INCOME TAX OFFICER v. BEDI ENTERPRISES
[Citation -2008-LL-0131-20]

Citation 2008-LL-0131-20
Appellant Name INCOME TAX OFFICER
Respondent Name BEDI ENTERPRISES
Court ITAT
Relevant Act Income-tax
Date of Order 31/01/2008
Assessment Year 1996-97
Judgment View Judgment
Keyword Tags proceedings for reassessment • reassessment proceedings • computation of income • condition precedent • acknowledgement of • reassessment order • issuance of notice • business premises • service of notice • valid assessment • authorised agent • audit objection • local authority • valid notice
Bot Summary: 21st Jan., 2002 and served on the assessee on 24th Jan., 2002, but neither the name of the person to whom the notice has been served has been mentioned nor any report and affidavit has been placed on the notice as who had served the notice. In the case of the appellant, the AO has neither served notice on the partner of the firm or Authorised Representative of the firm, even the notice server has not identified the person on whom the notice was served. The person who had served the notice has not given the name and identification of the person to whom the notice has been served and also its authenticity to receive the notice. Shri Anadi Verma, senior Departmental Representative further submitted that as a notice under s. 148 was served on the person present at the residential premises and who was the member of the family of the partner as the name of the recipient on the notice suggests, inference of CIT(A) that notice under s. 148 was neither served on the partner of the firm nor on the Authorised Representative of the firm, is not sustainable in law. In the case of Chandra Bhan Bansal, notice under s. 148 was served on assessee s son and the Agra Bench of the Tribunal held that the service of notice under s. 148 on the son of the assessee was a valid service. In the instant case it is not clear that who had signed the notice or who had received the notice or upon whom notice was served. In the case of Bal Govind Singh, the learned CIT(A) cancelled the assessment on the ground that notice under s. 148 had been served on the minor son of the assessee and the status of the assessee was not mentioned in the notice, and consequently notice was not valid.


This appeal, filed by Revenue, is directed against order of CIT(A)-II, Lucknow dt. 15th June, 2005 relating to asst. yr. 1996-97. only effective ground raised by Revenue in this appeal reads as under: "2. On facts and in circumstances of case, learned CIT(A) erred in law in annulling assessment order of AO relying on decision of Allahabad High Court in case of Addl. CIT vs. Prem Kumar Rastogi (1980) 124 ITR 381 (All), as notice under s. 148 of IT Act had been issued only after taking prior approval of Addl. CIT, Range-IV and properly served at residence of partner of assessee firm." Briefly stated, facts of case are that assessee furnished return showing income of Rs. 1,04,170 on 29th Nov., 1996 which was processed under s. 143(1)(a) on 25th Sept., 1997 determining refund payable at Rs. 56,470. AO observed that audit has pointed out that against receipts for work done of Rs. 50,96,608, assessee firm had shown receipts of only Rs. 46,84,488 and there was short computation of income to extent of Rs. 4,12,190. Accordingly, case was reopened and notice under s. 148 of Act was issued on 21st Jan., 2002 and served on assessee on 24th Jan., 2002. No return was filed by assessee in response to notice under s. 148 of IT Act, 1961. AO issued notice under s. 142(1) on 27th Aug., 2002 fixing case for compliance on 4th Sept., 2002. According to AO, this notice was duly served by notice server on 3rd Sept., 2002. Another notice under s. 143(2) was issued on 20th Dec., 2002 fixing compliance on 3rd Jan., 2003. According to AO, this notice was received by one Shri Babloo on 27th Dec., 2002. There was no compliance to this notice also. AO also issued notice to assessee through IT Inspector. report of Inspector reads as under: "The shop has since been closed. However from enquiry from other persons it is gathered by me that Mr. M. S. Bedi, one of partners (main) of aforesaid firm has shifted to Delhi. His Delhi address is as under: Mr. M. S. Bedi C-2/402, Capital Apartments Vasundra Enclave, Delhi-96." On basis of Inspector s report dt. 30th Jan., 2003, AO issued notice to Shri M.S. Bedi by speed post on address made available by IT Inspector. There was no response to this notice also. Consequently, AO framed assessment under s. 148/144 of Act on 14th Feb., 2003 and added sum of Rs. 4,12,120 to total income of assessee. Thus, total income came to Rs. 5,16,629. Aggrieved by order of AO, assessee carried matter in appeal before CIT(A). main plea of assessee before CIT(A) was that AO has erred on facts and law in passing assessment order under s. 148/144 of IT Act, 1961 dt. 14th Feb., 2003 without service of any notice under s. 148 of IT. Act, 1961 on assessee or any of its partners and, therefore, it was stated that assessment order is bad in law and be quashed. assessee also submitted before CIT(A) that AO has not served notice under s. 148 of Act on partners of firm or any authorised person and hence never acquired legal or valid jurisdiction to pass any order in present case. assessee, while relying upon decision of Hon ble Supreme Court in case of R.K. Upadhyaya vs. Shanabhai P. Patel (1987) 62 CTR (SC) 17: (1987) 166 ITR 163 (SC), submitted that service of notice is condition precedent to pass valid assessment order. assessee also relied on decision of Hon ble Gauhati High Court in case of CIT vs. Mintu Kalita (2001) 170 CTR (Gau) 149, wherein Hon ble High Court held that "service of notice prescribed by s. 148 for purpose of initiating proceedings for reassessment is not mere procedural requirement, it is condition precedent to initiation of proceeding for assessment under s. 147." It was also submitted by assessee before CIT(A) that someone had placed signature on copy of notice on record of Department. It was contended by assessee that said signatures are not that of any of partners. It was also submitted that copy of notice does not disclose on whom same has been served. It was also argued before CIT(A) by assessee that no further evidence or material has been brought on record by AO vide his remand report to show that recipient of notice is authorised person, i.e. any partner of firm. i.e. any partner of firm. In view of above, it was submitted by assessee before CIT(A) that no notice under s. 148 was received by assessee. assessee also prayed that there was no legal or valid service of notice under s. 148 in present case, AO did not acquire legal or valid jurisdiction to pass any order in present case. learned CIT(A) accepted this contention of assessee that neither t h e notice under s. 148 was served on partners of firm nor on Authorised Representative of firm, or any person authorised in this behalf by firm. For sake of convenience, we may reproduce finding of CIT(A) on this issue, which reads as under: "2.8...........I have carefully considered reply given by appellant and perused assessment order. remand report was called for from AO vide this office letter dt. 5th April, 2005 in which assessee (sic-AO) was informed that appellant has challenged validity of service of notice under s. 148. Hence remand report may be submitted in this regard. AO has sent remand report vide his letter dt. 9th May, 2005 and reported that first issue is with regard to validity of service of notice under s. 148 of IT Act. In this regard, it is submitted that notice under s. 148 dt. 21st Jan., 2002 was served on assessee on 24th Jan., 2002 and service of notice is placed on file. ITI s report has also been obtained and is placed on file. As notice under s. 148 has been served rightly, assessee s contention challenging validity of proceedings is immaterial and deserves to be rejected. I have also examined case record and Inspector s report in this regard. AO has issued notice under s. 148 dt. 21st Jan., 2002 and served on assessee on 24th Jan., 2002, but neither name of person to whom notice has been served has been mentioned nor any report and affidavit has been placed on notice as who had served notice. AO has mentioned about ITI s report which is placed on record. ITI Shri K. G. Philip has given his report to AO, Range-IV(2), Lucknow which is reproduced as under: Sub: Reg. service of notice under s. 148 in case of M/s Bedi Enterprises, 82, G.B. Marg, Lucknow Asst. yr. 1996-97 Please refer to above. In this regard, it is submitted that I have served notice under s. 148 in respect of above assessee for asst. yr. 1996-97 at his residential house 43, Purana Qila, Lucknow on 24th Jan., 2002 as assessee was not available at address mentioned in notice i.e. 82, G.B. Marg, Lucknow. It is further submitted that as far as my memory is concerned, above notice was served o n lady who was present in house at time of my visit and on my enquiry, she has stated that she is wife of assessee. Submitted. Sd/- K.G. Philip ITI Firstly, report is undated and it is not transpired from record as when this report was given by ITI to ITO and under which context. As far as language of report is concerned, it speaks about memory of Inspector. Thus, it is certain that report has been given afterward of service of notice i.e. 24th Jan., 2002. Since ITI had not identified person to whom he has served notice, it is clear that neither notice has been served on partner of firm, nor on Authorised Representatives of appellant firm in this regard as per provision of s. 282 of IT Act, 1961. Hon ble Supreme Court in its judgment in case of R.K. Upadhyaya vs. Shanabhai P. Patel (1987) 62 CTR (SC) 17: (1987) 166 ITR 163 (SC) have held, that service under new Act, is not condition precedent to confirmation of jurisdiction on ITO. It is condition precedent and to making of order of assessment. Hon ble Allahabad High Court in case of Addl. CIT vs. Prem Kumar Rastogi (supra) have held that person who is not authorised agent of assessee or agent or manager, personally carrying on assessee s business or adult member of family but who has merely accepted notices in past on his behalf cannot be deemed or treated to be authorised agent of assessee and service on him of assessment order of assessee is not valid. In case of appellant, AO has neither served notice on partner of firm or Authorised Representative of firm, even notice server has not identified person on whom notice was served. Hon ble Allahabad High Court in case of Laxmi Narain Anand Prakash vs. CST have held that question of law raised by assessee is decided by saying that notice under s. 21 having been improperly served, initiation of proceeding was without jurisdiction and it could not be validated by participation of assessee in proceedings. appellant has further relied on decision of Hon ble Calcutta High Court in case of Bhagwan Devi Saraogi & Ors. vs. ITO & Ors. (1979) 118 ITR 906 (Cal) wherein Hon ble Court have held that if no valid notice of assessment has been issued or if notice issued is illegal or invalid, entire assessment would be without jurisdiction and would be void and illegal. In view of above fact, it is clear neither notice under s. 148 was served on partners of firm, nor on Authorised Representatives of firm or on any person authorised in this behalf by firm. Moreover, person who had served notice has not given name and identification of person to whom notice has been served and also its authenticity to receive notice. In view of above facts and decision of jurisdictional High Court in case of Addl. CIT vs. Prem Kumar Rastogi (1980) 124 ITR 381 (All) and other decisions as discussed above, AO has not acquired jurisdiction to pass impugned order under s. 144/148 of IT Act, 1961 therefore, assessment order passed by AO is illegal and without jurisdiction. Thus, assessment order passed by AO is annulled. Since assessment order passed by AO has been annulled, therefore, there is no need to adjudicate other grounds of appeal as well." From above findings of CIT(A), it is clear that he has cancelled reassessment order and hence Revenue is in appeal before Tribunal. Before us, Shri Anadi Verma, senior Departmental Representative vehemently argued that AO has categorically stated that "on basis of observation of audit objection, raised by RAP dt. 25th Sept., 2002, proceedings under s. 148 were initiated by way of issuance of notice under s. 148 of IT Act, 1961 on 21st Feb., 2002. This notice was served upon assessee on 24th Jan., 2002." He further submitted that plea of assessee before CIT(A) was that notice under s. 148 was never served on assessee as office of assessee was no more situated at 82, G.B. Marg, Lucknow on date of alleged issuance of notice. In this regard, Shri Anadi Verma, senior Departmental Representative submitted that office records show that assessee has communicated neither closure of business nor change of address of business premises which was bounden duty of assessee. He further submitted that notice under s. 148 was sent to M/s Bedi Enterprises, 82, G.B. Marg, Lucknow which was served on 24th Jan., 2002. He further submitted that ITI, in his report, has duly stated that notice under s. 148 in this case, for asst. yr. 1996-97 was served at residential address 48, Purana Kila, Lucknow on 24th Jan., 2002 as assessee was not available at G.B. Marg, address. He further stated that above notice was served on lady who was present in house. Shri Anadi Verma, senior Departmental Representative further submitted that as notice under s. 148 was served on person present at residential premises and who was member of family of partner as name of recipient on notice suggests, inference of CIT(A) that notice under s. 148 was neither served on partner of firm nor on Authorised Representative of firm, is not sustainable in law. Learned Departmental Representative further submitted that subsequent notice under s. 142(1) dt. 27th Aug., 2002 was duly served on 3rd Sept., 2002 by notice server but same remained uncomplied with just as previous notice under s. 148. In view of above, Shri Anadi Verma, senior Departmental Representative submitted that there was valid service of notice on assessee and, therefore, CIT(A) was not justified in annulling reassessment order. He also relied on decision of Tribunal Agra Bench in case of Chandra Bhan Bansal vs. Dy. CIT (2004) 90 TTJ (Agra) 635: (2001) 79 ITD 639 (Agra). In this case it has been held that notice under s. 148 can be considered to be validly served when it was served on assessee s son. Learned Departmental Representative urged that order of CIT(A) may be set aside and restore that of AO. On other hand, learned Authorised Representative of assessee submitted that order of CIT(A) is based on correct appreciation of facts of case and also settled legal position and therefore no interference in his order is required. He further submitted that copy of notice bearing some signature was shown to assessee but, signature bearing on notice is neither of any of partners, nor of any person known to us or employee with assessee during assessment year under consideration or thereafter. He further submitted that notice does not detail identity of person on whom it has been served. Shri Kanchan Kaushal, learned counsel for assessee also submitted that as there was no proper service of notice, AO never acquired legal or valid jurisdiction to pass order in present case. According to him, for above reasons, present reassessment order passed by AO lacks jurisdiction and hence is bad in law. He further submitted that report of ITI has not been provided to assessee and, therefore, AO was not justified in relying on report of ITI. He also relied on following decisions: R.K. Upadhyaya vs. Shanabhai P. Patel (supra); Addl. CIT vs. Prem Kumar Rastogi (1980) 124 ITR 381 (All); Laxmi Narain Anand Prakash vs. CIT 1980-(ST2)-GJX-011-All; Bhagwan Devi Saraogi & Ors. vs. ITO & Ors. (1979) 118 ITR 906 (Cal); ITO vs. Bal Govind Singh 2004 (4) MTC 1101 (All); Gorakhpur Petro Oils Ltd. vs. Addl. CIT [ITA No. 1951/All/1996 dt. 12th Oct., 2004 (sic-31st May, 2005)] [reported at (2005) 95 TTJ (All)(TM) 489 Ed.]; Chandra Agencies vs. ITO (2004) 89 ITD 1 (Del); Duli Chand Luxmi Narain vs. Asstt. CIT (2004) 90 TTJ (Del) 236: (2004) 89 ITD 426 (Del); Hind Book House vs. ITO (2005) 93 TTJ (Del) 224: (2005) 92 ITD 415 (Del). We have heard learned representatives of both parties at length and have also perused materials available on record. decisions cited at time of hearing of appeal were duly considered. Sec. 148(1) of IT Act, 1961 reads as under: "148. (1) Before making assessment, reassessment or recomputation under s. 147, AO shall serve on assessee notice requiring him to furnish within such period, (* * *) as may be specified in notice, return of his income or income of any other person in respect of which he is assessable under this Act during previous year corresponding to relevant assessment year, in prescribed form and verified in prescribed manner and setting forth such other particulars as may be prescribed; and provisions of this Act shall, so far as may be, apply accordingly as if such return were return required to be furnished under s. 139." From above provisions, it is clear that service of valid notice is condition precedent to validity of reassessment. This section further provides that notice should be served on assessee. In regard to service of notice, we may refer to s. 282 of IT Act, 1961. Sec. 282 prescribes specified mode of service of notice. This section reads as under: "282. (1) notice or requisition under this Act may be served on person therein named either by post or as if it were summons issued by Court under CPC, 1908 (5 of 1908). (2) Any such notice or requisition may be addressed (a) in case of firm or HUF, to any member of firm or to manager or any adult member of family; (b) in case of local authority or company, to principal officer thereof; (c) in case of any other association or BOI, to principal officer or any member thereof; (d) in case of any other person (not being individual), to person who manages or controls his affairs." Sec. 282(1)(a) of IT Act, 1961 provides that in case of firm or HUF, notice can be served to any member of firm or to manager or any adult member of family. Sec. 282(1) provides that notice under this Act can be served on person either by post and if not by post, then in same manner in which summons issued by Court under CPC, 1908, are to be served. It is also trite law that as far as position (sic possible) service/summons should be effected on person named in notice/summon and, if it is not possible, then same should be effected on person who is duly vested with authority to receive such notice by person named in summon. It is also well settled that in order to ensure proper service of notice, acknowledgement of person served should be obtained and person serving should also record necessary detail so as to avoid any dispute in this regard. In instant case, it has been claimed by assessee that no notice under s. 148 of IT Act, 1961 was served. We also find that there was no participation in proceedings under s. 148 of IT Act. There was no response from assessee to notice issued under ss. 143(1) and 143(2) of IT Act. Thus, AO framed assessment under s. 148/144 of IT Act, 1961. It is well settled law that it is duty of Revenue to establish that service of notice under s. 148 was made on assessee himself or on somebody duly authorised by him in that behalf. When assessee took plea that there was no proper service on him, it is for Revenue to place relevant material to substantiate plea that assessee was served with proper notice. In case of R.K. Upadhyaya vs. Shanabhai P. Patel (supra), Hon ble Supreme Court held that "the mandate of s. 148(1) is that reassessment shall not be made unless there has been service." In our considered view, valid assessment order could not be passed without proper service of notice. In case of Addl. CIT vs. Prem Kumar Rastogi (supra), Hon ble Allahabad High Court held as under: "A person who is not authorised agent of assessee or agent or manager personally carrying on assessee s business or adult member of his family but who has merely accepted notices in past on his behalf cannot be deemed or treated to be authorised agent of assessee and service on him of assessment order of assessee is not valid." It is observed that during course of appellate proceedings CIT(A) called for remand report from AO. AO vide his letter dt. 9th April, 2005 submitted report. report of AO has been reproduced by CIT(A) in para 2.7 of order. On perusal of report of ITI which is undated, shows that ITI had not identified person to whom he has served notice. According to ITI, notice under s. 148 was served on lady who was present in house. It is relevant to observe that person on whom service has been effected has not duly been identified which was necessary as per r. 18 of Order V of CPC, 1908. In our view, learned CIT(A) has correctly observed that since ITI had not identified person to whom he had served notice, it is clear that neither notice has been served on partner of firm, nor on Authorised Representative of assessee firm in this regard as per provisions of s. 282 of IT Act, 1961. decision relied upon by learned Departmental Representative is not applicable to facts of present case. In case of Chandra Bhan Bansal (supra), notice under s. 148 was served on assessee s son and, therefore, Agra Bench of Tribunal held that service of notice under s. 148 on son of assessee was valid service. However, in instant case it is not clear that who had signed notice or who had received notice or upon whom notice was served. As we have already observed hereinabove that notice does not detail identity of person on whom it has been served. Hon ble Calcutta High Court in case of Bhagwan Devi Saraogi & Ors. (supra), held that "if no valid notice of reassessment has been issued or if notice issued is illegal or invalid entire reassessment proceedings would be without jurisdiction and would be void and illegal." In case of Bal Govind Singh (supra), learned CIT(A) cancelled assessment on ground that notice under s. 148 had been served on minor son of assessee and status of assessee was not mentioned in notice, and consequently notice was not valid. Revenue filed second appeal before Tribunal, Allahabad Bench and Tribunal held that there was no infirmity in order of CIT(A) as notice under s. 148 was not validly issued and served on assessee. In view of above discussions, we agree with this finding of CIT(A) that AO has not acquired jurisdiction to pass impugned order under s. 144/148/147 of Act, therefore, assessment order passed by AO is illegal and without jurisdiction. In that view of matter, learned CIT(A) has correctly annulled assessment order. In result, appeal is dismissed. *** INCOME TAX OFFICER v. BEDI ENTERPRISES
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