TMI Blog1989 (10) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... nse from the assessee and no return was filed. The ITO issued notice under section 142(1) which was served on the assessee and in response to such notice under section 142(1), Shri J.C. Chakraborty, an employee of the assessee appeared without accounts. The ITO heard the assessee and gave opportunity of being heard. In his detailed order, the ITO dealt with the claim of the assessee and facts as available before him to come to the conclusion that the assessee owned that Huller Rice Mill and, therefore, the income would have to be considered in his hands in his individual capacity. He completed the assessment as such under section 143(3)/145(2) read with section 147. The order was passed on 5-1-1985. 3. The assessee went in appeal before the AAC contending that the income as estimated by the ITO had no basis and may be deleted. The AAC mentioned that no additional ground has been raised by the assessee though a new point was tentatively included in the statement of submissions that no notice under section 148 was served on the assessee. The AAC observed that from all intents, it was evident that the assessee was not relying on this point as his main basis of appeal, as he has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 148 requires that before making assessment, re-assessment or recomputation under section 147, the ITO shall serve on the assessee a notice under section 148 containing all the requirements which may be included in a notice under section 139(2) and other procedure would follow suit. The Appellate Tribunal observed further that service of notice was inevitable as unless service was effected, it cannot be said that the re-assessment should be treated to be in order as noted by the A.A.C. on the ground that the assessee has not raised this ground in appeal. The Appellate Tribunal pointed out that the appellate authority would have to consider any plea and dispose of the matter as such. Since the A.A.C. has abruptly come to the conclusion, the said conclusion cannot be sustained. The Appellate Tribunal, therefore, deemed fit to set aside the order of the A.A.C. on the point for fresh disposal by him after dealing with the points raised by the assessee and after he verified the records of the department and after giving both the sides opportunity of being heard. The Appellate Tribunal also observed that both the sides would be at liberty to place fresh facts etc. before the A.A.C. for fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r both the years against the order of the A.A.C. dated 9-12-85, i.e., predecessor of the present Dy. Commissioner (Appeals) which order has become the subject matter before the Appellate Tribunal in the earlier occasion in the appeal preferred by the assessee being ITA Nos. 209 (Gau.) and 210 (Gau.) of 1986, dated 25-10-1988, which we have discussed in the preceding paragraphs. On reasons recorded in that order and on the appeal by the assessee, the Appellate Tribunal restored back the matter to the A.A.C. for verification of the issue regarding service of notice under section 148. The order of the A.A.C. was, therefore, set aside for fresh disposal. In view of that fact the order has become final now, the appeal by the revenue being ITA Nos. 247 (Gau.) and 248 (Gau.) of 1986 presently before us which are directed against the order of the first A.A.C. have become infructuous and are dismissed as such. 11. Now the matter pending before us for disposal is regarding the assessee's claim directed against the order of the successor Dy. Commissioner (Appeals), dated 9-1-1989. Again, we have discussed briefly the contents of this second order of the first appellate authority impugned no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urged that before the ITO, the assessee did not raise or whisper his grievance regarding non-service of notice under section 148. It is urged particularly, that the assessee did comply with other notices under sec.142(1) etc. which was taken up by the ITO in consequence of the action taken by him under section 148. It is pointed out that the assessee through his employee appeared and he was heard which will indicate that the assessee was very much conscious and aware of the fact that the current proceedings were under section 147 as the original assessment having been completed under section 143(1) have become final and conclusive. Various references were made to the entries in the order sheet, copies of which have been placed before us on behalf of the revenue to emphasise the stand taken by the revenue that the assessee having complied with the subsequent notices under section 142(1) etc. should be deemed that he had come to know that the proceedings conducted by the ITO was re-assessment proceedings as contemplated by section 147. It is urged, therefore, that this action of the assessee cannot but taken to prove that the assessee was fully aware of the current proceedings which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he file and registers relevant for the purpose. But the assessing officer has categorically stated that acknowledgement slip or indication of service of notice under sec. 148 is not available at this stage. 14. Thus, it is urged on behalf of the revenue that issue of notice has not been denied nor disputed by the assessee and in view of the decision of the Hon'ble Supreme Court in the case of R.K. Upadhyaya v. Shanabhai P. Patel [1987] 166 ITR 163/33 Taxman 229 the issue of notice under section 148 by the ITO is sufficient to authorise the assessing officer to proceed with the assessment proceedings although the service may be effected at a later stage. It is, therefore, urged that on the basis of this ratio, which is binding on all concerned, the proceeding initiated by the ITO for both the years were validly initiated and were proper and sustainable. It is contended, therefore, that the appeals by the assessee having no merits may be dismissed on this point alone. 15. The assessee's learned counsel in reply submits that the decision in the case of R.K Upadhyaya has no relevancy to the present issue as that decided case was in connection with limitation matter and, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition for appropriate orders etc. to quash and set aside the said notice issued by the ITO. The order was passed by the Hon'ble High Court on 20-8-73. The matter came up before the Hon'ble Supreme Court, in which it was held that the ITO had issued notice within the limitation period and the appeal by the aggrieved party was allowed and the order of the said High Court was vacated. The Hon'ble Supreme Court directed the ITO to proceed to complete the assessment after complying with the requirements of law. But the facts before us are distinguishable inasmuch as the re-assessments for both the years have been completed but there was no service of notice under section 148. In the present case of this assessee, there was no stay or writ by any appropriate authority preventing the ITO from passing the re-assessment order. So there was no period for extension in the matter of computation of the time limit within which the re-assessment can be made under section 153(2). That apart, as could be seen from the decisions of different High Courts, provisions of section 34 of the Indian Income-tax Act, 1922, are mandatory in nature. The provisions and requirements of sections 147, 148 and 149 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Banarsi Debi was followed by the Hon'ble Gujarat High Court in the case of Shanabhai P. Patel v. R.K Upadhyaya, ITO [1974] 96 ITR 141 in which the provisions of sections 147, 148 and 149 of the Income-tax Act, 1961, were dealt with. It was observed in the Gujarat case that these sections confer power of re-assessment on the ITO and these provisions were originally comprehended in the provisions of section 34 of the Indian Income-tax Act, 1922. Thus, keeping in view the decision in the case of Banarsi Debi, it was held in the Gujarat case held above that the words "service of notice" or issuance of notice have no fixed connotation but rather inter-changeable and, therefore, the same meanings and connotations should be ascribed to the provisions mentioned in section 148 and also in section 149. The Hon'ble Gujarat High Court pointed out that there are no two distinct and separate stages of issue of notice and service of notice. It was pointed out that the notice of re-assessment issued against the assessee before limitation, but served on the assessee after limitation would be without jurisdiction, void and ineffective. Similar view was expressed by the Hon'ble Punjab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .K. Upadhyaya to show that in the present context of the case before us, the issue of the notice having been properly made through registered post, should be considered to have been served on the assessee. In the case of R.K. Upadhyaya, it was observed by the Hon'ble Supreme Court that the scheme of the Income-tax Act, 1961, is quite different from the 1922 Act as far as notice of re-assessment is concerned and that there is clear distinction between the "issue of notice" and "service of notice" under the 1961 Act. It was pointed out that section 149 provides the limitation within which the notice has to be served under section 148. Once a notice is issued within the limitation period, the jurisdiction becomes vested in the ITO to proceed to assess. That is why, on behalf of the revenue, it is contended vehemently before us that in the present context of the case, the assessee's learned counsel did not dispute the fact that the notice under section 148 was issued by the ITO as contained in the remand report submitted by the ITO before us. It was observed by the Hon'ble Supreme Court that service of notice under the new Act is not a condition precedent to conferment of jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice" and "service of notice" under 1961 Act and section 149 prescribed the limitation period. The Hon'ble Supreme Court pointed out that the mandate of section 148(1) is that the re-assessment shall not be made until there has been "service" and that the requirement of "issue of notice" is satisfied when the notice is actually issued. Thus, in the present case before us, we find that the notice under section 148 was actually issued by the ITO for both the years and, therefore, the ITO had the jurisdiction to call for a return, account books etc. for the purpose of re-assessment proceedings. But as pointed out by the Hon'ble Supreme Court that the mandate of section 148(1) is that re-assessment order shall not be made until there has been service of such notice. In the case of R.K. Upadhyaya, the notice under section 148 was admittedly issued on the last date of the limitation period, i.e., on 31-3-70, but served on the assessee only on 3-4-70 and it was held that the notice was not barred by limitation and the ITO had jurisdiction to proceed to complete the assessment. 25. As indicated earlier, the assessee denied to have received notice under section 148 from the ITO for both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal cannot direct the ITO to proceed and to make an order of assessment or re-assessment or recomputation in pursuance of the said notice. 28. As pointed out earlier in the preceding paragraphs, the contention of the revenue is that the assessee was aware and came to know that action under section 147 had been taken and a notice under section 148 was issued and that was why the assessee complied with the other notices issued under sec. 142(1) asking the assessee to produce the books of account etc. and in fact one Shri Chakraborty, employee of the assessee did appear before the ITO and the case was discussed with him, as evident from the entries in the order sheets as per photostat copies placed in the file. It is, therefore, submitted by the revenue that in such a situation, it has to be concluded that the assessee was fully informed of the issuance of notice under section 148 and, therefore, the mandatory provisions for making the assessment was properly invoked by the ITO in making the re-assessment order in the present case for both the years. It is, therefore, submitted that the orders of the ITO may be restored. 29. The contention of the assessee, on the other hand, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held that service of requisite notice for an assessment on the assessee, is a condition precedent to the validity of any re-assessment under section 34 of the Indian Income-tax Act, 1922, and if the notice issued and served on the assessee was obviously invalid, proceedings were consequently illegal, void and consent cannot confer jurisdiction upon a court if the court has no jurisdiction and re-assessment proceedings were invalid. The same Hon'ble High Court in the case of B.K. Gooyee v. CIT [1966] 62 ITR 109, has expressed a similar view that service of a notice without ITO's signature would not confer jurisdiction on the ITO and such irregularity of service of notice under section 34 of the Indian Income-tax Act, 1922, cannot be waived by the assessee as the irregularity is not one of a merely procedural nature. 32. The Hon'ble Assam High Court in the case of Tansukhrai Bodulal v. ITO [1962] 46 ITR 325 had the occasion to deal with a similar situation under section 34 of the Indian Income-tax Act, 1922, regarding the necessity of giving 30 days' time to the assessee for filing return for re-assessment purpose under sec. 34. It was held on the facts of that case that the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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