IN HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. WRIT PETITION NO.513 OF 2019 Harjeet Surajprakash Girotra Petitioner Vs Union of India & Ors. Respondents Mr.Anupam Dighe with Ms.Chandni Tanna i/b India Law Alliance for Petitioner Mr.Sham Walve for Respondent No.2 CORAM: AKIL KURESHI & S.J. KATHAWALLA, JJ. ORDER RESERVED ON: JULY 8, 2019 ORDER DELIVERED ON: JULY 16, 2019 P.C.: 1. Heard learned Counsel for parties for final disposal of petition. petitioner has challenged notice dated 13.2.2019 and consequential actions taken by respondents pursuant to such notice. brief facts are as under: petitioner is individual, widowed lady. She has been allotted Permanent Account Number (PAN for short) by Income Tax Department. However, according to her, being Page 1 of 15 ::: Uploaded on - 17/07/2019 doc housewife, she had never filed return of income since she did not have any taxable income. After death of her husband, she resides mostly with her sisters at Jabalpur. 2. It appears that Respondent No.2 Assessing Officer issued notice of reopening of assessment of petitioner for Assessment Year 2011-2012. said notice dated 15.3.2018 was despatched for delivery through post. It was returned by postal authority on 23.3.2018 with remark left . According to Department, address in said postal communication was as stated by assessee in her PAN which she never requested to be changed. On basis of such notice and postal despatch, Assessing Officer carried on assessment for said Assessment Year. During assessment, however, he attempted to serve notices on petitioner at address given by her in her bank account, details of which were with Department. 3. Assessment Officer passed reassessment order dated 28.12.2018. Department thereafter issued recovery notice dated 1.2.2019 seeking recovery of petitioner s tax dues pursuant to said assessment order. According to Page 2 of 15 ::: Uploaded on - 17/07/2019 ::: Downloaded on - 18/07/2019 11:16:29 ::: wp.513.2019_J.doc Department, during period relevant to Assessment Year in question, petitioner had entered into various high value transactions such as cash deposits in bank account, purchase of mutual funds, sale and purchase of immovable properties, etc. 4. According to petitioner, she was completely unaware and oblivion to such proceedings since she was no longer residing at address indicated in her PAN card and entire assessment thus proceeded ex-parte. Only upon being telephonically informed about certain despatches by Department, she rushed from Jabalpur to Mumbai and gathered basic information. She, therefore, filed Writ Petition challenging reopening of assessment and consequential actions taken by Department. 5. Appearing for Petitioner, learned Counsel submitted that mere issuance of notice of reopening of assessment by Department is not sufficient. Service thereof to assessee is also necessary. In present case, notice issued by Department could not be served since petitioner had changed her address. Department, therefore, had to follow Page 3 of 15 ::: Uploaded on - 17/07/2019 ::: Downloaded on - 18/07/2019 11:16:29 ::: wp.513.2019_J.doc procedure prescribed under Income Tax Rules, 1961 ( Rules for short) to serve such notice. In present case, same has not been done. Without valid service of notice, reassessment could not have been done. 6. On other hand, learned Counsel for Department opposed petition, contending that notice of reopening of assessment was issued by Assessing Officer. This would be sufficient compliance with requirement of section 148 of Income Tax Act ( Act for short). notice was also despatched for service at petitioner s address given by her in her PAN card. She never intimated change in address. Department had, therefore, no information about her not residing at said place if at all. petitioner was systematically dodging service of notice. Counsel pointed out that several notices were issued during reassessment which also, petitioner did not accept. He further submitted that petitioner had entered into high value transactions during previous year relevant to assessment year in question, despite which she did not file return of income. Page 4 of 15 ::: Uploaded on - 17/07/2019 ::: Downloaded on - 18/07/2019 11:16:29 ::: wp.513.2019_J.doc 7. As is well known, section 147 of Act pertains to income escaping assessment. In terms of subsection (1) of section 147, if Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment, he may, subject to provisions of sections 148 to 153, assess or reassess such income and any other income chargeable to tax which has escaped assessment. Section 148 of Act pertains to issue of notice where income has escaped assessment. Sub-section (1) of section 148 provides that before making assessment or recomputation under section 147, Assessing Officer shall serve on assessee notice requiring him to furnish return of income in prescribed form. Section 149 of Act pertains to time limit for such notice to be issued under section 148 of Act. 8. In terms of section 148(1) of Act, thus, before making reassessment under section 147, Assessing Officer had to serve on assessee notice requiring him to furnish return. Service of notice is necessary and not its mere issuance. In terms of provisions contained in section 149 of Act, such notice could have been issued latest by 31.3.2018. As we have noted, Department did issue such notice on 15.3.2018 and despatched Page 5 of 15 ::: Uploaded on - 17/07/2019 ::: Downloaded on - 18/07/2019 11:16:29 ::: wp.513.2019_J.doc it through post for its service to petitioner at address given by her in PAN card. This postal despatch, however, was returned by postal department with remark left . Assessing Officer proceeded on basis of such notice and its return and completed assessment after issuing notices under section 143(2) of Act. question is could he have done so? 9. It is consistent view of Courts that not mere issuance of notice of reopening of assessment but its service on assessee, that too, within time frame envisaged under section 149 of Act is necessary for valid reopening of assessment. In case of Y. Narayan Chetty & Anr. vs. Income Tax officer, Nellore & Ors. reported in (1959) 35 ITR 388, Supreme Court in context of Income Tax Act, 1922 had observed as under: 5. first point raised by Mr. Sastri is that proceedings taken by respondent 1 under s.34 of Act are invalid because notice required to be issued under said section has not been issued against assessees contemplated therein. In present case Income Tax Officer has purported to act under s.34(1)(a) against three firms. said sub-section provides inter alia that "if Income Tax Officer has reason to believe that by reason of omission or failure on part of assessee to make return of his income under Section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax has been underassessed", he may, within time prescribed, "serve on assessee notice containing all or any of requirements which may be included in notice under sub-section (2) of Section 22 and may proceed to reassess such income, profits or gains". argument is that service of Page 6 of 15 ::: Uploaded on - 17/07/2019 ::: Downloaded on - 18/07/2019 11:16:29 ::: wp.513.2019_J.doc requisite notice on assessee is condition precedent to validity of any reassessment made under Section 34; and if valid notice is not issued as required, proceedings taken by Income Tax Officer in pursuance of invalid notice and consequent orders of reassessment passed by him would be void and inoperative. In our opinion, this contention is well-founded. notice prescribed by Section 34 cannot be regarded as more procedural requirement; it is only if said notice is served on assessee as required that lncome Tax Officer would be justified in taking proceedings against him. If no notice is issued or if notice issued is shown to be invalid then validity of proceedings taken by Income Tax Officer without notice or in pursuance of invalid notice would be illegal and void. That is view taken by Bombay and Calcutta High Courts in CIT v. Ramsukh Motilal and R.K. Das & Co. v. CIT and we think that that view is right. 10. In case of Shanabhai B. Patel vs. R.K. Upadhyaya, Income Tax Officer, Ahmedabad reported in (1974) 96 ITR 141, Division Bench of Gujarat High Court had examined similar issue and opined as under: 9. In our opinion, therefore, assumption of jurisdiction by Income-tax Officer of reassessing assessee is subject to provisions contained in section 148 to 153 of Act. Section 148 and 149, which we have reproduced above, clearly show that such jurisdiction cannot be assumed without issuance of notice within prescribed period and service thereof on assessee concerned. Mr. Kaji, however, attempted to persuade us that very fact that legislature has divided these different provisions contained in old section 34 of 1922 Act by suitably enacting sections 147, 148 and 149, where Income-tax Officer has been given power to reassess after service of notice on assessee issued within prescribed period, clearly indicates that legislature intended to depart from positions as it emerged from provisions contained in section 34 of old Act of 1922. We do not think that this submissions of Mr. Kaji is justified. scheme for power of reassessment has been now suitably divided in section 147 onwards of 1961 Act. This scheme of power was originally comprehended within provisions contained in section 34 of 1922 Act. This division of provisions contained in old section 34 into section 147 onwards, do not in any way materially alter positions which could justify court in accepting Page 7 of 15 ::: Uploaded on - 17/07/2019 ::: Downloaded on - 18/07/2019 11:16:29 ::: wp.513.2019_J.doc interpretation canvassed by Mr. Kaji that different stages have been prescribed before assumption of jurisdiction. These stages, according to Mr. Kaji, are issuance of notice within prescribed period and service of notice on assessee. On plain reading of sections 147, 148 and 149, we do not think that this contention of Mr. Kaji can be sustained. Though marginal notes of sections are not decisive, they give us idea about intention of legislature, that it did not contemplate two stages as contended by Mr. Kaji. Section 148 provides for service of notice before jurisdiction for reassessment can be assumed. marginal note of this section reads, "Issue of notice where income has escaped assessment". Section 149 provides for issuance of notice before expiry of prescribed period and marginal note of this section reads: "Time limit for notice". In our opinion, therefore, these words, "service of notice" or "issuance of notice", have no fixed connotation but are interchangeable, as held by Supreme Court in Banarsi Debi's case. Division Bench of this court in Induprasad Devshanker Bhatt v. J. P. Jani, Income-tax Officer, Circle IV, Ward-O, Ahmedabad, was dealing with similar contention that words "issue" and "service" as used in section 34 cannot be equated with each other and that stage of issue of notice is distinct and different stage from stage of service of notice. Mr. Justice Bhagwati (as he then was) observed as under : "Now, it is undoubtedly true that, according to decision of Desai C.J., as he then was, and Miabhoy J. in Madanlal Mathurdas v. Chunilal, Income-tax Officer, words 'issue' and 'serve' as used in section 34 cannot be equated with each other and that stage of issue of notice is distinct and different stage from stage of service of notice and ordinarily this decision being decision of Division Bench of this court would be binding upon us, but having regard to subsequent decision of Supreme Court in Banarasi Debi v. Income- tax Officer, this decision can no longer be regarded as good law and its authority must be held to have been impliedly overruled, though we may point out that even if view taken by Bombay High Court in this decision were correct, we should still have found considerable difficulty in accepting contention that proceedings under section 34 commence on issue of notice. Supreme Court in decision to which we have just referred pointed out that words 'issued' and 'served' are used as interchangeable terms in context of notice issued under section 34 and that where legislature has used word 'issued' in context of such notices, that word is used in same sense as word 'served'. This decision of Supreme Court made it clear that, so far as notices under section 34 are concerned, there are no two distinct and separate stages such as stage of issue of notice and stage of service of notice; notice is issued to assessee when it is served upon him. If that be Page 8 of 15 ::: Uploaded on - 17/07/2019 ::: Downloaded on - 18/07/2019 11:16:29 ::: wp.513.2019_J.doc position, entire foundation on which superstructure of argument urged on behalf of petitioner is based must disappear. There being only one stage, whether it be described as issue of notice or as service of notice, proceedings under section 34 would commence when step envisaged in that stage is taken and that would be when notice is served on assessee." 11. decision of Gujarat High Court was noticed by Punjab & Haryana High Court in case of Major Tikka Khushwant Singh vs. Commissioner of Income Tax, Patiala & Anr. reported in (1975) 101 ITR 106. Court observed as under: Thus, it will be assumed that while enacting 1961 Act, legislature knew that words "serve" and "issue" were being used interchangeably according to judicial interpretation. In spite of knowledge it preferred to use words in aforesaid Act. Mr. Awasthy, learned counsel for revenue, has argued that in 1961 Act, two words have been used in two different sections. According to him before making assessment, reassessment or recomputation under section 147, it is duty of Income-tax Officer to serve notice on assessee as required by section 148, whereas he can assume jurisdiction after issuance of notice within prescribed period under section 149 even though same may not be served upon assessee. He also submits that by dividing provisions of section 34 of 1922 Act in 1961 Act, intention of legislature has become clear. We express our inability to accept contention of learned counsel for Revenue. reading of sections 148 and 149 clearly shows that Income-tax Officer cannot assume jurisdiction to make assessment, reassessment of recomputation unless notice has been issued and served within time limit prescribed under aforesaid sections. same question came up before Division Bench of Gujarat High Court in Shanabhai P. Patel v. R.P. Upadhyaya, income-tax Officer, B. K. Mehta J., while speaking for court, observed as follows: "Sections 147, 148 and 149 of Income-tax Act of 1961 confer power of reassessment on Income-tax Officer. This scheme of power was originally comprehended in provisions of section 34 of Act of 1922. division of provisions contained in section 34 Page 9 of 15 ::: Uploaded on - 17/07/2019 ::: Downloaded on - 18/07/2019 11:16:29 ::: wp.513.2019_J.doc of 1922 Act into sections 147, 148 and 149 in Act of 1961 does not in any way indicate that legislature intended to depart from or materially alter position as it emerged from provisions of section 34 of old Act regarding notice of reassessment. Supreme Court held in Banarsi Debi vs. Income-tax Officer (1), that words, 'service of notice' or 'issuance of notice' in section 34 have no fixed connotation but are interchangeable. same meaning should be given to words 'issue of notice' in section 148 and 'service of notice' in section 149. "Under Act of 1961 also there are no two distinct and separate stages of issue of notice and service of notice. Notice of reassessment is issued to assessee when it is served on him. notice of reassessment issued against assessee before limitation but served on assessee after limitation would be without jurisdiction, void and ineffective." (4) We are respectfully in agreement with above observations. Similar view was taken by learned single judge of Calcutta High Court in Lilooah Steel & Wire Co. Ltd. v. Income-tax Officer, (4). Mr. Awasthy has placed reliance on Full Bench judgment of this court in Seth Balkishan Das v. Commissioner of Income-tax, Patiala (5). In that case question referred to this court was : whether on facts and in circumstances of case, service of notice under section 34 on assessee was invalid at law as copy of notice was not affixed at any conspicuous place in hte court-house or at any conspicuous place in income-tax office. matter for decision before Full Bench was absolutely different. learned counsel cannot derive any benefit from that case. In view of aforesaid discussion, we are of opinion that words "issue" and "serve" are interchangeable and that word "issue" has been used in section 1489 of 1961 Act in same sense in which word "serve" has been used. 12. As per these decisions, thus, notice of reassessment under section 148 of Act had to be served on assessee. In this context, we may examine stand of Department. We may recall, notice dated 15.3.2018 was despatched to petitioner s address as contained in her PAN card. This notice was returned by postal department on or around 22.3.2018 with Page 10 of 15 ::: Uploaded on - 17/07/2019 ::: Downloaded on - 18/07/2019 11:16:29 ::: wp.513.2019_J.doc remark left . It is also admitted positiion that petitioner had not intimated to Department about her change of address. After receiving envelope containing notice from postal department, till 31.3.2018 which was last date for service of such notice, department took no further steps. In this background, question is can Department contend that there was due service of notice. 13. Section 282 of Act pertains to service of notice generally and reads as under: Service of notice generally. 282. (1) service of notice or summon or requisition or order or any other communication under this Act (hereafter in this section referred to as communication ) may be made by delivering or transmitting copy thereof, to person therein named, - (a) by post or by such courier services as may be approved by Board; or (b) in such manner as provided under Code of Civil Procedure, 1908 (5 of 1908) for purposes of service of summons; or (c) in form of any electronic record as provided in Chapter IV of Information Technology Act, 2000 (21 of 2000); or (d) by any other means of transmission of documents as provided by rules made by Board in this behalf. (2) Board may make rules providing for addresses (including address for electronic mail or electronic mail message) to which communication referred to in sub- Page 11 of 15 ::: Uploaded on - 17/07/2019 ::: Downloaded on - 18/07/2019 11:16:29 ::: wp.513.2019_J.doc section (1) may be delivered or transmitted to person therein named. Explanation. - For purposes of this section, expressions electronic mail and electronic mail message shall have meanings as assigned to them in Explanation to section 66A of Information Technology Act, 2000 (21 of 2000). 14. As per sub-section (1) of section 282 thus, service of notice or summons, etc. may be made by delivering or transmitting copy to person named, inter alia as per clause (a) by post or by such courier service as may be approved by Board or in such manner as provided under Code of Civil Procedure for purposes of service of summons. Department has followed procedure envisaged in clause (a) of sub-section (1) of section 282 of attempting to deliver notice by post. 15. Rule 127 of Rules pertains to service of notice, summon, requisition, order and other communications, relevant portion of which reads as under: Service of notice, summons, requisition, order and other communication. 127.(1) For purposes of sub-section (1) of section 282, addresses (including address for electronic mail or electronic mail message) to which notice or summons or requisition or order or any other communication under Act (hereafter in this rule referred to as "communication") may be delivered or transmitted shall be as per sub-rule Page 12 of 15 ::: Uploaded on - 17/07/2019 ::: Downloaded on - 18/07/2019 11:16:29 ::: wp.513.2019_J.doc (2). (2) addresses referred to in sub-rule (1) shall be (a) for communications delivered or transmitted in manner provided in clause (a) or clause (b) of sub-section (1) of section 282 (i) address available in PAN database of addressee; or (ii) address available in income-tax return to which communication relates; or (iii) address available in last income-tax return furnished by addressee; or (iv) in case of addressee being company, address of registered office as available on website of Ministry of Corporate Affairs: Provided that communication shall not be delivered or transmitted to address mentioned in item (i) to (iv) where addressee furnishes in writing any other address for purposes of communication to income-tax authority or any person authorised by such authority issuing communication: Provided further that where communication cannot be delivered or transmitted to address mentioned in item (i) to (iv) or any other address furnished by addressee as referred to in first proviso, communication shall be delivered or transmitted to following address:- (i) address of assessee as available with banking company or co-operative bank to which Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of said Act); or .. 16. As per sub-rule (1) of Rule 127 for purposes of sub- section (1) of section 282, addresses to which notice or summons, etc. may be delivered or transmitted, shall be as per sub-rule (2). Clause (a) of sub-rule (2) of Rule 127 includes four sources of address for such transmission. First one being address available in PAN database of addressee. It was at this address that notice in question was despatched. first proviso to sub-rule (2) provides that said communication shall Page 13 of 15 ::: Uploaded on - 17/07/2019 ::: Downloaded on - 18/07/2019 11:16:29 ::: wp.513.2019_J.doc not be delivered at any of above mentioned addresses where assessee has furnished any other address for such purpose, which is not in present case. further proviso to sub-rule (2) which is of considerable importance to us provides that where communication cannot be delivered or transmitted to addresses mentioned in item Nos.(i) to (iv) or address furnished by assessee as per first proviso, communication shall be delivered or transmitted to addresses given below said further proviso. At item No.(i) is address of assessee as available with Banking company or cooperative bank to which Banking Regulations Act, 1949 applies. 17. Since delivery of notice could not be made at address of assessee available in PAN database, by virtue of further proviso to sub-rule (2) of Rule 127, communication had to be delivered at address as available with banking company. 18. It is undisputed that Department had access to petitioner s bank account. It is precisely from activities in such bank account that department had gathered material prima facie believing that income chargeable to tax had escaped Page 14 of 15 ::: Uploaded on - 17/07/2019 ::: Downloaded on - 18/07/2019 11:16:29 ::: wp.513.2019_J.doc assessment. In terms of Rule 127 and in particular, sub-rule (2) therefore, having regard to further proviso therein, Department had to deliver notice of reassessment at petitioner s address given by her to bank where her account was maitnained. No such steps were taken. Service of notice, therefore, was not complete. In absence of service of notice before last date envisaged under section 149 of Act for such purpose, Assessing Officer could not have proceeded further with reassessment proceedings. His consequential steps of attempting to serve notices of scrutiny assessment were of no consequence. Reopening of assessment was invalid. No valid assessment thereon could have been framed. 19. In result, impugned notice dated 15.3.2018 and consequential order of reassessment passed by Assessing Officer are set aside. All subsequent steps for coercive recovery of tax dues arising out of such order of assessment are also set aside. attachment of petitioner s bank accounts would, therefore, stand nullified. petition is allowed and disposed off accordingly. (S.J. KATHAWALLA, J.) (AKIL KURESHI, J.) Page 15 of 15 Harjeet Surajprakash Girotra v. Union of India & Or