TMI Blog2009 (8) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was nothing in the reasons which could invalidate the initiation of reassessment proceedings. - - - - - Dated:- 21-5-2009 - Member(s) : I. P. BANSAL., HARI OM MARATHA., SANJAY ARORA. ORDER-HARI OM MARATHA, J.M.: This appeal of the assessee for asst. yr. 2001-02 is directed against the order of learned CIT(A)-II, Agra, dt. 15th March, 2007. 2. The grounds raised in this appeal read as under: "1. Because the proceedings under s. 148 are illegal and bad in law, the notice under s. 148 was not served either on the assessee not any representative of the assessee. 2. Because the assessee had agricultural income of Rs. 1,65,260, proper evidence in the form of agreement with the agriculturists for taking the agricultural land on lease, copies of Khasra Khatauni of the agricultural land in respect of land, details of agricultural income and expenditure were duly filed before both the AO and also before the learned CIT(A) vide letter dt. 21st Feb., 2007, the authorities below were wrong in observing that the assessee has not filed any details of agricultural income and were not justified in not occupying the same. 3. Because the assessee received a gift of Rs. 2,75,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n used for the purpose of earning the income as above. Besides above, in the capital account there are credits of Rs. 1,65,260 on account of agricultural income and Rs. 2,75,000 on account of gift from R.K. Agarwal. No confirmation letter or address of Shri R.K. Agarwal is available on file. The assessee does not own any agricultural land and no such income has been shown by the assessee in subsequent assessment years. Hence, these credit entries are not genuine. I have therefore, reason to believe that income to the tune of Rs. 5,11,711 (Rs. 71,451 + Rs. 1,65,260 + Rs. 2,75,000) has escaped assessment in the case of the assessees for the asst. yr. 2001-02 issue notice under s. 148 accordingly to assess the escaped income under s. 147 of IT Act, 1961. Dt. 4th April, 2005 (G.P. Garg) ITO, 5(1), Firozabad." 5. Since the assessee did not appear before learned AO and did not file return of income in response to notice under s. 148, the learned AO made assessment under s. 144 r/w s. 147 on 23rd June, 2006. Before learned CIT(A), the assessee preferred first appeal by taking various grounds and learned CIT(A) allowed part r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, since these are not directly relevant at this stage so we will discuss them at an appropriate stage. Now coming to the issue of service of notice under s. 148, we are aware that s. 282 of the Act (IT Act, 1961), speaks about the "service of notice generally"-meaning thereby that if there is no dispute with regard to the service of notice, such and such is the procedure. For ready reference we extract s. 282 of the Act verbatim, as under: "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 CPC, 1908 (5 of 1908). (2) Any such notice or requisition may be addressed- (a) in the case of a firm or an HUF, 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 or BOI, to the principal officer or any member thereof; (d) in the case of any other person (not being an individual), to the person who manages or controls his affairs." 8. It is evident from the above that generally two modes of service of a notice are recognized-(i) by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mons shall declare that the summons had been duly served on the defendant: Provided that where the summons was properly addressed, prepaid and duly sent by registered post, acknowledgement due, the declaration referred to in this sub-rule be made notwithstanding the fact that the acknowledgement having been lost or mislaid or for any other reason, has not been received by the Court within thirty days from the date of issue of summons." 10. From the above it is evidently clear that as per CPC service by post means that the summons (notice in this case) has to be served by registered post with acknowledgement due, addressed to the defendant (the assessee), or his agent empowered to accept the service at a place where the defendant, or his agent, actually and voluntarily resides or carries on business or personally works for gain. Sec. 282 imports the mode of service from CPC and the above rule provides that when a service is to be effected by post it should be by registered post acknowledgement due (RPAD in short). The other requirements are that it should be in the name of the assessee and should be sent on a correct address, as stated above. As per the terms of s. 282 of the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been shown to be in existence within a period shorter than that within which such things or state of things usually to exist, is till in existence; (e) that judicial and official acts have been regularly performed; (f) that the common course of business has been followed in particular cases; (g) that the evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it; (h) that if a man refuses to answer a question which he is not compelled to answer by law, the answer, if given, would be unfavourable to him; (i) that when a document creating an obligation is in the hands of the obligor, the obligation has been discharged. But the Court shall also have regard to such facts as the following, in considering whether such maxims do or do not apply to the particular case before it; As to illustration (a)-A shopkeeper has in his till a marked rupee soon after it was stolen, and cannot account for its possession specifically but is continually receiving rupees in the course of his business. As to illustration (b)-A, a person of the highest character is tried for causing a man's death by an act of negligence in arranging cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrase "may presume" as under: "4. Whenever it is provided by this Act that Court may presume a fact, it may either regard such fact as proved unless it is disproved, or may call for proof of it." 14. The combined reading of all the above sections clearly establishes that generally a notice has to be served under IT Act in the manner as has been provided in s. 282. This is specific section in the Act which speaks of service of notice generally. This section provides that a notice is to be served either by post or as if it were a summons issued by a Court under CPC. When one comes to CPC, its r. 19A of order 5, clearly says that service by post means a service through registered post with acknowledgement due (RPAD). The other conditions are laid down as supplied by s. 27 of the General Clauses Act and when question of service is in dispute s. 114 of the Indian Evidence Act comes into play, which provides rebuttable presumption of a fact. There are plethora of judicial pronouncements on the issue of 'service of notice by post', which were rendered as per the facts and the circumstances of that case. A caution has to be struck before applying the ratio of that particular case which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assess the escaped income of Rs. 5,11,711". In first sentence of para 2 at p. 1 of this order it is mentioned. "Till 20th May, 2005, no compliance of notice under s. 148 was made". For ready reference paras 2 to 7 of the assessment order are being extracted hereinbelow, which are self-explanatory insofar as notice under s. 148 is concerned, these paras read as under: "Till 20th May, 2005 no compliance of notice under s. 148 was made, when a notice under s. 142(1) of IT Act, 1961 was issued to the assessee for production of books of accounts etc. 31st May, 2005. On this date none attended nor was any application seeking adjournment filed. Again on 7th June, 2005 a letter was sent to the assessee requiring him to show cause as to why his assessment may not be completed under s. 144 of IT Act, 1961 and the date fixed for the purpose was 14th June, 2005. On the date fixed again none attended. Accordingly on 16th June, 2005 a show-cause notice was issued to the assessee requiring him to show cause as to why penalty under s. 271(1)(b) of IT Act, 1961 may not be imposed and the date fixed for the purpose was 30th June, 2005. On this date again nobody attended. Accordingly on 12th Aug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixing the hearing on 18th July, 2005 when again nobody attended. On 12th Aug., 2005 again notice under s. 142(1) was issued fixing the hearing on 26th Aug., 2005 when again nobody attended nor any application seeking adjournment was filed. On 30th Aug., 2005 again notice under s. 142(1) was issued fixing the hearing on 16th Sept., 2005 when nobody attended. However, on 7th Sept., 2005 an application was moved by the employee of the counsel of the assessee which was rejected and got notice by the bearer of said application. On 2nd Dec., 2005 again notice under s. 142(1) was issued fixing the hearing on 8th Dec., 2005 when again nobody attended nor any application seeking adjournment was received. On 12th Dec., 2005 summons under s. 131(1) of IT Act, 1961 was issued requiring personal attendance of the assessee on 19th Dec., 2005 and this notice was duly received by Shri Naveen Agarwal, FCA on 13th Dec., 2005. On the date fixed again nobody attended. On 22nd Dec., 2005 again summons under s. 131 and notice under s. 142(1) were issued fixing the hearing on 3rd Jan., 2006 when again nobody attended not any application seeking adjournment was received. Again on 16th Jan., 2006 follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee on 19th Dec., 2005 and this notice was duly received by Shri Naveen Agarwal, FCA on 13th Dec., 2005. On the dale fixed again nobody attended. (10) On 22nd Dec., 2005 again summons under s. 131 and notice under s. 142(1) were issued fixing the hearing on 3rd Jan., 2006 when again nobody attended nor any application seeking adjournment was received. The above facts are sufficient to show that you are not making the compliance of the notices issued by the Department. In these circumstances, you have clearly committed default under various sections of IT Act viz., ss. 148, 142(1) and 131 and your assessment is liable to finalize ex parte on the basis of material available on record. You are accordingly again requested to explain as to why your assessment may not be completed under s. 144 of IT Act, 1961 and penal proceedings be not started for non-compliance of the above notices. It may be mentioned here that: (i) In the capital account you have shown income from agriculture at Rs. 1,65,260 for which no evidence is available on record. (ii) Gift of Rs. 2,75,000 for which no proof of genuineness is available on record. (iii) Similarly, the profit shown at Rs. 70,406 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed before the first appellate authority. The statements are verified on oath also, so, according to him, it is enough rebuttal on oath. Moreover, the assessee was ill during this entire period which fact is also established on record. We have examined these submissions and have found that the assessee has refuted the presumption of the service of notice. When the order under s. 147/144 was received by the assessee on 15th July, 2006, he filed appeal on 4th Sept., 2006 with a condonation application. With regard to non-service of notice to support his plea taken before learned CIT(A), the written submission dt. 23rd Nov., 2006, was sent to learned AO for his verification and comments. In his remand report learned AO did not comment at all on service of notice. The relevant portion of the written submission sent to learned AO reads as under: "In this regard, it is submitted that the notice under s. 148 in this case was not served on the assessee or any representative of the assessee. Moreover, the reasons for initiating the proceedings under s. 148 also does not authorize the AO to reopen the assessment as no information has come to the possession of AO entitling him to reopen t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been served within limitation when the service of notice was not in dispute. The facts of that case were that a notice was accepted to have been served by the assessee but there was a dispute with regard to the date of service. The notice under s. 143(2) was treated as served within limitation in view of s. 27 of the General Clauses Act, 1897. The notice in that case was sent to the assessee on 25th Aug., 1997 by registered post. The assessee asserted that it was served on him on 1st Sept., 1998, i.e., the day immediately after the expiry of the period envisaged by the sub-section. The AO asked the assessee to produce the documentary evidence in this regard but the assessee failed to furnish any evidence. In that context, the Hon'ble Judges have accepted that the presumption in question although rebuttable but could not be rebutted. In that case service of notice was proved as it was accepted by the assessee but the date of receipt was disputed. The statutory requirement was accomplished by the Department. In this given case before us the question is entirely different and distinct. In this case the AO (Department) has not been able to prove the service of notice except by drawi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Courts. A Single Judge of a High Court is bound by the judgment of another Single Judge and a fortiori judgments of Benches consisting of more Judges than one. So also, a Division Bench of a High Court is bound by the judgment of another Division Bench or a Full Bench. A Single Judge or Benches of High Courts cannot differ from the earlier judgments of co-ordinate jurisdiction merely because they hold a different view on the question of law for the reason that certainty and uniformity in the administration of justice is of paramount importance. But if the earlier judgment is erroneous or adherence to the rule of precedents results in manifest injustice, differing from an earlier judgment will be permissible. When a Division Bench differs from the judgment of another Division Bench, it has to refer the case to a Full Bench. A Single Judge cannot differ from a decision of a Division Bench except when that decision or a judgment relied upon in that decision is overruled by a Full Bench or the Supreme Court, or when the law laid down by a Full Bench or the Supreme Court is inconsistent with the decision. It may be noticed that a precedent case to be binding-(i) if it is reversed or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Evidence Act, 1872, s. 114-Notice by registered post-Presumption of service-Rebuttal of-Bare statement on oath by addressee denying the tender and refusal to accept delivery is sufficient to rebut the presumption-(General Clauses Act, 1897, s. 27). Ordinarily a statement of the addressee on oath that the postal cover said to have been refused by him, was never tendered to him would be sufficient to dislodge the presumption and shift the onus on the other side to establish by evidence that the service had been duly effected. It is, therefore, not possible to accept the contention that the bare statement on oath of the addressee in such a case would not, as a matter of law, be sufficient to dislodge the presumption that may be raised either under s. 114 of the General Clauses Act. A statement on oath of a party to the proceedings is a piece of oral evidence like statement of any other witness and there is no rule of law that such a statement should not be accepted merely because it is made by a person who is interested in the proceedings nor is there any requirement of law that the statement on oath of a party, the proceedings must always be corroborated by any independent Court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because it was never filed or taken on record by the A.O. Simply because it was found placed in the record has got no meaning. The assessee was ill throughout this period. This fact has been accepted by learned CIT(A) himself but the Revenue is not in appeal against this finding. Thus it is held that in view of the above reasoning in the light of the above precedents, the AO has failed to prove the service of a valid notice, which is a condition precedent for framing reassessment order. Hence the reassessment order in question cannot survive. 24. The other front of legal ground taken by the assessee is that there is no valid reason in this case to initiate action under s. 147 r/w s. 148 of the Act. 25. The reasons for reopening recorded by learned AO read as under: "The return of income for the asst. yr. 2001-02 has been filed by the assessee on 8th Oct., 2001 disclosing an income of Rs. 1,63,890 and agricultural income of Rs. 1,65,260. During the course of assessment proceedings of the assessee for the asst. yr. 2002-03 it came to notice that the assessee has claimed deduction on account of interest payment on loans raised and it was noticed that said loans have not been ut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carriage of goods by ship. The ships were dry docked for carrying out periodical repairs. The said repairs were mandatory for sea worthiness of the ship. The petitioner had been claiming deduction for the expenditure on such repairs spread over four years in all its assessments for several assessment years under the IT Act and the said claim was all along allowed by the respondents. For the asst. yr. 1998-99 the petitioner claimed that the said expenses on repairs should be allowed fully in the year in which they were incurred instead of being spread over in four years. The AO in the assessment made under s. 143(3) of the Act disallowed the entire claim on the ground that the said expenditure was capital expenditure and not allowable. The Tribunal, however, held that the entire expenditure was allowable as revenue expenditure in the year in which it was incurred. On 30th March, 2001, the petitioner received notices for the asst. yrs. 1990-91 to 1996-97 alleging that the income of the petitioner for the said assessment years had escaped assessment. The reasons for reopening the assessments for all the seven years were identical. The reason was that there was under-assessment due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to bring myself in agreement with the same, I write my separate order as under. 2. The appeal raises two issues, on both of which the order by my learned Brother finds the assessee's claim as legally valid, so that the assessee's appeal stands to be allowed; the reassessment proceedings being null and void ab initio, I shall take each of the two grounds in seriatim. 3. The first ground on which the assessee assails the assessment, per its ground No. 1 before the first appellate authority [or CIT(A)], the issue being argued before us, not seriously though, only by way of pleadings by the learned Authorised Representative, is that the reopening of the assessment, or the initiation of the proceedings by issue of notice under s. 148, is bad in law, This is contended on the basis that the recorded reasons are not specific or relevant, and do not have a direct proximity or nexus with the formation of belief as to the escapement of the relevant income for the relevant assessment year. The said reasons stand reproduced at p. 20 of the proposed order by my learned Brother, and specify three separate grounds for the issue of the notice, as: (a) the assessee had claimed deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to invalidating the reasons or the assessment framed in pursuance thereto. As explained by the apex Court and other High Courts, per a host of case law, some of which are listed as under, what all is required at that stage (of the issue of notice under s. 148) is the existence of valid and cogent reasons, leading to the formation of a honest belief, though prima facie, that there has been an escapement of income from assessment in the assessee's case for the relevant year. In fact, what is being suggested is per se contradictory, as the same proceedings, on the basis of findings wherein, being favourable to the assessee, the income is not being assessed, is sought to be impugned, and on the basis of the said findings. The only basis for a valid initiation of proceedings under s. 147 is the existence of valid reasons, and as long as it is so, the proceedings are maintainable, and cannot be subject to or assailed on the basis of the result of the said proceedings: (i) Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 210 CTR (SC) 30 : (2007) 291 ITR 500, 512 (SC); (ii) Raymond Woollen Mills Ltd. vs. ITO Ors. (1999) 152 CTR (SC) 418 : (1999) 236 ITR 34 (SC); (iii) I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a gift, (am in agreement with my learned Brother that the same could only be considered as a reason to suspect, even as the assessee relies on similar case decided by the Tribunal (Agra Bench) in the case of Asstt. CIT vs. Tarun Agarwal (in ITA No. 407/Agra/2006, dt. 30th June, 2008). In view of the foregoing, in my considered view, the reopening is legally valid and thus sustainable in law on the basis of the reasons recorded at (a) and (b) above. Support for the purpose is drawn, apart from the decisions aforereferred, the facts of each of which make interesting reading and are relevant, on the decision by the apex Court in the case of ITO vs. Purushottam Das Bangur Anr. (1997) 139 CTR (SC) 32 : (1997) 224 ITR 362 (SC). A recent decision by the Hon'ble Delhi High Court in the case of CIT vs. Highgain Finvest (P) Ltd. (2008) 214 CTR (Del) 441 : (2008) 304 ITR 325 (Del) is also on the point. The facts of the said case ITO vs. Purushottam Das Bangur Anr. are telling and thus would only be in order, to examine, as the same exhibit the requirement in law that the apex Court held necessary and relevant for the purpose of a valid reopening: "Held, reversing the decision of the Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he stated address, per registered post, which did not come back to it unserved or undelivered, so that in its view it is entitled to presume the fact of service on the assessee. The assessee's case, on the other hand, is that it has not participated in the proceedings and was in fact not well at the relevant time, so that there has been no service of notice in the present case. Before us, the learned Authorised Representative has raised the plea that the service in the instant case being per registered post it was necessarily required to be accompanied by an AD, and which being not the case, no service in law could be presumed where contested by the assessee. In other words, the presumption of service as available in law would not hold as the same is not accompanied by an acknowledgement due, the requirement of which is to be necessarily read along with that of remittance per registered post. This constitutes the bone of contention between the two parties in the instant case, with my learned Brother finding the assessee's contention as valid in law. 7. To begin with, it would be relevant to reproduce the relevant provision of law: "282. Service of notice generally.-(1) A notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the same address, stood received, with final notice under s. 142(1); the number of such notices running into over a dozen, being signed by the assessee himself, requesting for further time. It needs to be clarified that the assessee has not in fact raised any objection qua the service of the notice under s. 148(1), dt. 4th April, 2005 on it at any time before the AO, i.e., prior to the conclusion of the assessment proceedings before him, which culminated in the assessment order under s. 147 r/w s. 144 being framed on 23rd June, 2006, i.e., there is nothing on record to show so, including the statement of facts enclosed by the assessee along with his memo of appeal before the first appellate authority. By all accounts, the said objection stood raised for the first time by the assessee only in the appellate proceedings vide his written submissions dt. 23rd Nov., 2006. In fact, even the learned Authorised Representative before us did not state so, only stating of the assessee's non-participation in the assessment proceedings as the reason for the non-application of s. 292BB of the Act in the facts and circumstances of the present case, so that the same (non-participation) be const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t (s. 149), after observing due process of law, i.e., recording the reasons leading to the formation of belief as to the escapement of income, and in terms of other applicable provisions. The law thus marks a complete and clear distinction between the two legal processes, i.e., issue of notice and service of notice, each serving distinct purpose(s)/function(s). While the former enables assumption of jurisdiction to assess under s. 147, i.e., concerns the jurisdictional aspect (which may not necessarily obtain for each notice, even as s. 148 does entail the same), the latter (i.e., service) sets in motion the process of framing the assessment, i.e., concerns the procedural aspect-of the proposed assessment. The two processes or aspects are independent of each other, even as the service could only follow the issue, and the difference between the two is basic and vital. Apart from the plain language of the statute, this position stands abundantly clarified by the decision of the Hon'ble apex Court in the case of R.K. Upadhyaya vs. Shanabhai P. Patel, bringing out the departure from the 1922 Act in the matter, as also in the case of CIT vs. Jai Prakash Singh (1996) 132 CTR (SC) 262 : ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case and in that sense had power to initiate the proceeding. The omission to issue a notice under s. 23(2) merely prevents the ITO from making an assessment order under s. 23(3), and after he rectifies the omission by issuing that notice he can proceed further to the next stage, that is, to exercise the power of completing the assessment under s. 23(3). All these are steps within the overall jurisdiction vested in the ITO over the entire assessment proceeding. We are of definite opinion that the failure of the ITO to issue a notice under s. 23(2) does not call for an order by the AAC annulling the assessment. The AAC was right in merely setting aside the assessment." The above, in fact, represents the trite law, as also recently affirmed by the Tribunal (Agra Bench), after examining the case law in the matter, including by the Special Benches of the Tribunal, in the case of Virendra Dev Dixit vs. Asstt. CIT in IT(SS)A Nos. 6, 7, 14 and 15/Agra/2002, dt. 6th Feb., 2009. As such, it is abundantly clear that service of notice, even in respect of jurisdictional notice as s. 148, is a part of procedure, its whole intent and function being to put the assessee to notice of the env ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... questioned, eliminating any scope for further controversy, which is presently engaging the mind of the appellate Courts. There is, thus, by virtue of the said provision, no divestment of any vested right, which is not possible; the law only thereby intending to weed out frivolous objections in contradistinction to the genuine ones, as also cause the same to be adequately addressed. As would be apparent from the bare narration of the events, as made in the assessment order, the Revenue's charge of recalcitrance on the assessee's part is borne out from his conduct, resulting in the assessment being framed under s. 144 of the Act, and application of which section, it may be emphasized, is not under challenge, so that the same stands accepted by the assessee. Further, this is, even as is the fact of the relevant proceedings being on in its case was only in the knowledge of the assessee. How could, it may be asked, did the assessee; its return for the relevant year having been processed earlier under s. 143(1) and as far back as on 20th June, 2002, execute a power of attorney in favour of his counsel Shri Navin Agarwal, chartered accountant on 9th April, 2005, i.e., a few days after th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (P) Ltd. (1995) 215 ITR 883 (Mad). 14. In view of the foregoing, in my humble view, the assessee's objection to non-service of notice in the appellate proceedings, is not maintainable in law, so that, even assuming so, the assessment as framed is a legally valid assessment. Support for the purpose is also drawn from the decision by the Tribunal in the case of ITO vs. Varia Pratik Engineering and others as referred to at paras 12 and 13. 15. The next issue that arises is whether, in terms of s. 282 of the Act, there has been a service of notice under s. 148(1), dt. 4th April, 2005 on the assessee or not. Secondly, could the same be considered as an irregular or defective service. The second question assumes relevance in view of Courts making a clear distinction between a non-service and improper or defective service. 16. As stated earlier, the matter would require an interpretation of the provision of s. 282 of the Act, apart from s. 27 of General Clauses Act and s. 114 of the Indian Evidence Act. Again, I do not find any ambiguity in the matter, each of the provisions of law being abundantly clear in itself. Sec. 282 clearly gives an option of service to the issuing auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present case, it is entitled to presume the fact of service on the assessee in the instant case, a presumption to which s. 114 of the Indian Evidence Act, grants legal recognition. In fact, when coupled with fact of power of attorney dt. 9th April., 2005 in favour of the assessee's regular counsel on file, unmistakably and unerringly leads to the presumption of service of notice in the present case. The authorities under the IT Act, 1961 ('the Act' hereinafter) are fully empowered to take all the circumstantial evidences into account in drawing their inferences and which proposition rather stands endorsed by s. 114 of the Indian Evidence Act. As such, even going by the strict rules of the Evidence Act which are normally not applicable to the provisions of the Act, the presumption of service of notice under s. 148(1) of the Act gets validated in law. 18. There is, as such, no question of any infirmity in law for the said presumption, so that the notice has to be necessarily deemed as properly served. No doubt, the presumption is a rebuttable one, but the onus for the same is clearly on the assessee, and who has, apart from averment, not been able to show with any material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot before the Hon'ble Court. The said decision stands again affirmed, though rendered without noticing the same, i.e., independently, by the said Court in the case of CIT vs. Madhsy Films (P) Ltd. Case law 20. The first case I take up is that of CWT vs. Kundan Lal Behari Lal (1975) 99 ITR 581 (SC), which stands adverted to by my learned Brother in his order, which I find neither in the paper books (3 in number) filed by the assessee nor per its oral arguments. I do not find any merit in the reliance on the said case, even as being a decision by the apex Court, it is incumbent and only appropriate in the circumstances that it is dealt with. Per its said decision, rendered is in an entirely different context, i.e., meaning of the word 'issue' under s. 18(2A) of the WT Act, 1957, it stood held with reference to its earlier decision in the case of Banarsi Debi Anr. vs. ITO (1964) 53 ITR 100 (SC) , that the word 'issue' as occurring in s. 18(2A) meant 'served'. There is a material departure between provisions of 1922 Act and the Act in this respect, and which issue stands clarified by the apex Court long back per its decision in the case of R.K. Upadhyaya vs. Shanabhai P. Patel, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Clauses Act and s. 114 of the Indian Evidence Act, and which is only concomitantly so, as aforementioned, the Court did not examine the aspect of the meaning of the words 'service by post'. Further still, even so, the Court holds the service as not proper, so that at best it can be considered as an improper service. Finally, it may also be clarified that the decision by the Hon'ble Delhi High Court in the case of CIT vs. Shanker Lal Ved Prakash stands supported by the view expressed by the said Court, and without reference to the said decision, i.e., independently, per its subsequent decision in the case of CIT vs. Madhsy Films (P) Ltd. which is dt. 25th March, 2008, so that it is in fact the latest decision in the matter on the subject by the decision in the case of Eqbal Singh Sindhana being dt. 3rd April, 2007, and also by the same constitution, so that apart from other factors, it would prevail on grounds of being latest as well as stare decisis. The decision by the Hon'ble Delhi High Court in the case of CIT vs. Hotline International (P) Ltd., which is of even date as its decision in the case of Eqbal Singh Sindhana, and by the same Bench, is, again, with reference to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, by implication, only supports the Revenue's case. That is, but for the refusal or the return back, the presumption of service was valid. The same thus, only supports the Revenue's case. 23. Similarly, in the case of R.K. Vashist vs. Union of India, the enquiry report sent at the appellant's address under registered acknowledgement due cover was returned with the endorsement "not found". The Hon'ble Court's finding that there being no material to show that the registered cover was tendered to the appellant before passing the order or that he deliberately avoided service as the presumption about the service of the letter stood rebutted. In the case of CIT vs. Eqbal Singh Sindhana, the notice was returned undelivered by the postal authorities with the remark "plot No. 226 docs not exist". In the case of Keshab Narayan Banerjee vs. CIT, the postal cover sent through registered post stood received back by the Revenue from the postal authorities with the endorsement regarding refusal. In CIT vs. Hotline International (P) Ltd., the admitted facts are that security guards refused to receive the notice, informing of the factory being closed for Holi festival upto 31st March, 2002, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been effected by properly addressing, prepaying and sending by registered post, a letter containing the notice required to be served. Unless the contrary is proved the service is deemed to have been effected at the lime when the letter would be delivered in the ordinary course of post." 25. The decision in the case of United Commercial Bank vs. Bimsen Makhija stands issued under Public Premises (Eviction of Unauthorized Occupants) Act, 1971, and though bears reference to s. 27 of the General Clauses Act, stands rendered under r. 4 of the Rules framed under the said Act, which, as emphasized by the Court, insist upon service through a letter sent by registered post acknowledgement due. As such, there is no question of the said decision, which stands rendered in the context of the specific provision of another enactment by a Single Judge Bench, to the present case. Again, the service has only been considered as not proper. The decision by the Tribunal in the case of ITO vs. Bedi Enterprises, as would be apparent from the facts of the case, stands rendered under the circumstance where the service was sought to be made by the Department personally and, thus, is not applicable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive service would itself not affect the jurisdiction of the AO if otherwise reasonable opportunity of being heard has been given, and which is indeed so in the present case with the assessee himself eschewing appearance and compliance and, rather, thereby obstructing the due process of law. As such, even if the service in the present case were to be taken as irregular, it would only lead to an irregularity in the proceedings, and which would, therefore, warrant, given the principles of natural justice, a set aside of the matter to the file of the AO to decide the case by rectifying or curing the said defect. Reliance for the same, apart from the foregoing decisions, is also placed on the decisions in the case of CIT vs. Shital Prasad Kharag Prasad (2005) 196 CTR (All) 162 : (2006) 280 ITR 541 (All). Needless to add, there is no question of grant of opportunity in the present case with the assessee himself being responsible for not participating in the proceedings of which he was only well aware of, as apparent from a plethora of notices under s. 142(1) issued and served and the adjournment granted on several occasions, last of which stood requested by him personally. As such, even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwal was filed along with return and no postal address of the alleged donor was also provided in the papers filed along with the return. It was also noticed that the assessee does not own any agricultural land, as no such agricultural income was shown in the subsequent years. Therefore, it was inferred that these credit entries were not genuine. Therefore, notice under s. 148 of the IT Act, 1961 was issued on 4th April, 2005 to assess the escaped income of Rs. 5,11,711 (Rs. 71,451 + 1,65,260 + 2,75,000). 3. It has further been mentioned in the assessment order that till 20th May, 2005, no compliance of notice under s. 148 was made and notice under s. 142(1) of the Act to produce the books of accounts etc. was issued on 31st May, 2005, on which date none attended on behalf of the assessee and no application for seeking adjournment was filed. Again on 7th June, 2005, a letter was sent to the assessee requiring him to show cause as to why his assessment may not be completed under s. 144 of the Act and the date fixed was 14th June, 2005. On the said date also, nobody attended. For non-compliance, show-cause notice was issued under s. 271(1)(b) on 16th June, 2005 asking the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc. and also the additions on merits. It will be relevant to mention here that from the copy of Form No. 35, which is attached along with the appeal filed before the Tribunal, the form docs not state about the statement of facts and it states only about the grounds of appeal, for which the remarks have been given by the assessee. "As per separate sheet attached". However, the statement of facts was also claimed to be filed before the CIT(A), though there is no mention in Form No. 35 regarding statement of facts. 5. Challenging the validity of reassessment proceedings, it was submitted before the CIT(A) that no notice under s. 148 was served on assessee, as at the relevant point of time, the assessee was seriously ill and he was hospitalized for intensive treatment. It was submitted that the assessee's chartered accountant was also not properly authorized to represent his case at the relevant time, therefore, the proceedings remained unrepresented. It was submitted that as notice under s. 148 was not served on the assessee or on any representative of the assessee, the reassessment proceedings are not valid. It was submitted that the reasons for initiating the proceedings under s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords clearly indicate that notice was issued on the correct address and it was properly served by the postal authorities. Nothing was found on record to indicate that notice was not served or it was served on some unauthorized person. The assessee also failed to furnish any evidence of wrong service of notice on unauthorized person. With respect to reasons, he observed that gift was shown in the capital account without furnishing any detail in that respect and also the agricultural income was included in the return despite the fact that the assessee was never engaged in the agricultural activities and thus, the reasons for reopening were sufficient to initiate reassessment proceedings. With regard to the contention of the assessee that the AO could have initiated scrutiny proceedings, the learned CIT(A) has observed that mere fact that the AO could have initiated scrutiny proceedings does not preclude the AO to initiate reassessment proceedings. In this manner, the learned CIT(A) has upheld the validity of reassessment proceedings. He has also decided the issues on merits. However, in the questions proposed for the opinion of Third Member, there is no mention regarding the merits, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isputed, then only s. 27 of General Clauses Act and the provision of s. 114 of the Indian Evidence Act will come into play which provides, for rebuttable presumption. Reference was made to various decisions of the Courts to hold that presumption is rebuttable. It was observed that on going through the assessment records, nothing was found mentioned either regarding alleged authority letter of the assessee or the service of notice. Reference was made to the assessment order in which it was mentioned that notice under s. 148 of the Act was issued to assessee on 4th April, 2005 to assess the escaped income of Rs. 5,11,711 and it was also mentioned that till 20th May, 2005, no compliance of notice under s. 148 was made. Noting the attempts of AO to issue notice to the assessee for the purpose of making reassessment, it is observed by learned JM that when the learned AO has put so much labour in issuing notice, he could have taken care to serve the same by using his power for extraordinary service by way of affixture which has not been done by him. The relevant notice was the notice dt. 4th April, 2005 issued under s. 148 of the Act which was sent by speed post and there was no dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of Gujarat High Court in the case of CIT vs. Madhukant M. Mehta (1980) 19 CTR (Guj) 130 : (1981) 132 ITR 159 (Guj). 10. It was further observed that according to the decision of Hon'ble Delhi High Court in the case of Jagat Ram Khullar Anr. vs. Battu Mal, AIR 1976 Delhi 111, wherein it is held that ordinarily the statement of addressee on oath that the postal cover said to have been refused by him, was never tendered to him would be sufficient to dislodge the presumption and shifts the onus on other side to establish by evidence that the service had been duly effected. Thus, it was held that where a presumption is rebutted by way of an oath, then validity of service could not be presumed. Taking into account all these reasons, it has been held by learned JM that the service of notice under s. 148 is not proved and the presumption has been rebutted. There is no proof on record to prove the service except by way of presumption. The AO has failed to prove the service of notice, which is condition precedent for passing reassessment order. Therefore, reassessment order cannot survive. 11. Coming to the reasons, it is observed that in view of the decision of Agra Bench i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of ITO vs. Varia Pratik Engineering dt. 30th Sept., 2008 [reported at (2009) 120 TTJ (Ahd) 1 : (2009) 17 DTR (Ahd)(Trib) 1-Ed.], it is observed that s. 292BB will be applicable. Referring to the decision of Hon'ble Supreme Court in the case of CIT vs. Jai Prakash Singh (1996) 132 CTR (SC) 262 : (1996) 219 ITR 737 (SC), it was observed that the defect in notice can be cured and will not render the assessment proceedings invalid. Further, reference is made to s. 282 of the Act, s. 27 of the General Clauses Act and s. 114 of the Indian Evidence Act to say that service has to be deemed to have been effected, if the notice is sent by registered post at the correct address. The acknowledgement due is not sacrosanct to the service of notice as it does not specifically find place in s. 282 of the Act. Reference is made to various decisions of Hon'ble Delhi High Court, which have been referred to in the order of learned JM and it is held that valid service was made as the notice was sent at the correct address by way of registered post. 13. It is further observed that in view of so many notices issued and served on the assessee, even the restoration, assuming improper service, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application dt. 7th Sept., 2005 was moved by the employee of the counsel of the assessee and thus, it is clear that till 6th Sept., 2005 power of attorney of Shri Naveen Agarwal was not on record and it has correctly so been observed by the learned JM in paras 14 to 15 of his order. It was submitted that the power of attorney on record was not in response to notice under s. 148, but was in response to various notices issued under s. 142(1), as noted by the AO in para 4 of the order and which were received sometime on 30th June, 2005 as pointed out in the assessment order. It was submitted that the assessee was ill and hospitalized for the long period and therefore, there was no question of service of notice and this issue has been discussed by the learned CIT(A) in his order at p. 2 para 2 quoting the assessee's reply and thus, illness of the assessee is not in dispute by any authority. Further reference is made to the order of learned JM wherein in paras 14 to 15 this issue is discussed and it was observed that from the income-tax records no evidence was found on record to show that on which date the power of attorney of the chartered accountant came on record of the AO. It was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of interest and agricultural income, it was pointed out by the learned Authorised Representative that Hon'ble JM in paras 26 and 27 at pp. 20 and 21 has rejected the contention of Revenue by holding that these were only reasons to suspect by relying on the decision in the case of Asstt. CIT vs. Tarun Goel and the decision in the case of India Steamship Co. Ltd. vs. Jt. CIT. It was submitted that the learned AM is wrong in holding that these reasons were not reasons to suspect and these reasons were valid ground for reopening by relying on the decision of Hon'ble Supreme Court in the case of ITO vs. Purushottam Das Bangur Anr. (1997) 139 CTR (SC) 32 : (1997) 224 ITR 362 (SC). It was submitted that according to the decision of Third Member in the case of Asstt. CIT vs. O.P. Chawla (2008) 116 TTJ (Del)(TM) 755 : (2008) 114 ITD 69 (Del)(TM), the reassessment cannot be held to be valid merely on the ground that earlier assessment was framed under s. 143(1)(a) and the balance sheet of the assessee revealed that he had received certain amount of gift from NRI for which no details were submitted. It was held that the reasons recorded by the AO were a pretence and were recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons, the reassessment proceedings cannot be held to be validly initiated. It was pointed out that the case law relied upon by the Hon'ble AM are distinguishable as in those cases, the reassessment proceedings were initiated on the basis of report from Investigation Wing and the Hon'ble AM has not controverted any of the cases cited by the Authorised Representative. 20. The learned Authorised Representative further relied on the decision of Delhi High Court in the case of CIT vs. Rajesh Kumar Sharma (2008) 214 CTR (Del) 547 : (2009) 311 ITR 235 (Del), a decision rendered by Delhi High Court on 13th Aug., 2007, to contend that when a person is not authorized to receive the notice, no valid service can be done on that person. It was held that where notice was sent through speed post and it was not addressed to assessee, then the burden will lie on the Department to prove that such notice was properly served particularly when the assessee had categorically denied the receipt of the notice and as the Revenue failed to discharge its onus, no valid service can be presumed. The learned Authorised Representative pleaded that in the present case also, the assessee has denied receipt of no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 I, Avneesh Kumar Singh S/o Shri Harish Chandra Verma R/o 76, Chaubey Ji Ka Bagh, Firozabad do hereby authorize to Shri Naveen Kumar Agrawal (chartered accountant) to produce income-tax proceeding of my scrutiny case for the asst. yr. 2001-02. He is also authorized to produce all documents to give settlement, to file statements and take back them. Authority accepted Sd/- Sd/- (Assessee)." (Naveen Kumar Agarwal) 23. On the back of the stamp, serial No. 45 is mentioned. The date mentioned is 9th April, 2005 and purchaser's name as Avneesh Kumar Singh S/o Shri Harish Chand, resident of 76, Chaubeji Ka Bagh, Firozabad and the purpose for which the stamp has been issued is written as for power of attorney. There are two stamp papers of Rs. 5 each and total value of stamps is written as Rs. 10. The said stamp paper has been sold by Shri Trilochan Singh, who is having license No. 18 of 1995 and address is written as near Gaushala, Agra Gate, Firozabad. A copy of said power of attorney was also given to the learned Authorised Representative of the assessee who has also admitted in his written submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtmental Representative submitted that the findings and decision of learned AM should be adopted. 27. I have carefully gone through the assessment order, order of CIT(A) and the orders of learned JM and AM and also gone through the material available on record of Tribunal. The copy of notice sent by the Revenue to the assessee and the copy of receipt issued by post office receiving that notice is placed at p. 87 of the paper book filed by the assessee. Similar copy was also given by the learned Departmental Representative while submitting his arguments. Learned Departmental Representative has also produced the assessment record which was with him when he argued the case. The learned Authorised Representative also submitted that there was no dispute that notice under s. 148 was sent by registered/speed post. The only dispute is that it was not with acknowledgement due, as there is no evidence of service on the file of the Revenue. It has been submitted by him that as per the case of the Department, as per s. 27 of the General Clauses Act, if the notice is sent by registered post and it is correctly addressed and not returned back undelivered then it will be presumed that there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchased. This finding is further strengthened by the fact that notice sent by the Department to the assessee under s. 148 has not been received back. It has already been mentioned that the notice was bearing proper address. Therefore, according to the facts on record, it has to be held that the notice under s. 148 was received by the assessee, as on the receipt of notice, for the purpose of giving power of attorney, the assessee has purchased the stamp paper on 9th April, 2005. If the assessee had not received reassessment notice, then the assessee must not have purchased the said stamp paper on 9th April, 2005. 29. The decision of Hon'ble Delhi High Court in the case of Mayawati vs. CIT shall be squarely applicable. In the said decision, the Hon'ble Delhi High Court has referred all the earlier decisions and this is the latest decision of Hon'ble Delhi High Court. The ratio of this decision is that according to s. 27 of the General Clauses Act, a statutory presumption is to be drawn to the effect that if a letter is properly addressed, it must be deemed to have been served. It is observed by their Lordships that wherever the service of notice is essential or critical, experience ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sent by properly addressing, prepaying and posting by registered post to the addressee and such presumption is raised irrespective of whether any acknowledgement due is received from the addressee or not. It is obvious that when the section raises the presumption that the service shall be deemed to have been effected it means the addressee to whom the communication is sent must be taken to have known the contents of the document sought to be served upon him without anything more. Similar presumption is raised under illustration (f) to s. 114 of the Indian Evidence Act whereunder it is stated that the Court may presume that the common course of business has been followed in a particular case, that is to say, when a letter is sent by post by prepaying and properly addressing it the same has been received by the addressee. Undoubtedly the presumptions both under s. 27 of the General Clauses Act as well as under s. 114 of the Evidence Act are rebuttable but in the absence of proof to the contrary the presumption of proper service or effective service on the addressee would arise. In the instant case, additionally, there was positive evidence of the postman to the effect that the regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time at which the letter would have been delivered in the ordinary course of business. This Court has already held that when a notice is sent by registered post and is returned with a post endorsement 'refused' or 'not available in the house' or 'house locked' or 'shop closed' or 'addressee not in station', due service has to be presumed. It is, therefore, manifest that in view of the presumption available under s. 27 of the Act, it is not necessary to aver in the complaint under s. 138 of the Act that service of notice was evaded by the accused or that the accused had a role to play in the return of the notice unserved.' 15. In Jagdish Singh vs. Natthu Singh AIR 1992 SC 1604 the apex Court affirmed the conclusion of the High Court that the notice must be presumed to have been served on the addressee by virtue of the provisions of s. 27 of the General Clauses Act despite the fact that they were 'not actually served on the appellant as they had come back unserved upon the alleged refusal by, the appellant to accept them'. Again, in V. Raja Kumari vs. P. Subbarama Naidu AIR 2005 SC 109 it has been held that the principle incorporated in s. 27 of the General Clauses Act can profitab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded by the AO have already been reproduced at pp. 2 and 3 of the order passed by the learned JM. The first reason is regarding deduction of interest claimed by the assessee out of business income amounting to Rs. 71,451. While framing the assessment for subsequent year, it had come to the notice of the AO that such interest was not allowable. The similar income is earned by the assessee during the year under consideration and the AO could reasonably form a belief that such interest claimed by the assessee could not be deducted from the income shown to have been earned by the assessee. Thus, it cannot be held that the reasons recorded by the AO were mere pretence but were not valid or honest reasons. For contending that such reason is not a valid reason, the learned Authorised Representative has placed reliance on the decision of Hon'ble Allahabad High Court in the case of Dass Friends Builders (P) Ltd. vs. Dy. CIT. In that case the assessee company carried on the business of construction of buildings. For the year 1995-96, the return was filed by the assessee from construction of building at a loss of Rs. 2,77,400 and the assessment was completed under s. 143(1). A notice was iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for subsequent year and, therefore, the reasons recorded by the AO cannot be held to be valid reasons, as envisaged under s. 147 of the Act, cannot be accepted. 32. Similar is the case with regard to the agricultural income of the assessee. It was found in the subsequent year that the assessee does not own agricultural land. The reasons given for disallowance of interest will be equally applicable to this reason also and, therefore, it cannot be said that the reasons recorded by the AO for initiating reassessment proceedings were not valid reasons as envisaged under s. 147 of the Act. 33. Though, it has been argued by the learned Authorised Representative that so far as it relates to gifts, both the Members are in agreement that such reason is not valid reason, I do not find any such thing from the orders of learned JM and AM. However, as for the earlier two reasons it has been held that they were the valid reasons for initiation of reassessment proceedings, it is not necessary to go into that question as for deciding the validity or otherwise of reassessment proceedings, it will be sufficient if initiation of reassessment proceedings is held valid for any of the reasons state ..... X X X X Extracts X X X X X X X X Extracts X X X X
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