TaxTMI 
TaxTMI 
2022 (8) TMI 673
X X X X Extracts X X X X
X X X X Extracts X X X X
.... u/s. 142(1) was issued calling for books of account and other details to which the AR of the assessee appeared before the Assessing Officer and filed the requisite details as called for. 3. During the course of assessment proceedings, the Assessing Officer noted from the details filed by the assessee that the assessee has introduced capital of Rs. 14,35,98,259/- which is as per Schedule-I of the balance sheet. Similarly, as per Schedule-II of the balance sheet, the assessee claimed to have taken unsecured loan of Rs. 95,31,364/-. On being asked by the Assessing Officer to explain the source of capital introduced and unsecured loan taken, the assessee filed the reply, the relevant portion which has been reproduced in the body of the assessment order and which reads as under: "I am herewith submitting the following information/clarification required by you. 1. Source of capital introduced: During the year a sum of Rs. 14,35,98,259/- has transferred from M/s. Sujana Universal Industries Ltd. A/c to my capital Account to obtain from banks. However no physical capital was introduced by me during the year. 2. Note for Universal loans: As the bank is insisting for funds, I have tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unsecured loan & capital by the assessee. He inferred that it could be possible that the assessee sold the goods in cash or keeping undisclosed sundry debtors out of the books. According to the Assessing Officer, when the real dues to M/s. Sujana Universal Industries Limited are taken into account, an amount of Rs. 39,93,38,544/- is excess of liability over assets and therefore he brought this amount to tax as unexplained asset/undisclosed investment in the hands of the assessee. 5. The Assessing Officer further noted that the assessee did not furnish books of account, vouchers/bills, LRs/DCs for the expenditure claimed in the P & L A/c. He, therefore, made an addition of Rs. 9,91,15,015/- being 10% of the entire expenditure of Rs. 99,91,50,156/- claimed by the assessee. Accordingly, the Assessing Officer determined the total income of the assessee at Rs. 51,77,82,379/-. 6. Before the learned CIT(A), the assessee apart from challenging the addition on merit, challenged the validity of the assessment in absence of nonservice of notice u/s. 143(2) of the I.T. Act. However, the learned CIT(A) rejected the grounds challenging the validity of the assessment in absence of service of no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sferring the payable to capital account, unsecured loans and others nor the entries on account of purchase returns and reduction in sundry debtors have been reflected in the accounts for Asst. Year 2013-14. This shows and gives credence to the assessee's claim that the entries/adjustments are made in the balance sheet without making entries in the ledger accounts. The initial submissions before Assessing Officer are also not correct. 6.5 The Assessing Officer in the remand report raised doubts as to whether and the whether material filed is additional evidence or not. The same is non issue and whether the same is filed before the Assessing Officer during the assessment proceedings or not, the same needed to be examined w.r.t. submissions of the assessee. The Assessing Officer in the Remand Report only reiterated the contents/findings of the assessment order. The evidences filed as well as the explanation given have not been examined by the Assessing Officer. The contention raised by the assessee in the rejoinder fairly depicts the factual position. It appears, the Assessing Officer do not have anything adverse to comment and mostly reiterated the contents of to Assessment Ord....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppellant as enjoined u/s. 282 of the Act and therefore the entire assessment made u/s. 143(3) of the Act is void ab initio, invalid, bad in law and without jurisdiction and must be annulled. 2. The CIT(A) erred in holding that the notice u/s. 143(2) of the Act was a valid notice and that the consequent proceedings were validly initiated. 3. The CIT(A) failed to note that the provisions of Section 292BB were not applicable as the notice u/s. 143(2) of the Act were not served on the appellant as required and in accordance with the provisions of the Act and therefore the entire assessment proceedings lacks credence and hence invalid, bad in law and void ab initio and therefore the assessment should be annulled. 4. The CIT(A) ought to have clearly held on Ground No. 6 raised by the appellant before him that excess of liabilities over assets cannot have the characteristic of unexplained investment or cash credit and therefore on this ground also the entire addition of Rs. 39,93,38,544 ought to have been deleted. 3. Any other grounds that may arise at the time of hearing." ITA No. 1347/Hyd/2017 (Revenue) "(i) The Ld. CIT(A) erred both on facts and law of the case. (ii) The ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....11(1) Hyderabad transferring the scrutiny record prepared and put up for signature"..................................." 11. The learned AR submitted that from a bare reading of the assessment order as well as the order sheet entries dated 30.09.2013, it is clear that the notice u/s. 143(2) of the Act, was affixed at the premises at H. No. 2-4-96/1 Nacharam, Hyderabad. The learned Counsel for the assessee referring to the report of the Inspector, copy of which is placed at page No. 14 of the Paper Book filed by the Revenue drew the attention of the Bench to the same which is as under: 12. The learned Counsel for the assessee submitted that as per the Assessing Officer in the order sheet entries, the notice was allegedly served on the assessee on the last known address as per the return of income for the A.Y. 2012-13. However, the notice was allegedly served by affixture at a different address which is other than the address given in the return of income. He submitted that the assessee was regularly filing his return of income from the A.Y. 2008-09 to 2014-15 by giving the following address: "Shri Sridhar Reddy Jagan Nagari Satya 1-5-5913, Old Alwal, Select Theatre Road....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l Procedure Code (CPC). Further, the notice cannot be served by affixture at the very first instance. 16. The learned Counsel for the assessee again referring to the report of the Inspector while serving the notice through affixture drew the attention of the Bench to the same and submitted that the names of the witnesses do not disclose their complete name and address and names of their father etc., Therefore, the finding recorded by the learned CIT(A) that the notice u/s. 143(2) is deemed a valid notice is incorrect. The learned Counsel for the assessee also relied on the following decision to the proposition that when the notice issued u/s. 143(2) by affixture was not in accordance with law, the entire assessment proceedings have to be quashed: a) ITAT Delhi Benches in ITA No. 1605/Del/2012 in Wg. Cdr. Sucha Singh. b) ITAT Delhi Benches in ITA Nos. 1467 & 1468/Del/2011 in the case of Sumanglam Sewa Awam Educational Samiti c) ITAT Delhi in ITA Nos. 5626/Del/2012 & C.O. No. 319/Del/2016 in the case of Gravity Systems (P) Ltd. d) ITAT Hyderabad Benches in the case of Shri Mahesh Agarwal vs. ITO in ITA No. 365/Hyd/2019. He also relied on various other decisions. 17. The l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re an assessee has appeared in any proceeding or cooperated 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 this Act and such assessee shall be precluded from taking any objection in ay proceeding or inquiry under this Act that the notice was- (a) Not served upon him; or (b) Not served upon him in time; or (c) Served upon him in an improper manner; Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment". 4. In the present case assessee never raised any objection during the assessment proceedings. Therefore, the notice served through affixture is a valid notice and the ground taken by the assessee in this regard is without any merit. 5. It is also humbly submitted that the claim that the address in PAN database was incorrect is a claim made by the assessee and the onus lies on him to prove that there was a wrong entry of address. This is because the assessee has to produce PA....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ered or sent either to the proper officer to be served by him or one of his subordinates or to such courier services as are approved by the Court. (2) The proper officer may be an officer of a Court other than that in which the suit is instituted, and, where he is such an officer, the summons may be sent to him in such manner as the Court may direct. (3) The services of summons may be made by delivering or transmitting a copy thereof by registered post acknowledgment due, addressed to the defendant or his agent empowered to accept the service or by speed post or by such courier services as are approved by the High Court or by the Court referred to in sub-rule (1) or by any other means of transmission of documents (including fax message or electronic mail service) provided by the rules made by the High Court: Provided that the service of summons under this sub-rule shall be made at the expenses of the plaintiff. (4) Notwithstanding anything contained in sub-rule (1), where a defendant resides outside the jurisdiction of the Court in which the suit is instituted, and the Court directs that the service of summons on that defendant may be made by such mode of service of summons a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ourt from which it was issued, with a report endorsed thereon or annexed thereto stating that he has so affixed the copy, the circumstances under which he did so, and the name and address of the person (if any) by whom the house was identified and in whose presence the copy was affixed." 20. A perusal of the above rules of the procedures mentioned in CPC cited (Supra) shows that before resorting to alternate mode of service namely by affixture or by publication or by beating of drums, it is essential to resort to other routine way of service of notice by ordinary post or by registered post with acknowledgement due. However, the service by way of affixture has not been contemplated at the first instance. 21. We find the Assessing Officer in the present case has served the notice u/s. 143(2) of the Act through affixture at the very first instance. A perusal of the order sheet entries shows that the notice was put up for service before the Assessing Officer on 23.9.2013. However, the Revenue in its submission has mentioned that the notice was issued on 29.3.2013 and thereafter it was allegedly served by way of affixture on 30.09.2013. 22. A perusal of the service report of the Insp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e by the Ward Inspector on 30.9.2013. The reading of the content of the subsequent notice 22.10.2013 clearly shows that the return of income was filed by the assessee on 30.09.2012 for the A.Y. 2012-13 but there was no reference of earlier notice, if any, issued by the Assessing Officer for fixing the date of hearing as 15.10.2013 or nonappearance of assessee on 15.10.2013 despite service of notice on 30.9.2013. 26. We find an identical issue had come up before the Delhi Bench of the Tribunal in the case of Wg. Cdr. Sucha Singh vs. Income Tax Officer in ITA No. 1605/Del/2012 where the Tribunal after considering various decisions quashed the assessment proceedings in the absence of issue of notice u/s. 143(2) in a valid manner by observing as under: "5.1 On a careful consideration of fact, we find that, admittedly, the issue involved is legal issue and it is a settled position of law that a legal issue can be raised before the Tribunal even for the first time even if it was not raised before the authorities below. In our considered opinion, the position does not change in raising the legal issue before the Tribunal even if such legal issue was raised before the CIT(A) but was not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee on 04/09/2009 whereas the notice under section 143(2) was dated 14/09/2009 and was served by affixture on 24/09/2009 and, thus, the last known address before the issue of service of notice was H - 234, Naraina Vihar, Naraina, New Delhi i.e. the address mentioned in the return of income for assessment year 2009-2010. The remand report of the AO also admits that all the notices under section 143(2) remained un-served. Thus, the service of the very first notice has, undisputedly, been done by way of affixture whereas order V, rule 12 of CPC provides that wherever it is practicable, service has to be effected on the defendant in person or on his agent. Order V, rule 17 of CPC further provides that the affixture can be done only when the assessee or his agent refuses to sign the acknowledgement or cannot be found. Thus, for resorting to affixture, efforts have to be made to serve the notice upon the assessee and only after reaching a finding that the notice cannot be served upon the assessee, the mode of affixture can be resorted to. Further rule 17 of order V of CPC mandates that an independent local person be the witness of service through affixture and for the purpose of having....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ings in absence of proper service of notice by observing as under: "6. we have considered the rival submissions and have perused the facts on record. Undisputedly, notice u/s. 148 was issued on 26.03.2007 and was served upon the assessee through affixture on 16.04.2007. This fact has been recorded by the AO also on Page 2 of the Assessment Order. There is no other evidence on record to even suggest that efforts were made earlier to serve the notice on the assessee. The short question which arises for consideration in this case is as to whether notice under section 148 of the Act has been duly served upon the assessee prior to the Commencement or completion of the reassessment proceedings or not. The issue at hand will necessarily have to be examined in light of the relevant provisions of Income Tax Act, 1961 as well as the Code of Civil Procedure, 1908. 7. The relevant portion of section 148(1) of the Act, reads as under: "148. Issue of notice where income has escaped assessment (1) Before making the assessment reassessment or re computation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be spe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e in which the defendant ordinarily resides or carries on business or personally works for gain, and shall then return the original to the Court from which it was issued, with a report endorsed thereon or annexed thereto stating that he has so affixed the copy, the circumstances under which he did so, and the name and address of the person (if any) by whom the house was identified and in whose presence the copy was affixed." Order V, Rule 19A provides for simultaneous issue of summons for service by post in addition to personal service. It reads as under: "Rule 194. Simultaneous issue of summons for service by post in addition to personal service.-() The Court shall, in addition to, and simultaneously with, the issue of summons for service in the manner provided in rules 9 to 19 (both inclusive) also direct the summons to be served by registered post, acknowledgement due, addressed to the defendant, or his agent empowered to accept the service, at the place where the defendant, or his agent, actually and voluntarily resides or carries on business or personally works for gain: Provided that nothing in this sub-rule shall require the Court to issue a Summons for service by regi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee and admittedly no notice was tendered either to the assessee or his agent nor was the same refused either by the assessee or his agent. Under Order V, Rule 17 of the Code of Civil Procedure, the affixation can be done only when the assessee or his agent refuses to sign the acknowledgement or could not be found. Here, in the present case, it is very much apparent from the records that no effort was made by the Income-tax Department to serve the notice upon the assessee and no effort was made by the AO to locate the assessee. Even otherwise, as per Order V, Rule 19A of the Code of Civil Procedure, the notice sent by registered post ought to have been sent along with acknowledgement due but admittedly it was not sent along with acknowledgement due. The Delhi Bench of the Tribunal in the case of Dr. K.C. Verma vs. ACIT 84 ITD 33 (Delhi) held as follows "Section 282 provides the manner in which a valid service can be affected. According to this section, a notice under the Act is to be served either by post or as if it was summon under the Code of Civil Procedure, 1908. In the present case, admittedly, notice was never sent by post. So the question arises whether the service ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....benefit of this order, the provisions of Rule 20 are being reproduced as under: 20. Substituted service Where the Court is satisfied that there is reason to believe that the defendant is keeping out of the way for the purpose of avoiding service, or that for any other reason the summons cannot be served in the ordinary way, the Court shall order the Summons to be served by affixing a copy thereof in some conspicuous place in the Courthouse and also upon some conspicuous part of the house (if any) in which the defendant is known to have last resided or carried on business or personally worked for gain, or in such other manner as the Court thinks fit. The perusal of the above provisions shows that before ordering for substituted service, the Court must be satisfied that the defendant is keeping out of the way for the purposes of avoiding service or that for any other reason the summons cannot be served in the ordinary way. Further, before affixture the serving officer must use its due and reasonable diligence to find out the defendant and if the circumstances as mentioned in Rule 17 exist then only the notice may be served by affixture that too in the presence of witnesses by who....