TMI Blog2018 (6) TMI 1321X X X X Extracts X X X X X X X X Extracts X X X X ..... is contemplated under Section 149 is “issuance of notice” under Section 148 and not the service thereof on the assessee and further held that the “service of notice” under Section 148 is only required before the assessment, reassessment or re- computation. - Decided against the assessee - Tax Case (Revision) No.798 of 2017 - - - Dated:- 6-2-2018 - MR. S. MANIKUMAR AND MR. V. BHAVANI SUBBAROYAN, JJ. For The Petitioner : Mr. G. Baskar For The Respondent : Mr. T. Ravikumar ORDER ( Order of the Court was made by S .MANIKUMAR, J. ) Tax Case Revision is filed against the order, dated 12.07.2017, passed in I.T.A.No.3119/MDS/2016, on the file of Income Tax Appellate Tribunal, Bench 'B/SMC', Chennai, on the following substantial questions of law, (i) Is not the order of the Income-Tax Appellate Tribunal perverse in law in upholding that validity of Reassessment Proceedings even in absence of any direct material/evidence to prove the issue and/or service of notice u/s.148 dated 31.03.2012 on the Appellant? (ii) Whether on the facts and in the circumstances of the case Order of the Income-Tax Appellate Tribunal was perverse on facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue through the Annual Information Report (AIR). As the assessee, upon verification, was found to have not filed his return for the relevant year, the Assessing Officer (AO), after recording reasons, as to escapement of income and seeking approval thereof from the competent authority, viz., Joint Commissioner Income Tax, issued notice under section 148(1) of the Act, on 31.03.2012. The said notice, claimed, as sent through Registered Post (RPAD) at the Ashok Nagar address, came back un-served and that the same was finally served through affixture on 04.05.2012. Thereafter, a notice, under Section 142(1), was served on 11.12.2012. The assessee filed his return of income for the said year on 01.02.2013, admitting income, at ₹ 38,688/-, i.e., after claiming exemption, under Section 54, in respect of the Long Term Capital Gain (LTCG), arising on the aforesaid sale. The same came to be disallowed in the assessment proceedings, initiated through notice, under Section 143(2), assessing the income for the year at ₹ 31.11 lacs, including LTCG at ₹ 30.73 lacs, i.e., as returned. The only objection raised by the assessee before the Assessing Officer, was with regard to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee during the assessment proceedings in the present case. The assessee s objection in fact is not with regard to the scope of the provision or with regard to its applicability per se in the facts and circumstances obtaining in his case, but that the same is not applicable in-as-much as the provision has been introduced w.e.f. 01.04.2008, so that it would apply to proceedings for AY 2008-09 onwards. Circular 1 of 2009 dated 27.03.2009 issued by CBDT (reproduced at [2009] 310 ITR (St.) 42), vide clause 42.7 thereof, reading as under, clarifies that the said amendment shall be applicable to any proceedings pending as on 01.04.2008: 42.7 Applicability - This amendment has been made applicable with effect from 1st April, 2008. This means that the provision of new section 292BB shall apply in all proceedings which are pending on 1st April, 2008. This view stands endorsed in Panchvati Motors (P.) Ltd. (supra). The statutory presumption is with regard to the validity of the service of notice, objection toward which has not been raised by the assessee during the course of the relevant proceedings, even as he participates and cooperates therein, culminating in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent for AY 2008-09, the first assessment year for which the provision is said to be applicable, would be of income arising to or received by the assessee during the previous year 2007-08, i.e., financial year commencing 01.04.2007! Proceedings for that year would be on, theoretically, 01.04.2007 onwards. There could in fact be notices, as for instance qua advance tax, or where an assessee s business is discontinued during that year, which are issued during the relevant previous year itself. Would it therefore imply that the prejudice or the restriction cast by s. 292BB is applicable to the service of such notices even as the relevant proceedings or assessment concludes before 01.04.2008. Without doubt, the assessee could challenge the service of these notices at any time irrespective of the fact that he has participated in these proceedings and the same relate to AY 2008-09. There is, to capsulize, no correspondence between the restriction sought to be placed, subject to a caveat though, by the provision on the assessee s right with effect from a particular date (so that the status of the proceedings as on that date assumes relevance) with the year to which those proceedings or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 ITR 737 (SC), rejected a similar plea of the assessment made without notice to the other legal representative (LR) as a nullity, stating that in that case (Estate of Late Rangalal Jajodia (supra)), there was even no notice to the LR, with an objection having been in fact raised before the AO, which was made for the first time in the appellate proceedings in the case under reference, concluding as under: The principle that emerges from the above decision is that an omission to serve or any defect in the service of notices provided by procedural provisions does not efface or erase the liability to pay tax where such liability is created by distinct substantive provisions [charging sections]. Any such omission or defect may render the order made irregular - depending upon the nature of the provision not complied with - but certainly not void or illegal. (pg. 747) Further, the jurisdiction for framing an assessment or reassessment u/s. 147, as in the present case, is the issue of notice u/s. 148(1), and not its service, as explained in R.K.Upadhyaya v. Shanabhai P.Patel [1987] 166 ITR 163 (SC) - a decision referred by the Revenue in Chetan Gupta (supra), in the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found valid by an appellate forum, is to restore the matter for proper service of notice as per law. Rather, such a situation may not practically arise. This is as where an objection qua service of notice u/s. 148 is raised before the AO, he would, rather than disputing the same, accepting the same, cause the service of notice. The time limit for the completion of assessment commencing from the date of service, there is no question of the assessment getting time barred and, in fact, shall give a fresh time limit for the completion of the assessment. This, then, puts the import of s. 292BB in the context of a sec.147 assessment in perspective. As such, without prejudice, even if the assessee were to, assuming so, succeed on the question of non-applicability of s. 292BB in the instant assessment and, further, presuming a valid objection/s to service of notice u/s. 148, which would necessitate an examination of the assessee s objections in this regard on merits, the matter shall have to necessarily travel back to the file of the AO to cause service and frame assessment afresh, for which a time limit shall run from the date of the said service. That is, in no manner shall cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 148 being issued after obtaining administrative approval. The same is dated 31.03.2012. I have no reason to doubt the authenticity and the validity of the afore referred documents, generated in the normal course of business, particularly considering the explanation by the ld. DR that the system is, as a part of procedure, closed at the end of each day. A post dated entry therein is thus precluded, which may even otherwise result in different reports for the same day/s, establishing alteration. The same is accordingly considered sufficient to regard, at least prima facie, that the notice was indeed issued on 31.03.2012. Rather, the presumption as to the regularity of official acts shall attend the various documents furnished (s. 114(e) of the Indian Evidence Act, 1872; also, Chuharmal v. CIT [1988] 172 ITR 250 (SC)). Further, on inquiry, the ld. DR has per the written submissions (copy on record) explained that as a matter of procedure the person from the Postal Department visits the department on a regular basis, and that therefore as a matter of routine the documents are collected. The dispatch register was not available in view of the reorganization of the department i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar)). It may therefore not necessarily be followed even if it is the solitary decision. That the tribunal should nevertheless have strong reasons for taking a different view, or adopting the preferred view, goes without saying. The decision in Panchvati Motors (P.) Ltd. (supra), also accords with the settled principle that procedural law is applicable to pending proceedings (CWT v. Sharvan Kumar Swarup Sons [1994] 210 ITR 886 (SC)). Reference to the decision in Kuber Tobacco Products (P.) Ltd. (supra) would be of no consequence in view of the decisions by the higher forum. The tribunal in Bedrock Ltd. v. Dy. CIT (in ITA No.5450/Mum/2011 dated 25.07.2012), also relied upon by the assessee, rightly distinguishes the decision in Panchvati Motors (P.) Ltd. (supra) as well as in Aravali Engineers (P.) Ltd. v. CIT [2011] 335 ITR 508 (P H), also relied upon by the Revenue before it. This is as the notice u/s. 143(2), service of which confers jurisdiction for assessment, was admittedly issued beyond the time prescribed for its service. How could its service, which would only be subsequent to its issue, possibly be within time? The ensuing assessment was thus void ab initio. An objection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nus lies on the Appellant to exhibit that the Assessing Officer retained control over the notice u/s. 148 and was not put in the process of its service, when the Assessing Officer had not provided any direct material to prove either issue or service of notice u/s.148 of Income Tax Act, 1961. ( b) drawn presumption with regard to issue and service of notice u/s.148 in view of provisions of section 292BB. ( c) observed that the even if the matter is set aside to the stage of service of notice u/s.148, time limit shall run from the date of the service u/s.153(2) of Income Tax Act, 1961. ( d) dismissing the ground Nos.2.1 to 2.3 as not pressed, ever after indicating that if the issue on jurisdiction is decided against the Appellant, opportunity would be given to present the case on merits in respect of claim u/s.54 of the Income Tax Act. ( iii) The Income-Tax Appellate Tribunal erred in upholding jurisdiction of Assessing Officer u/s. 147 of Income Tax Act, 1961 and also presuming that there was valid issue and service of notice u/s. 148 of Income Tax Act, 1961. ( iv) The Income-Tax Appellate Tribunal erred in observing that the issue was raised for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that issue and/or service of notice u/s.148 is not procedural, but mandatory and therefore the same cannot be restored back to Assessing Officer to make proper issue and service of notice at this stage, which would be beyond 6 years from the end of the relevant assessment year and against the mandate of the provisions of section 149(1) of Income Tax Act, 1961. ( ix) The Income-Tax Appellate. Tribunal ought to have appreciated that the mandatory pre-condition for reassessment is proper and valid issuance and service of notice u/s.148 of Income Tax Act, 1961 and such notice is not procedural in nature. The Income-Tax Appellate Tribunal ought to have appreciated that in order to validly assume the jurisdiction,mandatory precondition is valid issue and service of notice u/s.148(1) of Income-Tax Act and such a gross violation to provisions of the Act by the mandatory notice cannot be cured by Section 292BB of the Act, by merely observing that the Assessee had appeared in the proceedings. ( x) The Income-Tax Appellate Tribunal ought to have appreciated that the Appellant can raise the jurisdictional issue at any stage of Appeal and the department cannot take shelter u/s.29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1 .- Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been included in the reasons recorded under sub-section (2) of section 148. Explanation 4.-For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. 148. Issue of notice where income has escaped assessment. ( 1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that in a case- ( a) where a return has been furnished during the period commencing on the 1st day of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment. 6. Section 147 and Section 148 of the Income-Tax Act, 1961 mandate certain conditions to be fulfilled for invoking the jurisdiction to reopen the assessment. Section 147 empowers the Assessing Officer to reopen an assessment, if the conditions prescribed therein are satisfied. The conditions are: (i) The Assessing Officer has to record the reason for taking action under section 147. It is on the basis of such reasons recorded in the file that the validity of the order reopening a assessment has to be decided. Recorded reasons must have a live link with the formation of the belief. (ii) The Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. (iii) The jurisdictional condition under section 147 is the formation of belief by the Assessing Officer that income chargeable to tax has escaped assessment for any assessment year. (iv) No action can be initiated under section 147 after the expiry of 4 years from the end of the relevant assessment year unless the income chargeabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue that since the AO had duly recorded the failure on the part of the assessee to fully and truly disclose all material facts this notation should be acted upon and the reasons conveyed to the assessee which were predicated on the Commissioner's noting, should be ignored. The contention of the Revenue was that the assessee had been made aware of the opinion of the AO in the Counter Affidavit of the Revenue filed on 5.11.2007. It was in that context that it was observed in Haryana Acrylic that six years had elapsed by that time. GKN Driveshafts (India) Ltd., v. Income Tax Officer (2003) 1 SCC 72 was applied to emphasise the fact that the reasons should have been furnished within a reasonable time. It was clarified that where the notice has been issued within the said period of six years, but the reasons have not been furnished within that period, in our view, any proceedings pursuant thereto would be hit by the bar of limitation inasmuch as the issuance of the notice and the communication and furnishing of reasons go hand-in- hand. The expression within a reasonable period of time as used by the Supreme Court in GKN Driveshafts (supra) cannot be stretched to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oid ab initio and cannot be annulled was noted. Furthermore, from a reading of that judgment, it is evident that it had not been seriously contended that the notice under Section 149 of the IT Act must also be served within the period set-down in that Section since the discussion centered upon Section 27 of the General Clauses ACt, 1897 which specifies that service of such a notice would be presumed to be legally proper as it would be deemed to have been delivered in the ordinary course at the correct address. It had, inter alia, been expressed that: while there would be no justification for enlarging the period of limitation prescribed by the statute itself, we should also not lose sight of the fact that disadvantage or discomfort of the assessee is only that he has to explain the correctness and veracity of the return filed by him. A reasonable balance of burden of proof must also, therefore, be maintained. In the facts and circumstances of the present case, we are satisfied that because notice was dispatched on August 25, 1998 and was duly addressed and stamped, the Department has succeeded in proving its service before August 31, 1998. On the other hand, the assessee has faile ..... X X X X Extracts X X X X X X X X Extracts X X X X
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