TMI Blog2022 (8) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... premises and assessee. In the absence of these details and complete address of the independent witnesses, resorting to the alternative mode of service of notice by the Assessing Officer at the very first instance makes the service of notice doubtful and does not inspire confidence. There is another reason to record a finding that the notice has neither been issued nor served on the assessee even by way of affixture. From the reading of order sheet, it is clear that attempt was made to serve the notice on the assessee at the address given in the ROI. In the Return of Income for the A.Y. 2012-13, the address given by the assessee was Shri Sridhar Reddy Jagan Nagari Satya, 1-5-5913, Old Alwal, Select Theatre Road, Hyderabad which is different from the address given in the service report mentioning that notice was served by affixture. In our considered opinion, there is contradiction in the report of the Inspector of the Revenue and the order sheet entry recorded by the Assessing Officer. There is yet another reason namely that the jurisdiction of the Assessing Officer was transferred and it was transferred to ITO Ward-11(1) Hyderabad from ITO ward 11(2) Hyderabad. As a matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CA Revenue by : Sri Rajendra Kumar , CIT ( DR ) ORDER Per R. K. Panda , AM These are cross appeals. The first one is filed by the assessee and the 2nd one is filed by the Revenue and are directed against the order dated 27.3.2017 CIT(A)-7, Hyderabad relating to the A.Y. 2012-13. For the sake of convenience, these were heard together and are being disposed of by this common order. 2. Fact of the case, in brief, are that the assessee is a firm engaged in the business of steel trading. It filed its return of income on 30.09.2012 declaring total income of Rs. 1,93,28,820/-. As per the assessment order, the case was selected for scrutiny under CASS and a notice u/s. 143(2) was issued and served on the assessee by affixture on 30.09.2013. Subsequently, notice u/s. 142(1) was issued calling for books of account and other details to which the AR of the assessee appeared before the Assessing Officer and filed the requisite details as called for. 3. During the course of assessment proceedings, the Assessing Officer noted from the details filed by the assessee that the assessee has introduced capital of Rs. 14,35,98,259/- which is as per Schedule-I of the balance shee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the account of the assessee for Rs. 49,39,82,512/-. This according to the Assessing Officer clearly shows that the argument that deferment of payments to supplier M/s. Sujana Universal Industries Limited is transferred for bank (name of which is not specified by the assessee) purpose as capital and unsecured loan is misleading and fallacious. The difference of Rs. 39,93,38,544/- is not reconciled by the assessee. He, therefore, inferred that the under reports of this amount is deliberate action on the part of the assessee. 4.1. According to the Assessing Officer, it is clear that the assessee received goods from M/s. Sujana Universal Industries Limited and transferred them to unknown parties. (whose names, the assessee is not willing to explain). Part of these amounts are clearly camouflaged under unsecured loan capital by the assessee. He inferred that it could be possible that the assessee sold the goods in cash or keeping undisclosed sundry debtors out of the books. According to the Assessing Officer, when the real dues to M/s. Sujana Universal Industries Limited are taken into account, an amount of Rs. 39,93,38,544/- is excess of liability over assets and therefore he brou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsal Industries Ltd. in the books of accounts of the assessee for Asst. Year 2012-13 and Asst. Year 2013-14 and the account copies of assessee's account copy in the books of account of M/s. Sujana Universal Industries Ltd. are filed which are relevant to examine the and find out the exact nature of transactions between them, the manipulation done by the assessee and implication of the same from the taxation angle. 6.4.1 Examination of the both the account copies for Asst. Year 2012-13 and 2013-14 have revealed that the account copies now submitted do not show any differences between them. Further, the assessment order done u/s. 143(3) for Asst. Year 2013-14, wherein the transactions between the two Concerns as submitted above have been accepted. 6.4.2 Neither the so called adjustments made by way of transferring the payable to capital account, unsecured loans and others nor the entries on account of purchase returns and reduction in sundry debtors have been reflected in the accounts for Asst. Year 2013-14. This shows and gives credence to the assessee's claim that the entries/adjustments are made in the balance sheet without making entries in the ledger accounts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , under the heads employee cost, administrative expenses, interest and finance charges and depreciation. Considering the fact that purchases are mainly from M/s. Sujana Universal Industries Ltd. which stand verified, no disallowance may be made on purchases. The Assessing Officer is directed to restrict the disallowance to 10% of expenses claimed under employee cost and administrative expenses. The ground raised is disposed off with above direction . 9. Aggrieved with such order of the learned CIT(A), the assessee as well as the Revenue are in appeal before the Tribunal by raising the following grounds of appeal: ITA No. 1248/Hyd/2017 (Assessee) 1. The Ld. Commissioner of Income-tax (Appeals)-7 Hyderabad ['CIT (A)'], failed to note that no notice u/s. 143(2) of the Income Tax Act, 1961 ('Act') was served on the appellant as enjoined u/s. 282 of the Act and therefore the entire assessment made u/s. 143(3) of the Act is void ab initio, invalid, bad in law and without jurisdiction and must be annulled. 2. The CIT(A) erred in holding that the notice u/s. 143(2) of the Act was a valid notice and that the consequent proceedings were validly initiated. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 30.09.2012 declaring total income of Rs. 1,93,28,820/-. The case has been selected for scrutiny by CASS on AST. Hence, notice u/s. 143(2) is prepared and put up. DOH: 15.10.2013: Time 11.30 AM 30.9.2013: The above notice has been served by Affixture at the above address of the assessee being the assessee or the learned AR shall now appear before the learned CIT(A) on or before 31/07/2021 with all the cogent supportive material at his own risk and responsibility to be followed by three effective opportunities of hearing. known address given in the RETURN OF INCOME for the A.Y. 2012-13 as the assessee is presently not available at the above address and his whereabouts are not known. Since the assessee's returned income for the A.Y. 2012-13 exceeds Rs. 20 lakhs, the jurisdiction over the case vests with ACIT, Circle 11(1) Hyderabad. As directed letter to the ACIT, Circle 11(1) Hyderabad transferring the scrutiny record prepared and put up for signature ................................... 11. The learned AR submitted that from a bare reading of the assessment order as well as the order sheet entries dated 30.09.2013, it is clear that the notice u/s. 143(2) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded under the Code of Civil Procedure, 1908 for the purposes of service of summons; or (c) in the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000; (d) by any other means of transmission of documents as provided by rules made by the Board in this behalf. (2) The Board may make rules providing for the addresses (including the address for electronic mail or electronic mail message) to which the communication referred to in sub-section (1) may be delivered or transmitted to the person therein named. Explanation-For the purposes of this section, the expressions electronic mail and electronic mail message shall have the meanings as assigned to them in Explanation to section 66A of the Information Technology Act, 2000 (21 of 2000) 15. Referring to the above, he submitted that the notice was required to be served in accordance with the procedure laid down by the Civil Procedure Code (CPC). Further, the notice cannot be served by affixture at the very first instance. 16. The learned Counsel for the assessee again referring to the report of the Inspector while serving the notice through affixture drew the attentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the PAN database of the Department. As the notice could not be served, immediate efforts were made by the AO to effect service. An Inspector of Income-tax located the premises and the notice was served through affixture on 30/09/2013 at the last known address in presence of two witnesses. Thereafter a notice u/s. 143(2) was again issued on 22/10/2013 and also on 07/10/2014. It is humbly submitted that throughout the proceedings the assessee never objected on the issue of non-service of notice. As seen from order sheet notings, on 19/12/2014, 06/01/2015, 16/01/2015, 04/03/2015 and 20/03/2015 either the assessee or the AR appeared. The assessment order was passed on 27/03/2015. Throughout the assessment proceedings the assessee did not contest the issue of non-service of notice u/s. 143(2). It is humbly submitted that the issue is covered ule. 292BB of the I.T. Act which is reproduced below: Notice deemed to be valid in certain circumstances. 292BB. Where an assessee has appeared in any proceeding or cooperated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious case laws relied on by the learned Counsel for the assessee shows that the law does not contemplate service of notice by way of affixture at the very first instance. Provisions of section 282 of the I.T. Act which has already been reproduced in the preceding paragraphs, provides that the service of notice is required to be made in such manner as may be provided under the Code of Civil Procedure for the purpose of service of summons. Order 5 Rule 9 or Order 5 Rule 17 of the CPC provides the manner of service of notice to the assessee by ordinary or by alternative means of service. For ready reference, we reproduce Order 5 Rule 9 and Order 5 Rule 17 of the C.P.C. which reads as under: 1 [9. Delivery of summons by Court.--(1) Where the defendant resides within the jurisdiction of the Court in which the suit is instituted, or has an agent resident within that jurisdiction who is empowered to accept the service of the summons, the summons shall, unless the Court otherwise directs, be delivered or sent either to the proper officer to be served by him or one of his subordinates or to such courier services as are approved by the Court. (2) The proper officer may be an offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ................................................... ............................................................................................................ 17. Procedure when defendant refuses to accept service, or cannot be found.--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, 2 [who is absent from his residence at the time when service is sought to be effected on him at his residence and there is no likelihood of his being found at the residence within a reasonable time] 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is yet another reason namely that the jurisdiction of the Assessing Officer was transferred and it was transferred to ITO Ward-11(1) Hyderabad from ITO ward 11(2) Hyderabad. As a matter of fact, Assessing Officer circle 11(1) again issued notice u/s. 143(2) on 22.10.2013 and also on 10.07.2014. Again, notice dated 22.10.2013 and 10.7.2014 were issued at the address 2-4-96/1 Nacharam but there is no service of these two notices on the file of the Assessing Officer. 25. In our considered opinion, there was no requirement of law to issue 2nd notice u/s. 143(2) as has been done in the present case on 22.10.2013 and 10.7.2014. Further as per law notice u/s. 143(2) is required to be served within a period of 6 months from the end of the financial year in which the return is furnished. In the present case as is clear no notice was served on the assessee within six months of issuance of notice from the end of financial year i.e. before 30.09.2013. In our considered opinion, the Assessing Officer has resorted to affixture of notice by the Ward Inspector on 30.9.2013. The reading of the content of the subsequent notice 22.10.2013 clearly shows that the return of income was filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or could not be found. Here, in the present case, no effort was made by the IT department to serve the notice upon the assessee, since the company of the assessee was closed due to Holi festival holidays, and admittedly no effort was made by the serving officer to locate the assessee. 24. Even otherwise, as per order V, r. 19A of the CPC, the notice sent by registered post ought to have been sent along with acknowledgement due but admittedly it was not sent along with acknowledgement due. 25. So, from the entire material available on record we have no hesitation in holding that there has been no valid service of notice under S. 148 of the act upon the assessee as the same was neither tendered to the assessee or his agent, nor the same was refused by either of them. 5.3 Coming to the facts of the case, it is undisputed that the property located at 123, Hargobind Enclave, Delhi was sold by the assessee during assessment year 2008-2009. It is also undisputed that the return of income for assessment year 2009-2010 was filed by the assessee on 04/09/2009 whereas the notice under section 143(2) was dated 14/09/2009 and was served by affixture on 24/09/2009 and, thus, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee before embarking upon the assessment proceedings. Since the entire reassessment proceedings were based on assumption of jurisdiction through the issue of notice under section 143(2) of the Act, which was not validly served on the assessee, we hold that the assessing officer was patently wrong in completing the assessment without effecting the service of notice in accordance with section 282(1) of the Income Tax Act, 1961 read with order V rule 12 and order V rule 17 of the CPC. Therefore, on the facts and circumstances of the case, we have no option but to quash the entire assessment proceedings. Accordingly, we quash the assessment proceedings and allow the appeal of the assessee on the legal issue. In view of our adjudication in favour of the assessee on the legal issue, the other grounds become academic in nature and are not being adjudicated upon . 27. We find the Delhi Bench of the Tribunal in the case of Sumanglam Sewa Awam Education Samity Vs. ACIT (Supra) while deciding an identical issue has quashed the re-assessment proceedings in absence of proper service of notice by observing as under: 6. we have considered the rival submissions and have perused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is agent.-Wherever it is practicable, service shall be made on the defendant in person, unless he has an agent empowered to accept service, in which case service on such agent shall be sufficient Order V, Rule 17 of the Code of civil Procedure lays down the procedure when defendant refuses to accept service or cannot be found and it reads as under: 'Rule 17. Procedure when defendant refuses to accept service, or cannot be found.-Where the defendant or his agent or such other person as aforesaid refuses to sign the acknowledgement or where the serving officer, after using all due and reasonable diligence, cannot find the defendant (who is absent from his residence at the time when service is sought to be effected on him at his residence and there is no likelihood of his being found at the residence within a reasonable time), 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 sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem to make and do such appearances, applications and acts on behalf of such parties; b) persons carrying on trade or business for and in the names of parties not resident within the local limits of the jurisdiction of the court within which limits the appearance, application or act is made or done, in matters connected with such trade or business only, where no other agent is expressly authorized to make and do such appearances, applications and acts 8. Thus a bare reading of the provisions of the Income visions of the Income Tax Act, 1961 and the Code of Civil Procedure reproduced herein above it is seen that as per order V, Rule 12 of the Code of Civil Procedure, wherever it is practicable per Order V, Rule 12 of the Civil Procedure Code, wherever it is practicable the service has to be erected on defendant in person or on his agent. Admittedly, in the present case, notice under section 148 of the Act was not tendered to the assessee nor the same Was refused at all by the assessee. It was refused by the servant of another person Who by no stretch of imagination can be said to be the agent of the assessee and admittedly no notice was tendered either to the assessee or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ummons 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 affixed. Rule 19 provides that where a summon is returned under Rule 17, the Court shall, if the return under that rule has not been verified by the affidavit of the serving officer and may, if it has been so verified, examine the serving officer on oath, or cause him to be so examined by another Court, touching his proceedings and may make such further enquiry in the matter as it thinks fit; and shall either declare that the Summon has been duly served or order such service as it thinks fit. At this stage, the attention is also drawn to Rule 20 which provides the circumstances under which the substituted service can be effected. For the benefit of this order, the provisions of Rule 20 are being reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose presence such notice was affixed, therefore, we are of the considered opinion that there is no valid service of notice to the assessee before the statutory period for assuming jurisdiction and completing the assessment. Merely because the assessee has participated in the proceedings will not validate the assessment proceedings in absence of service of notice u/s. 143(2) of the I.T. Act and the provisions of section 292BB, in our opinion, cannot come to the rescue of the Revenue for invalid assumption of jurisdiction. In this view of matter, we hold that the entire assessment proceedings are void ab initio, invalid, bad in law and therefore, are to be quashed. Accordingly, we quash the assessment proceedings and allow the appeal filed by the assessee. 29. Since we have allowed the appeal filed by the assessee by quashing the assessment proceedings, the grounds raised by the Revenue challenging the order of the learned CIT(A) in deleting the addition become academic in nature and therefore, are not being adjudicated. 30. In the result, the appeal filed by the assessee is allowed and the appeal filed by the Revenue is dismissed. Order pronounced in the Open Court on 29th ..... 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