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TMI Blog2015 (9) TMI 756X X X X Extracts X X X X X X X X Extracts X X X X ..... rh on 11th October, 2001 disclosing an income of Rs. 6,47,425. The return was processed under Section 143(1) of the Act and an acknowledgement issued on 5th January, 2002. 4. Information was received from the Additional Director of Income Tax Investigation (ADIT) Unit (VI), New Delhi by letter dated 27th February, 2008, stating that the Assessee had been arrested on 17th May, 2007 in FIR No.5 dated 23rd March, 2007, Police Station Vigilance Bureau, Ludhiana pertaining to the Ludhiana City Centre Scam and a pen drive had been recovered from him. The print outs from the pen drive received by ADIT from the Punjab Vigilance Bureau were forwarded to the Assessing Officer (AO) in Chandigarh. A perusal of the print outs revealed that there were various entries in different names pertaining to Financial Year (FY) 2000-2001. The information when tabulated by the AO showed that there were credits of Rs. 40,49,77,905 on which interest of Rs. 7,35,49,141 had been paid. For the FY in question a sum of Rs. 84,86,363 had been paid as interest. The Assessee had failed to enclose a balance sheet with his return of income filed. Apart from salary income, the Assessee had disclosed income from house ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings and our earlier submission, without prejudice to the legal rights of the assessee earlier original return filed by the assessee, may be treated as a return in these provisions u/s 148 of the Income Tax Act, under protest and we object the present proceedings." 8. On that very date, i.e. 12th December 2008, the ACIT, Central Circle 5, New Delhi again wrote to the Assessee with the two addresses mentioned hereinbefore acknowledging that the letter dated 12th December, 2008 of Vipin Aggarwal & Associates had been received in dak and further stating as under: "....I have been informed by the ACIT, Circle 3(1), Chandigarh that notice has been validly served on Shri Ved Prakash, accountant of Kiran Cinema (who also receives other notices of the concerned group concerns)." 9. The ACIT stated that the assessment was going to be barred by limitation on 31st December, 2008 and, therefore, the Assessee should show cause why the sums mentioned hereinbefore "should not be added in the income as they were not declared in the return of AY 2001-02." 10. In response to the above letter, Vipin Aggarwal & Associates wrote to the ACIT on 19th December, 2008, as under: "Dear Sir, This is w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable address of the Assessee, i.e. C/o Kiran Cinema, Sector-22, Chandigarh." It was further stated that Mr. Ved Prakash "who has been working as regular Accountant for the last five-six years received the notice on behalf of the Assessee as the Assessee himself is rarely available at the given address." It was further mentioned that service of all notices pertaining to "the Assessee Group" was effected at the above address at Kiran Cinema and that different employees of Kiran Cinema had received the said notices. Further, in the case of Ms. Vandana Gupta, the Assessee's daughter, service of notices had been effected at Kiran Cinema. Even in the other group case of M/s. Jagtumal Kundan Lal, C/o Jagat Theatre, service of notice had been effected at Kiran Cinema. It was accordingly asserted by the Revenue that proper compliance had been made. 14. The Assessee, inter alia, contended before the CIT(A) that service of notice had not been effected properly in accordance with the legal requirements specified under Section 282(1) of the Act; that Section 292 BB did not have retrospective operation and further that the Assessee had in any event raised an objection in that regard prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Upadhyaya v. Shanbhai P. Patel (1987) 3 SCC 96, Mr. Singh submitted that service of notice under Section 148 of the Act was "not a condition precedent to conferment of jurisdiction in the ITO to deal with the matter". Referring to Section 153 (2) of the Act Mr. Singh submitted that there was no time limit for completion of the re-assessment. This was different from the requirement under Section 34 of the Income Tax Act, 1922 („1922 Act‟) In other words as long as notice had been issued under Section 148 of the Act, the AO would have jurisdiction to proceed with the reassessment. The only restriction was that he could not complete the re-assessment without notice being served upon the Assessee. 21. Mr. Singh submitted that in the present case the Assessee did not deny that Mr. Ved Prakash was employed by him as an Accountant. Referring to the decision in Harshad J. Shah v. LIC of India AIR 1997 SC 2459 Mr. Singh submitted that in such circumstances the doctrine of „apparent authority‟ would apply such that although the principal may not have given that person such authority, his conduct was such that it could be inferred. According to Mr. Singh, in terms o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) Before making the assessment, reassessment or recomputation under Section 147, the Income-tax Officer shall serve on the Assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of Section 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section." 25. The Supreme Court in R.K. Upadhyaya (supra), explained that there was a distinct shift in the scheme of the provisions of the 1961 Act in comparison with the corresponding provision i.e. Section 34 under the 1922 Act under which the mandatory requirement was that both the issuance and service of notice had to be completed within the prescribed period. Consequently, the service of notice within the limitation period was the foundation of jurisdiction under the 1922 Act. In Y. Narayana Chetty v. Income Tax Officer, Nellore [1959] 35 ITR 388 (SC) the Supreme Court observed in the context of Section 34 of the 1922 Act,: "The notice prescribed by section 34 of the Income tax Act for the purpose of initiating reassessment proceedings is not a mere procedural requirement; the service of the presc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... validity of any reassessment made under section 147. If no notice is issued or if the notice issued is shown to be invalid, then the proceedings taken by the Income tax Officer without a notice or in pursuance of an invalid notice would be illegal and void." 29. In CIT v. Hotline International (P) Ltd. (supra) this Court held that affixation of notice on an address at which the security guard of the Assessee-company refuses to receive such notice cannot be construed to be a proper service of notice under Section 148 of the Act. The security guard was not an agent of the Assessee and therefore, the reassessment proceedings were held to be bad in law. 30. In Dina Nath v. Commissioner of Income-tax [1994] 72 Taxman 174 (J & K) the notice under Section 143 (2) of the 1961 Act was served upon one S, who was neither a member of the family of the Assessee nor his duly authorized agent. However, S had been accepting the notice on behalf of the Assessee and prosecuting the cases on his behalf earlier before the income tax authorities. The High Court held: "the object of issuance the notice or summons is to intimate the concerned person to appear and answer the queries or the question sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent judicial authority for the proposition that the burden of showing that service of noticed has been effected on the Assessee or his duly authorized representative is on the Revenue. These include Fatechand Agarwal v. Commissioner of Wealth-Tax [1974] 97 ITR 701 (Ori) and Venkat Naicken Trust v. ITO [1999] 107 Taxman 391 (Mad). In CIT v. Thayaballi Mulla Jeevaji Kapasi (1967) 66 ITR 147 (SC), the Respondent to whom the notice was directed was not in town. The only information which the process server had was that the Respondent was either in Bombay or Ceylon. Thereafter, the process server affixed the notice on the business premises of the Respondent. The Supreme Court affirmed the essential principle that "if no notice was served within the period, the Income-tax Officer was incompetent to commence proceedings for reassessment under Section 34 of 1922 Act." It was further held that "service of notice under Section 34 (1) (a) within the period of limitation being a condition precedent to the existence of jurisdiction, if the Income-tax Officer was unable to prove that the notice was duly served upon the Respondent within the prescribed period, any return filed by the Respondent a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the Revenue to serve the Assessee at the address provided by him i.e. "c/o Jagat Theatre, Sector 17, Chandigarh". All the notices were addressed to him at the address "C/o Kiran Cinema, Chandigarh" which was in Sector-22. Therefore, this is not a case where an attempt was made by the Revenue to serve the Assessee at his known address, and upon not finding him there the Revenue learnt of the address where he would be found. Merely because other notices sent to the 'Assessee group' were received by the employees of Kiran Cinema it does not automatically lead to the inference that the Assessee's place of business was also Kiran Cinema. In any event, there could not be an inference that Mr. Ved Prakash was duly empowered by the Assessee to receive notices on his behalf. In the very first notice dated 28th March 2008 the endorsement made by Mr. Ved Prakash shows him describing himself as "Accountant, Kiran Cinema, Sector-22, Chandigarh" and nothing more. 38. It was not as if the Revenue was not made aware of the lapse. Vipin Aggarwal & Associates, the Chartered Accountants (CAs) of the Assessee, by their letter dated 12th December 2008 informed the ACIT that the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for time, would not render the service of notice on the employee a valid and a legal service. It is contended that the Assessee had not denied service of notice on such employee. The High Court however negatived the plea of the Revenue and held that in the absence of finding by the Tribunal that the employee of the Assessee was authorized to accept such service on behalf of the Assessee, notice could not be said to have been duly served upon the Assessee. It was held that "acquisition of knowledge in regard to the issuance of a notice under Section 22 (2) of 1922 Act could not be considered to be equivalent to, or a substitute for, the service of the notice on the Assessee." It was further observed that "knowing about the issuance of the notice otherwise than by its service on the person concerned is one thing and the service of the notice on the person is another." 41. In the context of sales tax the Full Bench of the Allahabad High Court in Laxmi Narain Anand Prakash v. Commissioner of Sales Tax, Lucknow AIR 1980 All 198 it was held that the notice of initiation proceeding under Section 21 of U.P. Sales Tax Act, 1947 was a condition precedent and not only a procedural requiremen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Mr. Vohra, and as held by the Special Bench of the Tribunal in Kuber Tobacco Products (P) Limited v. Deputy Commissioner of Income-tax [2009] 28 SOT 292 (Del) (SB), Section 292 BB which was introduced with effect from 1st April 2008 and is prospective. Conclusions 46. To summarize the conclusions: (i) Under Section 148 of the Act, the issue of notice to the Assessee and service of such notice upon the Assessee are jurisdictional requirements that must be mandatorily complied with. They are not mere procedural requirements. (ii) For the AO to exercise jurisdiction to reopen an assessment, notice under Section 148 (1) has to be mandatorily issued to the Assessee. Further the AO cannot complete the reassessment without service of the notice so issued upon the Assessee in accordance with Section 282 (1) of the Act read with Order V Rule 12 CPC and Order III Rule 6 CPC. (iii) Although there is change in the scheme of Sections 147, 148 and 149 of the Act from the corresponding Section 34 of the 1922 Act, the legal requirement of service of notice upon the Assessee in terms of Section 148 read with Section 282 (1) and Section 153 (2) of the Act is a jurisdictional pre-condition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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