TMI Blog2019 (4) TMI 2020X X X X Extracts X X X X X X X X Extracts X X X X ..... n to invoke reassessment jurisdiction, against the assessee, remained unfulfilled. The non-service of notice, in our opinion, was not merely a curable procedural defect but primary requirement under law, without fulfilment of which the revenue could not be empowered to trigger re-assessment proceedings against the assessee. Thus we hold that in the absence of service of notice u/s 148, reassessment jurisdiction as acquired by Ld. AO could not be sustained in law which left us with no option but to quash the reassessment proceedings. - Decided in favour of assessee. - I.T.A. No. 4533/Mum/2017, I.T.A. No. 4855/Mum/2017, I.T.A. No. 4534/Mum/2017, I.T.A. No. 4854/Mum/2017, I.T.A. No. 4532/Mum/2017 And I.T.A. No. 4886/Mum/2017 - - - Dated:- 23-4-2019 - Hon ble Shri Pawan Singh, JM And Hon ble Shri Manoj Kumar Aggarwal, AM For the Assessee : Shri Jitendra Jain, Ld. AR. For the Revenue : Chaudhary Arun Kumar Singh-Ld. DR. ORDER Per Manoj Kumar Aggarwal (Accountant Member) 1. The bunch of cross-appeals in respect of three different assessee having same address, for Assessment Year [AY] 2008-09, contest the order of Ld. first appellate authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant in spite of repeated request by the Appellant during the reassessment proceedings. (f) The CIT(A) erred in confirming the action of AO in issuing the notice u/s 148 of the Act after expiry of four years from the end of relevant assessment year. The Appellant submits that in its case assessment proceedings has been completed u/s 143(1) of the Act after considering full details/disclosure filed by the Appellant; hence, the same cannot be reopened after expiry of four years from the end of relevant assessment year. 2.3 The effective grounds raised by the revenue read as under: - (i) Whether on the facts and circumstances of the case and in Law, the CIT(A) erred in ignoring the findings of survey, materials gathered there-from and the statement of directors etc. admitting that only accommodation entries were provided, more so when such findings got strengthened by findings of AO during assessment? (ii) Whether, on the facts and circumstances of the case and in Law, the CIT(A) was justified in directing the deletion of the sum brought to tax by AO as unexplained income under section 68 of the Income Tax Act, 1961 in respect of moneys credited in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated to be engaged in the business of real estate and investments was subjected to an assessment u/s 143(3) read with Section 147 on 31/03/2016 by Ld. Assistant Commissioner of Income Tax-1(3)(1), Mumbai [AO] wherein the income was determined at ₹ 393.38 Lacs after sole addition u/s 68 for ₹ 395 Lacs as against returned loss of ₹ 1.61 Lacs filed by the assessee on 30/09/2008. The original return of income was processed u/s 143(1). 3.2 The reassessment proceedings got triggered by issuance of notice u/s 148 on 10/03/2015 which was beyond 4 years but within 6 years from the end of relevant AY i.e. 2008-09. However, the notice was returned back unserved by postal authorities on 16/03/2015. As per revenue, the notice was affixed at the address of the assessee on 09/07/2015 as per the report of the notice-server of the ward. This was followed by issuance of notice u/s 142(1) on 23/07/2015 through post requesting the assessee to file a return in response to notice issued u/s 148 on 10/03/2015. However, the same was also returned back with the remarks not known. Subsequently, notice u/s 142(1) was finally hand served to the office of the assessee on 30/07/2015. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions dated 15/10/2015, drew attention to the fact that the notice u/s 148 dated 10/03/2015 was addressed to the following incomplete / incorrect address: - Court Chambers, 35, Sir V.T. Marg Mumbai 400 020 As against the same, the correct address of the assessee was as follows: - 1B, Court Chambers, 35, Sir Vithaldas Thackersey Marg, New Marine Lines, Mumbai 400 020 In support of correct address, copy of relevant extracts of this address as registered with Registrar of Companies was placed on record. It was submitted that the building Court Chambers was an office building housing a large number of commercial offices related to various businesses and the assessee was occupying a single office unit in this large complex. Mere writing of the name of building without mentioning the proper and correct office number or even the floor number, it could possibly not lead to delivery of any correspondence to assessee s office. The attention was also drawn to the fact that in earlier years, the income tax returns were duly filed with proper and correct address and despite having full and complete address, Ld. AO kept on sending notices at incomplete add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and chargeable to tax without there being any adverse material on record. Reliance was placed on certain judicial pronouncements to support the same, which have already been extracted in the quantum assessment order. The attention was also drawn to the fact that investment made by the stated share applicant viz. M/s Deevee Commercial Ltd. was genuine and supported by cogent documentary evidences. 3.7 However, not convinced with assessee s submissions, Ld. AO proceeded to reassess the income of the assessee and issued notice u/s 142(1) along with questionnaire on 28/01/2016 directing assessee to file the requisite information / explanations in support of the transactions. The assessee pointed out that the persons whose statements were being relied upon by the revenue to draw adverse inference against the assessee was retracted subsequently and therefore, the same alone could not form the basis to make additions. The assessee also submitted that details of share applicant along with their respective address, number of shares issued, face value per share and share premium received against the same. These details have already been extracted in para 12.1 on page No. 24 of the qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letters obtained from the share subscribers confirming the transactions and showing source of fund for making investment by them viii) Bank statement of share subscribers showing payment towards share subscribed ix) NBFC registration certificate of share subscribers wherever applicable x) Bank statement of Appellant Company reflecting share capital received during the year xi) Return of Allotment in Form-2 filed with Registrar of Companies Reliance was placed on various judicial pronouncements in support of the submissions. It was also reiterated that the additions were being made merely on the basis of third-party statements made during survey proceedings which were retracted later on in view of the fact that the statement was given under pressure and to buy peace of mind. 4.2 The Ld. first appellate authority concurred with assessee s stand on merits that Ld. AO heavily relied upon third-party statements who were later on retracted and therefore, the same alone were not sufficient to invoke Section 68 against the assessee. It was further observed that Ld. AO failed to demonstrate as to how unaccounted money was brought in to the channe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 149 would mean issued at the correct address and notice issued at incomplete address could not be said to be a valid notice in terms of Section 149. Proceeding further, Ld. AR submitted that similar is the position of notice stated to be served by affixture on 09/07/2015. Therefore, the jurisdictional requirement of Section 149 was not complied with by the revenue and therefore, the proceedings were bad in law. Reliance has been placed on the following judicial pronouncements in this regard: - i) Hon ble Chhattisgarh High Court in Ardent Steel Ltd. Vs ACIT 405 ITR 422 ii) Hon ble Delhi High Court in PCIT Vs Atlanta Capital Pvt. Ltd. ITA 665-666 of 2015 5.2 Coming to service of notice, it has been emphasized that Section 148 envisages service of notice before making assessment, reassessment or re-computation u/s 147. The notice, as per Ld. AR, was never served upon assessee since the notice issued on 10/03/2015 was undisputedly returned back by postal authorities with remarks incomplete address / not known. Thereafter, the revenue adopted the mode of affixture for service of notice as per Section 282(1)(b) of the Act i.e. in the manner prescribed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the course of hearing before us. The stand of first appellate authority, in deleting the additions, on merits, have sought to be buttressed on the strength of documentary evidences submitted by the assessee during proceedings before lower authorities. 5.4 Per contra, Ld. Departmental Representative, through oral submissions as well as on the strength of written submissions, pleaded that the letter dated 23/07/2015 was received by the assessee on the same address as given in notice dated 10/03/2015 and therefore, the notice was validly issued as well as served upon assessee as per law. On merit, reliance has been placed, inter-alia, on the recent decision of Hon ble Apex Court rendered in PCIT Vs. NRA Iron Steel Private Limited [Civil Appeal No. 29855 of 2018 dated 05/03/2019] to submit that deletion of additions by Ld. first appellate authority was not justified. 6.1 We have carefully heard the rival submissions and perused relevant material on record including judicial pronouncements cited before us. Since the assessee s appeal contest the very jurisdiction of Ld. Assessing Officer and goes to the root of the matter, we take up the same first. After perusal of mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile mentioning the address of the assessee in the said notice and the notice is stated to have been affixed at the same incomplete address viz. Court Chambers, 35, Sir V.T.Marg Mumbai 400 020. It is another aspect that the said report has not been substantiated with signatures of any independent witness. Thereafter, notice sent u/s 142(1) at the same address has also been returned back, as it would have been. 6.3 The only communication, which is shown to have been served on the assessee on 30/07/2015, is the letter dated 23/07/2015, the contents of which has been reproduced below: - GOVERNMENT OF INDIA OFFICE OF THE Asst. COMMISSIONER OF INCOME TAX, CIRCLE l(3)(l), MUMBAI. Room No. 540, M. K. Road, Aayakar Bhavan, Mumbai - 400 020. ------------------------------------------------------------------------------------------------------------------------------ No. DCIT-l(3)(l)/Req./2015-16 Date: 23.07.2015 PAN-AALCS2054 G To, The Principal Officer M/s Sweet Memories Properties Pvt. Ltd, Court Chambers, 35, Sir V.T. Marg Mumba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the preceding paragraphs, we find that there was no service of notice u/s 148 by the revenue on assessee in the present case and the primary condition to invoke reassessment jurisdiction, against the assessee, remained unfulfilled. The non-service of notice, in our opinion, was not merely a curable procedural defect but primary requirement under law, without fulfilment of which the revenue could not be empowered to trigger re-assessment proceedings against the assessee. 6.5 At this juncture, we find that the given factual matrix is squarely covered by an exhaustive decision of Hon ble Delhi High Court rendered in CIT Vs. Chetan Gupta [2015 382 ITR 613] wherein Hon ble Court, after considering catena of judgment on the subject, has succinctly dealt with identical issue in the following manner: - Service of notice a jurisdictional requirement 24. The Court first would like to deal with the question whether notice under Section 148 of the Act is a jurisdictional requirement. The relevant portion of Section 148 (1) reads as under: 148. Issue of notice where income has escaped assessment. - (1) Before making the assessment, reassessment or recomputat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reassessment. This has been emphasized in several other decisions of the High Courts as well. 28. In C.N. Nataraj v. Fifth ITO [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 the father of the Assessee who was neither an agent of the Assessee nor authorized to accept notices on their behalf. The Court, relying on the decision in N. Narayana Chetty (supra) observed: There is no doubt that a notice prescribed under section 148 of the Act for initiating reassessment proceedings is not a mere procedural requirement; the service of the prescribed notice on the assessee is a condition precedent to the validity of any reassessment made under section 147. If no no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible 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 (supra) it was reiterated that service of valid notice under Section 148 was the foundation for the initiation of reassessment proceedings and a condition precedent for the validity of the notice. It was held that the Tribunal was not right in holding that the notices under Section 148 addressed as 'SCR' and the karta 'S' were valid notices for reassessing the income of the HUF 'MM' or 'MS' or its successors. Onus on Revenue to prove service of notice 34. There is sufficient judicial authority for the proposition that the burden of showing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (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 the principal to third parties. On the facts of the case, the said doctrine was held not to bind the LIC against third parties who may have been unaware of the lack of authority of the agent to whom they handed over the premium cheques. In the present case, however, the Revenue has not been able to show that the Assessee held out Mr. Ved Prakash to be his employee or agent. 37. No attempt appears to have been made by the Revenue to serve the Assessee at the address provided by him i.e. c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. CIT [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 Manager of the Assessee applied for extension of time for filing the return, which was allowed by the ITO. However, the return was not filed within the extended time and an ex parte order was passed. Before the High Court it was contended that the employee on whom the service of the notice was found to have been made was not duly authorized to accept such notice and that the mere fact that the General Manager of the firm applied for time, would not render the service of notice on the employee a valid and a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the requirement of notice under Section 143 (2) cannot be dispensed with. 44. The submission that under Section 153 (2) of the Act, there was an open ended time limit for completion of the reassessment till such time proper service of the notice under Section 148 of the Act was not effected on the Assessee is hypothetical since in the present case pursuant to issuance of such notice, reassessment has in fact been completed. In any event, even Section 153 (2) makes it clear that no order of reassessment can be made after the expiry of one year from the end of the financial year in which the notice under Section 148 was served. Therefore, the service of notice is a pre-condition to finalising the reassessment. Section 292 BB not attracted 45. In the present case, prior to the completion of the reassessment, the Assessee has raised an objection that he has not been duly served in accordance with Section 148 of the Act. Consequently, the proviso to Section 292 BB is attracted and Revenue cannot take advantage of the main portion of Section 292 BB. In any event, as rightly pointed out by Mr. Vohra, and as held by the Special Bench of the Tribunal in Kuber T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt proceedings were liable to be quashed. Consequently, the question framed is answered in the affirmative, i.e., in favour of the Assessee and against the Revenue. 48. The appeal is dismissed but, in the facts and circumstances of the case, with no order as to costs. 6.6 Therefore, keeping in view the facts circumstances of the present case, applicable legal position statutory provisions, we hold that in the absence of service of notice u/s 148, reassessment jurisdiction as acquired by Ld. AO could not be sustained in law which left us with no option but to quash the reassessment proceedings. We order so. The assessee s appeal stand allowed in terms of our above order. 7. Since the assessee succeeds on legal grounds and we have already quashed the re-assessment proceedings against the assessee, considering the revenue s appeal, on merits would become merely academic in nature and we see no fruitful reason to delve into the same. Therefore, the appeal stands dismissed, being infructuous. 8. In nutshell, the assessee s appeal stands allowed whereas the revenue s appeal stands dismissed. Cross Appeals: M/s Stroll Properties Pvt. Ltd. M/s Sitil ..... 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