TaxTMI 
TaxTMI 
2019 (4) TMI 2020
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....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 reopening of assessment is bad in law, illegal, ultra-virus and cont....
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.... 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/s 68 of the Income Tax Act?" (vi) Whether on the facts and circumstances of the case and in Law, the CIT(A) erred in hol....
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....ake 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 per the report of notice-server, the office copy of the notice u/s 148 dated 10/03/2015 was affixed on the assessee's address on 09/07/....
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....etails 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 assessee at a very low price. The assessee, vide letter dated 15/10/2015 offered the original return filed u/s 139 as the return in response to notice u/s 148. 3.....
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....ent 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 reassessment proceedings were dismissed. However, on merits, the assessee drew attention to the fact that requisite details as well as documentary evidences were filed by t....
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....truction 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 to the assessee which makes reassessment proceedings bad in law. The attention has been drawn to the fact that notice u/s 148 was not issued at the correct address of the assessee and the same could not be said to have been issued wit....
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....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 initiated & therefore, unsustainable in law. 5.3 It is also the submissions of Ld. AR that the affixture report dated 09/07/2015 again states incomplete address of the assessee without referring to the office number of the assessee. The submissions has a....
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....t 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 attempts made by the postal authorities and returned back on 16/03/2015 with remarks incomplete address / not known. The said very remarks by postal authorities, in our opinion, would have triggered the revenue to probe into the correct address of the ass....
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....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 u/s. 148 for AY 2008-09 Sd/- with round seal डा अक्षय जैन Dr. Akshay Jain सहायक आयुक्त-1 (3), 1 मुंबई Asst. Commissioner of Income Tax-1 (3) 1, Mumbai IB 1st Floor, Court Chambers 35, Sir, Vitha....
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....hyaya (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 notice on the assessee is a condition precedent to the validity of any reassessment made under section 34. 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." 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....
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....rued 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 question sought to be clarified by a Court or the authorities. As serious consequences are likely to follow, a notice or summons must necessarily be issued and served in the form and in the 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 th....
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.... 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 Respondent after the expiry of the period of eight years will not invest the Income-tax Officer with authority to reassess the income of the Respondent pursuant to such return." 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....
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....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 that the Assessee had not till then received the notice dated 28th March 2008 under Section 148 of the Act. They made a specific request to the ACIT that a copy of notice 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....
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....2 (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 requirement. The mere fact that the Assessee had obtained knowledge of the proceeding and participated could not validate the proceeding being initiated without 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 comp....
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....sessment, 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 under Section 148 of t....