TMI Blog2017 (8) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer i.e. ITO and Process Server Shri Alam Singh. In view of the above, it is clear that there was no valid service of notice u/s 148 of the Act by way of affixture also. Therefore, we hold that reassessment proceedings resulting into reassessment order dated 30.12.2010 are bad in law. A.O himself noted in the reasons that “satisfaction of the ACIT, Range VIII, New Delhi has been obtained on 22.3.2010 to issue notice u/s 148 of the Act” which makes it clear that approval/sanction of Joint CIT, Range VIII, New Delhi was obtained prior to recording of reasons and thus we have no hesitation to hold that the A.O recorded reasons subsequently and sanction/approval u/s 151 of the Act was obtained by the ITO prior to recording of reasons. Therefore, we are unable to understand that on which material and reasons the JCIT, Range VIII gave approval/sanction for issuance of notice u/s 148 of the Act and initiation of reassessment proceedings. Thus, we hold that sanction/approval u/s 151 of the Act was given by the sanctioning authority without seeing the reasons and record and without application of mind, in a mechanical manner, which also vitiates the reassessment proceedings and cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e quashed. 3. That in any case and without prejudice to the above, the authorities below, while framing the assessment order and sustaining the same, have grossly erred both on facts and in law in ignoring the fact that the objections raised by the appellant company against the initiation of proceedings and assumption of jurisdiction u/s 147 of the Act were never disposed off and therefore, the order so passed deserves to be quashed. 4. That learned Commissioner of Income Tax (Appeals) - XI, New Delhi, while sustaining the assessment order, has grossly erred and was wholly unjustified in not providing the appellant company an effective opportunity of being heard at any time after calling for the remand report from the AO, and thus the appellate order was passed in quite derogation of principles of natural justice and equity. 5. That in any case and without prejudice to the above, the authorities below have grossly erred and were wholly unjustified both on facts and in law in making and sustaining the addition to the tune of ₹ 40700000/- to the total income of the appellant company u/s 68 of the Act as unexplained cash credit ignoring and overlooking the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. The ld. AR further pointed out that the A.O just to fill the gap, substituted the service of notice by affixture on the same wrong address, without any prior effort to get notice served through procedure laid down u/s 283(1)(a) of the Act and the affixture of notice at the premises of wrong address itself having incurable defects. 5. Elaborating the facts of issuance and affixture of notice to the wrong address, the ld counsel pointed out that the address mentioned in the notice was valid till 1.3.2001 and the address in the record of the department was A-58/4, Sainik Farms, Meharauli, New Delhi which is clearly discernible from the copies of Income tax return filed by the assessee from A.Ys 2003-04 to 2008-09, copies of the same have been placed at assessee s paper book [APB] pages 285 to 294. The ld. AR further contended that the change of address of the assessee company was also immediately informed to the Registrar of Companies [ROC] and copy of the corresponding letters have been placed at pages 278 to 284 of the APB. The ld. AR further vehemently contended that the various notices received from the Income tax department from 22.3.2004 and 6.10.2009 clearly shows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court of Delhi in the case of CIT Vs. Chetan Gupta reported at 382 ITR 613 [Del] and CIT Vs. Hotline International P. Ltd reported at 296 ITR 333 [Delhi, the ld counsel submitted that the Hon'ble High Court in the case of Chetan Gupta [supra] has overruled the proposition laid down in the case of Mayawati [supra] as recorded by the ld. CIT(A), by holding that proper service of notice is jurisdictional requirement and the same cannot be dispensed with. The ld counsel vehemently pointed out that issuance in the name of the company instead of the name of the principal officer of a company, that too, to the wrong address, makes the notice bad in law as per the ratio of the decision of the Calcutta High Court in the case of Rama Devi Agrawal Vs. CIT reported at 117 ITR 256 [Calcutta] and the decision of the Hon'ble Allahabad High Court in the case of Madan Lal Agrawal Vs. CIT reported at 144 ITR 745 [All]. 8. Placing reliance on the decision of the ITAT, Mumbai Bench in the case of GTL limited VS. ACIT reported at 37 ITR [Trib] 376 [Mum], the ld. AR submitted that non mentioning of the sanction of the competent authority u/s 151 of the Act vitiate entire reassessment proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 357 ITR 330 [Del], PCIT Vs. G G Pharma India P. Ltd Vs. ITO dated 8.10.2015 ITA No. 545/2015, Comero Leasing and Finance Pvt Ltd Vs. ITO ITA No. 4281/Del/2010, CIT Vs. Kamdhenu Steels 248 CTR 33 [Del], CIT Vs. Suren International Pvt. Ltd 357 ITR 24 [Del] and L.R. Gupta Ors Vs. UOI 194 ITR 32 [Del] which was relied in the subsequent decision in the case of United Electrical [P] Co. Ltd Vs. CIT 258 ITR 317 [Del] submitted that when there is no discussion in the reasons about return of income, nature of accommodation entries, multiplicity of entries, absence of material on support of DDI, INV Info and then the A.O reached satisfaction that there was accommodation entries which makes the reasons highly ambiguous, vague which has to be held as recorded with application of mind by the A.O. Therefore, all the proceedings including the notice u/s 148 of the Act and consequent reassessment order framed u/s 143(3)/147 of the Act deserve to be quashed. 12. On the issue of approval u/s 151 of the Act without reasons and lack of application of mind by approving authority placing reliance on the decision in the case of United Electrical Company [supra], the Hon'ble High Court of De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be alleged against the A.O. 14. Placing rejoinder to the above submissions of the Revenue, the ld. AR submitted that the assessee is regularly filing returns of income since last 20 years and the address of the assessee was changed four times during this long period of two decades. The ld. AR vehemently pointed out that the non service of notice u/s 148 of the Act which was issued and affixed on the wrong address leads to a clear adverse inference that no notice u/s 148 of the Act has been served upon the assessee as per the requirement u/s 283(1)(a) of the Act which is an incurable defect and on this legal ground the reassessment proceedings and consequent order should be quashed. 15. The ld. AR lastly pointed out that service of notice through affixture on the wrong address without efforts to serve the notice under the ordinary procedure is also a fruitless effort of the A.O and in absence of any such exercise the service of notice is bad in law as per the ratio of the order of the ITAT Mumbai dated 9.9.2014 in the case of Sanjay Badani Vs. DCIT passed in ITA No. 5221-5222/Mum 16. On careful consideration of above rival submissions, we note that the notice u/s 148 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see as per the due procedure and requirement of the Act. 18. In view of the above discussion, we clearly observe that the address of the appellant assessee on the date of issuance of notice on 22.3.2010 was A-58/4, Sainik Farm, Mehrauli Road, New Delhi as per records of the A.O and there is no material on record to suggest that new address of Sainik Farm on which the notice u/s 148 of the Act was issued was not intimated to the A.O by the assessee and thus, we are unable to agree with the contention of the ld. DR that the address of the Nehru Place, New Delhi as mentioned in the impugned notice u/s 148 of the Act dated 22.3.2010 was a correct address at the time of issuance of notice by the A.O. 19. At this juncture, we respectfully take cognizance of the decision of the Hon'ble High Court of Delhi CIT Vs. Chetan Gupta reported at 382 ITR 613 [Del] wherein their Lordship has emphasized the significance of service of notice u/s 148 of the Act on the appellant provided that notice issued within the prescribed time as per the provisions of the Act and their Lordships also held that issuance of notice to the correct address is also mandate of section 148 of the Act which ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... needs to be issued in the name of Principal Officer or Director or Managing Director of the noticee company and such defect makes the notice bad in law. For this proposition, the ld. AR has placed reliance on the judgment of the Hon'ble Calcutta High Court in the case of Rama Devi Agarwal Vs. CIT 117 ITR 256, 264-65 [Cal] and the decision of the Hon'ble Allahabad High Court in the case of Madan Lal Agarwal Vs. CIT reported at 144 ITR 745 [Allahabad] and submitted that copy of notice placed at APB page 51 clearly shows that notice has been issued in the name of the company and there is no mention of the name of the Principal Officer or Director or Managing Director of the noticee company. On this contention, the ld. DR replied that where the name of the company is mentioned which is a legal entity and not in physical existence, then it is expected from the Principal Officer or Director or Managing Director of the notice company to comply with the notice and non mentioned of the Principal Officer or Director or Managing Director of the notice company does not make any difference. 22. On careful consideration of the above submissions, at the very outset, from the copy of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 case, assessee has filed his objection before the AO and such objection has also been noted by the AO in his assessment order to the effect that assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsider 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 and address of the person (if any) by whom the house was identified and in whose presence the copy was aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 note-sheet by the AO directing the Inspector for service by affixture and had only recorded the fact that the notice was served ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, it is clearly discernible that no independent witness or person was present during the course of affixture who could be said a person who could identify the place of business of the assessee at the time of affixture of notice. Therefore, we hold that neither the procedure laid down under Order V. Rule 17 CPC had been followed nor that laid down under order V rules 19 and 20 had been adhered to. Neither before taking recourse to service by affixture, the Assessing Officer or the concerned officer had recorded the findings to justify the service by this mode nor afterwards called for the affidavit or certificate of service by affixture from the Serving Officer i.e. ITO and Process Server Shri Alam Singh. In view of the above, it is clear that there was no valid service of notice u/s 148 of the Act by way of affixture also. Therefore, we hold that reassessment proceedings resulting into reassessment order dated 30.12.2010 are bad in law. Our conclusion also gets strong support from the decision of the jurisdictional High Court of Delhi in the case of Hotline International Private Limited 296 ITR 333 [Delhi. To sum up, we hold that the A.O issued notice u/s 148 of the Act in the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w our attention towards page 93 and 94 of APB and submitted that the JCIT, Range VIII provided approval u/s 151 of the Act in the case of the assessee on 22.3.2010 and therefore, approval u/s 151 of the Act cannot be held as prior to the recording of reasons. 28. The ld. AR again pointed out that even on a careful reading of pages 48 and 49 of APB i.e. copy of proposal for approval of selection of case u/s 148/147 of the Act addressed to the ACIT it is discernible that whether the JCIT, Range VIII gave his approval thereon because on the first page right side the ITO, Ward VIII(3) himself noted that Approval u/s 151 given in 33 cases. The ITO, Ward VIII(3) to acknowledge and thereafter signature of the ITO Shri Piyush Sinha alongwith date 22.3.2010 is seen and thereafter his designation i.e. ITO, Ward VIII(3) is written on page 49 some signature have been put above the name of the ITO Piyush Sinha. However, from pages 93 and 94 we observe that the JCIT, Range -8 gave his approval on 22.3.2010. Be that as it may, we further observe that from the copy of the reasons available at page 50 of the APB we observe that the A.O recorded the following reasons for issuing notice u/s 148 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and unsustainable. The ld. AR reiterated written arguments/synopsis and precisely his arguments are as follows: . I None of the reasons make mention of the return of income filed by the assessee and the status of the assessment whereas the assessee has filed the Return of Income of ₹ 19,64,220/- on 2nd December 2003. (PB 1) i. The reason does not deal with the basis on which the information from DDI (Inv)-l has been prepared and sent to the AO for taking action u/s 147 against the appellant. The basis could be search action / survey routine compilation of information. Nothing is mentioned in the reason. ii. What material was used to prepare the information which has triggered the action u/s 147. iii. In the reason dated 22.03.2010, the AO has not named the parties who have provided the accommodation entries to the appellant. The said reason could not be supported /supplemented by the additional information in the form of the list of parties provided the reason at page 274 is considered, the AO has just mentioned the information of the DDI (Inv)-I there no satisfaction of the escapement of income which is a prerequisite for valid reassessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . ITO ITA No. 4281/Del/2010 [Jud-Com 73] vii. CIT Vs. Kamadhenu Steels Alloys Ltd ors 248 CTR 33 [Del] viii CIT Vs. Suren International P. Ltd 357 ITR 24 [Del] [Jud-Com 84-88] ix. LR Gupta Ors Vs. UOI Ors 194 ITR 32 [Del] x. United Electricals Co. Pvt. Ltd Vs. CIT 258 ITR 317 [Del] xi. German Remedies Ltd Vs. DCIT 287 ITR 494 [Bom] xii Central India Electric Supply Co. Ltd Vs. ITO 51 DTR 51 [Del] xiii PCIT Vs. N C Cables P Ltd ITA No. 335/2015 dated 10.1.2017 [Del] 391 ITR 11 [Del] 32. The ld. DR, supporting the action of the A.O drew our attention towards copy of reasons available at page 50 of the APB and contended that the reasons must be read alongwith Annexure i.e. pages 95 to 99 of the APB which clearly reveals that the assessee was beneficiary of accommodation entries of ₹ 2.67 crores during A.Y 2003-04 so as to introduce its unaccounted money/income into its accounts and in view of the above fact the A.O had reason to believe that such income has escaped assessment. 33. Replying to the above, the ld. AR pointed out that the reasons are incoherent, vague and non communicative as the A.O has not named the parties w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries to the assessee, (ii) the nature of accommodation entries, such as share application, unsecured loans, bogus purchases or sales etc, has not been mentioned, (iii) how and in what manner the assessee obtained accommodation from the alleged parties (iv) it is not demonstrated by the A.O that how he became able to form his belief that the income of ₹ 2.67 crore has escaped assessment for A.Y 2003-04 without even referring or seeing the relevant assessment records. These facts could not be controverted by the ld. DR. 37. From the said list/Annexure [APB pages 95 to 99] it is vivid that there are 56 entries out of which only 14 amounting to ₹ 70 lakhs pertains to assessee and out of remaining 42 entries 24 entries are repetition of identical entries and 18 entries are those which do pertain to the assessee. These facts have not been disputed and controverted by the ld. DR even on the specific query from the Bench. In the reasons [supra] the A.O stated that he has reason to believe that the income of the ₹ 2.67 crore has escaped assessment which clearly shows that the A.O recorded reasons without application of mind in a mechanical manner. 38. At this junctu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice under Section 148. 10. In ACIT v. Dhariya Construction Co.(2010)328 ITR 515 the Supreme Court in a short order held as under: Having examined the record, we find that in this case, the Department sought reopening of the assessment based on the opinion given by the DVO. Opinion of the DVO per se is not an information for the purposes of reopening assessment under s. 147 of the IT Act, 1961. The AO has to apply his mind to the information, if any, collected and must form a belief thereon. In the circumstances, there is no merit in the civil appeal. The Department was not entitled to reopen the assessment. 11. The above basic requirement of Sections 147/148 has been reiterated in numerous decisions of the Supreme Court and this Court. Recently, this Court rendered a decision dated 22nd September 2015 in ITA No. 356 of 2013 (Commissioner of Income Tax II v. Multiplex Trading and Industrial Co. Ltd.) where the assessment was sought to be reopened beyond the period of four years. This Court considered the decision of the Supreme Court in Phool Chand Bajrang Lal v. Income-tax Officer (supra) as well as the decision of this Court in M/s Haryana Acrylic Manufacturing Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of reasons on 22.3.2010. To sum up, in the instant appeal, the main contention of the assessee is that the A.O issued the notice u/s 148 of the Act mechanically simply on the basis of information alleged to have been received from the Investigation Wing without application of mind. On the basis of foregoing discussion, we are inclined to agree with the is contention of the ld. AR and at the cost of repetition, we again hold that as the ratio of various decisions of Hon'ble Supreme Court and Hon'ble High Court of Delhi including the decision in the case of M/s Haryana Acrylic [supra], Suren International [supra] and G G Pharma [supra], in the present case, the reasons have been recorded by the A.O in a routine and mechanical manner and without application of mind which cannot be said to be a proper and sustainable belief with regard to escapement of income as per requirement of section 147/148 of the Act. Therefore, we hold that the initiation of reassessment and all consequential subsequent proceedings are not as per requirement of the provisions of the Act and hence the same are bad in law and thus the same cannot be held as sustainable and consequently, we quash the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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