TaxTMI 
TaxTMI 
2020 (2) TMI 109
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.... u/s 148 and attended the proceedings. The ld. CIT (A) has not taken into consideration the provisions of section 292BB as the provision was effective from 01.04.2008 and the assessment in case of assessee was completed on 24.03.2015 i.e. after more than six years of insertion of the provision. 3. Whether on the facts and in the circumstances of the case and in law ld. CIT (A) has erred in not appreciating the fact that the notice issued u/s 148 was also received by ld. A/R of the assessee and the ld. A/R has attended the proceedings. 4. Whether on the facts and in the circumstances of the case and in law ld. CIT (A) has erred in not appreciating the case laws narrated in remand report in support of assessment order and in favour of revenue." 2. The brief facts of the case are that M/s. Mahla Real Estate Pvt. Ltd. filed its return of income on 15.11.2007 declaring loss of Rs. 5,22,052/-. Subsequently a notice under section 148 of the IT Act was issued to the assessee on 14.03.2014 and the assessment order under section 147/143(3) of the Act was passed on 24.03.2015 determining total income at Rs. 3,64,16,430/-. 3. Aggrieved by the order of the AO, assessee f....
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....ents as were raised by him before the ld. CIT (A) and the same are contained in para 3.1.1 of the order of ld. CIT (A) which are reproduced herein in below :- "3.1.1 Submission made by the appellant In this case during the course of assessment proceedings the assessee submitted a written reply on 09.03.2014 challenging the service of notice u/s 148 of the Income Tax Act, 1961. The Learned Assessing Officer did not reply. A copy of letter dated 09.03.2014 is available on paper book page no 1 to 2. The case of the assessee is that no valid service was made of notice u/s 143. Therefore the entire proceeding are ab-initio void. It is further submitted that since the ser,fice of notice u/s 148 was challenged during the course of assessment proceedings, hence the provisions of section 29088 are of no help. It is the case of the assessee that notice u/s 148 was not served upon the assessee. The entire facts are discussed below. The assessment framed by the Learned Assessing Officer deserves to/be quashed. 1. Service of notice u/s 148 not valid: - (i) Chandan: - In the assessment order the Learned Assessing Officer has dealt the issue of service....
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....notice. In these circumstances service of notice upon a part time employee of a different concern is not valid. It is further submitted that in the case of company service of notice has to be made in accordance with the provision of section 282(I)(b) of the Income Tax Act, 1961 which state that "service has to be made in such manner as provided under the Code of Civil Procedure, 1908 (5 of 1908) for the purposes of service notice". It is submitted that it is settled position of law that when service is effected by notice server of the department in such case it is for the department to prove that notice has been served in accordance with provisions of order V of the Code of Civil Procedure, particularly rules 16 to 20 thereof In support the following case laws are quoted: - (i) CIT vs. Mai Chanri 28 /TR 684 (Cal; (ii) (Ii) Saha Vs. CIT 27 ITR 231 (Cal) In the case of the company the notice has to be served either upon to the assessee i.e. the Directors or upon the Principal Officer or any person duly authorized by the company. In this case none of these conditions are fulfilled. Notice has not been served on directors or on the Principal....
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....ew taken in that case was that an oral authority is not sufficient but there should be a written authority. Similar view has been taken in CIT V. Baxirarn Rodmal [1934] 2 1TR 438 (Nag.), CIT v. Dey Brothers [1935] 3 ITR 213 (Rang.) and C.N. Nataraj v. Fifth ITO [19651 56 1TR 250 (Mys.). In CIT v. Baxirarn Rodmal [194] 2 ITR 438 (Nag.) It has been held that the mere fact that a person had accepted notices on behalf of the assessee on previous occasions and appeared for the assessee would not constitute him an agent on whom a notice or requisition under the Act would be validly served nor would any statement made by him bind the assessee. In C.N. Nataraj v. Fifth ITO ([1965] 56 ITR 250, the Mysore High Court took the view that the service of notice under section 148 on a clerk of the assessee's father who was neither an agent of the assessee nor authorized by him to accept notices on his behalf was not valid and, therefore, the assessee would not be assessed under section 147 in pursuance of such service of notice . Thus, in order tha't there should be a valid service, the person on whom service is effected must have valid authorization given to him in writing to rec....
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....mself was doubtful about the validity of service of notice issued u/s 148 upon Shri Chandan, so another copy of the notice was also served upon Shri Anand Sharma CA who is working with S.L. Poddar & Co. However it is submitted that despite specific request made by the assessee under letter dated 14.12.2015 to furnish copy of notice u/s 148 disclosing the service upon Shri Anand Sharma, no copy of notice u/s 148 has been furnished which discloses the signature of Shri Anand Sharma CA. In any case the assessee submits that Shri Anand Sharma was also not competent nor authorized to receive notice u/s 148. It is with the issue of notice u/s 148 and service thereof that proceeding of assessment stand initiated. It is subsequent to this that a CA is appointed for handling the assessment proceedings. Thus a CA cannot come into picture before the assessment proceedings are initiated. The assessee cannot imagine or visualize issuance of notice u/s 148, therefore no question arises of CA being authorized to receive notice u/s 148. Shri Anand Sharma was not authorized for receiving notices on behalf of the assessee, therefore any service upon him is invalid. The assessee further quot....
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....ion to notice u/s 148 by a composite assessment order-AO required to, first decide assessee's objection and serve a copy of order on assessee and after giving some reasonable time to the assessee for challenging his order, it was open to him to pass an assessment order-Same was not done by AO in instant case-Order on objection to the notice u/s 148 and the assessment order passed quashed-Assessee's writ petition allowed. (ii) COMMISSIONER OF INCOME TAX (NOIDA) vs. DEEPAK GUPTA (2014) 100 DTR ((ALL)) We agree with the reasoning given by ITAT that it was mandatory for the A.O. to decide objections and that the exercise of discretion on the objections would in any case not validate the notice under Section 147/148 of the Income Tax Act. (II) GKN DRIVESHAFTS (INDIA) LTD. vs. INCOME TAX OFFICER & ORS. 259 ITR 0019 Notice under ss. 143(2) and 148-Writ petition challenging the validity of notices-Reasons for issuing the impugned notices have been disclosed-Petitioner can raise objections before the AO-AO has to dispose of the objections, if filed by the petitioner, by passing a speaking order before proceeding with the assessment-Writ petition r....
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....ion of that belief-Except for a letter written by a CIT to another CIT, the assessing authority had no other material before him for the belief that the alleged payments were in fact not made by the assessee-company and that the amounts paid through cheques were returned back in cash after routing it through four or five bank accounts-Thus, assessing authority could not reach a conclusion simply on the basis of the statement of BS who had no business transactions with assessee that the transactions were bogus and the amount was returned back-No link between facts found and the satisfaction arrived at by the assessing authority- Assessee at the time of his assessment has presented before the assessing authority all the material and relevant facts-Assessing authority while assessing the income of the assessee has scrutinized those facts and made the order of assessment-Impugned notice issued to the assessee and further proceedings initiated under s. 147/148 therefore liable to be quashed. (II) SIGNATURE HOTELS (P) LTD. vs. INCOME TAX OFFICER & ANR. HIGH COURT OF DELHI (2011) 3381TR 51 Information received by the AO from the Director of IT (Inv.) that the assessee ha....
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....wing case laws are quoted in support: - (I) The Apex Court has observed that not allowing cross examination is a serious flaw and makes the order nullity. Andman Timber Ind. Vs. Commission of Central Excise (2015) 281 CTR 211 (SO. "not allowing the assessee to cross examine the witness by the adjudicating authority though the Statements of those witnesses were made the basis of the impugned order, is a serious flaw which makes the order nullity in as much as it amounted to violation of principle of natural justice because of which the assessee was adversely affected. (ii) COMMISSIONER OF INCOME TAX vs. BIJU PATNAIK HIGH COURT OF ORISSA 190 ITR 0396 Although answers can be recorded either in favour of the Department or against it, ultimately each answer would again become inconclusive on account of the final findings of fact of the Tribunal that ITO has not given reasonable opportunity to the assessee to rebut the statements recorded ex parte under s. 131 of the Act and to furnish explanation to some of the materials. It is true that Tribunal has not given due weight to the relevant and admissible evidence while recording the findings of fact. However, the....
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.... s. 131 in spite of the request of the assessee, evidence of M could not have been used against the assessee-Therefore, the assessment order is vitiated (IV) HEIRS AND LRS OF LATE LAXMANBHAI S. PATEL vs. COMMISSIONER OF INCOME TAX (HIGH COURT OF GUJARAT ) (2010) 327 ITR 0290 Opportunity of being heard-During search of one R, key of bank locker along with two packets containing six promissory notes were recovered-Out of those six promissory notes, one was in the sum of Rs. 8,78,358 executed by one K in the capacity of partner of firm DCI- In his statement recorded during search, R stated that the key of locker and the two envelopes were handed over to him by the assessee-K also admitted in his statement recorded on the same day at 2.00 AM midnight that he had executed the pronote and signed it on behalf of DCI after obtaining a sum of Rs. 8,78,358-Later, K filed an affidavit that his statement was recorded at late hours in the night under coercion and pressure-Subsequently, K along with two other partners of DCI, made a voluntary disclosure of a sum of Rs. 11 lacs including the amount of Rs. 8,78,358 and same was assessed in the hands of the three partners....
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....1961 it is further submitted and explained here under the circumstances under which the assessee was forced to file income tax return despite no valid service of notice u/s 148 of the Income Tax Act, 1961 - 1. It is submitted that the department issued notice u/s 148 on 14.03.2014. Further letter no. 252 dated 20.05.2014 was issued for purposes of assessment. Again so show cause notice for completion of assessment u/s 144 was issued under letter no. 370 dated 26.06.2014 along with notice u's 142(1). Further as a matter of final opportunity letter no. 2647 was issued on 02.03.2015 threatening the assessee for completion of assessment u/s 144 on total income of Rs. 3,57,13,900/-. The date of hearing was filed on 09.03.2015. Copies of all these notices are enclosed herewith. 2. On the purported last date of hearing i.e. 09.03.2015 assessee submitted a detailed submission agitating the service of notice u/s 148 of the Income Tax Act, 1961. Thus it would be seen till the last date of hearing assessee did not make any compliance of notice u/s 148 as there was no valid service of it. 3. It was on account of threatening by the Learned Assessing Offic....
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....ld. CIT (Appeals). 7. We have heard the ld. Counsels of both the sides and have also perused the material available on record, orders passed by the Revenue authorities as well as the judgments cited by the respective parties. We have noticed from the record that the assessee during the course of appellate proceedings before ld. CIT (A) had also filed additional evidences and made submissions and the said additional evidences along with the written submissions were forwarded by the ld.CIT (A) to the AO for obtaining his comments by admitting the additional evidences as the jurisdiction of the AO was challenged by the assessee and it was specifically claimed by the assessee that the notice issued under section 148 of the Act was never served upon it. The remand report submitted by the AO has been given in detail at page 15 to 26 of the order of the ld. CIT (A). After obtaining the remand report wherein it was mentioned by the AO that the service of the notice was effected on Shri Chandan and also letter dated 20.05.2014 was served upon Shri S.L. Poddar, Senior Advocate on 29.05.2014 and show cause notices dated 26.06.2014 was also served on Shri Dinesh Kumar on 27,.06.2014 and not....
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....is fact has not been commented upon at all and thus has remained uncontroverted. (ii) Affidavit of Shri Chandan is uncontroverted : - The claim of the Learned Assessing Officer that there was valid service of notice uls 148 upon Shri Chandan was contested by the assessee by filing an affidavit of Shri Chandan. In this affidavit Shri Chandan has deposed that he is a part time employee in Durga Motor Company as a peon and was not authorized to receive any notice of the assessee company. The Learned Assessing Officer has not considered it proper to examine Shri Chandan in respect of averment in the affidavit and thus the facts narrated in the affidavit have remained undisputed and unchallenged. Therefore service upon Shri Chandan is invalid. He was not connected in any way with the assessee company. His receiving of any other notice earlier or subsequently does not make the service of notice u/s 148 valid. (iii) Affidavit of Shri Aman Gupta is uncontroverted : - In his affidavit furnished Shri Aman Gupta Director of the company has stated that Shri Chandan was not authorized to receive notices of the company and he never informed of having ....
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....) Service of notice u/s -i48 objected before completion of assessment: - It is submitted that the assessment in this case is completed on 24.03.2015 and the assessee objected to the service of notice u/s 148 vide letter dated 09.03.2014. The Learned Assessing -Officer had sufficient time to dispose the objection of the assessee, but the same was not done. A copy of letter dated 09.03.2014 stands submitted in the papers submitted with the earlier submission. The Learned Assessing Officer has alleged that the assessee intentionally raised the objection towards to last of the assessment proceedings. This has no merit. It is submitted that in this case the department has not allowed sufficient time to the assessee. This would be clear from the issue of following notices: - (a) Notice u/s 148 issued on 14.03.2014 (b) Reminder of filing of return issued on 20.05.2014 (c) Show cause notice for completion of assessment u/s 144 issued on 26.06.2014. (d) The above letters were issued by the then Learned Assessing Officer Shri Surendra Yaday. He never issued any notice u/s 142(1). Thereafter there was change of incumbency and Shri....
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....port submitted by the Learned Assessing Officer there is no claim by him that notice u/s 148 was served on any director or any agent authorized by the company. This fact being undisputed, the service of notice u/s 148 has correctly been challenged by the assessee. In the circumstances the assessment so completed is invalid. It view of the above undisputed/uncontroverted facts the claim of the assessee is fully proved that there was no valid service of notice u/s 148 and therefore the Learned Assessing Officer had no jurisdiction for completing the assessment. The assessment so framed deserves to be knocked down. PARAWISE COMMENTS ON THE REMAND REPORT: - 3. Rule 46(1) - additional evidence: - The assessee submits humbly that once the Learned CIT(A) has called for a report from the Learned Assessing Officer on papers and submission made before him by the assessee, it automatically means that the Learned CIT(A) in his discretion has admitted the papers submitted by the assessee and it is only thereafter that on these papers comments of the Learned Assessing Officer have been called for 4. Papers submitted by the assessee go to the root of t....
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....rtificate of 46 per cent of the yield. In this view of the matter, the additional evidence entertained by the Tribunal cannot be said to be bad. (iii) Anmol Color India Pvt. Ltd. (2009) 121TTJ 269 (Jaipur ITAT) The powers of the first appellant authority are very wide and coterminus with those of the AO and what AO can do., he can do and what AO fails to do, that also he can do. The embargo put on his power under r. 46A(1) and (2) has also been loosened by sub-r. (4) which also empowers the CIT(A) to direct the production of any document, the examination of witness to enable him to dispose of the appeal. Thus the legislative intent is quite clear and the CIT(A) should not jump straightway to reject, if the appellant files some evidence before him under the pretence of r. 46A(1). The powers of the CIT(A) are also to be interpreted in the context of the amended law, wherein he is no more empowered to restore back any matter which was earlier under s. 251(I)(a) necessitating a compulsory admission of the evidence before him in the interest of justice. Therefore, in the present circumstances and facts of the case, the CIT(A) was not justified in not admitting the addi....
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....dence produced by assessee regarding loan. (i) B.L. Choudhary vs. CIT (1976) (Orissa) First appellate authority is vested with wide powers to admit additional papers. 6. Service of notice u/s 148 - (A) Service on Shri Chandan - It is submitted that Learned Assessing Officer has tried to justify the service of notice u/s 148 on the ground that Shri Chandan accepted the notice after telephonic talk with Shri Aman Gupta. Secondly Shri Chandan has received notices subsequently also. Thirdly that Shri Chandan has also placed stamp/seal of Durga Motor Company upon the notice. It is submitted that all the above three grounds upon which the Learned Assessing Officer is depending for the validity of service have no legs. The law prescribes that in the case of the company the notice can be served either upon the director or upon an agent duly authorized by the company. In this case it is not the case of the Learned Assessing Officer that Shri Chandan had any written authority to receive notices on behalf of the company. His receiving of notices subsequently is equally bad in law and cannot validate the earlier service. His puttin....
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....ice by C.A. Hence the ratio of the case is not applicable to the facts of the case. (C) Service upon Shri Anand Sharma - The Learned Assessing Officer has not claimed that service upon Shri Anand Sharma was a valid service. It is submitted that a Chartered Accountant is authorized to receive notices which arise and are issued during the course of assessment proceedings. It is submitted that notice u/s 148 goes to the root of the proceedings. In other words the assessment proceedings originate with the service of this notice. Therefore there cannot be any occasion to authorize the CA to receive such notice. It is after the receipt of notice u/s 148 that proceedings for assessment begin. Therefore a CA or a counsel is engaged once assessment proceedings start.i.e. after the receipt of notice u/s 148 of the Income Tax Act, 1961. The assessee in his earlier submitted has quoted the following case laws to support that service upon CA or counsel is not a valid service. The case laws are quoted again below: - (ii) Har Singar Gutkha vs. Deputy Commissioner of Income Tax (2011) 138 TTJ 318 (Lucknow) Service of notice under s. 148 on a chartered a....
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....f case laws were quoted in support. The Learned Assessing Officer has not brought any new material to justify his action for taking action u/s 148 without causing any enquiry which could have led him to believe that there was escapement of income. He has tried to justify his action on the basis of material made available to him by the DDIT (Inv)-11. The Learned Assessing Officer had also quoted certain case laws in his support. It is submitted that when two divergent opinions are available on the same issue then one that is favourble to the assessee has to be followed 881TR 192/6 DTR 481. 9. Completion of assessment in violation of principle of natural justice: - The assessee had challenged the completion of assessment being volatile of the principle of natural justice on the following counts: - (i) The assessment has been completed despite objection of the assessee that there was no valid service of notice u/s-148 The Learned Assessing Officer should have met this objection before completing the assessment. (ii) No adequate opportunity was provided to the assessee to defend himself before completing the assessment: - V....
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.... Sardar Patel Marg, Jaipur either through registered post or speed post. Further, the AO has not served notice issued u/s 148 of the Act through affixture at the above registered office address. In fact, it is evident from the relevant assessment record that even after raising the objection by the appellant about non service of notice issued u/s 148 of the Act in a valid manner, a copy of the notice issued u/s 148 of the Act was still not served upon the appellant at any point of time oefore completing the assessment on 24.03.2015. It is also noted that there was no power of attorney lying on the assessment record issued by the appellant company in favour of Shri Anand Sharma, CA. Therefore service of notice to Shri Anand Sharma issued u/s 148 of the Act is of no consequence in the absence of any authority from the appellant company. Even, the order sheet do not contain any entry which may indicate that a power of attorney was filed by the appellant company in favour of Snri Anand Sharma on or before the 14.03.2014 for the year under consideration. The service of notice on Shri Chandan, who was neither the employee of the appellant nor was authorized to receive such notice on behal....
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.... (vi) Reassessment proceedings finalized by an Assessing Officer without effecting proper service of notice on the assessee under section 148 (1) of the Act are invalid and liable to be quashed. (vii) Section 292138 is prospective. In any event the assessee in the present case, having raised an objection regarding the failure by the revenue to effect service of notice upon him, the main part of section 29288 is not attracted. [Para 46] On the facts of the present case, the Tribunal was right in its conclusion that since no proper service of notice had been effected under section 148 (1) on the assessee, the reassessment proceedings were liable to be quashed. [Para 47] The revenue's appeal is dismissed. [Para 48]" Thus, it is evident from the above decision of Hon'ble High Court of Delhi that service of notice issued u/s 148 of the Act is a jurisdictional requirement and without service of notice, the assessment order passed is liable to be, quashed. In the said order, it was held by the Hon'ble High Court that section 292BB of the Act is prospective in nature and the main part of section 292BB was not applicable and the participation....
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.... The departmental appeal has no merit. The same is, accordingly, dismissed."(emphasis supplied) (a) In the case of CIT Vs ITC Hotels [2014] 50 taxmann.com 424 (Karnataka), it was held by Hon'ble High Court of Karnataka that: "6. Therefore, in the instant case, admittedly, when notice under Section 148 of the Act is not duly served on the assessee, the proceedings under Section 147 of the Act is one without jurisdiction and the Tribunal has rightly set aside the order. We find no infirmity or irregularity committed by the Tribunal. Hence, the substantial question of law is answered in favour of the assessee and against the Revenue. There is no merit in the appeal and the same is accordingly dismissed." (emphasis supplied) (b) It may be mentioned that in the case of CIT Vs Dr. Ajay Prakash [2014] 42 taxmann.com 387 (Allahabad), the Hon'ble High Court of Allahabad has upheld the order of Hon'ble ITAT, wherein the assessment order in reassessment proceedings was quashed on account of invalid service of notice issued u/s 148 of the Act. It was held by the Hon'ble High Court that: "7. The f indings recorded by the Income-tax au....
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....f Shri Anand Sharma on or before 14.03.2014 for the year under consideration. Although the ld. D/R submitted before us that the service of notice was effected on Shri chandan but the fact remains that the said Shri Chandan was neither the employee of the assessee nor was authorized to received such notice and, therefore, in such a situation we cannot treat the said alleged service on Shri Chandan to be a valid service in view of the provisions of section 282 of the Act read with Order 5 of the Code of Civil Procedure 1908. Even otherwise, the said Shri Chandan while allegedly receiving the notice on 14.03.2014 had affixed the stamp of M/s. Durga Motor Company which also goes to show that the said notice was never served upon the assessee. We have also gone through the decision cited by the ld. CIT (A) in case of CIT vs. Chetan Gupta (2015) 62 taxmann.com 249 (Delhi) wherein it has been categorically held by Hon'ble Delhi High Court that under section 148 of the IT Act, the issue of notice to the assessee and the service of such notice upon the assessee are jurisdictional requirements that must be mandatorily complied with and thus they are not mere procedural requirements. The l....