Authority accepted Sd/- Sd/- (Assessee)." (Naveen Kumar Agarwal) 23. On the back of the stamp, serial No. 45 is mentioned. The date mentioned is 9th April, 2005 and purchaser's name as Avneesh Kumar Singh S/o Shri Harish Chand, resident of 76, Chaubeji Ka Bagh, Firozabad and the purpose for which the stamp has been issued is written as for power of attorney. There are two s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itioner at the relevant time. However, according to the learned Authorised Representative in the case of the assessee, the assessee could not have received such notices as it never reached him and at the relevant point of time, the assessee was seriously ill and, therefore, he could not receive the notice. 26. Reiterating his arguments submitted on 18th May, 2009, the learned Departmental Representative submitted that the findings and decision of learned AM should be adopted. 27. I have carefully gone through the assessment order, order of CIT(A) and the orders of learned JM and AM and also gone through the material available on record of Tribunal. The copy of notice sent by the Revenue to the assessee and the copy of receipt issued by post office receiving that notice is placed at p. 87 of the paper book filed by the assessee. Similar copy was also given by the learned Departmental Representative while submitting his arguments. Learned Departmental Representative has also produced the assessment record which was with him when he argued the case. The learned Authorised Representative also submitted that there was no dispute that notice under s. 148 was sent by registered/spee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f first notice under s. 142(1), there was no need for the assessee to purchase stamp paper for giving power of attorney to Shri Naveen Kumar Agarwal, chartered accountant for contesting his case for the asst. yr. 2001-02. This fact itself makes it clear that the assessee had, in fact, received the notice under s. 148 and for that reason the said stamp paper for power of attorney was purchased. This finding is further strengthened by the fact that notice sent by the Department to the assessee under s. 148 has not been received back. It has already been mentioned that the notice was bearing proper address. Therefore, according to the facts on record, it has to be held that the notice under s. 148 was received by the assessee, as on the receipt of notice, for the purpose of giving power of attorney, the assessee has purchased the stamp paper on 9th April, 2005. If the assessee had not received reassessment notice, then the assessee must not have purchased the said stamp paper on 9th April, 2005. 29. The decision of Hon'ble Delhi High Court in the case of Mayawati vs. CIT shall be squarely applicable. In the said decision, the Hon'ble Delhi High Court has referred all the earlier de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the service shall be deemed to be effected by properly addressing, prepaying and posting it by registered post, a letter containing the document, and unless the contrary is proved. To have been effected at the time at which the letter would be delivered in the ordinary course of post. The section thus raises a presumption of due service or proper service if the document sought to be served is sent by properly addressing, prepaying and posting by registered post to the addressee and such presumption is raised irrespective of whether any acknowledgement due is received from the addressee or not. It is obvious that when the section raises the presumption that the service shall be deemed to have been effected it means the addressee to whom the communication is sent must be taken to have known the contents of the document sought to be served upon him without anything more. Similar presumption is raised under illustration (f) to s. 114 of the Indian Evidence Act whereunder it is stated that the Court may presume that the common course of business has been followed in a particular case, that is to say, when a letter is sent by post by prepaying and properly addressing it the same has been....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng 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. Unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business. This Court has already held that when a notice is sent by registered post and is returned with a post 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. It is, therefore, manifest that in view of the presumption available under s. 27 of the Act, it is not necessary to aver in the complaint under s. 138 of the Act that service of notice was evaded by the accused or that the accused had a role to play in the return of the notice unserved.' 15. In Jagdish Singh vs. Natthu Singh AIR 1992 SC 1604 the apex Court affirmed the conclusion of the High Court that the notice must be presumed to have been served on the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sion of Delhi High Court in the case of Mayawati vs. CIT. 31. Now, coming to the second aspect that whether the reasons recorded by the AO were valid reasons so as to hold that the reassessment proceedings were validly initiated, it has been the case of the assessee that according to the reasons recorded, the AO could not have formed the belief, as envisaged in s. 147 of the Act. The reasons recorded by the AO have already been reproduced at pp. 2 and 3 of the order passed by the learned JM. The first reason is regarding deduction of interest claimed by the assessee out of business income amounting to Rs. 71,451. While framing the assessment for subsequent year, it had come to the notice of the AO that such interest was not allowable. The similar income is earned by the assessee during the year under consideration and the AO could reasonably form a belief that such interest claimed by the assessee could not be deducted from the income shown to have been earned by the assessee. Thus, it cannot be held that the reasons recorded by the AO were mere pretence but were not valid or honest reasons. For contending that such reason is not a valid reason, the learned Authorised Representa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts of next year. It was held that merely because the case of the assessee was accepted as correct in the original assessment, the ITO is not precluded from reopening of assessment on the basis of finding of fact made on the basis of fresh material in the course of assessment of next year. Therefore, the argument of the learned Authorised Representative that the reasons are based on assessment order for subsequent year and, therefore, the reasons recorded by the AO cannot be held to be valid reasons, as envisaged under s. 147 of the Act, cannot be accepted. 32. Similar is the case with regard to the agricultural income of the assessee. It was found in the subsequent year that the assessee does not own agricultural land. The reasons given for disallowance of interest will be equally applicable to this reason also and, therefore, it cannot be said that the reasons recorded by the AO for initiating reassessment proceedings were not valid reasons as envisaged under s. 147 of the Act. 33. Though, it has been argued by the learned Authorised Representative that so far as it relates to gifts, both the Members are in agreement that such reason is not valid reason, I do not find any su....