TMI Blog2018 (6) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... Mahendra Gargeiya For Respondent(s) : Mr. Anuroop Singhi with Mr. Aditya Vijay Judgment 1. By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby the Tribunal has allowed the appeal of the department and also partly allowed the cross objection of the assessee for statistical purposes. 2. This court while admitting the matter framed the following question of law:- i) Whether the ld. ITAT was right in holding that the notice u/s 148 dated 22.03.2010 having been sent through speed post and not having been received back, there was a presumption as to the service of the same ignoring fact that the address on which such notice was sent, was altogether a completely different location and hence no such presumption could have been considered? 3. Counsel for the appellant Mr. Gargeiya has taken us to the order of the AO wherein it has been observed as under:- 3.4. On 2.12.2010, the A/R of the assessee has filed two letters. One is of challenging the service of notice. The another is challenging the validity of reasons recorded for initiating proceedings u/s 148 of the Act. i) First letter challenging the service of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, fixing the hearing on 19.10.2010, which was sent for service through Speed Post, has duly been served on you and in response to which your A/R attended the hearing on 19.10.2010 and the case was adjourned to 29.10.2010. It shows that although in the notices the road name was mentioned as Kailash Marg, Bani Park, Jaipur, instead of Kalidas Marg, Bani Park, Jaipur the speed posts were served on the addressee as there is no road in the name of Kailash Marg at Bani Parek. In view of the above facts your application is not accetable, and hence, the same is therefore rejected. The notice u/s 148 was issued in the name of Ms. Shubashri Paniker, F-58, Kailash Marg, Bani Park, Jaipur on 22.3.2010 and sent for service through Speed Post on 22.3.2010. The Speed Post was not received back from the Postal Authorities. Again, the notice u/s 142(1) dated 4.10.2010 fixing hearing on 19.10.2010 was sent on the same address. In response to which Shri N.K. Shrimal, CA/AR attended this office on 19.10.2010. It is pertinent to note that there is no Road in the name of Kailash Marg in Bani Park, Jaipur and the Plot No. F=58 is situated at Kalidas Marg , Bani Park, Jaipur. From these facts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not raise any objection after 30 days of issuance of notice, then and it is a valid presumption under law that no notice is served. This fact is further corroborated by repeated appearance of AR of the assessee. Apropos reasons recorded for reopening, the impugned bogus entry was found in the books of the assessee; it has been held by the Hon ble Apex Court in the case of Phool Chand Bajrang Lal And Another vs. ITO, 203 ITR 456 that it is not for the Court to judge the sufficiency of reasons recorded for forming the belief which is the initial stage of income escaping assessment. The AO had valid information in his possession which is placed on the record. It is pleaded that the ld. CIT(A) erred in holding that there is no service of notice and assumption of jurisdiction is invalid. 5. He has relied upon the decision of the Delhi High Court in case of Commissioner of Income Tax vs. Rajesh Kumar Sharma (2009) 311 ITR 0235 wherein it has been held as under:- 5. Section 282(1) of the Act provides that a notice or requisition under the 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 Procedur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he effect that it was undelivered and so it must be presumed that it was actually served upon the assessed. 11. We are not in position to make any such assumption because of the categorical stand of the assessed that he had not received the notice. The burden was entirely upon the Revenue to show that the notice was dispatched to the correct address. It is only then that such a presumption could have been made. But learned Counsel for the Revenue has not been able to show that the envelope containing the notice was correctly addressed. We are, Therefore, not inclined to accept this contention of learned Counsel for the Revenue. 12. It was finally contended that the assessed presented himself in the proceedings before the Assessing Officer. However, as we have noted above, the assessed appeared before the Assessing Officer in response to a notice under Section 142(1) and 143(2) of the Act and not pursuant to a notice under Section 147/148 of the Act. In fact, as we have already noted, the assessed had written a letter to the assessed soon after receiving the notice under Section 142(1) and 143(2) of the Act and that he was unaware of any notice having been issued under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in the Commissioner of Income-tax, Bombay City v. Ramsukh Motilal : [1955]27ITR54(Bom) and R. K. Das ; Co. v. Commissioner of Income-tax, West Bengal: [1956]30ITR439(Cal) , and we think that that view is right. 5.2. He has also relied upon the decision of Supreme Court in case of R.K. Upadhyaya vs. Shanabhai P. Patel (1987) 166 ITR 163 (SC) wherein it has been held as under:- 2. The High Court has quashed the notice by accepting the assessee's contention that the action of the Income-tax Officer was barred by limitation prescribed by the Act. There is no dispute that the notice in this case under Section 147(b) of the Act was issued by registered post on March 31, 1970, and was received by the assessee on April 3, 1970. To the facts of the case, Section 147(b) of the Act applies. The two relevant provisions are in Sections 148 and 149 of the Act which provide: 148(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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to making the order of assessment. Once a notice is issued within the period of limitations, jurisdiction becomes vested in the Income-tax Officer to proceed to reassess. The mandate of Section 148(1) is that reassessment shall not be made until there has been service. The requirement of issue of notice is satisfied when a notice is actually issued. In this case, admittedly, the notice was issued within the prescribed period of limitation as March 31, 1970, was the last day of that period. Service under the new Act is not a condition precedent to conferment of jurisdiction in the Income-tax Officer to deal with the matter but it is a condition precedent to making of the order of assessment. The High Court in our opinion lost sight of the distinction and under a wrong basis felt bound by the judgment in : [1964]53ITR100(SC) . As the Income-tax Officer had issued notice within limitations, the appeal is allowed and the order of the High Court is vacated. The Income-tax Officer shall now proceed to complete the assessment after complying with the requirements of law. Since there has been no appearance on behalf of the respondents, we make no orders for costs. 5.3. He has relied upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to accept. It is impossible to accept the contention that when factually there was refusal to accept the notice on the part of the appellant he could not be visited with the knowledge of the contents of the registered notice because, in our view, the presumption raised under Section 27 of the General Clauses Act as well as under Section 114 of the Indian Evidence Act is one of proper or effective service which must mean service of everything that is contained in the notice. It is impossible to countenance the suggestion that before knowledge of the contents of the notice could be imputed the sealed envelope must be opened and read by the addressee or when the addressee happens to be an illiterate person the contents should be read over to him by the postman or someone else. Such things do not occur when the addressee is determined to decline to accept the sealed envelope. It would, therefore, be reasonable to hold that when service is effected by refusal of a postal communication the addressee must be imputed, with the knowledge of the contents thereof and in our view, this follows upon the presumptions that are raised under Section 27 of the General Clauses Act, 1897 and Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the financial year in which service of the notice was effected. Section 148 (1), however, is clear that no reassessment can take place without service of notice being effected on the Assessee or his authorised representative. 27. In R.K. Upadhyaya (supra) the Supreme Court explained that the mandate of Section 148 (1) is that reassessment shall not be made until there has been service. However, the said decision does state that jurisdiction becomes vested in the AO to proceed with the assessment once notice is issued within a period of limitation. It also emphasized that no reassessment shall be made until there has been service. The legal position therefore, even under the 1961 Act, is that service of notice under Section 148 is a jurisdictional requirement for completing the re-assessment. This has been emphasized in several other decisions of the High Courts as well. 28. In C.N. Nataraj v. Fifth Income-tax Officer (1965) 56 ITR 250 (Mys), the High Court of Mysore was dealing with the case where the notice under Section 148 of the Act was issued in the names of the Assessee who were minors and not in the names of their guardians. The notices were served on a clerk of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the ITO seeking time. Since no return was filed by the Assessee within the time granted, the ITO completed the reassessment under Section 144 of the 1961 Act. On appeal the High Court found that none of the partners of the Assessee-firm had been personally served with the notice. Service was effected only on the Manager of the firm who had no specific or written authority to receive such notice. It was held: when the statute provides that a notice should be served in a particular mode, it was not possible to hold that there had been a proper service of notice merely from the fact that the person to whom the notice had been addressed had received the notice through some other source or that he had become aware of the contents of the notice. There had not been a due service of notice as contemplated by the provisions of the Code of Civil Procedure dealing with service of notice or summons. Therefore, the service of the notice on the Manager who had no written authority to receive the same could not be held to be a proper service on the Assessee. 33. In Sri Nath Suresh Chand Ram Naresh v. CIT (supra) it was reiterated that service of valid notice under Section 148 was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpowered to receive such notice on his behalf. Besides the appointment of such agent by the Assessee has to be in writing in order to meet the requirement of Order III Rules 2 and 6 CPC. Therefore, in the instant case, the Revenue had to show that the person on whom the notice was served i.e., Mr. Ved Prakash was in fact empowered by the Assessee to receive notices on his behalf. Apart from invoking the doctrine of apparent authority‟, the Revenue has been unable to show that, in fact, Ved Prakash was empowered to receive such notice on behalf of the Assessee. 36. The reliance by the Assessee on the decision in Harshad J. Shah v. LIC of India (supra) appears to be misplaced. The facts there were that the relationship of principal and agent flowed from the contract. The agent was employed as such by the LIC and the letter of appointment contained an expressed prohibition on him collecting premium on behalf of the LIC. Further there were regulations that prohibiting the agents from collecting premium on behalf of the LIC. The Court explained the doctrine of apparent authority and observed: the authority of the agent is apparent where it results from a manifestation made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee and again asked for a copy thereof along with the reasons for reopening the assessment. However, no attempt was made by the ACIT to ascertain the correct address of the Assessee and serve a copy of the notice afresh on him. Participation by Assessee in proceedings not a waiver 39. The next issue to be considered is whether the failure by the Assessee to specifically protest that Mr. Ved Prakash was not his Accountant or agent or that he was not empowered to accept notices on his behalf should be taken to be a waiver by the Assessee of the requirement of proper service of notice in terms of Section 148 of the Act. The settled legal position is that merely because an Assessee may have participated in the proceedings, the requirement of service of proper notice upon the person in accordance with the legal requirement under Section 148 of the Act is not dispensed with. 40. In B. Johar Forest Works v. Commissioner of Incometax (1977) 107 ITR 409 (J K) the notice issued by the ITO to the Assessee under Section 22 (2) of the 1922 Act. The notice was served on an employee of the Assessee who was not authorized to accept such notice. Subsequently, the General Mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 to finalizing the reassessment. (iv) The onus is on the Revenue to show that proper service of notice has been effected under Section 148 of the Act on the Assessee or an agent duly empowered by him to accept notices on his behalf. In the present case, the Revenue has failed to discharge that onus. (v) The mere fact that an Assessee or some other person on his behalf not duly authorised participated in the reassessment proceedings after coming to know of it will not constitute a waiver of the requirement of effecting proper service of notice on the Assessee under Section 148 of the Act. (vi) Reassessment proceedings finalised by an AO without effecting proper service of notice o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any objection in any proceedings or inquiry under the Act that notice was not served upon him or was served in an improper manner. In this regard, it may be stated that this provision came to be inserted by the Finance Act, 2008 with effect from 1st April, 2008 and is not applicable to the assessment year in question. However, this provision also substantiates our finding that in the given circumstances as in the present case, service of notice before assessment could be inferred. The participation by the Assessee in the assessment proceedings on receipt of the copy of the notice can be deemed to be service of notice within the ambit of Section 148(1) of the Act. That is what is the legislative intent of service of notice on Assessee under this section that no assessment under Section 147 can be finalized before the Assessee has sufficient notice thereof. 7. Taking into consideration, the notice which was sent u/s 148 on 22nd March 2010 on the address where the assessee was not residing, in that view of the matter, the presumption could not have been drawn. However, the service made at the address which was referred on the envelop is not of assessee. 8. Hence, the issue i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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