TMI Blog2010 (3) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... lpur, Ludhiana on 15th July, 1998. During the course of search proceedings, original agreement dt. 20th April, 1998 was seized, under which the assessee had sold land measuring 25 Kanals, 1 Marla to Shri Sukhdev Singh S/o Shri Bawa Singh, for consideration of ₹ 8 lakhs per acre. The Asstt. CIT (Inv.), Circle-I(2), Ludhiana, passed the information proposing action to be taken under s. 158BD of the Act. Notice under s. 158BD of the Act was issued on 29th April, 2002, which was served by an affixture. Subsequently, notice under s. 142(1) of the Act was issued on 11th May, 2005 which was claimed to be served on 7th June, 2005. The AO issued another notice under s. 142(1) on 12th July, 2005 which is also claimed to be served on the assessee on 15th July, 2005. The abovesaid notices were not complied with and information was gathered by the AO that the assessee was residing at Moga. Notices under s. 142(1) were issued on 2nd Aug., 2005 and 9th Aug., 2005 through Registered A.D. but none appeared on behalf of the assessee on the appointed dates of hearing. The assessee failed to file any return of income for the block period and the assessment in the case was completed on ex parte b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferred the file of the Asstt. CIT, Range-I, Ludhiana since the Asstt. CIT was competent authority to take action under s. 158BD. The Asstt. CIT-I, Ludhiana issued a notice under s. 158BD of the IT Act for the block period 1st April, 1988 to 15th July, 1998 on 29th April, 2002. The present AO has reported that this notice was not issued by registered post. However, as per a noting on the copy of notice in the assessment record, there is a report dt. 19th March, 2003 of the process server as per which Shri Sher Singh had left Village Bhamian and his present address and whereabouts were not available. An identical report is noted on 18th July, 2003, pursuant to which there is a direction by the AO to affix (the notice) on the last known address. There is also an order by the AO directing the Inspector to affect service of the notice under s. 158BD and letter by affixture under the CPC, 1908 as the notice could not be served in the ordinary way. The AO has ordered the notice to the affixed on conspicuous part of the place where the assessee is known to have last resided or carried on business or personally worked for gains or is presently residing. He has also ordered that copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur Singh, cousin of Shri Sher Singh also expressed inability to inform the present address of Shri Sher Singh. However, Shri Surinder Singh, Sarpanch of Village Bhamian Kalan, informed that the assessee was residing at Sirhind and gave his address. On 22nd Oct., 2006, the Inspector visited the address of Shri Sher Singh. A maid servant was present at the present address who informed that Shri Sher Singh would be back in the evening. The Inspector served the notice under s. 221(1) by affixture on the front gate of Shri Sher Singh's house. 5. The CIT(A) noted the notice under s. 158BD has admittedly not been served by post . The CIT(A) noted that the service by affixture as provided in order 5 of CPC, 1908, was carried out by the AO and held In the present case, the AO in his order directing substituted service, has not given any reason to arrive at his satisfaction that the notice could not be served in the ordinary way. No mention of any effort made to trace the assessee is noted either by the process server or by the AO . 6. The CIT(A) thus held that in the present case the AO knew as far back as in May, 2000 that the assessee was not residing at Village Bhamian Kal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cognized mode of service which is a parallel way of service. The learned Departmental Representative further pointed out that during affixture of notice under order 5, r. 17 of CPC, there is no requirement of independent witnesses. The learned Departmental Representative pointed out that the CIT(A) allowed the appeal of the assessee as due diligence was wanting, however, from the perusal of the facts it is apparent that the Revenue authorities did their utmost to trace the assessee and serve the notice. During the assessment proceedings, efforts were made to serve the notice by enquiries from the neighbours, the cousins of Shri Sher Singh and Nambardar of the village. Reliance was placed on Ganeshi Lal Sons Anr. vs. ITO (1981) 130 ITR 846(All) and CIT vs. Thayaballi Mulla Jeevaji Kapasi (Decd) (1967) 66 ITR 147(SC) by the learned Departmental Representative for the Revenue. The learned representative for the assessee pointed out that the assessee had sold the aforesaid property in asst. yr. 1999-2000 and the notice of hearing was affixed on the said property, which had been sold. The learned Authorised Representative further submitted that the sale deed was executed in 2000 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mark of the postal authorities that the addressee had left the village and had gone somewhere else. (b) The file records were transferred to Asstt. CIT, Range-I, Ludhiana, who issued a notice under s. 158BD of the Act on 29th April, 2002. The CIT(A) noted that there is noting on the copy of the notice in the assessment record. A report dt. 19th March, 2003 of the process server is available as per which the assessee had left Village Bhamian Kalan and his present address and whereabouts were not known. Another identical report is noted on 18th July, 2003. (c) Pursuant to the report dt. 18th July, 2003, there was a direction by the AO to affix the notice on the last known address. The CIT(A) on perusal of assessment record found an order by the AO directing the Inspector to affect service of notice under s. 158BD of the Act and letter by affixture as per procedure, under the CPC, as the notice could not be served in ordinary manner. The AO ordered affixture on conspicuous part of the place where the assessee was known to have last resided or is presently residing and also for placement of copy of notice on the notice board. On the face of the notice, there is an endorsement tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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). 12. Sec. 282 of the Act lays down the procedure for service of notice or requisition, on the concerned person, either by post or as summons issued under CPC, 1908 (V of 1908). As per s. 282 of the Act, any notice under the IT Act is to be served on the person named in the said notice, either by post or as if it were the summons issued by the Court under CPC. Service of notice on the person concerned is a condition precedent to the initiation of proceedings. The Courts have held that in the absence of valid service within the period of limitation, the proceedings initiated pursuant to such notice are illegal and void. 13. The Hon'ble Supreme Court in CIT vs. Thayaballi Mulla Jeevaji Kapasi (Decd) (supra) held as under : Service of notice prescribed by s. 34 of the Indian IT Act, 1922, for the purpose of commencing proceedings for reassessment is not a mere procedural requirement; it is a condition precedent to the initiation of proceedings for assessment under s. 34. If no noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied and in whose presence the copy was affixed. 17. Order 5, r. 19A provides for simultaneous issue of summons for service by post in addition to personal service. It is provided that the notice would be sent by registered post with acknowledgement due addressed to the defendant or his agent where the defendant actually or voluntarily resides or carries on his business or personally works for gains. In case where the Courts consider it unnecessary in the circumstances of the case, not to issue summons for service by registered post, the provisions of sub-r. 19A(1) are not to apply. In case the acknowledgement is received back by the Court with endorsement by the postal authority where the person or his agent has refused to take delivery, when tendered to him, it is provided in sub-r. (2) that the Court issuing the summons shall declare that the summons had been duly served on the defendant. 18. The Hon'ble Delhi High Court in CIT vs. Eqbal Singh Sindhana (supra), has held where the notice is sent by registered post, it ought to have been sent along with acknowledgement due and where the registered envelope was not sent along with acknowledgment due, then it was held by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consider the relevant provisions of law. Sec. 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 CPC, 1908 (V of 1908).' Rule 17 of order 5 of the CPC 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, not 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 and address of the person (if any) by whom the house was identified and in whose presence the copy was affixed.' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place is properly identified. Secondly, such report may not be prepared by the process server and other persons sitting in their office.' 10. Even the Hon'ble Kerala High Court in the case of A.K. Kochandi Ors. vs. Agrl. ITO 1976 CTR (Ker) 72: (1977) 110 ITR 406(Ker) held that the substituted service of notice (i.e., service by affixture) must be in accordance with the prescribed procedure of law and that in the absence of proof of service as mandated in law, such service cannot be treated as valid service. The Hon'ble High Court also observed that mere statement of service by affixture would not be enough to establish a proper service. In this connection, the following observations of the Hon'ble Kerala High Court in the case of A.K. Kochandi Ors. (supra) are relevant : 'Where service of a notice on the assessee or his authorized agent or an audit member of his family is not possible, statutes authorize substituted service and such service attributes constructive knowledge, of the assessee. To attribute such constructive knowledge the substituted service must be in accordance with the prescribed procedure, that is, by s. 64 of the Agrl. IT Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shop No. 33, Anajmandi, Mullanpur. 13. So however, in the report of the Inspector/Notice Server, who claimed to have affixed the notice, there is no evidence of any independent local person having been associated with the identification of the place of business of the assessee. In fact, such report is not witnessed by any person at all. Evidently, it is in clear violation of the mandate of r. 17 of order 5 of the CPC, which lays down the procedure to serve notice by affixture. It mandates that the serving officer shall affix the notice on the outer door or some other conspicuous part of the house in which the person ordinarily resides or carries on business or personally works for gain and shall thereafter report that he has so affixed the copy, the circumstances under which he did so and, the name and address of the person by whom the house was identified and in whose presence the copy was affixed. The impugned report of the Inspector/Notice Server is bereft of any such lawful requirements enshrined in the CPC. In fact, it would not be out of place to observe that there is no assertion even by the Inspector/Notice Server that they had personally checked the business place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on the last known address. Sd/ (AO) 24. The CIT(A) from the assessment record had also noted an order by the AO directing the Inspector to affect service of notice under s. 158BD and letter by affixture under CPC, as the notice could not be served in the ordinary way. The AO ordered the notice to be affixed on the conspicuous part of the place where the assessee is last known to have resided and he also ordered the copy of the notice to be placed on the notice board. 25. On the face of the notice issued under s. 158BD of the IT Act dt. 29th April, 2002, placed at p. 47 of the paper book, there is a report of the Inspector, which is as under : Sir, The notice has been affixed on the wall of residential house which was purchased by Shri Gurnam Singh of Village Bhamian. Sd/- Sd/- (Inspector) (Inspector) 5th Aug., 2003 5th Aug., 2003 26. The service of notice by affixture is verified by two Inspectors on 5th Aug., 2003 and there are no signatures of independent witnesses who had either identified the place of residence or had witnessed the affixture of the said notice or any other independent report submitted to the AO. Thereafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urns of income were being filed in the name of Balsher Singh at Sirhind. The assessee further claims to have been assessed to tax under PAN at his address in Sirhind. 28. In the entirety of the circumstances, we find that the notice under s. 158BD of the Act was affixed on the address which did not belong to the assessee and could not be held to be the house in which the assessee ordinarily resides or carries on his business or personally works for gains. No efforts were made to trace the assessee as it could not be presumed that the assessee was residing at the same address which property was sold by the assessee. In view of the fact that the said property was sold by the assessee and the factum of sale being mentioned in the documents found during the course of search proceedings, which in turn was the basis for initiating the proceedings under s. 158BD of the Act, there is clear violation of the mandate of order 5, rr. 17, 18 and 19 of CPC, which lays down the procedure to serve the notice through post and affixture. The Inspectors in the present case had affixed the notice on the wall of the property sold by assessee in 2000 and in the circumstances, it cannot be held to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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