TMI Blog2014 (12) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... has also been noted by the AO in his assessment order to the effect that assessee has objected non service of notice u/s.143(2) during the course of assessment proceedings itself - Thus, participation of assessee in the assessment proceedings will not disentitle the assessee his right to object to the service of notice u/s.143(2) of the I.T. Act, 1961. Notice issued u/s 143(2) dated 17-7-2012 returned unserved by postal authorities - notice was affixed by the Inspector on 28-7-2012 - Serving Officer had not set out reason for passing subsequent entry nor for adopting the mode for service by affixture and without stating the reasons for doing so, the adoption of the mode of substituted service could not be legally justified - Notice was served by affixture - the adoption of mode of substituted service was not legally justified - there is no mention of name and address of the person who had identified the house of the assessee and in whose presence the notice u/s 143(2) was affixed - there was no valid service of notice u/s 143(2) by way of affixation - the department has not been able to demonstrate that notice u/s.143(2) was served within the statutory time limit, the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o framed u/s.143(3) r.w.s.147 without service of notice u/s.143(2) of the I.T.Act. 4. The assessee in its appeals, has taken the following grounds :- 1. On the facts and circumstances of the case and leg Ld. Commissioner of Income Tax (Appeals) erred in confirming the reopening the assessment in absence of reason to believe and material on records and such reopening of the assessment is bad law and erroneous in facts and it is liable to be quashed. 2. On the facts and circumstances of the case and leqal propositions; Hon'ble Commissioner of Income Tax (Appeals) erred in confirming the assessment/reassessment order in spite of the fact that notice under section 143(2) of Income Tax Act, 1961 was not served to the assessee. Hence, the assessment .is bad in law and liable to be annulled. 3. On the given facts: circumstances and judicial pronouncements Ld. Assessing Officer erred in making addition of loan/advances between M/s Nishotech Systems Pvt Ltd and M/s Sanitech Engineering Pvt Ltd. by treating the same as deemed dividend u/s 2(22)( e), ignoring the fact that such addition is bad in law and erroneous in facts and liable to be deleted. 5. Learned AR vehement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also to make mention of his efforts in report. The serving officer should also state in his report the circumstances under which he did so and the name and address of the person by whom house or premises were identified and in whose premises copy of summon was affixed, otherwise such service could not be accepted to be a legally valid service of notice u/s.143(2). 9. We have considered rival contentions, carefully gone through the orders of the authorities below. The Scheme of the Act broadly permits the assessment in three formats; (i) acceptance of the returned income;(ii) acceptance of returned income subject to permissible adjustments u/s.143(l) of the Act by issuance of intimation; and (iii) scrutiny assessment under section 143(3) of the Act. This Scheme was originally introduced by Direct Tax Laws (Amendment) Act,1989 with effect from 1.4.1989. The issuance of notice under section 143(2) of the Act is in the course of assessment in the third mode, namely, scrutiny assessment. Section 143(2) of the Act requires that where return has been filed by an assessee, if the Assessing Officer considers it necessary or expedient to ensure that the assessee has not understated the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-sections (2) and (3) of section 143. 11. During the course of hearing, the Bench specifically asked the learned AR with regard to the requirements of Section 292BB introduced w.e.f. 1-4-2008 with retrospective effect. In reply, learned AR contended that as per proviso to Section 292 BB, where the assessee has raised objection regarding issue of notice before the completion of such assessment or reassessment, the provisions contained u/s.292BB will not be applied. We found that provisions of Section 292BB was introduced w.e.f. 1-4-2008 relevant to A.Y. 2008-09 under consideration, according to which, where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner. We found that in the instant case, ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Appellate Bench of the High Court. Bearing these facts in mind, let us now proceed to consider the relevant provisions of law. Section 63(1) of the Act reads: 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 (V of 1908). 9. Rule 17 of Order V of the Civil Procedure Code reads: Where the defendant or his agent or such other person as aforesaid refuses to sign the acknowledgment, or where the serving officer, after using all due and reasonable diligence, cannot find the defendant, and there is no agent empowered to accept service of the summons on his behalf, nor any other person on whom service can be made, the serving officer shall affix a copy of the summons on the outer door or some other conspicuous part of the house in which the defendant ordinarily resides or carries on business or personally works for gain, and shall then return the original to the court from which it was issued, with a report endorsed thereon or annexed thereto stating that he has so affixed the copy, the circumstances under which he did so, and the name a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises were identified and in whose premises the copy of the summon was affixed. These facts should also be verified by an affidavit of the Serving Officer. 14. The reason for taking all these precautions is that service by affixture is substituted service and since it is not direct or personal service upon the defendant, to bind him by such mode of service the mere formality of affixture is not sufficient. Since the service has to be done after making the necessary efforts, in order to establish the genuineness of such service, the Serving Officer is required to state his full action in the report and reliance can be placed on such report only when it sets out all the circumstances which are also duly verified by the witnesses in whose presence the affixture was done and thus the affidavit of the Serving Officer deposing such procedure adopted by him would also be essential. In the instant case, the whole thing had been done in one stroke. It was not known as to why and under which circumstances another entry for service of notice by affixture was made on 27-7-2012 when sufficient time was available through normal service till 30-9-2012. Nor there is any entry in the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.143(2) was served within the statutory time limit, the assessment made on the basis of such invalid notice could not be treated to be valid assessment and, hence, such assessment order deserves to be treated as null and void and liable to be quashed and annulled. Accordingly, we allow assessee s appeal on legal issue regarding non-service of notice u/s.143(2). As we have already allowed assessee s appeal on legal issue, we are not going to discuss the merits of the addition made on account of deemed dividend u/s.2(22)(e) of the Act. 16. As the facts and circumstances in the case of another assessee-Shri Nilesh Badani (ITA No.5222/Mum/2014) are pari materia, therefore, our observation made in the case of Shri Sanjay Badani (ITA No.5221/Mum/2014) will be applied mutatis mutandis to the appeal filed by Shri Nilesh Badani. 17. Since we have allowed the above appeals, the stay applications filed by the assessees have become infructuous. 18. In the result, ITA No.5221/Mum/2014 and ITA No.5222/Mum/2014 are allowed in terms indicated hereinabove, whereas the stay applications No.216/Mum/2014 215/Mum/2014 are hereby dismissed. Order pronounced in the open court on this 9th S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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