TMI Blog2016 (12) TMI 1410X X X X Extracts X X X X X X X X Extracts X X X X ..... 2BB of the Act, since the assessee has raised its objection to the validity of notice under section 143(2) of the Act vide letter 07.09.2007, admittedly filed with the AO on 07.09.2007 itself before completion of assessment proceedings on 29.11.2007. Thus we are of the considered view that since the alleged affixture of notice under section 143(2) of the Act dated 23.10.2006 on 31.10.2006 is not in accordance with the law and procedure, the said notice is rendered bad in law and therefore the AO had no power to assume jurisdiction to take up the assessee’s case for scrutiny. Consequently, the order of assessment framed under section 143(3) of the Act vide order dated 29.11.2007 for A.Y. 2005-06 on the basis of such invalid notice under section 143(3) of the Act is bad in law and ab initio void and is liable to be quashed. - Decided in favour of assessee - ITA No. 7469/Mum/2010 - - - Dated:- 23-12-2016 - Shri Jason P. Boaz, Accountant Member And Shri Sandeep Gosain , Judicial Member Appellant by : Shri J.D. Mistri Respondent by : Shri Ms. S. Padmaja ORDER Per Jason P. Boaz, A.M. This appeal by the assessee is directed against the order of the CIT(A)- 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.1 On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in confirming the disallowance of the claim of the Appellant for interest of ₹ 11,07,57,156 payable by the Appellant to its holding company, namely Mukand Limited. 2.2 The learned CIT (A) and the Assessing Officer failed to appreciate the explanations given by the Appellant. The learned CIT (A) and the Assessing Officer failed to appreciate that the Appellant has not closed down its business completely and was exploring the possibility of developing its land. 2.3 The Appellant prays that all the conditions prescribed for claiming the deduction of interest payable to Mukand Limited have been complied with and hence the learned Assessing Officer be directed to allow deduction in respect of such interest in terms of provisions of Section 36(1)(iii) of the Act. In view of the above the Appellant prays that the disallowance made by the learned Assessing Officer be deleted and the loss for the year be increased accordingly. III. DISALLOWANCE OF RATES AND TAXES RS. 29,06,197: 3.1 On the facts and in the circumstances of the case and in law, the learned CIT (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn of income for A.Y. 2005-06 on 24.10.2005 and therefore in order to take up the assessee s case for scrutiny, notice under section 143(2) is required to be served on the assessee within 12 months from the end of the month in which the return of income was furnished i.e. on or before 31.01.2006. It is submitted that since the first notice under section 143(2) received by the assessee was on 05.09.2007, the assessee vide letter dated 07.09.2007, duly filed in the office of the AO on the same date as per acknowledgement thereon; objected that the said notice was illegal and bad in law as it was served beyond the time limit prescribed under section 143(2) of the Act. The Sr. Counsel invited the attention of the Bench to the order of assessment which shows that the AO simply ignored this objection raised by the assessee and proceeded to complete the assessment stating that notice under section 143(2) of the Act was issued on 23.10.206 and duly served on the assessee. 4.1.3 On appeal, before the learned CIT(A), it is submitted that the assessee contended that though it had denied service of any notice dated 23.10.2006, the AO neither furnished any proof of service of this notice nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Inspector does not specify the enquiries made to ascertain the correct address on which the said notice was to be served. No attempt was made by Revenue to ascertain facts and whereabouts of the assessee by making contact with the assessee on the telephone number 25148936 given in the return of income or with the Chartered Accountant whose number was given in the covering letter attached to the return of income for A.Y. 2005-06. 4.1.7 According to the Sr. Counsel, service of notice by affixture cannot be resorted to in a routine manner without records evidencing any efforts being made by Revenue to serve the notice on the assessee as required. Affixture is usually used as a measure of last resort. Such a procedure requires witnessing of the incident by two independent witnesses from the locality. In the case on hand the Inspector s report of service of notice by affixture, as extracted in the remand report, does not contain signatures of any such independent witnesses. Rather, it is clear that the said Inspector signed the report on his own along with another Inspector. It is further submitted that the AO s statement in the remand report dated 15.06.2010 that the copy of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that as per the law laid down in this regard, service of notice by affixture must be preceded by adequate efforts by the Revenue to serve the notice on the assessee to be held as valid service of notice in terms of section 282(i) of the Act. The assessee argues that this is absolutely lacking in the case on hand, as the facts show that the notice allegedly served on 23.10.2006 was sought to be served only on 31.10.2006. The said notice was served by affixture on 31.01.2006 itself, without bringing on record to show as to what efforts were made by the Inspector to ascertain the whereabouts of the assessee or from its own records, before service of the notice by affixture. It is contended that notice by affixture can be resorted to only in very exceptional circumstances and cannot be resorted to in a routine manner as has been done in the case on hand. Revenue has failed to establish that any reasonable efforts whatsoever have made by it to serve the said notice on the assessee or that the assessee evaded service of the notice and therefore service by affixture would be only available option left. 4.1.10 The Sr. Counsel submits that the provisions of section 292BB of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pronouncements cited by both the sides. The issue for consideration is whether the notice under section 143(2) of the Act was served on the assessee in the case on hand within the time prescribed under the provisions of section of Section 143(2) of the Act and as per the requirements laid down by law and procedure. The contention of the assessee is that since no notice under section 143(2) of the Act was served on the assessee within the time prescribed and in accordance with the legal procedure laid down, the AO had no jurisdiction to proceed with the scrutiny assessment and consequently the resultant order of assessment for A.Y. 2005-06 is bad in law and required to be struck down as null and void. 4.3.2 In the case on hand, the assessee admittedly filed its return of income for A.Y. 2005-06 on 24.10.2005 and therefore the initial notice under section 143(2) of the Act ought to have been served on the assessee within 12 months from the end of the month in which the return of income was filed, i.e. on or before 31.10.2006. According to the assessee the first notice under section 143(2) of the Act was served on it on 05.09.2007 and in this regard it had filed letter dated 07.09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed aside the assessee s contentions and upheld the validity of the service of notice under section 143(2) of the Act for A.Y. 2005-06. In our view, the fact of the matter is that whether or not the AO for different assessment years in the case on hand is an Income Tax Officer/DCIT/or Additional CIT, this is different on the basis of income bracket in which the assessee falls for that particular year, which is an internal administrative arrangement of the Department; the assessment records remain in the same Ward/Range-10, Mumbai and therefore once the assessee has intimated the Department vide letter dated 19.06.2006 of the change of the place/address of its Registered Office/ Administrative Office, it was incumbent for the Department to have its records suitably rectified. How was the assessee on 19.06.2006 to know which officer was to take up its assessment for A.Y. 2005-06 and therefore rightly filed the said letter with the AO for A.Y. 2004-05 in which assessment proceedings were ongoing. We observe that the Department was well aware of the change of address as intimated by the assessee s letter dated 19.06.2006, for the order of assessment for A.Y. 2004-05 dated 24.10.2006, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Godavari Electrical Conductors (2015) 120 DTR (AP) 84 at paras 9 to 13 thereof:- 4.3.6 One of the contentions put forth by the assessee in respect of the service of notice under section 143(2) of the Act by affixture the ITIs in the case on hand, since the due process of law has not been followed by the Department, it has thereby rendered the said service as not a valid service. In this regard we find that similar issue of procedures to be followed by Revenue for service of notice by affixture; applicability or otherwise of section 292BB of the Act and the validity of assessment proceedings on the basis of participation of the assessee when there has been no valid service of notice, etc. was examined at length by the ITAT, Agra Bench in the case of Arun Lal vs. ACIT (2010) 124 ITD 85 (Agra) (TM). The Third Member at paras 20 to 25 of his order rendered in the context of notice under section 148 of the Act held as under that since there was no valid service of notice, the assessment proceedings are void ab initio and liable to be quashed: - 20. I have carefully considered the submissions of both the parties and also carefully gone through the assessment order, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ordinary way. Nevertheless, there must be material on record on the basis of which a reasonable person might come to the conclusion that either of these conditions are satisfied. It was observed that the satisfaction of the Court contemplated by order V, r. 20 is an objective satisfaction and it is not a subjective one. Therefore, relevant material must exist on record to justify that conclusion. In that case the report was given by process-server to the effect that he made enquiries at number of places but he could not find out the assessee. After such report, the AO passed an order for affixture. It was observed by the Hon ble High Court that the mere fact that the processor-server could not find out the assessee would not lead to the conclusion that the assessee was keeping out of the way for the purpose of avoiding service or that for any other reason the summons cannot be served. It was observed that the report of the process-server itself does not indicate that more than one attempt was made by the process-server and on the contrary it was indicating that one single attempt of enquiry was made at number of places but notice-server could not find out the assessee. That fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of Special Bench in the case of Kuber Tobacco Products (P) Ltd. vs. Dy. CIT (supra), wherein it has been held that s. 292BB inserted by Finance Act, 2008, w.e.f. 1st April, 2008 has no retrospective operation and applies to and from to asst. yr. 2008-09 only. Therefore, the assessee is not barred to challenge the validity of block assessment in appellate proceeding on the ground of non-issuance of notice under s. 148. The assessment year in the instant case being 2001-02, provisions of s. 292BB shall have no application. 23. So far as it relates to the question of validity of reassessment proceedings on the basis of participation of the assessee in the reassessment proceedings, reference can be made to the decision of CIT vs. Shital Prasad Kharag Prasad (supra) wherein the issue regarding validity or otherwise and service of notice under s. 148 was considered by their Lordships of jurisdictional High Court and it was held that a notice contemplated under s. 148 of the Act is a jurisdictional notice and is not curable under s. 292B of the Act. It was observed that this issue is now fairly settled that an assessing authority gets jurisdiction to reopen its concluded ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t jurisdiction. The notice should specify the correct assessment year and should be issued to particular assessee. The notice issued to the assessee in that case did not specify the capacity in which it was issued to one S, whether as individual or as principal officer or as a member of association or BOI. The assessment was completed by the ITO in the status of an AOP consisting of S and some others. It was held that before assessing an AOP, notice should be addressed to the principal officer or a member thereof as required by s. 282(2)(c), which was not done. Such a fundamental infirmity, it was held, could not be called a technical objection or a mere irregularity; such vital infirmity could not be cured or obliterated by placing reliance on s. 292B. A Division Bench of this Court in the case of Madan Lal Agarwal vs. CIT (1983) 32 CTR (All) 179 : (1983) 144 ITR 745 (All) has held that a notice contemplated by s. 148 is a jurisdictional notice for initiating proceedings for making an assessment under s. 147 and any defect in that notice cannot be cured by anything done by the ITO subsequently. A vague notice is an invalid notice and in such a case vagueness cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (TM) in the case of Arun Lal (supra), we find that in the case on hand, Revenue has not been able to prove that it fulfilled its legal obligations to show what efforts Revenue made between the date of issue of notice on 23.10.2006 to date of service of notice by affixture i.e. 31.10.2006 to effect the service of the said notice under section 143(2) of the Act in a normal manner. No material was placed on record before us to show that any effort was made by the AO to serve the notice in a normal manner before service by affixture was done on 31.10.2006. The Hon'ble Courts have held that before service of notice by affixture can be undertaken: - (i) there must be reason to believe that the assessee is keeping out of the way to avoid service thereof; (ii) that of any other reason the notice cannot be served on the normal way. In the case on hand we find there is no material on record to show that any attempt was made by Revenue to serve the notice under section 143(2) of the Act dated 23.10.2006 through the normal mode. 4.3.7 In so far as the applicability or otherwise of section 292BB of the Act to the case on hand is concerned, the ITAT Special Bench Delhi in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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