AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 27
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....isions of section 148 of the Act in the manner as required and stipulated by the Statute and therefore, the assessment order so passed deserves to be quashed. 2. That while framing the assessment order and sustaining the same, the authorities below have grossly erred both on facts and in law in ignoring the fact that the mandatory requirement of recording the reasons in terms of the provisions of section 148(2) were not complied with and therefore, the order so passed deserves to be quashed. 3. That in any case and without prejudice to the above, the authorities below, while framing the assessment order and sustaining the same, have grossly erred both on facts and in law in ignoring the fact that the objections raised by the appellant company against the initiation of proceedings and assumption of jurisdiction u/s 147 of the Act were never disposed off and therefore, the order so passed deserves to be quashed. 4. That learned Commissioner of Income Tax (Appeals) - XI, New Delhi, while sustaining the assessment order, has grossly erred and was wholly unjustified in not providing the appellant company an effective opportunity of being heard at any time after calling for the ....
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.... The ld. AR first of all pointed out that notice u/s 148 of the Act was not served upon the assessee as it was issued at the wrong address i.e. 601, Sidharth 96, Nehru Place, New Delhi and the same remained unserved due to self speaking reason that was issued to the wrong address. The ld. AR further submitted that non service of notice u/s 148 of the Act which was containing wrong address cannot be held as valid issuance and service of notice on the assessee. The ld. AR further pointed out that the A.O just to fill the gap, substituted the service of notice by affixture on the same wrong address, without any prior effort to get notice served through procedure laid down u/s 283(1)(a) of the Act and the affixture of notice at the premises of wrong address itself having incurable defects. 5. Elaborating the facts of issuance and affixture of notice to the wrong address, the ld counsel pointed out that the address mentioned in the notice was valid till 1.3.2001 and the address in the record of the department was A-58/4, Sainik Farms, Meharauli, New Delhi which is clearly discernible from the copies of Income tax return filed by the assessee from A.Ys 2003-04 to 2008-09, copies of the ....
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.... 4 of the impugned order. 7. The ld. Counsel pointed out that the ld. CIT(A) has adjudicated the above grounds raised against the assessee on the legal proposition that requirement of law is that notice should be issued and not served relying the ratio of the decision of the Hon'ble Delhi High Court in the case of Mayawati Vs. CIT & Ors reported at 321 ITR 349 [Del]. Placing reliance on the decision of the Hon'ble jurisdictional High Court of Delhi in the case of CIT Vs. Chetan Gupta reported at 382 ITR 613 [Del] and CIT Vs. Hotline International P. Ltd reported at 296 ITR 333 [Delhi, the ld counsel submitted that the Hon'ble High Court in the case of Chetan Gupta [supra] has overruled the proposition laid down in the case of Mayawati [supra] as recorded by the ld. CIT(A), by holding that proper service of notice is jurisdictional requirement and the same cannot be dispensed with. The ld counsel vehemently pointed out that issuance in the name of the company instead of the name of the principal officer of a company, that too, to the wrong address, makes the notice bad in law as per the ratio of the decision of the Calcutta High Court in the case of Rama Devi Agrawal Vs....
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....o be recorded prior to sanction u/s 151 of the Act which is lacking in this case. 11. The ld. AR placing reliance on various decisions of Hon'ble Supreme Court and Hon'ble High Court including the decision in the case of Chhugamal Rajpal Vs. S.P. Chalia & Ors 79 ITR 603 [SC] and decision of the Hon'ble jurisdictional High Court in the case of Signature Hotels P. Ltd Vs. ITO 338 IYR 51 [Del], CIT Vs. Insecticides India Ltd 357 ITR 330 [Del], PCIT Vs. G & G Pharma India P. Ltd Vs. ITO dated 8.10.2015 ITA No. 545/2015, Comero Leasing and Finance Pvt Ltd Vs. ITO ITA No. 4281/Del/2010, CIT Vs. Kamdhenu Steels 248 CTR 33 [Del], CIT Vs. Suren International Pvt. Ltd 357 ITR 24 [Del] and L.R. Gupta & Ors Vs. UOI 194 ITR 32 [Del] which was relied in the subsequent decision in the case of United Electrical [P] Co. Ltd Vs. CIT 258 ITR 317 [Del] submitted that when there is no discussion in the reasons about return of income, nature of accommodation entries, multiplicity of entries, absence of material on support of DDI, INV & Info and then the A.O reached satisfaction that there was accommodation entries which makes the reasons highly ambiguous, vague which has to be held as recor....
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....xture of notice submitted that since the date 31.3.2010 was the last date for framing reassessment, therefore, the notice through speed post and affixture was simultaneously issued to the assessee and which has been issued and served on the assessee as per the requirement of provisions of the Act and thus this allegation of non service of notice on the basis of affixture and issuance of notice to correct and non-existent address cannot be alleged against the A.O. 14. Placing rejoinder to the above submissions of the Revenue, the ld. AR submitted that the assessee is regularly filing returns of income since last 20 years and the address of the assessee was changed four times during this long period of two decades. The ld. AR vehemently pointed out that the non service of notice u/s 148 of the Act which was issued and affixed on the wrong address leads to a clear adverse inference that no notice u/s 148 of the Act has been served upon the assessee as per the requirement u/s 283(1)(a) of the Act which is an incurable defect and on this legal ground the reassessment proceedings and consequent order should be quashed. 15. The ld. AR lastly pointed out that service of notice through af....
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....he least, from the copy of the assessment order dated 22.3.2004 for A.Y 2001-02 available at APB 304-309 it is clearly observed that new address of the Sainik Farm was known to the department and thus we decline to accept the contention of the ld. DR that the assessee is habitual of changing its address frequently and change of address from Nehru Place to Sainik Farm, New Delhi was not intimated to the department by the assessee as per the due procedure and requirement of the Act. 18. In view of the above discussion, we clearly observe that the address of the appellant assessee on the date of issuance of notice on 22.3.2010 was A-58/4, Sainik Farm, Mehrauli Road, New Delhi as per records of the A.O and there is no material on record to suggest that new address of "Sainik Farm" on which the notice u/s 148 of the Act was issued was not intimated to the A.O by the assessee and thus, we are unable to agree with the contention of the ld. DR that the address of the Nehru Place, New Delhi as mentioned in the impugned notice u/s 148 of the Act dated 22.3.2010 was a correct address at the time of issuance of notice by the A.O. 19. At this juncture, we respectfully take cognizance of the d....
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....not be held as valid issuance and service of notice by post on the assessee. Thus, on this ground we hold that non service of notice u/s 148 issued to the wrong address is incurable defect which makes the notice as well as the consequent reassessment order vitiated and bad in law. 21. The next legal contention raised by the ld. AR is that notice u/s 148 of the Act has been in the name of the company although the same needs to be issued in the name of Principal Officer or Director or Managing Director of the noticee company and such defect makes the notice bad in law. For this proposition, the ld. AR has placed reliance on the judgment of the Hon'ble Calcutta High Court in the case of Rama Devi Agarwal Vs. CIT 117 ITR 256, 264-65 [Cal] and the decision of the Hon'ble Allahabad High Court in the case of Madan Lal Agarwal Vs. CIT reported at 144 ITR 745 [Allahabad] and submitted that copy of notice placed at APB page 51 clearly shows that notice has been issued in the name of the company and there is no mention of the name of the Principal Officer or Director or Managing Director of the noticee company. On this contention, the ld. DR replied that where the name of the company....
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....nary course cannot be held as valid service of notice as per the provisions of order v of Rule 17 of Code of Civil Procedure. 24. At this juncture, it is relevant to take respectful cognizance of the decision of the ITAT Mumbai Bench dated 9.9.2014 in the case of Shri Sanjay Badani [supra] wherein it was held thus: "11. During the course of hearing, the Bench specifically asked the learned AR with regard to the requirements of Section 292BB introduced w.e.f. 1-4-2008 with retrospective effect. In reply, learned AR contended that as per proviso to Section 292 BB, where the assessee has raised objection regarding issue of notice before the completion of such assessment or reassessment, the provisions contained u/s.292BB will not be applied. We found that provisions of Section 292BB was introduced w.e.f. 1-4-2008 relevant to A.Y. 2008- 09 under consideration, according to which, where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of th....
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....ith law. It is necessary to mention that, according to the assessees, they had no place of business at all. They claim that they have closed their business long before the notices were issued. Hence, according to them, Mr. Neogi must have gone to a wrong place. This contention of the assessees has been accepted by the Appellate Bench of the High Court. Bearing these facts in mind, let us now proceed to consider the relevant provisions of law. Section 63(1) of the Act reads: "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 Code of Civil Procedure, 1908 (V of 1908)." 9. Rule 17 of Order V of the Civil Procedure Code reads: "Where the defendant or his agent or such other person as aforesaid refuses to sign the acknowledgment, or where the serving officer, after using all due and reasonable diligence, cannot find the defendant, and there is no agent empowered to accept service of the summons on his behalf, nor any other person on whom service can be made, the serving officer shall affix a copy of the summons on the outer door or some other conspicuous part of the house in which the ....
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....o find him and also to make mention of his efforts in the report. Another requirement of rule 17 is that the Serving Officer should state that he has affixed the copy of summons as per this rule. The circumstances under which he did so and the name and address of the person by whom the house or premises were identified and in premises the copy of the summon was affixed. These facts should also be verified by an affidavit of the Serving Officer. 14. The reason for taking all these precautions is that service by affixture is substituted service and since it is not direct or personal service upon the defendant, to bind him by such mode of service the mere formality of affixture is not sufficient. Since the service has to be done after making the necessary efforts, in order to establish the genuineness of such service, the Serving Officer is required to state his full action in the report and reliance can be placed on such report only when it sets out all the circumstances which are also duly verified by the witnesses in whose presence the affixture was done and thus the affidavit of the Serving Officer deposing such procedure adopted by him would also be essential. In the instant case....
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....had not certified that the service had been effected by adopting this course." 25. In view of the above, from the notice of affixture report available at page 52 of the APB, there is no evidence or indication in the report of the Inspector that he had personal knowledge of the present place of business of the assessee and therefore, he was in a position to identity the same. From the affixture report, it is clearly discernible that no independent witness or person was present during the course of affixture who could be said a person who could identify the place of business of the assessee at the time of affixture of notice. Therefore, we hold that neither the procedure laid down under Order V. Rule 17 CPC had been followed nor that laid down under order V rules 19 and 20 had been adhered to. Neither before taking recourse to service by affixture, the Assessing Officer or the concerned officer had recorded the findings to justify the service by this mode nor afterwards called for the affidavit or certificate of service by affixture from the Serving Officer i.e. ITO and Process Server Shri Alam Singh. In view of the above, it is clear that there was no valid service of notice u/s 1....
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....e recorded prior to the recording of satisfaction u/s 151 of the Act which is lacking in the present case. 27. The ld. DR replying to the above, contended that notice has been issued on 22.3.2010 and approval of the ACIT Range VIII, has been obtained on the very same date. Therefore, it cannot be said that reasons are subsequent to the approval of requisition dated 17.3.2010. The ld. DR drew our attention towards page 93 and 94 of APB and submitted that the JCIT, Range VIII provided approval u/s 151 of the Act in the case of the assessee on 22.3.2010 and therefore, approval u/s 151 of the Act cannot be held as prior to the recording of reasons. 28. The ld. AR again pointed out that even on a careful reading of pages 48 and 49 of APB i.e. copy of proposal for approval of selection of case u/s 148/147 of the Act addressed to the ACIT it is discernible that whether the JCIT, Range VIII gave his approval thereon because on the first page right side the ITO, Ward VIII(3) himself noted that "Approval u/s 151 given in 33 cases. The ITO, Ward VIII(3) to acknowledge" and thereafter signature of the ITO Shri Piyush Sinha alongwith date 22.3.2010 is seen and thereafter his designation i.e. ....
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....nd the impugned reassessment proceedings and order are quashed on this count. 30. Second limb of Ground No. 2 as taken in Ground No. 2 by the assessee is that he reasons recorded are vague, non-specific and without application of mind. The A.O has not assumed valid initiation of reassessment proceedings and thus the same has to be held as bad in law and unsustainable. The ld. AR reiterated written arguments/synopsis and precisely his arguments are as follows: ". I None of the reasons make mention of the return of income filed by the assessee and the status of the assessment whereas the assessee has filed the Return of Income of Rs. 19,64,220/- on 2nd December 2003. (PB 1) i. The reason does not deal with the basis on which the information from DDI (Inv)-l has been prepared and sent to the AO for taking action u/s 147 against the appellant. The basis could be search action / survey routine compilation of information. Nothing is mentioned in the reason. ii. What material was used to prepare the information which has triggered the action u/s 147. iii. In the reason dated 22.03.2010, the AO has not named the parties who have provided the accommodation entries to the appella....
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.... [Bom] [Jud-com 48-50] iii. Signature Hotels Pvt Ltd Vs. ITO 338 ITR 51 [Del] [Dud-Com 63-67] iv. CIT Vs. Insecticides India Ltd 357 ITR 330 [Del] [Jud-Com 68-70] v. Pr CIT Vs. G & G Pharma I Ltd ITA 545/2015 08.10.2015 [Jud-Com 71-72] vi. Comero Leasing & Finance Pvt Ltd Vs. ITO ITA No. 4281/Del/2010 [Jud-Com 73] vii. CIT Vs. Kamadhenu Steels Alloys Ltd & ors 248 CTR 33 [Del] viii CIT Vs. Suren International P. Ltd 357 ITR 24 [Del] [Jud-Com 84-88] ix. LR Gupta & Ors Vs. UOI & Ors 194 ITR 32 [Del] x. United Electricals Co. Pvt. Ltd Vs. CIT 258 ITR 317 [Del] xi. German Remedies Ltd Vs. DCIT 287 ITR 494 [Bom] xii Central India Electric Supply Co. Ltd Vs. ITO 51 DTR 51 [Del] xiii PCIT Vs. N C Cables P Ltd ITA No. 335/2015 dated 10.1.2017 [Del] 391 ITR 11 [Del] 32. The ld. DR, supporting the action of the A.O drew our attention towards copy of reasons available at page 50 of the APB and contended that the reasons must be read alongwith Annexure i.e. pages 95 to 99 of the APB which clearly reveals that the assessee was beneficiary of accommodation entries of Rs. 2.67 crores during A.Y 2003-04 so as to introduce its unaccounted money/income into its acc....
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....rly discernible that there is no mention regarding any Annexure or list or any other document thereto. In the reasons recorded on 22.3.2010, there is no mention of some important facts viz. (i) name of the parties who provided the accommodation entries to the assessee, (ii) the nature of accommodation entries, such as share application, unsecured loans, bogus purchases or sales etc, has not been mentioned, (iii) how and in what manner the assessee obtained accommodation from the alleged parties (iv) it is not demonstrated by the A.O that how he became able to form his belief that the income of Rs. 2.67 crore has escaped assessment for A.Y 2003-04 without even referring or seeing the relevant assessment records. These facts could not be controverted by the ld. DR. 37. From the said list/Annexure [APB pages 95 to 99] it is vivid that there are 56 entries out of which only 14 amounting to Rs. 70 lakhs pertains to assessee and out of remaining 42 entries 24 entries are repetition of identical entries and 18 entries are those which do pertain to the assessee. These facts have not been disputed and controverted by the ld. DR even on the specific query from the Bench. In the reasons [sup....
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....o issue a notice under S. 148." The Supreme Court concluded that it was not satisfied that the ITO had any material before him which could satisfy the requirements under Section 147 and therefore could not have issued notice under Section 148. 10. In ACIT v. Dhariya Construction Co.(2010)328 ITR 515 the Supreme Court in a short order held as under: "Having examined the record, we find that in this case, the Department sought reopening of the assessment based on the opinion given by the DVO. Opinion of the DVO per se is not an information for the purposes of reopening assessment under s. 147 of the IT Act, 1961. The AO has to apply his mind to the information, if any, collected and must form a belief thereon. In the circumstances, there is no merit in the civil appeal. The Department was not entitled to reopen the assessment." 11. The above basic requirement of Sections 147/148 has been reiterated in numerous decisions of the Supreme Court and this Court. Recently, this Court rendered a decision dated 22nd September 2015 in ITA No. 356 of 2013 (Commissioner of Income Tax II v. Multiplex Trading and Industrial Co. Ltd.) where the assessment was sought to be reopened beyond the ....
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....as not applied his mind to the so called list of alleged accommodation entries. This is a case of clear non application of mind by the A.O at the time of initiation of reassessment proceedings and recording of reasons on 22.3.2010. To sum up, in the instant appeal, the main contention of the assessee is that the A.O issued the notice u/s 148 of the Act mechanically simply on the basis of information alleged to have been received from the Investigation Wing without application of mind. On the basis of foregoing discussion, we are inclined to agree with the is contention of the ld. AR and at the cost of repetition, we again hold that as the ratio of various decisions of Hon'ble Supreme Court and Hon'ble High Court of Delhi including the decision in the case of M/s Haryana Acrylic [supra], Suren International [supra] and G & G Pharma [supra], in the present case, the reasons have been recorded by the A.O in a routine and mechanical manner and without application of mind which cannot be said to be a proper and sustainable belief with regard to escapement of income as per requirement of section 147/148 of the Act. Therefore, we hold that the initiation of reassessment and all co....