TMI Blog1996 (4) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... ove notice it was proposed to frame the assessment under s. 144 of the IT Act, 1961. Another notice was issued calling upon the assessee to explain as to why the assessment under s. 144 should not be resorted to. According to the Department, this notice was served on the assessee on 12th Nov., 1994. Since nobody attended on behalf of the assessee, the learned AO completed the assessment computing the income at Rs. 51,81,460. The AO noticed that the unsecured loans have increased from Rs. 16.81 lakhs as on 31st March, 1991 to Rs. 77.27 lakhs as on 31st March, 1992. Cash and bank balance at the year end have increased from Rs. 7,110 (last year) to Rs. 28,59 lakhs. Sundry debtors have increased from Rs. 8.98 lakhs (last year) to Rs. 15,10,230. Inventories have increased from Rs. 4,08,885 to 11.2 lakhs. The sales have increased from Rs. 2.53 lakhs to Rs. 13.56 lakhs. Manufacturing expenses have increased from Rs. 20 lakhs to Rs. 29.05 lakhs. Administrative expenses have increased from Rs. 5.18 lakhs (last year) to Rs. 7.79 lakhs. Cash-in-hand was shown at Rs. 27.25 lakhs whereas total sales of the year and job charges amounted to only Rs. 15.3 lakhs. The loans of Rs. 50 lakhs were trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never be negligent or careless in attending the matter before the Revenue authority. Thus, circumstantial evidence supports the assessee's claim that the notices were not properly served on the person responsible, contended the authorised representative for the assessee. It was further contended that is was the duty of the Revenue authorities to establish that the service was made on the assessee himself or somebody else duly authorised by the assessee to receive such notice and in this regard, a reference was made to the decision of the Orissa High Court in the case of Fatechand Agarwal vs. CWT (1975) 97 ITR 701 (Ori). 4. An opportunity was extended to the AO to present his view on this point and vide his letter dt. 6th Feb., 1995 bearing No. 1156, the AO commented that the assessee's argument that Department should serve notice of hearing on authorised person or the directors of the company is not relevant because the assessee has never intimated the names of authorised persons who alone will receive the notice nor it has been indicated that who was the principal officer of the company. Just because, the notice does not mention the "Principal Officer", the notice does not becom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8) 173 ITR 306 (AP) and Hon'ble Madras High Court I. Devarajan Ors. vs. Tamil Nadu Farmers Service Co-operative Federation Ors. (1979) 13 CTR (Mad) 280 : (1981) 131 ITR 506 (Mad). The last notice dt. 8th Nov., 1994 was served on the manger of the company who had been receiving notices earlier also. The company has not intimated the AO that the manager, who was receiving the notice earlier, had been deprived of the authority to receive the notice. This indicates that he had the full authority of the company to receive the notice which is clear from his action. This is further confirmed form the fact that the assessment order was served on the manager himself though, it was addressed to the company only. The appellant has admitted the service of assessment order on this person as correct and has filed the appeal in this office. The service of the assessment order has not been disputed. Moreover, the notices were sent by registered post. The Hon'ble Delhi High Court in the case of M.L. Narang vs. CIT (1982) 136 ITR 108 (Del), has held that service is presumed if the notice is sent by registered post. The relevant extract is as under: 'The IT Act is a Central Act and s. 282 provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresent the case before him and the same was not availed of by the assessee by producing evidence. 8. Opposing the arguments of the learned authorised representative for the assessee, the learned Departmental Representative supported the order of the Revenue authorities. The learned Departmental Representative submitted that the notices were sent as per the address furnished by the assessee. The assessee has not subsequently furnished any change in the constitution of the directors or has not furnished any new address. The assessee had also never given the name and the address of the principal officer of the company on which the letter should be addressed. In any case, all the three letters sent were accepted by the authorised person and the communication might have gone to the concerned person. Though the AO has admitted that name of the person who has received the letters cannot be specifically mentioned, one of the letters was received by the manager which is clear from the stamp affixed on the acknowledgement card. Thus, there was a valid service of notice. If the assessee had defaulted in giving the proper address and due to this fact, the letters did not reach to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out any evidence and the same cannot be accepted. Hence, the learned AO was perfectly justified in completing the assessment under s. 144. 11. However, it is seen that while so doing, the learned AO has made huge additions. It is borne out of the record that before making these additions, no notice was issued to the assessee on this specific point calling upon the reasons of the assessee why addition of Rs. 50 lakhs should not be made under s. 68 of the Act. It is true that the ground of appeal No. 2 of the assessee before us mentioned the issue of a notice under ss. 143(2) and 142(1) of the IT Act but neither in the order of the AO nor in the order of the learned CIT(A), there is any mention that a notice under s. 142(1) was issued. 12. In the judgment of Privy Council in CIT vs. Laxminarain Badridas (1937) 5 ITR 170 (PC) in a classic passage, Lord Russell of Killowen observed as under: "The Officer is to make an assessment to the best of his judgment against a person who is in default as regard supplying information. He must not act dishonestly or vindictively or capriciously, because he must exercise judgment in the matter. He must make what he honestly believes to be a fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the AO's comment was called upon and received and taken note of for refusing to admit the fresh evidence adduced before the CIT(A) for the first time, particularly in a proceeding where order was under s. 144, without giving the assessee an opportunity to make comments upon the objections of the AO against the admission of the evidence are very fatal and goes against the cardinal principles of natural justice. The CIT(A) has rejected the admission of evidence on technicalities and confirmed the addition of an amount of Rs. 50 lakhs on an assessee which was, in the preceding years, a loss making concern. In the light of the above facts also, the addition cannot be justified. 13. In the light of the above discussion, on the facts and also on the basis of the decisions cited supra, we are of the view that the order of the Revenue authorities are liable to be set aside. We set aside the assessment order as confirmed by the learned CIT(A) and remand the matter back to the file of the AO to redo the assessment de novo after affording the assessee an opportunity to present his case in accordance with law. 14. The appeal by the assessee is allowed for statistical purposes. - - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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