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TMI Blog2010 (11) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... f appeal and the matter was remanded back to the Assessing Officer to pass the assessment order de novo by making the following observations: "26. In this regard, it is not disputed that the final conclusion of the raid by Central Excise Authorities had direct bearing on the assessment of income. It is not disputed that at the time of passing of the assessment order as well as at the time of passing order on 28.12.2006 by ld. CIT(A), adjudication order passed by Commissioner, Central Excise Authorities dated 30.12.2006 was not available. The basis of entire proceedings is search by Central Excise Authorities and consequent show-cause notice dated 30.1.2003. We, therefore, set aside the entire assessment order for being made de novo by AO after taking into consideration the adjudication order as a whole and after giving the assessee full opportunity of being heard and then to pass the assessment order in accordance with law. These grounds are allowed for statistical purposes." 3.1 The assessee moved an application u/s 254 of the Act in M.A. No.131/Luc/08 arising out of the aforesaid order dated 26/10/2007 in I.T.A. No.66/Luc/07 and the order was recalled for the limited purposes v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pal Officer or any other person so authorized to receive the notice on its behalf. According to the Assessing Officer, the notice had been served on an authorized person and due compliance was being made to such notice. The assessee's ground has no legal basis. 4.1 Against the order of the Assessing Officer, the assessee preferred an appeal to the learned CIT (A) and apart from the grounds on merit, the following legal grounds were raised: "1. BECAUSE the proceedings under section 147 have neither been validly initiated nor concluded in accordance with the provisions of law and the assessment order dated 28th March, 2005 passed in pursuance thereof is void ab initio. 2. BECAUSE the notice under section 148 has not been issued and served as per the specific provisions as contained in Income-tax Act and the assessment made in pursuance of the same, is wholly without jurisdiction. 3. BECAUSE otherwise also, the impugned assessment order as also various additions as stand comprised therein, are vitiated in law, owing to non consideration of relevant material and information and in not giving due and effective opportunity of being heard." 5. The learned CIT (A), in the impugned ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Hon'ble Supreme Court were also not relevant as the same had been made in an altogether different context. The learned CIT (A) observed that the show-cause notice issued by the Central Excise Department was available with the Assessing Officer right from the beginning and the Assessing Officer had his own independent enquiries also. He further observed that the contents of the show-cause notice had a direct bearing on the computation of income along with the investigation conducted by the Assessing Officer. Therefore, it could not be said to be an irrelevant material along with Assessing Officer's own enquiries for initiation of proceedings under section 147. He, therefore, was of the view that so far as initiation part of the proceedings was concerned, on the basis of "reasons recorded" it was valid. According to him, at the stage of initiation of proceedings under section 147, it was not necessary to go into the merits of the information and/or sufficiency thereof and that it was also not the requirement of law that information referred to in the "reasons recorded" should be of conclusive in nature, all that was needed was that the material relied upon by the Assessing off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion thereof, but from the fact that it has been typed on general stamp dated 30.6.2004 so it was evident that the same must have been executed on or after 30.6.2004 and not in any case on 10th March, 2004 when the notice in question was received by Shri Dinesh Singh. It was further stated that in any case, the said Power of Attorney did not empower Shri Dinesh Singh to receive any such notice, nor he had been appointed (in terms of the said power of attorney) as agent or authorized representative of the assessee. As such in absence of such an authority being in favour of Shri Dinesh Singh, on 10.3.2004 (date of service) the issue was fully covered in favour of the assessee by the judgment and order dated 22.5.2008 passed by the Hon'ble High Court of Judicature at Allahabad, Lucknow Bench, Lucknow passed in Income-tax Appeal No.1 of 2005 in the case of the assessee for the assessment year 2000-2001. It was contended that the assessee challenged the notice issued under section 148 of the Act on the ground that the same had not been issued and served in accordance with the provisions of law. It was further stated that the notice under section 148 dated 25.02.2004 was non-sequitor as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nough if it is served on the Principal Officer or any other person so authorised to receive notice on its behalf". It was stated that in the present case no such authority existed in favour of Shri Dinesh Singh, who had received the said notice on 10th March, 2004. The learned counsel for the assessee contended that even the letter dated 23rd March, 2004 by Shri Mahesh Singh, MD of the assessee's company, whereby he stated that return filed originally be treated to have been filed in compliance with the notice under section 148 dated 25.2.2004 did not go to cure the inherent invalidity of service of jurisdictional notice under section 148. The reliance was placed on the judgment of full bench decision of Hon'ble Allahabad High Court in the case of Laxmi Narain Anand Prakash v. CST (1980) UPTC 125 and a reference was made to the case of CIT v. Shital Prasad Kharag Prasad (2006) 280 ITR 541 wherein it has been held as under: "It is settled law that the service of a valid notice under section 148 is the foundation for the initiation of reassessment proceedings and a condition precedent for the validity of the notice. The further fact is that the notice under section 148 was not serve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Range-IV in connection with the notice u/s 143(2) for A.Y. 1999-2000, in this regard reference was made to page No. 10 of the departmental paper book. It was further contended that notices were received by different persons at different times, reference was made to a notice dated 18.12.2005 u/s 143(2) which was received by Shri O. P. Nehru. It was stated that Shri O. P. Nehru at some place affixed his signature in English and at another in Hindi. The learned CIT, D. R. referred to a copy of letter dated 18/02/2005 issued by the Assessing Officer which was served through the Inspector of Income-tax who mentioned on the second page of the letter (placed at page No. 12 & 13 of the departmental paper book) as under: "Dy CIT Lko. Sir, As per your direction, notice u/s 142 (1),143(2), 143(3) have duly been served on Sri O. P. Nehru, one of the dealing officer in the factory office campus at 11.00 AM in preserve of Sri M. S. Patel M.D." Sd/./ ITI 19/02/2005" 7.2 On the basis of aforesaid letter of the Income-tax Inspector, the learned CIT, D. R. submitted that may be the Inspector by being authority and higher in wisdom managed to enter into the factory campus and met the M.D and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceive notices may be express or even implied from the nature of work carried on by the agent on behalf of his principal, i.e. as in the case of a recognized agent carrying on business in the name of the principal. The reliance was placed on the following case laws: (i) Sunder Lal v. CIT, AIR 1931 Pat. 282 (ii) CIT v. A.R.A.N. Chettiar, Firm AIR 1928 Bang. 108 (iii) Ramnivas Hanumanbnux Somani v. Income Tax Officer [1959] 37 ITR 329 (Bom.) (iv) Jagni Bhagat v. CIT AIR 1930 Pat. 121 (v) Mithoo Lal Tekchand v. CIT [1967] 64 ITR 377 (All.) (vi) General Commercial Corporation Ltd. v. CIT [1966] 62 ITR 459 (Mad.) (vii) Azad Crown Works v. CST [1976] 37 STC 570 (Bom.) (vii) CIT v. Daulat Ram Khanna [1967] 65 ITR 603 (SC) 7.3 It was further submitted that after the issuance of notice u/s 148, the assessee itself stated that the earlier return filed for the assessment year 1999-2000 should be treated as the return filed for this particular notice. Therefore, the notice was received by the assessee and compliance was made, as such, the service of notice u/s 148 was valid service on the assessee. It was stated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lia, on the ground that the notice u/s 148 dated 25/02/2004 had neither been validly issued nor served in accordance with law and that the Assessing Officer vide letter dated 05/10/2004 had merely stated that the notice has been served on an authorized person and compliance is being made. Nowhere, the person receiving the notice had been identified nor it was shown that the person receiving the notice had the authority to receive such notice. Therefore, the plea predicament of the Assessing Officer at that stage was understandable as he himself was not aware of the person who had received the notice nor he had in his possession any authority letter in favour of anyone. It was submitted that the learned CIT, D. R. had argued that the signature of the recipient on the said notice appears to be of Sri Om Prakash Nehru and for making such a statement he relied the report dated 17.08.2010 of one Shri Munna but the said letter was merely a concoction and was not admissible as evidence particularly when in the said report nowhere reference was made to the notice u/s 148 dated 25/02/2004. It was further contended that the assessee never appointed Sri Om Prakash Nehru as its legal advisor t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on recognized agent only where the principal resides outside the territory personally where as the department's case was that the notice on authorized person to receive such notice was valid and binding on the Principal even if the principal resides therein. Therefore, in the said case the issue is relating to the service of notice on an agent duly authorized to accept service of notice but the assessee's case is entirely different where the Revenue has not even been able to identity the person on whom the said notice u/s 148 dated 25/02/2004 was served on 10/03/2004. Furthermore, the said case relied by the learned CIT, D. R. had been distinguished by the Hon'ble Allahabad High Court in the case of Additional CIT v. Prem Kumar Rastogi reported in (1980) 124 ITR 381. 8.2 As regards to the another case law relied by the learned CIT, D. R. in the case of Mithoo Lal Tek Chand v. CIT reported in [1967] 64 ITR 377 (All.), the learned counsel for the assessee submitted that in the said case a notice u/s 34(1)(a) of the old Act corresponding to section 148(a) of the new Act was served on Munim in the presence of all the members of the HUF and it was under those circumstances the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax had been escaped assessment in the hands of the erstwhile firm. So in order to bring such income to tax, a notice was issued and served through affixture at the premises of the partners who had taken over the business of the erstwhile firm (since dissolved). Therefore, the facts of the said case are also dissimilar to the facts of the assessee's case. The learned counsel for the assessee submitted that in the event of noticee refusing to accept the service of notice, the same should be served through affixture but in the present case, there was no such refusal by the assessee and it could not even be so inferred on the basis of the report dated 17.08.2010 of Shri Munna for the simple reason that it did not even refer to the notice under section 148 in question. The reliance was placed on the decision of Hon'ble Supreme Court in the case of CIT v. Daulat Ram Khanna 65 ITR 603. It was reiterated that the service of notice dated 25/02/2004 was not valid and on the basis of irregular service of notice, no jurisdiction could be conferred on the Assessing Officer to make assessment, this contention deserves to be accepted as the same is covered fully by the decisions of Hon'ble J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139" (emphasis supplied) 9.1 From the above provision it is crystal clear that the notice by the Assessing Officer under section 148 shall be served on the assessee, therefore, only when there is a valid service of notice on the assessee under section 148, the subsequent proceedings can be valid because the mandate of section 148 is that the notice shall be served on the assessee. As regards to the service of notice under section 148 the reference is to be made to section 282 of the I.T. Act which provides as under: "282. (1) A notice or requisition under this Act may be served on the person therein named either by post or as if it were a summons issued by a court under the Code of Civil Procedure, 1908 (5 of 1908). (2) Any such notice or requisition may be addressed- (a) in the case of a firm or a Hindu undivided family, to any member of the firm or to the manager or any adult member of the family ; (b) in the case of a local authority or company, to the principal officer thereof ; (c) in the case of any other association o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtered Accountant" 9.2 On a bare perusal of the aforesaid special Power of Attorney, it is noticed that the said Power of Attorney was in connection with the notice u/s 143(2) of the Act but no date has been mentioned. However, on perusing the backside of the stamp paper, it is noticed that the said stamp paper of Rs. 20/- was sold/issued to the assessee on 30/06/2004 by one Shri Anwar Hussain, Stamp Vendor, Civil Court, Lucknow, Licence Number 82 valid upto 31/03/2006. So it is crystal clear that on 10/03/2004 which is claimed to be date of service of notice, no such authority was there with Shri Dinesh Singh. Further more, the said Power of Attorney was not in connection with section 148 of the I.T. Act, 1961. Therefore, it can safely be held that even Shri Dinesh Singh was not having any proper authority to receive the notice dated 25/02/2004 issued u/s 148 of the Act claimed to have been served on 10/03/2004. As we have already mentioned that section 282 of the Act provides as to how the notice under the IT Act is to be served. At this stage it is relevant to refer the judgment dated 22/05/2008 of Hon'ble Jurisdictional High Court in assessee's own case in appeal No. 1 of 2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 smmons for service by post in addition to personal service. It reads as under: "Rule 19.A. Simultaneous issue of summons for service by post in addition to personal service.- (1) 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; acknowledgment 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 registered post, where, in the circumstances of the case, the court considers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 14 of the Power of Attorney Act, 1882 are relevant which provide that the power was to be utilized for the purpose for which power of attorney was given. Therefore, in the instant case even if it is presumed that Shri Dinesh Singh was having the Power of Attorney on the stamp paper of Rs. 20/- which was purchased on 30/06/2004, the facts remain that on 10/03/2004 he was not having any Power of Attorney to receive the notice u/s 148 of the Act and moreover the said Power of Attorney was relating to the proceedings u/s 143(2) of the Act and as per the provisions contained in section 21 of the Power of Attorney Act, 1882, the power not given cannot be used. In the present case, since Shri Dinesh Singh was not empowered to receive the notice u/s 148 of the Act, the service of notice dated 25/02/2004 issued u/s 148 of the Act was not a valid service. As regards to the claim of the department that Shri O. P. Nehru put his initial on the notice u/s 148 of the Act dated 25/02/2004 is concerned, the department miserably failed to bring on record that he was an authorized person to receive the said notice. As such he was neither a Principal Officer of the assessee company nor the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Hon'ble Jurisdictional High Court in the case of CIT v. Shital Prasad Kharag Prasad [2006] 280 ITR 541 (All.) has held as under: "The assessing authority gets jurisdiction to reopen a concluded assessment only after serving a valid notice on the assessee. A notice contemplated under section 148 of the I.T. Act, 1961, is a jurisdictional notice and is not curable under section 292B of the Act, if it was not served in accordance with the provisions of the Act." It has further been held as under: "That the notice under section 148 was not served on the adult member of the family who were in existence at the time of the partition of the joint Hindu family. Filing of the return in consequence of an illegal service of notice on A would not validate the reassessment proceedings. The proceedings were invalid." 9.7 In the instant case also reassessment under section 147 has been framed in consequence of an illegal service of notice, so the proceedings were invalid. For the aforesaid view, we are also fortified by the decision of the ITAT, Lucknow Bench 'B', Lucknow in the case of M/s Kanpur Plastipack Ltd. v. Income Tax Officer in I.T.A. No.870/Luc/06 for the assessment year 96-97 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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