TaxTMI 
TaxTMI 
2019 (4) TMI 2020
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....: M/s. Sweet Memories Property Pvt. Ltd 2.1 Aforesaid Cross-appeals for Assessment Year [AY] 2008-09 contest the order of Ld. Commissioner of Income-Tax (Appeals)-3, Mumbai, [in short referred to as 'CIT(A)'], Appeal No. CIT(A)-3/ACIT- 1(3)(1)/IT-73/2016-17 dated 28/04/2017 on separate grounds of appeal. 2.2 The effective grounds raised by the assessee read as under: - 1(a) The Commissioner of Income Tax (Appeals) - 3, Mumbai [hereinafter referred to as 'the CIT(A)'] erred in confirming the action of AO in reopening of the assessment by invoking the provisions of section 147 read with section 148 of the Income Tax Act,1961 ("the Act"). The Appellant submits that the notice issued u/s 148 of the Act and reopening of assessment u/s 147 of the Act is bad in law, illegal, ultra- virus and contrary to the provision of the Act and shall be quashed. (b) The CIT(A) erred in confirming the re-opening of assessment u/s 147 read with section 148 of the Act by the AO, since the same was without valid service of notice u/s 148 of the Act The Appellant submits that there is no valid service of notice u/s 148 of the Act on the Appellant hence the ....
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....and genuineness of moneys credited in the books as share capital, including share premium, of Rs. 3,95,00,000/- just by submitting PAN, and acknowledgement of income-tax returns of the shareholders, and that the share premium has been received through banking channel and duly supported by the forms filed by the assessee company with Registrar of Companies. (ROC)?" (iv) Whether ,on the facts and circumstances of the case and in Law, the CIT(A) erred in not upholding the addition made on account of unjustified share premium, by relying on the decision of Hon'ble ITAT, Mumbai in the case of Green Infra Ltd. (ITA No. 7762/Mum/2012 dtd.23/08/2013), although the facts were different in the said case since the addition was made u/s. 56(1) whereas in this case addition has been made u/s. 68? (v) Whether on the facts and circumstances of the case and in Law, the CIT(A) erred in relying on the decision of Hon'ble Bombay High Court in the case of Vodafone India Services Pvt. Ltd. Vs. Union of Income & Ors 368 ITR 1 (Bom) wherein the issue is relating to income arising out of international transaction in the form of issue of shares and not taxability of capital receipt u/....
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....rawn to the fact that the notice must be served in terms of provisions of Section 148 to assume valid reassessment jurisdiction to make assessment u/s 147. Since no notice was served on the assessee, the reassessment proceedings were to be dropped. Reliance was placed on various judicial pronouncements to support the same. 3.4 The assessee's submissions were controverted by Ld. AO by drawing attention to the fact that notice was first issued on 10/03/2015 through speed post and therefore the same was issued well within the time limit as per Section 149 of the Act and the said notice was issued after obtaining requisite approval u/s 151 of the Act and the notice was properly addressed. However, the notice was returned back undelivered on 16/03/2015 with the remarks incomplete address / not known after two unsuccessful attempts made by postal authorities to deliver the same at the given address, first on 11/03/2015 and thereafter on 13/03/2015. Since the notice was returned back undelivered, a noticeserver was deputed to deliver the copy of the said notice with reminder to the assessee to promptly file the return of income so that reassessment proceedings could be expedited. As pe....
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....as located just behind the Income Tax Department Office and in case of any difficulty, the notices could have been served personally since address and contact details were duly mentioned in all correspondences as well as in the Income Tax returns filed by the assessee. However, no efforts were made to serve the notice u/s 148 within the prescribed time limit. The attention was also drawn to the fact that affixture of notice was also done at the incomplete address which was never received by the assessee and therefore, a notice drawn on incorrect / incomplete address could not be said to be validly issued or served within the meaning of law and therefore, reassessment proceedings were wrongly initiated and liable to be dropped. However, the same could not find favor with Ld. AO who proceeded to reassess the income which got triggered pursuant to receipt of information during survey proceedings conducted by DDIT (Inv.), Mumbai on Capri Group of Services on 09/10/2014. During survey proceedings, it transpired that the assessee received share premium of Rs. 3.55 Crores. The share was allotted at a very high premium and the same shares were bought back by the group companies of the asse....
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....ditworthiness of the investors & genuineness of the transactions and tabulated the financial positions of 8 share applicants on page no. 29 of the quantum assessment order. Few instances were also noted wherein it transpired that the shares of share applicants purchased @Rs. 20/- per share were subsequently purchased by the group concerns of capri group at a low price i.e. at Rs. 2/- per share thereby generating losses for the investor companies. The assessee rebutted the same on the ground that the assessee did not bought any shares from any of the applicants and selling was purely a commercial or genuine decision of the shareholders to sell the shares at an agreed consideration. 3.8 Finally, not convinced with assessee's explanations / submissions, Ld. AO treated the amount of Share Capital & Share Premium aggregating to Rs. 395 Lacs received by the assessee from 10 share applicants as unexplained cash credit u/s 68 and added the same to the income of the assessee. 4.1 The assessee agitated the same on legal grounds as well as on merits before Ld. first appellate authority vide impugned order dated 28/04/2017 wherein the assessee's plea contesting the invocation of reassess....
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....as tabulated in para 4.1 above, the impugned additions u/s 68, in the opinion of Ld. first appellate authority, in respect of Share Capital could not be sustained. 4.3 The addition of Share Premium was deleted in terms of CBDT instruction No. 2/2015 dated 29/01/2015 and decision of Hon'ble Bombay High Court rendered in Vodafone India Services Pvt. Ltd. Vs. Union of India [368 ITR 1] in view of the fact that these transactions were on capital account. Reliance was also placed on the decisions of Hon'ble Bombay High Court rendered in CIT Vs. Gagandeep Infrastructure Pvt. Ltd. & CIT Vs. Green Infra Ltd. to arrive at the conclusion that addition on account of share premium was not justified. 4.4 The aforesaid conclusions drawn by first appellate authority has given rise to cross-appeals before us. The assessee, in its appeal, is contesting the validity of reassessment proceedings on the same grounds as agitated before lower authorities whereas the revenue is contesting the deletion of additions, on merits. 5.1 The Ld. Authorized Representative for Assessee, taking us through the documents placed in the paper-book, reiterated the submissions that notice u/s 148 was never issued....
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.... However, there was no service by affixture also on assessee's office as alleged by the revenue since the same also bear the incomplete address only. It was submitted that the assessee came to know about proceedings u/s 148 for the first time only upon receipt of Ld. AO's letter dated 23/07/2015 on 30/07/2015 which was hand delivered at the assessee's correct address. The said letter referred to notice u/s 148 dated 10/03/2015 and its alleged noncompliance by the assessee. However, the said letter did not make any mention of the alleged affixture on 09/07/2015 and therefore, the assessee vide letter dated 06/08/2015 objected and denied the service of notice with a request to drop the proceedings on non-fulfilment of jurisdictional condition of service of notice. Our attention is further drawn to the fact that the envelop containing notice dated 10/03/2015 was always and at present also, in sealed condition and therefore, the stand that the same was served vide affixture on 09/07/2015 could not hold any ground. It has been the submissions of Ld. AR that notice u/s 148, till date has never been served upon assessee and therefore, the reassessment proceedings were not validly initiate....
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.... the fact that the aforesaid notice bear the address of the assessee as Court Chambers, 35, Sir V.T.Marg Mumbai - 400 020 without mentioning the office number. From the records, it transpires that the assessee's correct / complete address is 1-B, Court Chambers, 35, Sir V.T. Marg, New Lines, Mumbai - 400 020 which is evident from returns of income filed by the assessee for AYs 2013-14 & 2014-15 on 27/09/2013 & 29/09/2014 as well as per the records of Registrar of Companies, a copy of which has been placed on page nos. 26 to 29 of the paper-book. The Ld. AR has contended that the building Court Chambers was an office building housing a large number of commercial offices related to various businesses and the assessee was merely occupying a single office unit in this large complex, which remain undisputed. Therefore, mere writing of the name of building, without mentioning the proper and correct office number or even the floor number, it could possibly not lead to delivery of any correspondence to assessee's office. The said fact is uncontroverted by the revenue and also gather strength from the evidence that notice sent through postal authorities remained undelivered despite two atte....
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....vt. Ltd, Court Chambers, 35, Sir V.T. Marg Mumbai 400020 Sub: Request to file the return in response to the Notice u/s 148 of the Act. Sir/Madam, Notice under section 148 of the Income Tax Act was issued to you on 10.03.15, however this office has not received any proper reply from your side in response to the said notice as to filing Return of Income for the assessment year 2008-09. Kindly note that this is the last opportunity being given to you to respond TO SAID NOTICE WITHIN 7 DAYS OF RECEIPT OF THIS NOTICE, otherwise necessary action will be taken as per law without any further intimation to you. For Sweet Memories Property Pvt. Ltd. Sd/- Director / Authorized Signatory Thanking You, Yours Faithfully Sd/- Dr. Akshay Jain ACIT1(3)-1 Mumbai 1. No notice dated 10/3/15 as mentioned in this notice has been received earlier. 2 This is the first notice received ....
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..... - (1) Before making the assessment, reassessment or recomputation under Section 147, the Income-tax Officer shall serve on the Assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of Section 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section." 25. The Supreme Court in R.K. Upadhyaya (supra), explained that there was a distinct shift in the scheme of the provisions of the 1961 Act in comparison with the corresponding provision i.e. Section 34 under the 1922 Act under which the mandatory requirement was that both the issuance and service of notice had to be completed within the prescribed period. Consequently, the service of notice within the limitation period was the foundation of jurisdiction under the 1922 Act. In Y. Narayana Chetty v. ITO [1959] 35 ITR 388 the Supreme Court observed in the context of Section 34 of the 1922 Act,: "The notice prescribed by section 34 of the Income tax Act for the purpose of initiating reassessment proceedings is not a mere procedural requirement; the service of the prescribed not....
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....t to the validity of any reassessment made under section 147. If no notice is issued or if the notice issued is shown to be invalid, then the proceedings taken by the Income tax Officer without a notice or in pursuance of an invalid notice would be illegal and void." 29. In Hotline International (P) Ltd. (supra) this Court held that affixation of notice on an address at which the security guard of the Assessee-company refuses to receive such notice cannot be construed to be a proper service of notice under Section 148 of the Act. The security guard was not an agent of the Assessee and therefore, the reassessment proceedings were held to be bad in law. 30. In Dina Nath v. CIT [1994] 72 Taxman 174 (J. & K.) the notice under Section 143 (2) of the 1961 Act was served upon one S, who was neither a member of the family of the Assessee nor his duly authorized agent. However, S had been accepting the notice on behalf of the Assessee and prosecuting the cases on his behalf earlier before the income tax authorities. The High Court held: "the object of issuance the notice or summons is to intimate the concerned person to appear and answer the queries or the questio....
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.... sufficient judicial authority for the proposition that the burden of showing that service of noticed has been effected on the Assessee or his duly authorized representative is on the Revenue. These include Fatechand Agarwal v. CWT [1974] 97 ITR 701 (Ori.) and Venkat Naicken Trust v. ITO [1999] 107 Taxman 391/[2000] 242 ITR 141 (Mad). In CIT v. Thayaballi Mulla Jeevaji Kapasi [1967] 66 ITR 147 (SC), the Respondent to whom the notice was directed was not in town. The only information which the process server had was that the Respondent was either in Bombay or Ceylon. Thereafter, the process server affixed the notice on the business premises of the Respondent. The Supreme Court affirmed the essential principle that "if no notice was served within the period, the Income-tax Officer was incompetent to commence proceedings for reassessment under Section 34 of 1922 Act." It was further held that "service of notice under Section 34 (1) (a) within the period of limitation being a condition precedent to the existence of jurisdiction, if the Income-tax Officer was unable to prove that the notice was duly served upon the Respondent within the prescribed period, any return filed by the Respond....
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....n made by the Revenue to serve the Assessee at the address provided by him i.e. "c/o Jagat Theatre, Sector 17, Chandigarh". All the notices were addressed to him at the address "C/o Kiran Cinema, Chandigarh" which was in Sector-22. Therefore, this is not a case where an attempt was made by the Revenue to serve the Assessee at his known address, and upon not finding him there the Revenue learnt of the address where he would be found. Merely because other notices sent to the 'Assessee group' were received by the employees of Kiran Cinema it does not automatically lead to the inference that the Assessee's place of business was also Kiran Cinema. In any event, there could not be an inference that Mr. Ved Prakash was duly empowered by the Assessee to receive notices on his behalf. In the very first notice dated 28th March 2008 the endorsement made by Mr. Ved Prakash shows him describing himself as "Accountant, Kiran Cinema, Sector- 22, Chandigarh" and nothing more. 38. It was not as if the Revenue was not made aware of the lapse. Vipin Aggarwal & Associates, the Chartered Accountants (CAs) of the Assessee, by their letter dated 12th December 2008 informed the ACIT t....
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....lied for time, would not render the service of notice on the employee a valid and a legal service. It is contended that the Assessee had not denied service of notice on such employee. The High Court however negatived the plea of the Revenue and held that in the absence of finding by the Tribunal that the employee of the Assessee was authorized to accept such service on behalf of the Assessee, notice could not be said to have been duly served upon the Assessee. It was held that "acquisition of knowledge in regard to the issuance of a notice under Section 22 (2) of 1922 Act could not be considered to be equivalent to, or a substitute for, the service of the notice on the Assessee." It was further observed that "knowing about the issuance of the notice otherwise than by its service on the person concerned is one thing and the service of the notice on the person is another." 41. In the context of sales tax the Full Bench of the Allahabad High Court in Laxmi Narain Anand Prakash v. Commissioner of Sales Tax AIR 1980 All 198 it was held that the notice of initiation proceeding under Section 21 of U.P. Sales Tax Act, 1947 was a condition precedent and not only a procedural requir....
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....htly pointed out by Mr. Vohra, and as held by the Special Bench of the Tribunal in Kuber Tobacco Products (P.) Ltd. v. Dy. CIT [2009] 28 SOT 292 (Delhi) (SB), Section 292 BB which was introduced with effect from 1st April 2008 and is prospective. Conclusions 46. To summarize the conclusions: (i) Under Section 148 of the Act, the issue of notice to the Assessee and service of such notice upon the Assessee are jurisdictional requirements that must be mandatorily complied with. They are not mere procedural requirements. (ii) For the AO to exercise jurisdiction to reopen an assessment, 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 ....