TaxTMI 
TaxTMI 
2020 (9) TMI 1212
X X X X Extracts X X X X
X X X X Extracts X X X X
....der the consent term in suit filed before Rent Tribunal agreed for vacating the premises against the zero consideration. 4. Under the facts and circumstances of the case, the ld. CIT(A) erred in sustaining the addition of Rs. 1,13,23,461/- out of total addition of Rs. 2,76,51,300/- by applying the provision of Section 50C of the income Tax Act, 1961. 5. The ld ITO erred in levying interest u/s 234A and 234B of the Income Tax Act, 1961. 6. The ld. ITO erred in initiating penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961. 7. The assessee craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing." 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic. 3. The brief facts of the case are that the assessee is a private limited company. filed its return of income originally on 14.10.2010 declaring a loss of Rs. 3,16,326/-. Subsequently in protest against allegedly notice issued u/s 148 of the Income Tax Act, 1961 (in short, the Act) on 30.03.2017, assessee furnished return on 30.10.2017 disclosing the same loss of Rs....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of this letter is available on paper book page no. 5 & 6. In view of this the completion of assessment u/s 148 is ab-initio void and deserves to be annulled. The same is assailed as under: - 2. No service of notice u/s 148 - During the course of assessment proceedings it was vehemently argued by the assessee that the service of notice should be proved and disclosed to the assessee before proceeding in the matter of assessment. However the Learned Assessing Officer did not bother. He even while responding to the objections of the assessee vide letter dated 07.11.2017 scanned below. The Learned Assessing Officer has not mentioned the date on which notice u/s 148 was served either by post or by notice server as claimed in the letter. This proves that in the records of the revenue there is no evidence of service of notice u/s 148. Otherwise the Learned Assessing Officer would have disclosed and shown to the assessee but this was not done. Therefore it is prayed that assessment so framed without jurisdiction deserves to be annulled; In the letter scanned above, although the assessee has challenged the service of notice u/s 148 despite this Learned Assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e during the course of assessment proceedings. The appellant company relies upon the following decisions for the proposition of law that proper service of notice u/s 148 is mandatory for assuming valid jurisdiction to re-assess the escaped income. He has relied on the following decisions: (i) CIT vs. Vardhman Estate P. Ltd. 287 ITR 368 (Del) (ii) CIT vs. Bhan Textiles P. Ltd. 287 ITR 370 (Del) (iii) CIT vs. Lunar Diamonds Ltd. 281 ITR 1 (Del) (iv) Venkat Naicken Trust v. ITRO 242 ITR 141 (Mad) (v) Sudev Industries Ltd. v. ITO 98 TTJ 97 (Del) (vi) Hind Book House v. ITO 92 lTD 415 (Del) (vii) Dulli Chand Laxmi Narain v. AC'IT 89 lTD 426 (Del) (viii) Dina Nath v. CIT 204 ITR 667 (J&K) (ix) Jayanthi Talkies Distributors v. CIT 120 ITR 576 (Mad)" Therefore the order passed without serving notice to the assessee deserve to be quashed. 8. On the other hand, the ld DR had relied on the orders of the authorities below. CIT Dr relied on provisions of Section 292BB and contended that since assessee had participated in the reassessment proceedings and had also filed its return of income, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ith provisions of order V of Code of Civil Procedure, particularly Rules 16 to 20 thereof. 10.1 Since the assessee has raised this ground and questioned the service of notice during the course of assessment proceedings time and again, therefore, the provisions of Section 292BB of the Act as relied upon by the ld DR is of no help to the revenue as this provision is applicable only in the facts and circumstances, when the assessee has not raised the issue of service and has not questioned the same during the course of assessment proceedings. In this respect, we draw strength from the following decisions: (i) CIT vs. Vardhman Estate P. Ltd. 287 ITR 368 (Del) (ii) CIT vs. Bhan Textiles P. Ltd. 287 ITR 370 (Del) (iii) CIT vs. Lunar Diamonds Ltd. 281 ITR 1 (Del) (iv) Venkat Naicken Trust v. ITRO 242 ITR 141 (Mad) (v) Sudev Industries Ltd. v. ITO 98 TTJ 97 (Del) (vi) Hind Book House v. ITO 92 lTD 415 (Del) (vii) Dulli Chand Laxmi Narain v. ACIT 89 lTD 426 (Del) (viii) Dina Nath v. CIT 204 ITR 667 (J&K) (ix) Jayanthi Talkies Distributors v. CIT 120 ITR 576 (Mad)" 11. The only argument raised by the depar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion was true and that the primary onus to establish the identity, genuineness and creditworthiness of the creditors whose names appeared therein was on the Assessee. The AO accordingly concluded that he had reason to believe that the income for the AY in question had been under-assessed to the extent of the sums mentioned hereinbefore and had therefore escaped assessment within the meaning of Section 147(b) of the Act. The re-assessment proceedings 5. On 28th March 2008, the Assistant Commissioner of Income Tax (ACIT) Circle 3, Chandigarh issued a notice under Section 148 of the Act. The notice was addressed to the Assessee but the address indicated therein was "C/o Kiran Cinema, Sector-22, Chandigarh." It appears that the said notice was served upon one Mr. Ved Prakash, an Accountant at Kiran Cinema on that very date. 6. Subsequently the jurisdiction of the Assessee was transferred to the ACIT, Central Circle-5, New Delhi. On 28th November, 2008, another notice under Section 148 of the Act was issued to the Assessee by the ACIT, New Delhi and this time there were two addresses shown for him. The first was "C/o Kiran Cinema, Sector-22, Chandigarh" and the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is further submitted that pen drive was never recovered from the possession or control of the assessee and therefore there is no question of any explanation from the assessee. Assessee never did any money lending as alleged in the reason recorded. Therefore, the reopening of the present assessment is with great respect unjustified. The assessee has already declined to have any knowledge as well as recovery from him, the said pen drive before the ADIT (Inv.), Ludhiana and Delhi. It is further requested that copy of the pen drive and its printouts as referred in the reasons recorded may please be supplied to us. Further, in the reason recorded for the reopening of the case, it has been mentioned that the concerned officer has tabulated the information and some amount of credit totalling to Rs. 40,49,77,905/- along with interest has been shown. It is requested that the basis of the said figures may be given to us, so that reply may be filed as required in your show cause notice dated 12.12.08 regarding adding of said amount to the income of the assessee for the Asstt. Year 2001-02." 11. The ACIT computed the assessment on 29th December, 2008 under Section 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onvenience prefer to receive notice at this place instead of so called address of care of Jagat Theatre." The purpose of the notice was to make the Assessee aware of the proceedings and that purpose had been fulfilled. Further, Section 292BB was a procedural provision which had come into effect from 1st April, 2008 whereas the notice was issued thereafter and assessment had been made on 29th December, 2008. Accordingly, the above ground was rejected. Thereafter the CIT (A) proceeded to discuss the merits of the additions made and upheld it. The impugned order of the ITAT 16. Aggrieved by the above order the Assessee filed an appeal being ITA No. 1891/Del/2012 before the ITAT urging more or less the same grounds of challenge to the order of re-assessment. 17. The ITAT, by the impugned order, reversed the order of the CIT (A) and came to the conclusion that with the Assessee's contention that Ved Prakash is neither his employee nor his authorized representative remaining uncontroverted, and with that AO failing to take note of the Assessee's objections about non-service of notice under Sections 148 and 143 (2) of the Act, it could not be said to be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....esented the Assessee. Once the Revenue had taken such a stand, the burden according to Mr. Singh shifted to the Assessee to show that Ved Prakash was not his agent. 22. Mr. Singh also referred to Section 292 BB of the Act. Reliance was also placed on the decision in CIT v. Shital Prasad Kharag Prasad [2006] 280 ITR 541/[2005] 147 Taxman 441 (All.); Hotline International (P.) Ltd. (supra); Nath Suresh Chand Ram Naresh v. CIT [2006] 280 ITR 396/[2005] 145 Taxman 186 (All.); P.N. Sasikumar v. CIT [1988] 170 ITR 80/[1987] 35 Taxman 131 (Ker.); Venad Properties (P.) Ltd. v. CIT [2012] 340 ITR 463/212 Taxman 20/[2011] 16 taxmann.com 62 (Delhi) and Mayawati v. CIT [2010] 321 ITR 349 (Delhi). 23. In reply, Mr. Ajay Vohra submitted that notice to an Assessee under Section 148 and 143 (2) of the Act was different from a notice under Section 142 (1) for instance. Service of notice on the Assessee strictly in terms of Section 148 read with Section 282 (1) of the Act is a jurisdictional requirement. Section 153 (2) of the Act made it clear that without such service of notice the AO could not proceed to make the re-assessment. He submitted that the onus was on the Re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he proceedings taken by the Income-tax Officer without a notice or in pursuance of an invalid notice would be illegal and void." 26. This was also the basis for the decision in Banarasi Debi v. ITO [1964] 53 ITR 100 (SC). However, under the 1961 Act the procedural requirement has been spread over three sections, being Sections 147, 148 and 149. The period of limitation within which notice under Section 148 has to be issued is specified in Section 149. Section 153 (2) of the Act stipulates that no order of re-assessment can be passed beyond the period of one year from the expiry of the financial year in which service of the notice was effected. Section 148 (1), however, is clear that no reassessment can take place without service of notice being effected on the Assessee or his authorised representative. 27. In R.K. Upadhyaya (supra) the Supreme Court explained that "the mandate of Section 148 (1) is that reassessment shall not be made until there has been service." However, the said decision does state that jurisdiction becomes vested in the AO to proceed with the assessment once notice is issued within a period of limitation. It also emphasized that no reassessmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he manner prescribed by law." 31. The High Court in Dina Nath (supra), referred to Order V Rule 12 CPC as well as Order III Rule 6 CPC. It thereafter concluded that notice must be served personally upon the individual or upon his agent duly authorized in terms of Order III Rule 6 CPC. The contention of the Assessee was upheld and the reassessment proceeding was quashed. 32. In Jayanthi Talkies Distributors v. CIT [1979] 120 ITR 576 (Mad.) the notice was served by the notice-server of the Department on the Manager of the Assessee-firm. The Manager wrote to the ITO seeking time. Since no return was filed by the Assessee within the time granted, the ITO completed the reassessment under Section 144 of the 1961 Act. On appeal the High Court found that none of the partners of the Assesseefirm had been personally served with the notice. Service was effected only on the Manager of the firm who had no specific or written authority to receive such notice. It was held: "when the statute provides that a notice should be served in a particular mode, it was not possible to hold that there had been a proper service of notice merely from the fact that the person to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....On the facts of that case it was held that the Revenue had sufficiently discharged the onus by producing the affidavit of the process server. 35. Under Section 282 (1) of the Act, service of notice may be made by delivering or transmitting a copy thereof to the person to whom the notice is addressed by more than on mode. One of the modes is "in such manner as provided under the Code of Civil Procedure, 1908 ('CPC')". For the purpose of service of summons under Order V Rule 12 CPC, service can be taken to complete, if it is effected, on person to whom his address or to another person who is empowered to receive such notice on his behalf. Besides the appointment of such agent by the Assessee has to be in writing in order to meet the requirement of Order III Rules 2 and 6 CPC. Therefore, in the instant case, the Revenue had to show that the person on whom the notice was served i.e., Mr. Ved Prakash was in fact empowered by the Assessee to receive notices on his behalf. Apart from invoking the doctrine of 'apparent authority', the Revenue has been unable to show that, in fact, Ved Prakash was empowered to receive such notice on behalf of the Assessee. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce under Section 148 "along with basis and reason of opening the above mentioned case under Section 148" be provided to them to enable them to "comply with the same." However, the ACIT in his reply of the same date continued to show the addresses of the Assessee as "c/o Kiran Cinema, Sector-22, Chandigarh" and "c/o M/s. Vipin Aggarwal & Associates CA" and insisted that notice had been "validly served on Shri Ved Prakash, accountant of Kiran Cinema (who also receives other notices of the concerned group concerns)." The CAs for a second time on 19th December 2008 pointed out that that "notice u/s 148 was not received by the assessee" and again asked for a copy thereof along with the reasons for reopening the assessment. However, no attempt was made by the ACIT to ascertain the correct address of the Assessee and serve a copy of the notice afresh on him. Participation by Assessee in proceedings not a waiver 39. The next issue to be considered is whether the failure by the Assessee to specifically protest that Mr. Ved Prakash was not his Accountant or agent or that he was not empowered to accept notices on his behalf should be taken to be a waiver by the Assessee of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t jurisdiction. It is subsequently held that "it is firmly established that where a Court or Tribunal has no jurisdiction, no amount of consent, acquiescence or waiver can create it." Decisions referred to by the Revenue 42. The cases referred to by Mr. Singh do not appear to be relevant to the case on hand. The general observations in Venad Properties (P.) Ltd. (supra) to the effect that the failure to comply with a procedural requirement should not defeat substantive justice may not be apposite in the present context where the failure to serve notice under Section 148 is a jurisdictional and not merely a procedural requirement. 43. Also, the observations in Mayawati (supra) to the effect that the requirement of service of notice under Section 143 (2) of the Act cannot be considered as mandatory can no longer be considered to be good law in light of the subsequent decision of the Supreme Court in Hotel Blue Moon (supra) where it was held that an "omission on the part of the assessing authority to issue notice under Section 143 (2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143 (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tice has been effected under Section 148 of the Act on the Assessee or an agent duly empowered by him to accept notices on his behalf. In the present case, the Revenue has failed to discharge that onus. (v) The mere fact that an Assessee or some other person on his behalf not duly authorised participated in the reassessment proceedings after coming to know of it will not constitute a waiver of the requirement of effecting proper service of notice on the Assessee under Section 148 of the Act. (vi) Reassessment proceedings finalised by an AO 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 292 BB 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 292 BB is not attracted. 47. On the facts of the present case, the Court finds that the ITAT was right in its conclusion that since no proper service of notice had been effected under Section 148 (1) of the Act on the Assessee, the reassessment proceedings were liable to be qu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssment, notice under Section 148 (1) has to be mandatorily issued to the Assessee. Further the AO cannot complete the reassessment without service of the notice so issued upon the Assessee in accordance with Section 282 (1) of the Act read with Order V Rule 12 CPC and Order III Rule 6 CPC. (iii) Although there is change in the scheme of Sections 147, 148 and 149 of the Act from the corresponding Section 34 of the 1922 Act, the legal requirement of service of notice upon the Assessee in terms of Section 148 read with Section 282 (1) and Section 153 (2) of the Act is a jurisdictional pre-condition to finalizing the reassessment. (iv) The onus is on the Revenue to show that proper service of notice has been effected under Section 148 of the Act on the Assessee or an agent duly empowered by him to accept notices on his behalf. In the present case, the Revenue has failed to discharge that onus. (v) The mere fact that an Assessee or some other person on his behalf not duly authorised participated in the reassessment proceedings after coming to know of it will not constitute a waiver of the requirement of effecting proper service of notice on the Assessee u....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Sir/Madam, Telephone / दूरà¤à¤¾à¤·: 0141 2385632 Dated: 07.11.2017 27051300/- Objections to initiation of Sub: Notice under sec 148 of the I.T. Act proceedings - A.Y. 2010-11 Reply regarding - Please refer to letter No. Nil dated Nil filed on 07.11.2017 thereby raising objections against reopening of assessment under sec. 147 in your case for the A.Y. 2010-11 wherein the following objections have been raised:- 2. i. ii. iii. iv. Notice under sec. 148 dated 30.03.2017 has never been served or received till 31.03.2017. Reassessment proceedings cannot be initiated without making enquiry only on the basis of information received. Incorrect facts in the reasons recorded. Suspicion however strong cannot take the place of evidence The contention of the above referred letters has been duly considered. It is pertinent to mention here that the time limit for Notice under sec. 148 has been prescribed in section 149 of the Income-tax Act, 1961. Relevant part of the above section is read as under:- अधिकारी 7 जयपà¥à¤° [(1) No....
X X X X Extracts X X X X
X X X X Extracts X X X X
....atisfied" [Kalyanji Mavji & Co. vs CIT(SC) 102 ITR 287]. The only condition to be satisfied for re- opening is that the taxable income has escaped assessment [Kone Elevator India P.Ltd. vs ITO (Mad) 340 ITR 454]. In the instant case there is sufficient material available on records which indicates that income of the assessee has escaped assessment. Therefore, proceedings under sec. 147 has been rightly initiated and accordingly the Notice under sec. 148 has rightly been issued in the case under reference. 6. Inview of above, it is requested to please attend the proceedings and comply with the requirements of Order sheet entry dated 01.11.2017. For this purpose the case has been fixed for hearing on PM . Notice under sec. 143(2) is enclosed. 10th November, 2017 2.30 Encl: as above. Yours sincerely, (Jai Narayan), Income-tax Officer, Ward 3(2), Jaipur. Document 3 सतà¥à¤¯à¤®à¥‡à¤µ जयते à¤à¤¾à¤°à¤¤ सरकार/ Government of India कारà¥à¤¯à¤¾à¤²à¤¯ / Office of the आयक....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hin six years from the end of relevant assessment year. In the instant case this limit expires on 31.03.2017. Notice under sec. 148 in the instant case was issued on .2 Document 4 30.03.2017 under endorsement No. 1292. The above Notice was handed over to the official of Postal Department for serving upon the assessee. The Postal authorities has duly acknowledged the receipt of above Notice and accordingly issued a receipt on 31.03.2017 No. ER328684609IN'. From the above fact it is evident that the Notice under sec . 148 has duly been issued within the stipulated time limits. The above Notice stands duly served by the Postal Authorities at the given address. Further, the said Notice has also been served at the given address through the Notice Server of Income-tax Department. Thus, a Notice under sec. 148 issued within limitation period and served subsequent to expiry date of limitation tentamounts to be a valid Notice. This has been held in the following judgments:- 4. New Bank of India Limited Vs ITO (Del) 136 ITR 679 R.K. Upadhyaya Vs. Shanabhai P. Patel (SC) 166 ITR 163 ITO Vs Lal Chand Agarwal ....