TMI Blog2019 (9) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... RYANA HIGH COURT] has held that notice should not only be issued but should also have been served on the assessee within the stipulated period and in the absence of a valid notice, the assessment is initiated. Capital gain on transfer of property - considered the sale consideration to be at ₹ 13,44,000/- and after allowing 40% of the sale value as assessee s expenditure towards development, brought the balance of ₹ 8,06,400/- to tax - HELD THAT:- Assessee has developed the land and sold the same to the land owners. Therefore, the assessee s contention that - there is no transaction of any transfer by the assessee to the land owners, is to be accepted. Further, both the AO and the CIT(A) have failed to consider the transaction as a whole and failed to allow the cost of acquisition of the land to the assessee while computing the income from the transaction of sale. As rightly pointed out by the Ld.Counsel for the assessee, if the transaction was to be considered as transfer, then the AO and the CIT(A) ought to have taken the transaction of sale dt.15-11-2006 also into consideration and the cost of acquisition should have been allowed and if it was so done, there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, including Trading and Profit and Loss Account, Form No.3CD and 3CB and vouchers for expenses. In response to the same, assessee filed the copy of the return along with computation of income, audited reports in Form 3CB 3CD and copies of unregistered development agreement cum GPA dt.27-03-2006. No books of accounts along with supporting vouchers were submitted. The AO, thereafter, based on the material available on record, observed that the assessee has allegedly entered into a development agreement with land owners by way of unregistered deed and that they have subsequently, registered plots in favour of the land lords to give a clear title over plots allotted to them and the consideration mentioned in sale deed dt.16-11-2006 is irrelevant. The AO observed that the assessee is referring to the unregistered development agreement cum GPA dt.27-03-2006, whereas the registered sale deed dt.16-11- 2006 has not been filed during the course of assessment proceedings. He held that since agreement of sale cum GPA is un-registered, assessee does not get any clear title. He also observed from the sale deed that the vendor has already paid the sale consideration of ₹ 13,44,000/- and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served on the assessee. As regards the findings of AO that the notice was served by affixture also, he pointed out that the AO has neither taken any initiative to find out the correct address of the assessee nor the notice by affixture witnessed by any independent witnesses. He also referred to the docket order of the assessment proceedings, wherein there is no noting that the notice u/s.148 of the Act has been served by way of affixture. Therefore, according to him, this notice has never been served on the assessee. He further submitted that the address at which the alleged notice is allegedly affixed (though is correct), could not be served on the assessee, because the assessee-firm had become defunct and there was nobody working at that address. Therefore, according to him, this assessment itself is void due to non-service of notice u/s.148 of the Act to the assessee. He submitted that assessee had raised these grounds before the CIT(A), but he has simply and summarily brushed aside the issue stating that the assessee has taken this ground to evade the tax. For this purpose, Ld.Counsel for the assessee placed reliance on the following decisions: i. Sanjay Badan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the rival contentions and material on record, we find that for the relevant assessment year before us is AY.2007-08 for which, notice u/s.148 could be issued on or before 31-03-2014. In the case before us, the AO has issued notice u/s.148 of the Act on 26-03-2014. Therefore, it is within the period of six years from the end of relevant assessment year. However, it is clear that assessee has not been served notice u/s.148 of the Act and even the notice by affixture was also served on 04-04-2014. But as rightly pointed out by the Ld.Counsel for the assessee, there is no report of the AO, which contains the names and addresses of the witnesses, who have identified the property. Further, it is also not recorded in the docket order of the assessment records. Therefore, it is not clear as to whether notice by affixture has really been served on assessee. Further, the Hon'ble Punjab Haryana High Court in the case of CIT Vs. Avi-oil India Pvt. Ltd., (2010) [323 ITR 242] (P H) has held that notice should not only be issued but should also have been served on the assessee within the stipulated period and in the absence of a valid notice, the assessment is initi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nagar, Pune 411 016. The AO has also recorded the Pune address of the assessee in the assessment order passed on 30-12-2011. On a pertinent query, the ld. DR admitted that the address given in the return is the same which has been mentioned in the assessment order. On a further question as to how the notice was sent at the Solapur address of the assessee when the return of income contained Pune address, the ld. DR submitted that the Solapur address has been given by the assessee in his PAN details and the system generating notice u/s. 143(2) took up such address from the PAN database. The ld.DR took us through Rule 127 which provides that notice etc. may be delivered on any of the addresses which, inter alia, include the address available in the PAN database of the addressee under sub-clause (i) of Rule 127(2)(a). She submitted that the notice sent by the Department on the address given by the assessee in PAN database was accordingly in order. She also invoked Section 27 of the General Clauses Act, 1897 to buttress her submission of valid service of notice, once a notice is sent through registered post. 19. Considering the wide spectrum of arguments put forth b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice, the assessment is vitiated. 21.3. Similarly, the Hon ble Gujarat High Court in Shanabhai P. Patel vs. R. K. Upadhyaya, ITO (1974) 96 ITR 141 (Guj) dealt with a situation in which reassessment notice was issued within time-limit but served beyond the prescribed period of four years. The Hon ble High Court held that sec. 149 enjoins that a notice should be issued within prescribed period. It held that the words service of notice or issuance of notice have no fixed connotation but are interchangeable and same meaning should be given to both the words used in ss. 148 and 149. In reaching this conclusion, their Lordships also relied on Banarsi Debi vs. ITO (1964) 53 ITR 100 (SC). The Revenue carried the matter before the Hon ble Summit Court. In R. K. Upadhyaya, ITO vs. Shanabhai P. Patel (1987) 166 ITR 163 (SC), their Lordships highlighted the difference in the language of the 1922 Act under which the judgment in Banarsi Debi vs. ITO (supra) was rendered and the 1961 Act. It observed that : A clear distinction has been made out between the issue of notice and service of notice under the 1961 Act . Reversing the judgment of the Hon ble Gujarat High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued a notice to the petitioner calling upon him to pay the arrears of rent and also terminate tenancy. The notice could not be served through postmaster who tried to serve the same on the addressee but eventually returned with the endorsement left without address, returned to sender . The question arose before the Hon ble Supreme Court as to whether it should be considered as a proper service. Considering the section 11(1) of the Jammu Kashmir Houses and Shops Rent Control Act, the Hon ble Supreme Court observed that if the addressee refuses or declines to accept the notice, then it can be considered as a proper service. When a postman calls at the address mentioned and fails to contact the addressee and the same is returned to the sender because the tenant is away from the premises for considerable time, then such delay should be attributed to the tenant s own conduct and should be considered as served . We do not find any applicability of the ratio laid down in the case to the facts as are obtaining before us. That was a decision under a different statute and in a different context in which notice was required to be given by the owner to the tenant for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pression serve or either of the expressions give or send or any other expression in used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing prepaying and posting by registered post, a letter containing the document, and unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post . It is manifest from the mandate of section 282 of the Act read with section 27 of the General Clauses Act that these provisions deal with the service of notice and more particularly the service of notice by post. Section 27 provides that service by post shall be deemed to be effected by properly addressing, pre-paying and posting by registered post. It means that when a letter containing the document is properly addressed, pre-paid and posted by a registered post, it will be considered as a valid service. It is not the end of the provision. There is a specific mention of the words `unless the contrary is proved . It means that the presumption of valid service on properly addressing, pre-paying and positing by registered post is not irrebuttable. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the assessee cannot assail the valid service of such a notice. But the fact of the matter is that the notice etc. must be delivered at the one of addresses given in the rule. Simply issuing a notice at the address given in PAN etc., which is not delivered to the assessee, may satisfy the requirement of the initial issue of notice at the correct address but not that of service of such notice until such notice is actually delivered or served. It can be seen from the discussion made above that no notice u/s 143(2) was delivered or served upon the assessee. Thus rule 127 does not assist the case of the Revenue in any manner. Before parting with this issue, we want to make it clear that the question as to whether or not the rule 127 will have retrospective effect is left open as adjudication on this issue is not warranted in the facts of the instant case since the notice was not delivered or served upon the assessee at any address. iv. Whether the notice u/s 143(2) was deemed to have been issued/served ? 23.1. The ld. DR invoked the provisions of section 292BB to contend that since the assessment proceedings were attended by the assessee he canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f issuance of a notice is not established, the adverse consequences will follow. 23.4. Since the proviso to section 143(2) talk of service of notice and not issue of notice, let us examine if the notice u/s 143(2) was served on the assessee in terms of section 292BB on his attending the assessment proceedings. 23.5. The assessee has placed on record a copy of his letter dated 28-11-2011 addressed to the DCIT, Circle-3, PMT Building, Pune objecting to the service of notice dated 08-09-2010 purportedly issued u/s. 143(2) and served upon him. The assessee categorically stated that I would like to state that the said notice 08-09-2010 has not been received by me . It has also been mentioned in para 4 of the assessee s aforesaid letter that hence, this notice is not a valid notice and bad in law. I request you to please quash the assessment proceedings . This letter of the assessee bears the stamp of the office of ACIT, Circle-3, Pune with the date of 28-11-2011. On examination of the assessment folder produced before us by the ld. DR, it is found that the original of this letter bearing the date of receipt by the office of ACIT, Circle-3 as 28-11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the boundaries of the plots. Further, in a development agreement, there is a transfer of land in exchange for the development of the entire property. Thus, the assessee has incurred expenditure for development of the said land, in consideration of which, it has received a portion of the land. This transaction of transfer of land in favour of assessee has to be taxed in the hands of the land owners as there is transfer of land. As far as the assessee is concerned, he is liable to capital gain, when it sells its share of land. The assessee had filed the sale deed dt.15-11-2006 before the CIT(A) to demonstrate that the it had purchased land on 15-11-2006 in acres and had immediately sold the plots on 16-11-2006 i.e., the very next day. This shows that assessee has developed the land and sold the same to the land owners. Therefore, the assessee s contention that - there is no transaction of any transfer by the assessee to the land owners , is to be accepted. Further, both the AO and the CIT(A) have failed to consider the transaction as a whole and failed to allow the cost of acquisition of the land to the assessee while computing the income from the transaction of sale. As rightly po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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