COMMISSIONER OF INCOME TAX (CENTRAL)-I v. CHETAN GUPTA
[Citation -2015-LL-0915-8]

Citation 2015-LL-0915-8
Appellant Name COMMISSIONER OF INCOME TAX (CENTRAL)-I
Respondent Name CHETAN GUPTA
Court HIGH COURT OF DELHI AT NEW DELHI
Relevant Act Income-tax
Date of Order 15/09/2015
Assessment Year 2001-02
Judgment View Judgment
Keyword Tags barred by limitation • issue of notice • non-service of notice • reason to believe • reassessment proceedings • valid notice
Bot Summary: In response to the above notice, on 12th December, 2008, Vipin Aggarwal Associates addressed a letter to the ACIT inter alia stating as under: In this connection, it is to submit that the assessee has not received any notice u/s 148 dated 28.03.2008 requiring the assessee firm to file a return in the prescribed form, as mentioned in the present notice. Issue of notice where income has escaped assessment Before making the assessment, reassessment or recomputation under Section 147, the Income-tax Officer shall serve on the Assessee a notice containing all or any of the requirements which may be included in a notice under sub-section of Section 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub- section. If no notice is issued or if the notice issued is shown to be invalid then the proceedings taken by the Income- tax Officer without a notice or in pursuance of an invalid notice would be illegal and void. If no notice is issued or if the notice issued is shown to be invalid, then the proceedings taken by the Income tax Officer without a notice or in pursuance of an invalid notice would be illegal and void. 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 legal service. The observations in Mayawati v. CIT to the effect that the requirement of service of notice under Section 143 of the Act cannot be considered as mandatory can no longer be considered to be good law in light of the subsequent decision of the Supreme Court in ACIT v. Hotel Blue Moon where it was held that an omission on the part of the assessing authority to issue notice under Section 143 cannot be a procedural irregularity and the same is not curable and the requirement of notice under Section 143 cannot be dispensed with. To summarize the conclusions: Under Section 148 of the Act, the issue of notice to the Assessee and service of such notice upon the Assessee are jurisdictional requirements that must be mandatorily complied with.


$ * IN HIGH COURT OF DELHI AT NEW DELHI Reserved on: 9th September, 2015 Date of Decision: 15th September, 2015 + ITA 72 of 2014 COMMISSIONER OF INCOME TAX (CENTRAL)-I ..... Appellant Through: Mr. Kamal Sawhney, Senior Standing Counsel with Mr. Raghvendra Singh, Advocate. versus CHETAN GUPTA ..... Respondent Through: Mr. Ajay Vohra, Senior Advocate with Ms. Kavita Jha and Mr. Vaibhav Kulkarni, Advocates. CORAM: DR. JUSTICE S. MURALIDHAR MR. JUSTICE VIBHU BAKHRU Dr. S. Muralidhar, J. 1. This appeal by Revenue is directed against order dated 21st June 2013, passed by Income Tax Appellate Tribunal (ITAT) in ITA No.1891/Del/2012 for Assessment Year (AY) 2001-2002. Question of law 2. Admit. question of law framed for consideration is: Whether ITAT was correct in holding that since notice under Section 148 of Income Tax Act (the Act) was not served on ITA No.72 of 2014 Page 1 of 24 Assessee in accordance with law, re-assessment made consequent thereto was without jurisdiction and liable to be quashed? Background facts 3. Assessee, showing his address as C/o Jagat Theatre, Chandigarh , filed return of income for AY 2001-2002 with Income Tax Range-2, Chandigarh on 11th October, 2001 disclosing income of Rs.6,47,425. return was processed under Section 143(1) of Act and acknowledgement issued on 5th January, 2002. 4. Information was received from Additional Director of Income Tax Investigation (ADIT) Unit (VI), New Delhi by letter dated 27th February, 2008, stating that Assessee had been arrested on 17 th May, 2007 in FIR No.5 dated 23rd March, 2007, Police Station Vigilance Bureau, Ludhiana pertaining to Ludhiana City Centre Scam and pen drive had been recovered from him. print outs from pen drive received by ADIT from Punjab Vigilance Bureau were forwarded to Assessing Officer (AO) in Chandigarh. perusal of print outs revealed that there were various entries in different names pertaining to Financial Year (FY) 2000-2001. information when tabulated by AO showed that there were credits of Rs.40,49,77,905 on which interest of Rs.7,35,49,141 had been paid. For FY in question sum of Rs. 84,86,363 had been paid as interest. Assessee had failed to enclose balance sheet with his return of income filed. Apart from salary income, Assessee had disclosed income from ITA No.72 of 2014 Page 2 of 24 house property on account of his half share in property in Delhi and some interest income. AO therefore concluded that Assessee had not fully and truly disclosed all material facts for AY in question. AO noted that in statement dated 24th September 2007, recorded by ADIT (Inv.), Ludhiana, Assessee denied knowledge of names appearing in pen drive although he failed to deny that pen drive was recovered from his possession. AO drew presumption that information in pen drive found in his possession was true and that primary onus to establish identity, genuineness and creditworthiness of creditors whose names appeared therein was on Assessee. AO accordingly concluded that he had reason to believe that income for AY in question had been under-assessed to extent of sums mentioned hereinbefore and had therefore escaped assessment within meaning of Section 147(b) of Act. re-assessment proceedings 5. On 28th March 2008, Assistant Commissioner of Income Tax (ACIT) Circle 3, Chandigarh issued notice under Section 148 of Act. notice was addressed to Assessee but address indicated therein was C/o Kiran Cinema, Sector-22, Chandigarh. It appears that said notice was served upon one Mr. Ved Prakash, Accountant at Kiran Cinema on that very date. 6. Subsequently jurisdiction of Assessee was transferred to ACIT, Central Circle-5, New Delhi. On 28th November, 2008, another ITA No.72 of 2014 Page 3 of 24 notice under Section 148 of Act was issued to Assessee by ACIT, New Delhi and this time there were two addresses shown for him. first was C/o Kiran Cinema, Sector-22, Chandigarh and second C/o Vipin Aggarwal & Associates, E-4, Defence Colony, New Delhi. 7. In response to above notice, on 12th December, 2008, Vipin Aggarwal & Associates addressed letter to ACIT inter alia stating as under: In this connection, it is to submit that assessee has not received any notice u/s 148 dated 28.03.2008 requiring assessee firm to file return in prescribed form, as mentioned in present notice. In view of that you are requested to provide us above notice u/s 148 along with basis and reason of opening above mentioned case u/s 148 of Income Tax Act to enable us to get comply with same. In continuation to above proceedings and our earlier submission, without prejudice to legal rights of assessee earlier original return filed by assessee, may be treated as return in these provisions u/s 148 of Income Tax Act, under protest and we object present proceedings. 8. On that very date, i.e. 12th December 2008, ACIT, Central Circle 5, New Delhi again wrote to Assessee with two addresses mentioned hereinbefore acknowledging that letter dated 12 th December, 2008 of Vipin Aggarwal & Associates had been received in dak and further stating as under: ITA No.72 of 2014 Page 4 of 24 ....I have been informed by ACIT, Circle 3(1), Chandigarh that notice has been validly served on Shri Ved Prakash, accountant of Kiran Cinema (who also receives other notices of concerned group concerns). 9. ACIT stated that assessment was going to be barred by limitation on 31st December, 2008 and, therefore, Assessee should show cause why sums mentioned hereinbefore should not be added in income as they were not declared in return of AY 2001-02. 10. In response to above letter, Vipin Aggarwal & Associates wrote to ACIT on 19th December, 2008, as under: Dear Sir, This is with reference to your letter dated 12.12.08 and our earlier reply dated 12.12.08. It is again submitted that notice u/s 148 was not received by assessee. However, without prejudice to above submissions, it is respectfully submitted that copy of information mentioned in reason recorded as received from ADIT (Investigation Unit), VI(1) may please be supplied to us so that reply may be filed. It is further submitted that pen drive was never recovered from possession or control of assessee and therefore there is no question of any explanation from assessee. Assessee never did any money lending as alleged in reason recorded. Therefore, reopening of present assessment is with great respect unjustified. assessee has already declined to have any knowledge as well as recovery from him, said pen drive before ADIT (Inv.), Ludhiana and Delhi. It is further requested that copy of pen drive and its printouts ITA No.72 of 2014 Page 5 of 24 as referred in reasons recorded may please be supplied to us. Further, in reason recorded for reopening of case, it has been mentioned that concerned officer has tabulated information and some amount of credit totalling to Rs.40,49,77,905/- along with interest has been shown. It is requested that basis of said figures may be given to us, so that reply may be filed as required in your show cause notice dated 12.12.08 regarding adding of said amount to income of assessee for Asstt. Year 2001-02. 11. ACIT computed assessment on 29th December, 2008 under Section 143(3)/148 of Act and made addition of Rs.30,50,48,745 to income of Assessee for AY 2001-02. Order of CIT (A) 12. In appeal filed before Commissioner of Income Tax (Appeals) [CIT(A)], Assessee contended inter alia that AO erred in law in framing impugned assessment order without assuming jurisdiction as per law and without serving mandatory notices under Sections 143 & 148 of Act. 13. In order dated 26th March, 2012 dismissing Assessee s appeal, CIT(A) noted that letter had been faxed by ACIT, New Delhi to ACIT, Circle-3, Chandigarh regarding issue of notice under Section 148 of Act. In response, ACIT Chandigarh by fax letter inter alia stated that notice in name of Assessee had been served at only available address of Assessee, i.e. C/o Kiran Cinema, Sector-22, Chandigarh. It was further stated that Mr. Ved Prakash ITA No.72 of 2014 Page 6 of 24 who has been working as regular Accountant for last five-six years received notice on behalf of Assessee as Assessee himself is rarely available at given address." It was further mentioned that service of all notices pertaining to Assessee Group was effected at above address at Kiran Cinema and that different employees of Kiran Cinema had received said notices. Further, in case of Ms. Vandana Gupta, Assessee's daughter, service of notices had been effected at Kiran Cinema. Even in other group case of M/s. Jagtumal Kundan Lal, C/o Jagat Theatre, service of notice had been effected at Kiran Cinema. It was accordingly asserted by Revenue that proper compliance had been made. 14. Assessee, inter alia, contended before CIT(A) that service of notice had not been effected properly in accordance with legal requirements specified under Section 282(1) of Act; that Section 292 BB did not have retrospective operation and further that Assessee had in any event raised objection in that regard prior to completion of re-assessment by AO. 15. CIT(A) rejected above contentions by observing that Assessee was silent on issue as to why notices in case of family members and other group cases were received at address of Kiran Cinema. CIT (A) concluded that it appeared that Assessee and his group for their own convenience prefer to receive notice at this place instead of so called address of care of Jagat Theatre. purpose of notice was to make Assessee aware of proceedings and ITA No.72 of 2014 Page 7 of 24 that purpose had been fulfilled. Further, Section 292BB was procedural provision which had come into effect from 1st April, 2008 whereas notice was issued thereafter and assessment had been made on 29th December, 2008. Accordingly, above ground was rejected. Thereafter CIT (A) proceeded to discuss merits of additions made and upheld it. impugned order of ITAT 16. Aggrieved by above order Assessee filed appeal being ITA No.1891/Del/2012 before ITAT urging more or less same grounds of challenge to order of re-assessment. 17. ITAT, by impugned order, reversed order of CIT (A) and came to conclusion that with Assessee s contention that Ved Prakash is neither his employee nor his authorized representative remaining uncontroverted, and with that AO failing to take note of Assessee s objections about non-service of notice under Sections 148 and 143 (2) of Act, it could not be said to be proper service upon Assessee. 18. ITAT followed decisions of this Court in CIT v. Hotline International Pvt. Ltd. 296 ITR 333 (Del) and of Supreme Court in Assistant Commissioner of Income Tax v. Hotel Blue Moon 321 ITR 362 (SC) and held that on account of absence of valid service of notice under Section 148 of Act on Assessee, re-assessment proceedings for AY 2001-02 were bad in law. ITA No.72 of 2014 Page 8 of 24 Submissions of counsel 19. This Court has heard submissions of Mr. Raghvendra Singh, learned Junior counsel for Revenue and Mr. Ajay Vohra, learned Senior counsel for Respondent-Assessee. 20. submission of Mr. Singh was to effect that there is distinction to be drawn between issuance of notice under Section 148 of Act and service of such notice upon Assessee. Relying on decision of Supreme Court in R.K. Upadhyaya v. Shanbhai P. Patel (1987) 3 SCC 96, Mr. Singh submitted that service of notice under Section 148 of Act was not condition precedent to conferment of jurisdiction in ITO to deal with matter . Referring to Section 153 (2) of Act Mr. Singh submitted that there was no time limit for completion of re-assessment. This was different from requirement under Section 34 of Income Tax Act, 1922 ( 1922 Act ) In other words as long as notice had been issued under Section 148 of Act, AO would have jurisdiction to proceed with reassessment. only restriction was that he could not complete re- assessment without notice being served upon Assessee. 21. Mr. Singh submitted that in present case Assessee did not deny that Mr. Ved Prakash was employed by him as Accountant. Referring to decision in Harshad J. Shah v. LIC of India AIR 1997 SC 2459 Mr. Singh submitted that in such circumstances doctrine of apparent authority would apply such that although principal may ITA No.72 of 2014 Page 9 of 24 not have given that person such authority, his conduct was such that it could be inferred. According to Mr. Singh, in terms of Section 282 (1) of Act read with Order 9 Rule 12 CPC, invoking doctrine of implied authority, service of notice upon Mr. Ved Prakash should be construed as proper service of notice upon Assessee. Further Assessee had nowhere denied that in other proceedings Mr. Ved Prakash had in fact represented Assessee. Once Revenue had taken such stand, burden according to Mr. Singh shifted to Assessee to show that Ved Prakash was not his agent. 22. Mr. Singh also referred to Section 292 BB of Act. Reliance was also placed on decision in CIT v. Shital Prasad Kharag Prasad 280 ITR 541 (All); CIT v. Hotline International Pvt. Ltd. 296 ITR 333 (Del); Sri Nath Suresh Chand Ram Naresh v. CIT 280 ITR 396 (All); P.N. Sasikumar v. CIT (1988) 170 ITR 80 (Ker); Venad Properties (P) Limited v. Commissioner of Income Tax (2012) 340 ITR 463 (Del) and Mayawati v. CIT (2010) 321 ITR 349 (Del). 23. In reply, Mr. Ajay Vohra submitted that notice to Assessee under Section 148 and 143 (2) of Act was different from notice under Section 142 (1) for instance. Service of notice on Assessee strictly in terms of Section 148 read with Section 282 (1) of Act is jurisdictional requirement. Section 153 (2) of Act made it clear that without such service of notice AO could not proceed to make re- assessment. He submitted that onus was on Revenue to show that service of notice had been effected on Assessee or his authorised ITA No.72 of 2014 Page 10 of 24 representative. failure to serve such notice would lead to inevitable result of invalidating re-assessment order. Finally, he pointed out that Section 292 BB of Act, introduced with effect from 1st April 2008 was not retrospective. In any event, in terms of proviso thereto, Assessee had, prior to completion of re- assessment, specifically raised objection to effect that service of notice under Section 148 of Act had not been effected upon him. Mr. Vohra referred to number of decisions in support of above submissions, which will be discussed hereafter. Service of notice jurisdictional requirement 24. Court first would like to deal with question whether notice under Section 148 of Act is jurisdictional requirement. relevant portion of Section 148 (1) reads as under: 148. Issue of notice where income has escaped assessment (1) Before making assessment, reassessment or recomputation under Section 147, Income-tax Officer shall serve on Assessee notice containing all or any of requirements which may be included in notice under sub-section (2) of Section 139; and provisions of this Act shall, so far as may be, apply accordingly as if notice were notice issued under that sub- section. 25. Supreme Court in R.K. Upadhyaya (supra), explained that there was distinct shift in scheme of provisions of 1961 Act in comparison with corresponding provision i.e. Section 34 under 1922 Act under which mandatory requirement was that both issuance and service of notice had to be completed within prescribed period. Consequently, service of notice within limitation period ITA No.72 of 2014 Page 11 of 24 was foundation of jurisdiction under 1922 Act. In Y. Narayana Chetty v. Income Tax Officer, Nellore [1959] 35 ITR 388 (SC) Supreme Court observed in context of Section 34 of 1922 Act,: "The notice prescribed by section 34 of Income tax Act for purpose of initiating reassessment proceedings is not mere procedural requirement; service of prescribed notice on assessee is condition precedent to validity of any reassessment made under section 34. If no notice is issued or if notice issued is shown to be invalid then proceedings taken by Income- tax Officer without notice or in pursuance of invalid notice would be illegal and void. 26. This was also basis for decision in Banarasi Debi v. ITR (1964) 53 ITR 100. However, under 1961 Act procedural requirement has been spread over three sections, being Sections 147, 148 and 149. period of limitation within which notice under Section 148 has to be issued is specified in Section 149. Section 153 (2) of Act stipulates that no order of re-assessment can be passed beyond period of one year from expiry of financial year in which service of notice was effected. Section 148 (1), however, is clear that no reassessment can take place without service of notice being effected on Assessee or his authorised representative. 27. In R.K. Upadhyaya (supra) Supreme Court explained that mandate of Section 148 (1) is that reassessment shall not be made until there has been service. However, said decision does state that jurisdiction becomes vested in AO to proceed with assessment once notice is issued within period of limitation. It also emphasized ITA No.72 of 2014 Page 12 of 24 that no reassessment shall be made until there has been service. legal position therefore, even under 1961 Act, is that service of notice under Section 148 is jurisdictional requirement for completing re-assessment. This has been emphasized in several other decisions of High Courts as well. 28. In C.N. Nataraj v. Fifth Income-tax Officer (1965) 56 ITR 250 (Mys), High Court of Mysore was dealing with case where notice under Section 148 of Act was issued in names of Assessee who were minors and not in names of their guardians. notices were served on clerk of father of Assessee who was neither agent of Assessee nor authorized to accept notices on their behalf. Court, relying on decision in N. Narayana Chetty (supra) observed: "There is no doubt that notice prescribed under section 148 of Act for initiating reassessment proceedings is not mere procedural requirement ; service of prescribed notice on assessee is condition precedent to validity of any reassessment made under section 147. If no notice is issued or if notice issued is shown to be invalid, then proceedings taken by Income tax Officer without notice or in pursuance of invalid notice would be illegal and void." 29. In CIT v. Hotline International (P) Ltd. (supra) this Court held that affixation of notice on address at which security guard of Assessee-company refuses to receive such notice cannot be construed to be proper service of notice under Section 148 of Act. security ITA No.72 of 2014 Page 13 of 24 guard was not agent of Assessee and therefore, reassessment proceedings were held to be bad in law. 30. In Dina Nath v. Commissioner of Income-tax [1994] 72 Taxman 174 (J & K) notice under Section 143 (2) of 1961 Act was served upon one S, who was neither member of family of Assessee nor his duly authorized agent. However, S had been accepting notice on behalf of Assessee and prosecuting cases on his behalf earlier before income tax authorities. High Court held: object of issuance notice or summons is to intimate concerned person to appear and answer queries or question sought to be clarified by Court or authorities. As serious consequences are likely to follow, notice or summons must necessarily be issued and served in form and in manner prescribed by law. 31. High Court in Dina Nath (supra), referred to Order V Rule 12 CPC as well as Order III Rule 6 CPC. It thereafter concluded that notice must be served personally upon individual or upon his agent duly authorized in terms of Order III Rule 6 CPC. contention of Assessee was upheld and reassessment proceeding was quashed. 32. In Jayanthi Talkies Distributors v. Commissioner of Income-tax (1979) 120 ITR 576 (Mad) notice was served by notice-server of Department on Manager of Assessee-firm. Manager wrote to ITO seeking time. Since no return was filed by Assessee within time granted, ITO completed reassessment under Section 144 of 1961 Act. On appeal High Court found that none ITA No.72 of 2014 Page 14 of 24 of partners of Assessee-firm had been personally served with notice. Service was effected only on Manager of firm who had no specific or written authority to receive such notice. It was held: when statute provides that notice should be served in particular mode, it was not possible to hold that there had been proper service of notice merely from fact that person to whom notice had been addressed had received notice through some other source or that he had become aware of contents of notice. There had not been due service of notice as contemplated by provisions of Code of Civil Procedure dealing with service of notice or summons. Therefore, service of notice on Manager who had no written authority to receive same could not be held to be proper service on Assessee. 33. In Sri Nath Suresh Chand Ram Naresh v. CIT (supra) it was reiterated that service of valid notice under Section 148 was foundation for initiation of reassessment proceedings and condition precedent for validity of notice. It was held that Tribunal was not right in holding that notices under Section 148 addressed as SCR and karta S were valid notices for reassessing income of HUF MM or MS or its successors. Onus on Revenue to prove service of notice 34. There is sufficient judicial authority for proposition that burden of showing that service of noticed has been effected on Assessee or his duly authorized representative is on Revenue. These include Fatechand Agarwal v. Commissioner of Wealth-Tax [1974] ITA No.72 of 2014 Page 15 of 24 97 ITR 701 (Ori) and Venkat Naicken Trust v. ITO [1999] 107 Taxman 391 (Mad). In CIT v. Thayaballi Mulla Jeevaji Kapasi (1967) 66 ITR 147 (SC), Respondent to whom notice was directed was not in town. only information which process server had was that Respondent was either in Bombay or Ceylon. Thereafter, process server affixed notice on business premises of Respondent. Supreme Court affirmed essential principle that if no notice was served within period, Income-tax Officer was incompetent to commence proceedings for reassessment under Section 34 of 1922 Act." It was further held that service of notice under Section 34 (1) (a) within period of limitation being condition precedent to existence of jurisdiction, if Income-tax Officer was unable to prove that notice was duly served upon Respondent within prescribed period, any return filed by Respondent after expiry of period of eight years will not invest Income-tax Officer with authority to reassess income of Respondent pursuant to such return. On facts of that case it was held that Revenue had sufficiently discharged onus by producing affidavit of process server. 35. Under Section 282 (1) of Act, service of notice may be made by delivering or transmitting copy thereof to person to whom notice is addressed by more than on mode. One of modes is "in such manner as provided under Code of Civil Procedure, 1908 ( CPC )". For purpose of service of summons under Order V Rule 12 CPC, service can be taken to complete, if it is effected, on person to whom his ITA No.72 of 2014 Page 16 of 24 address or to another person who is empowered to receive such notice on his behalf. Besides appointment of such agent by Assessee has to be in writing in order to meet requirement of Order III Rules 2 and 6 CPC. Therefore, in instant case, Revenue had to show that person on whom notice was served i.e., Mr. Ved Prakash was in fact empowered by Assessee to receive notices on his behalf. Apart from invoking doctrine of apparent authority , Revenue has been unable to show that, in fact, Ved Prakash was empowered to receive such notice on behalf of Assessee. 36. reliance by Assessee on decision in Harshad J. Shah v. LIC of India (supra) appears to be misplaced. facts there were that relationship of principal and agent flowed from contract. agent was employed as such by LIC and letter of appointment contained expressed prohibition on him collecting premium on behalf of LIC. Further there were regulations that prohibiting agents from collecting premium on behalf of LIC. Court explained doctrine of apparent authority and observed: authority of agent is apparent where it results from manifestation made by principal to third parties. On facts of case, said doctrine was held not to bind LIC against third parties who may have been unaware of lack of authority of agent to whom they handed over premium cheques. In present case, however, Revenue has not been able to show that Assessee held out Mr. Ved Prakash to be his employee or agent. ITA No.72 of 2014 Page 17 of 24 37. No attempt appears to have been made by Revenue to serve Assessee at address provided by him i.e. "c/o Jagat Theatre, Sector 17, Chandigarh". All notices were addressed to him at address "C/o Kiran Cinema, Chandigarh" which was in Sector-22. Therefore, this is not case where attempt was made by Revenue to serve Assessee at his known address, and upon not finding him there Revenue learnt of address where he would be found. Merely because other notices sent to 'Assessee group' were received by employees of Kiran Cinema it does not automatically lead to inference that Assessee's place of business was also Kiran Cinema. In any event, there could not be inference that Mr. Ved Prakash was duly empowered by Assessee to receive notices on his behalf. In very first notice dated 28th March 2008 endorsement made by Mr. Ved Prakash shows him describing himself as Accountant, Kiran Cinema, Sector-22, Chandigarh and nothing more. 38. It was not as if Revenue was not made aware of lapse. Vipin Aggarwal & Associates, Chartered Accountants (CAs) of Assessee, by their letter dated 12th December 2008 informed ACIT that Assessee had not till then received notice dated 28th March 2008 under Section 148 of Act. They made specific request to ACIT that copy of notice under Section 148 along with basis and reason of opening above mentioned case under Section 148" be provided to them to enable them to "comply with same." However, ACIT in his reply of same date continued to show addresses of Assessee as "c/o Kiran Cinema, Sector-22, Chandigarh and c/o ITA No.72 of 2014 Page 18 of 24 M/s. Vipin Aggarwal & Associates CA and insisted that notice had been validly served on Shri Ved Prakash, accountant of Kiran Cinema (who also receives other notices of concerned group concerns)." CAs for second time on 19th December 2008 pointed out that that "notice u/s 148 was not received by assessee" and again asked for copy thereof along with reasons for reopening assessment. However, no attempt was made by ACIT to ascertain correct address of Assessee and serve copy of notice afresh on him. Participation by Assessee in proceedings not waiver 39. next issue to be considered is whether failure by Assessee to specifically protest that Mr. Ved Prakash was not his Accountant or agent or that he was not empowered to accept notices on his behalf should be taken to be waiver by Assessee of requirement of proper service of notice in terms of Section 148 of Act. settled legal position is that merely because Assessee may have participated in proceedings, requirement of service of proper notice upon person in accordance with legal requirement under Section 148 of Act is not dispensed with. 40. In B. Johar Forest Works v. Commissioner of Income-tax (1977) 107 ITR 409 (J&K) notice issued by ITO to Assessee under Section 22 (2) of 1922 Act. notice was served on employee of Assessee who was not authorized to accept such notice. Subsequently, General Manager of Assessee applied for extension of time for filing return, which was allowed by ITO. ITA No.72 of 2014 Page 19 of 24 However, return was not filed within extended time and ex parte order was passed. Before High Court it was contended that employee on whom service of notice was found to have been made was not duly authorized to accept such notice and that mere fact that General Manager of firm applied for time, would not render service of notice on employee valid and legal service. It is contended that Assessee had not denied service of notice on such employee. High Court however negatived plea of Revenue and held that in absence of finding by Tribunal that employee of Assessee was authorized to accept such service on behalf of Assessee, notice could not be said to have been duly served upon Assessee. It was held that acquisition of knowledge in regard to issuance of notice under Section 22 (2) of 1922 Act could not be considered to be equivalent to, or substitute for, service of notice on Assessee. It was further observed that knowing about issuance of notice otherwise than by its service on person concerned is one thing and service of notice on person is another. 41. In context of sales tax Full Bench of Allahabad High Court in Laxmi Narain Anand Prakash v. Commissioner of Sales Tax, Lucknow AIR 1980 All 198 it was held that notice of initiation proceeding under Section 21 of U.P. Sales Tax Act, 1947 was condition precedent and not only procedural requirement. mere fact that Assessee had obtained knowledge of proceeding and participated could not validate proceeding being initiated without ITA No.72 of 2014 Page 20 of 24 jurisdiction. It is subsequently held that it is firmly established that where Court or Tribunal has no jurisdiction, no amount of consent, acquiescence or waiver can create it. Decisions referred to by Revenue 42. cases referred to by Mr. Singh do not appear to be relevant to case on hand. general observations in Venad Properties (P) Limited (supra) to effect that failure to comply with procedural requirement should not defeat substantive justice may not be apposite in present context where failure to serve notice under Section 148 is jurisdictional and not merely procedural requirement. 43. Also, observations in Mayawati v. CIT (supra) to effect that requirement of service of notice under Section 143 (2) of Act cannot be considered as mandatory can no longer be considered to be good law in light of subsequent decision of Supreme Court in ACIT v. Hotel Blue Moon (supra) where it was held that omission on part of assessing authority to issue notice under Section 143 (2) cannot be procedural irregularity and same is not curable and, therefore, requirement of notice under Section 143 (2) cannot be dispensed with. 44. submission that under Section 153 (2) of Act, there was open ended time limit for completion of reassessment till such time proper service of notice under Section 148 of Act was not effected on Assessee is hypothetical since in present case ITA No.72 of 2014 Page 21 of 24 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 expiry of one year from end of financial year in which notice under Section 148 was served. Therefore service of notice is pre-condition to finalising re-assessment. Section 292 BB not attracted 45. In present case, prior to completion of reassessment, Assessee has raised objection that he has not been duly served in accordance with Section 148 of Act. Consequently, proviso to Section 292 BB is attracted and Revenue cannot take advantage of main portion of Section 292 BB. In any event, as rightly pointed out by Mr. Vohra, and as held by Special Bench of Tribunal in Kuber Tobacco Products (P) Limited v. Deputy Commissioner of Income-tax [2009] 28 SOT 292 (Del) (SB), Section 292 BB which was introduced with effect from 1st April 2008 and is prospective. Conclusions 46. To summarize conclusions: (i) Under Section 148 of Act, issue of notice to Assessee and service of such notice upon Assessee are jurisdictional requirements that must be mandatorily complied with. They are not mere procedural requirements. ITA No.72 of 2014 Page 22 of 24 (ii) For AO to exercise jurisdiction to reopen assessment, notice under Section 148 (1) has to be mandatorily issued to Assessee. Further AO cannot complete reassessment without service of notice so issued upon Assessee in accordance with Section 282 (1) of Act read with Order V Rule 12 CPC and Order III Rule 6 CPC. (iii) Although there is change in scheme of Sections 147, 148 and 149 of Act from corresponding Section 34 of 1922 Act, legal requirement of service of notice upon Assessee in terms of Section 148 read with Section 282 (1) and Section 153 (2) of Act is jurisdictional pre-condition to finalizing reassessment. (iv) onus is on Revenue to show that proper service of notice has been effected under Section 148 of Act on Assessee or agent duly empowered by him to accept notices on his behalf. In present case, Revenue has failed to discharge that onus. (v) mere fact that Assessee or some other person on his behalf not duly authorised participated in reassessment proceedings after coming to know of it will not constitute waiver of requirement of effecting proper service of notice on Assessee under Section 148 of Act. ITA No.72 of 2014 Page 23 of 24 (vi) Reassessment proceedings finalised by AO without effecting proper service of notice on Assessee under Section 148 (1) of Act are invalid and liable to be quashed. (vi) Section 292 BB is prospective. In any event Assessee in present case, having raised objection regarding failure by Revenue to effect service of notice upon him, main part of Section 292 BB is not attracted. 47. On facts of present case, Court finds that ITAT was right in its conclusion that since no proper service of notice had been effected under Section 148 (1) of Act on Assessee, reassessment proceedings were liable to be quashed. Consequently, question framed is answered in affirmative, i.e., in favour of Assessee and against Revenue. 48. appeal is dismissed but, in facts and circumstances of case, with no order as to costs. S. MURALIDHAR, J VIBHU BAKHRU, J SEPTEMBER 15, 2015 b nesh/Rk ITA No.72 of 2014 Page 24 of 24 COMMISSIONER OF INCOME TAX (CENTRAL)-I v. CHETAN GUPTA
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