Madras High Court
Venkatesan Raghuram Prasad vs The Income Tax Officer on 6 February, 2018
Bench: S.Manikumar, V.Bhavani Subbaroyan
In the High Court of Judicature at Madras Dated: 06.02.2018 CORAM: THE HONOURABLE MR. JUSTICE S.MANIKUMAR AND THE HONOURABLE MRS. JUSTICE V.BHAVANI SUBBAROYAN Tax Case (Revision) No.798 of 2017 Venkatesan Raghuram Prasad ... Petitioner Vs The Income Tax Officer, Non-Corporate Ward-2(3), 121, M.G.Road, Nungambakkam, Chennai 600 034. ... Respondent Prayer: Tax Case Revision filed under Section 260A of the Income Tax Act, 1961, to revise the order of the Income Tax Appellate Tribunal, Bench 'B/SMC', Chennai, dated 12.07.2017, passed in I.T.A.No.3119/MDS/2016. For Petitioner : Mr.G.Baskar For Respondent : Mr.T.Ravikumar O R D E R
(Order of the Court was made by S.MANIKUMAR, J.) Tax Case Revision is filed against the order, dated 12.07.2017, passed in I.T.A.No.3119/MDS/2016, on the file of Income Tax Appellate Tribunal, Bench 'B/SMC', Chennai, on the following substantial questions of law,
(i) Is not the order of the Income-Tax Appellate Tribunal perverse in law in upholding that validity of Reassessment Proceedings even in absence of any direct material/evidence to prove the issue and/or service of notice u/s.148 dated 31.03.2012 on the Appellant?
(ii) Whether on the facts and in the circumstances of the case Order of the Income-Tax Appellate Tribunal was perverse on facts and in law in dismissing the grounds on merits in respect of claim u/s.54 of the Income Tax Act, as not pressed, even after indicating at the time of hearing that if the issue on jurisdiction is decided against the Appellant, opportunity would be given to present the case on merits in respect of claim u/s.54 of the Income Tax Act?
(iii) Whether on the facts and in the circumstances of the case, the Income-Tax Appellate Tribunal was right in law in upholding the reassessment, in spite of notice u/s.148 dated 31.03.2012 being neither issued nor served on the Appellant; and can the Respondent take shelter u/s.292BB of Income Tax Act, 1961, to validate such action of reassessment?
(iv) Whether on the facts and in the circumstances of the case, the Income-Tax Appellate Tribunal is right in law in upholding that impugned reassessment by observing that such non-issue or non-service of notice u/s.148 cannot make the reassessment void or a nullity in view of the provision of Section 292BB of Income Tax Act, 1961?
(v) Whether on the facts and in the circumstances of the case the Income-Tax Appellate Tribunal is right in law in holding that the onus lies on the Appellant to exhibit that the Assessing Officer retained control over the notice u/s. 148 and was not put in the process of its service, when the Assessing Officer had not provided any direct material to prove either issue or service of notice u/s.148 of Income Tax Act, 1961?
(vi) Whether on the facts and in the circumstances of the case, the Income-Tax Appellate Tribunal is right in law in not admitting the grounds raised in respect of non-service of notice u/s.148 while challenging the jurisdiction of the Assessing Officer in reopening the assessment?
(vii) Whether on the facts and in the circumstances of the case the Income-Tax Appellate Tribunal is right in law in holding that even if the matter is restored back to Assessing Officer to cause service of notice u/s.148 and frame assessment afresh, the time limit shall run from the date of said notice, without appreciating that the same would be against the mandate of the provisions of section 149(1) of Income Tax Act, 1961?
2. Short facts, carved out from the material on record are that the assessee sold a property at Ashok Nagar, Chennai, during the relevant year, on 19.10.2004, for Rs.66.40 lacs, information on which was received by the Revenue through the Annual Information Report (AIR). As the assessee, upon verification, was found to have not filed his return for the relevant year, the Assessing Officer (AO), after recording reasons, as to escapement of income and seeking approval thereof from the competent authority, viz., Joint Commissioner Income Tax, issued notice under section 148(1) of the Act, on 31.03.2012. The said notice, claimed, as sent through Registered Post (RPAD) at the Ashok Nagar address, came back un-served and that the same was finally served through affixture on 04.05.2012. Thereafter, a notice, under Section 142(1), was served on 11.12.2012. The assessee filed his return of income for the said year on 01.02.2013, admitting income, at Rs.38,688/-, i.e., after claiming exemption, under Section 54, in respect of the Long Term Capital Gain (LTCG), arising on the aforesaid sale. The same came to be disallowed in the assessment proceedings, initiated through notice, under Section 143(2), assessing the income for the year at Rs.31.11 lacs, including LTCG at Rs.30.73 lacs, i.e., as returned. The only objection raised by the assessee before the Assessing Officer, was with regard to the claim, under Section 54. Assessees challenge to the service of notice, under Section 148, was before the first appellate authority for the first time. The same, however, did not find his favour, in view of Section 292BB of the Act, inasmuch as, without doubt no objection qua the service of notice, under Section 148(1) was raised during the course of the assessment proceedings.
3. Aggrieved, the assessee was in second appeal in I.T.A.No.3119/Mds/2016, before the Income-Tax Appellate Tribunal, which dismissed the appeal on 12.07.2017, as follows:
3.1 The question that arises is if s. 292BB is applicable to the impugned assessment or not. The assessees case, relying on the decisions in CIT v. Chetan Gupta [2016] 382 ITR 613 (Del) and Kuber Tobacco Products (P.) Ltd. v. Dy. CIT [2009] 117 ITD 273 (Del)(SB), is that the provision is prospective, so that it shall apply to proceedings for AY 2008-09 and subsequent years. The Revenue, on its part, places reliance on the decision in CIT v. Panchvati Motors (P.) Ltd. [2011] 59 DTR 289 (P&H). Section 292BB of the Act, inserted on the statute book by Finance Act, 2008 w.e.f. 01.04.2008, reads as under:
Notice deemed to be valid in certain circumstances.
292BB. Where an assessee has appeared in any proceeding or co-operated 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 upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was
(a) not served upon him; or
(b) not served upon him in time; or
(c) served upon him in an improper manner :
Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment. (emphasis, supplied) The law, per the said amendment, deems that the assessee having participated in the proceedings has been served the notice in time and in accordance with law. The caveat is that objection/s, if any, qua any of the aspects of service is to be raised before the completion of the assessment, i.e., by 28.02.2013 in the instant case. No objection has admittedly been raised by the assessee during the assessment proceedings in the present case. The assessees objection in fact is not with regard to the scope of the provision or with regard to its applicability per se in the facts and circumstances obtaining in his case, but that the same is not applicable in-as-much as the provision has been introduced w.e.f. 01.04.2008, so that it would apply to proceedings for AY 2008-09 onwards.
Circular 1 of 2009 dated 27.03.2009 issued by CBDT (reproduced at [2009] 310 ITR (St.) 42), vide clause 42.7 thereof, reading as under, clarifies that the said amendment shall be applicable to any proceedings pending as on 01.04.2008:
42.7 Applicability - This amendment has been made applicable with effect from 1st April, 2008. This means that the provision of new section 292BB shall apply in all proceedings which are pending on 1st April, 2008. This view stands endorsed in Panchvati Motors (P.) Ltd. (supra). The statutory presumption is with regard to the validity of the service of notice, objection toward which has not been raised by the assessee during the course of the relevant proceedings, even as he participates and cooperates therein, culminating in completion of assessment or reassessment. The same operating as a restriction on the right of the assessee to raise an objection/s qua service of notice, i.e., to the assessees prejudice, there is no question of the said provision being retrospective in operation. In fact, even the Circular by the Board admits this position, making it abundantly clear that only the proceedings pending as on 01.04.2008, the date on which amendment comes into effect, would be subject to the amended law. That is, the proceedings concluded or assessment completed before 01.04.2008 is not impacted by the said amendment in any manner; the curb on the assessees untrammeled right to raise objection/s qua service of a notice at any stage (even where he participates or cooperates in the proceedings) coming into effect from 01.04.2008 only. That is, the curbbecomes applicable from a particular, specified date. How, then, one wonders,could it possibly relate to or have reference to a particular assessment year, stated to be AY 2008-09 onwards? It is a mere coincidence that the specified date is from the beginning of a previous year, and may well have been from any other date, viz. 01/2/2008; 01/06/2008, et. al. Further, even the Hon'ble Court in Chetan Gupta (supra) does not state it to be effective for the assessment for a particular year (i.e., the previous year ending 31/3/2008 or fy 2007-08) and subsequent years. The provision was not attracted in the facts of that case in-asmuch as the assessee had admittedly raised an objection during the course of the assessment proceedings that he had not been served notice u/s. 148. There is in fact no discussion on the scope of the applicability of the provision in the Judgment, and all that the Hon'ble Court states is that the provision is introduced w.e.f. 01.04.2008 and is prospective (refer para 45). There is, as aforesaid, no doubt or controversy on that; the curb on the assessees right to object service, thus causing prejudice thereto, becomes applicable only from 01.04.2008. That, however, does not in any manner imply or lead to the inference of the provision being applicable with reference to a particular year of assessment or to the assessment for a particular year. This is as the provision has per se nothing to do so with the year for which the assessment is being framed or to which the proceedings relate. Why, the assessment for AY 2008-09, the first assessment year for which the provision is said to be applicable, would be of income arising to or received by the assessee during the previous year 2007-08, i.e., financial year commencing 01.04.2007! Proceedings for that year would be on, theoretically, 01.04.2007 onwards. There could in fact be notices, as for instance qua advance tax, or where an assessees business is discontinued during that year, which are issued during the relevant previous year itself. Would it therefore imply that the prejudice or the restriction cast by s. 292BB is applicable to the service of such notices even as the relevant proceedings or assessment concludes before 01.04.2008. Without doubt, the assessee could challenge the service of these notices at any time irrespective of the fact that he has participated in these proceedings and the same relate to AY 2008-09. There is, to capsulize, no correspondence between the restriction sought to be placed, subject to a caveat though, by the provision on the assessees right with effect from a particular date (so that the status of the proceedings as on that date assumes relevance) with the year to which those proceedings or the assessment (of his income) relate, and the only thing relevant is that the said restriction shall be operative from a particular date, so that the provision shall stand attracted, irrespective of the year to which the proceedings or assessment relate, the pendency of the relevant proceedings on the said date. The Board Circular (supra), which is in the nature of contemporaneous exposito, referred and relied upon in Panchvati Motors (P.) Ltd. (supra), clearly spells out the correct legal position in this regard.
3.2 On the mind of the Bench in this regard being conveyed during hearing to the ld. AR, he would raise another objection, claiming that notice u/s. 148(1) dated 31.03.2012 was not validly issued. In-as-much as the same raises a legal issue, the ground, raised orally, was admitted in pursuance to r. 11 of the Income Tax (Appellate Tribunal) Rules, 1963, making it at the same time clear that the same, i.e., the said ground, raised for the first time before the tribunal, could be answered only on the basis of undisputed facts, i.e., as borne out by the record. The assessees charge is that the notice u/s. 148 is not issued in-as-much as it had not travelled outside the control of the issuing officer, the AO, so that it could not therefore be regarded as issued.
Before considering this fresh objection by the assessee, it would be relevant to advert to the leading decisions qua the import of a notice in proceedings under the Act. As explained in Estate of Late Rangalal Jajodia v. CIT [1971] 79 ITR 505 (SC) (at pg.511), lack of notice does not amount to the revenue authority having had no jurisdiction to assess, but that the assessment was defective by the reason of the notice not having been given, further observing that the assessment proceedings do not cease to be proceedings under the Act merely by the reason of want of notice. And that it shall though be a proceeding liable to be challenged and corrected. In other words, the proceedings become irregular for want of notice and, therefore, as explained in Guduthur Bros. v. ITO [1960] 40 ITR 298 (SC), shall have to go back to the stage where the irregularity sets in. In fact, referring to its afore-noted observations in Estate of Late Rangalal Jajodia (supra) (at pg. 746), also noting the facts of that case (at pgs. 746-747), the Hon'ble Apex Court in CIT v. Jai Prakash Singh [1996] 219 ITR 737 (SC), rejected a similar plea of the assessment made without notice to the other legal representative (LR) as a nullity, stating that in that case (Estate of Late Rangalal Jajodia (supra)), there was even no notice to the LR, with an objection having been in fact raised before the AO, which was made for the first time in the appellate proceedings in the case under reference, concluding as under:
The principle that emerges from the above decision is that an omission to serve or any defect in the service of notices provided by procedural provisions does not efface or erase the liability to pay tax where such liability is created by distinct substantive provisions [charging sections]. Any such omission or defect may render the order made irregular - depending upon the nature of the provision not complied with - but certainly not void or illegal. (pg. 747) Further, the jurisdiction for framing an assessment or reassessment u/s. 147, as in the present case, is the issue of notice u/s. 148(1), and not its service, as explained in R.K.Upadhyaya v. Shanabhai P.Patel [1987] 166 ITR 163 (SC) - a decision referred by the Revenue in Chetan Gupta (supra), in the following words:
A clear distinction has been made out between "issue of notice" and "service of notice" under the 1961 Act. Section 149 prescribes the period of limitation. It categorically prescribes that no notice under section 148 shall be issued after the prescribed limitation has lapsed. Section 148(1) provides for service of notice as a condition precedent to making the order of assessment. Once a notice is issued within the period of limitation, jurisdiction becomes vested in the Income-tax Officer to proceed to reassess. The mandate of section 148(1) is that reassessment shall not be made until there has been service. The requirement of issue of notice is satisfied when a notice is actually issued. In this case, admittedly, the notice was issued within the prescribed period of limitation as March 31, 1970, was the last day of that period. Service under the new Act is not a condition precedent to conferment of jurisdiction on the Income-tax Officer to deal with the matter but it is a condition precedent to the making of the order of assessment. (pg. 165) How could then, one may ask, even de hors s. 292BB, and assuming non service of notice u/s. 148, lead to the assessment under the Act being void or a nullity? It is no more than a defect or an irregularity, which would, on challenge, require being corrected, as clarified in Estate of Late Rangalal Jajodia (supra), by, following the law in the matter, restoring the matter back to the stage where the irregularity sets in. This further explains the decision in Chetan Gupta (supra) being of no assistance to the assessee. In fact, as duly noted by the Hon'ble Court therein, the law, per s. 153(2), spells out the consequence of non service of notice u/s. 148. This is as the time limit for the completion of assessment u/s. 147 is set at a defined time period (one year) from the date of its service. As such, assuming non service of notice u/s. 148(1), it shall not operate to render the assessment u/s. 147 as an impossibility, as would be the case where the same becomes barred by time, so that even its restoration for removal of the irregularity, i.e., to which it is subject, becomes a futile exercise. That is, the only remedy in case of non service of notice u/s. 148(1), or where an objection/s in respect of its service has been raised before the completion of assessment u/s. 147, and which is found valid by an appellate forum, is to restore the matter for proper service of notice as per law. Rather, such a situation may not practically arise. This is as where an objection qua service of notice u/s. 148 is raised before the AO, he would, rather than disputing the same, accepting the same, cause the service of notice. The time limit for the completion of assessment commencing from the date of service, there is no question of the assessment getting time barred and, in fact, shall give a fresh time limit for the completion of the assessment. This, then, puts the import of s. 292BB in the context of a sec.147 assessment in perspective.
As such, without prejudice, even if the assessee were to, assuming so, succeed on the question of non-applicability of s. 292BB in the instant assessment and, further, presuming a valid objection/s to service of notice u/s. 148, which would necessitate an examination of the assessees objections in this regard on merits, the matter shall have to necessarily travel back to the file of the AO to cause service and frame assessment afresh, for which a time limit shall run from the date of the said service. That is, in no manner shall cause impugned assessment to be a nullity, but only its set aside for fresh assessment.
3.3 Coming back to the question of the assessee disputing the issue of notice u/s. 148 on the ground that the issuing authority retains control over the same, and that it was not handed over to the postal department, which only shall mark its issue. This, given the settled law that issue implies the notice being put in the process of service, with the issuing authority loosing effecting control over the same, is a question of fact, precluding its admission in-as-much as the relevant facts are disputed. Further, even otherwise, it is the assessee on whom the burden lies to exhibit, at least prima facie, that the apparent is not real, and that, though signed, the AO retained control over the notice and was not put in the process of its service. So however, to ensure that the Revenue has some basis to claim issue of notice on 31.03.2012, the ld. DR was called upon by the Bench to furnish any material with the Revenue in this regard. He submitted the following documents:
a). List of approved cases, which bears assessees name with the approval date (for issue of notice u/s. 148(1)) as at 31.03.2012 (a system generated report).
b). The status report which carries the remarks by the approving authority i.e., as of being satisfied with the reasons recorded by the AO that it is a fit for reopening, and which also bears several dates, including the date of approval; of issue of notice u/s. 148 (stated as 31.03.2012); and of its service (stated as 02.04.2012) (a system generated report).
c). A system generated report on assessment, which carries several fields including the status of the assessment (noted as completed). The same carries the following note in the comments column The notice u/s. 148 was issued on 31.03.2012. The due date of the filing of return is 02.05.2012. The same also bears the date of the passing of the order, i.e., 28/2/2013.
d). Notice u/s. 148(1) dated 31.03.2012, which bears the endorsement RPAD, which was emphasized by the ld. DR during hearing, as being in the same hand as the signature signing the notice, i.e., of the officer issuing the notice (i.e., R.Ravi Chandran, ITO, Business Range-II (3), Chennai), and which clearly appears to be the case.
e). Order sheet entry, again in the hand of the AO, as to the notice u/s. 148 being issued after obtaining administrative approval. The same is dated 31.03.2012.
I have no reason to doubt the authenticity and the validity of the afore referred documents, generated in the normal course of business, particularly considering the explanation by the ld. DR that the system is, as a part of procedure, closed at the end of each day. A post dated entry therein is thus precluded, which may even otherwise result in different reports for the same day/s, establishing alteration. The same is accordingly considered sufficient to regard, at least prima facie, that the notice was indeed issued on 31.03.2012. Rather, the presumption as to the regularity of official acts shall attend the various documents furnished (s. 114(e) of the Indian Evidence Act, 1872; also, Chuharmal v. CIT [1988] 172 ITR 250 (SC)). Further, on inquiry, the ld. DR has per the written submissions (copy on record) explained that as a matter of procedure the person from the Postal Department visits the department on a regular basis, and that therefore as a matter of routine the documents are collected. The dispatch register was not available in view of the reorganization of the department in November, 2014. No material rebutting the said documents or contradicting the said explanation has been brought on record. The same, even so, would make the facts disputed, precluding the legal challenge to admission of the legal aspect as to jurisdiction for want of issue of notice u/s. 148 on 31.03.2012. The said objection by the ld.AR cannot therefore, i.e., in any case, be admitted.
4. In sum:
The decision in Chetan Gupta (supra) does not, in ratio, lay down the law as being ascribed to it; there being in fact no discussion on that aspect of the matter therein. The decision in Panchvati Motors (P.) Ltd. (supra), on the other hand, clearly lays down the stated legal position. The assessment year involved in that case was AY 1998-99, and the assessee had, as in the present case, admittedly not raised any objection in respect of the service of notice u/s. 148. The Hon'ble Court, whose order is thus squarely applicable, clarified that where no objection regarding a service of notice u/s. 148 of the Act was raised before the AO, the argument that there was no valid service of notice, as advanced by the assessee before it, fails (refer para 13 of the decision). The question of law (i) raised before it, i.e., as to whether the tribunal was, in the facts and circumstances of the case, right in law to hold that the service of notice u/s. 148 was not valid and, therefore, was not correct in quashing the assessment order on the said ground, by the Revenue was answered in positive, i.e., in favour of the Revenue. In other words, the said decision, besides being squarely applicable in the facts and circumstances of the case, decides the legal question arising in the instant case. In fact, even otherwise, where two decisions by non jurisdictional High Courts decide a legal issue differently, none being binding on the tribunal, it is upon the tribunal to take a decision which appeals to its judicial conscience. Why, every decision by a non jurisdictional High Court has a persuasive value, though is not a binding precedent, which would make it at par with the jurisdictional High Court, is again well settled (refer: Suresh Desai & Ass. v. CIT [1998] 230 ITR 912 (Del); Geoffery Manners & Co. Ltd. v. CIT [1996] 221 ITR 695 (Bom); CIT v. Thane Electricity Supply Ltd. [1994] 206 ITR 797 (Bom); Patil Vijayakumar & Ors. v. Union of India [1985] 151 ITR 48 (Kar)). It may therefore not necessarily be followed even if it is the solitary decision. That the tribunal should nevertheless have strong reasons for taking a different view, or adopting the preferred view, goes without saying. The decision in Panchvati Motors (P.) Ltd. (supra), also accords with the settled principle that procedural law is applicable to pending proceedings (CWT v. Sharvan Kumar Swarup & Sons [1994] 210 ITR 886 (SC)). Reference to the decision in Kuber Tobacco Products (P.) Ltd. (supra) would be of no consequence in view of the decisions by the higher forum. The tribunal in Bedrock Ltd. v. Dy. CIT (in ITA No.5450/Mum/2011 dated 25.07.2012), also relied upon by the assessee, rightly distinguishes the decision in Panchvati Motors (P.) Ltd. (supra) as well as in Aravali Engineers (P.) Ltd. v. CIT [2011] 335 ITR 508 (P&H), also relied upon by the Revenue before it. This is as the notice u/s. 143(2), service of which confers jurisdiction for assessment, was admittedly issued beyond the time prescribed for its service. How could its service, which would only be subsequent to its issue, possibly be within time? The ensuing assessment was thus void ab initio. An objection by the assessee qua service of notice, which s. 292BB seeks to regulate, implies a disputed set of facts, and not an admitted fact on the basis of which no jurisdiction stands assumed. Sec. 292BB is squarely applicable in the present case, precluding the assessee from raising any objection with regard to the service of notice u/s. 148(1). The decision by the ld. CIT(A) is accordingly upheld, dismissing the assessees Grounds 1.1 to 1.4. Needless to add, there has accordingly been no examination of the assessees objections qua service of the said notice on merits, and this order may not be construed as expressing any opinion thereon.
Without prejudice to the foregoing, the concomitant of non-service or an invalid service of notice u/s. 148, assuming an objection/s in its regard could be validly raised, is a set aside to the stage of the said service for framing the assessment pursuant thereto, for which the time limit shall run from the date of the service (s. 153(2)). The same renders the controversy as to the applicability of s. 292BB qua the impugned assessment as of little consequence.
The plethora of materials brought on record by the Revenue, which are also saved by the presumption as to regularity of official acts, fails the legal challenge to the issue of notice u/s. 148(1) on 31/3/2012, raised for the first time before the tribunal. Further, even as no contradicting material, disputing or rebutting the same has been brought on record by the assessee, even where so, it would render; the facts being disputed, the said challenge as inadmissible, for which support is also drawn from Aravali Engineers (P.) Ltd. (supra).
Grounds 2.1 to 2.3 are dismissed as not pressed. I decide accordingly.
5. In the result, the assessees appeal is dismissed.
4. Aggrieved by the same, the present appeal has been filed on the above substantial questions of law and to support the same, the appellant has raised the following grounds,
(i) The Order of Income Tax Appellate Tribunal is perverse, since while disposing of the appeal, observed that ground Nos.2.1 to 2.3 were dismissed as not pressed and proceeded to adjudicate only on the validity of jurisdiction in the reassessment proceedings.
(ii) The order of the Income Tax Appellate Tribunal is perverse both on facts and in law for the following reasons:
(a) Held that the onus lies on the Appellant to exhibit that the Assessing Officer retained control over the notice u/s. 148 and was not put in the process of its service, when the Assessing Officer had not provided any direct material to prove either issue or service of notice u/s.148 of Income Tax Act, 1961.
(b) drawn presumption with regard to issue and service of notice u/s.148 in view of provisions of section 292BB.
(c) observed that the even if the matter is set aside to the stage of service of notice u/s.148, time limit shall run from the date of the service u/s.153(2) of Income Tax Act, 1961.
(d) dismissing the ground Nos.2.1 to 2.3 as not pressed, ever after indicating that if the issue on jurisdiction is decided against the Appellant, opportunity would be given to present the case on merits in respect of claim u/s.54 of the Income Tax Act.
(iii) The Income-Tax Appellate Tribunal erred in upholding jurisdiction of Assessing Officer u/s. 147 of Income Tax Act, 1961 and also presuming that there was valid issue and service of notice u/s. 148 of Income Tax Act, 1961.
(iv) The Income-Tax Appellate Tribunal erred in observing that the issue was raised for the first time before the Tribunal and no contradicting materials disputing or rebutting the presumption as to regularity of official acts in respect of issue of notice u/s.148(1) in view of Section 292BB of the Act, as inadmissible. The Income-Tax Appellate Tribunal ought to have considered the submission made by the Appellant on 15.04.2017 in proper perspective.
(v) The Income-Tax Appellate Tribunal erred in observing that provisions of Section 292BB of Income Tax Act, 1961 is applicable to the impugned assessment, empowering such presumption with regard to issue and service of notice u/s.148. The Income-Tax Appellate Tribunal erred in observing that the provisions of section 292BB of Income Tax Act, 1961 shall stand attracted to the pending proceedings as on 01.04.2008, irrespective of the year to which the proceedings or assessment relate.
(vi) The Income-Tax Appellate Tribunal erred in placing reliance on Clause 42.7 of Circular 1 of 2009 dated 27.03.2009 issued by Central Board of Direct Taxes. The Income-Tax Appellate Tribunal erred in placing reliance on various decisions, which are distinguishable on the facts of the case of the appellant and not even referring to the direct authorities relied on by the appellant.
(vii) The Income-Tax Appellate Tribunal ought to have properly appreciated the interpretation of section 292BB to extend its applicability to the mandatory notice u/s.148 for validly reopening an assessment, would provide absurd results nullifying the provisions of Income Tax Act, 1961, empowering the Assessing Officer with unfettered rights without accountability.
(viii) The Income-Tax Appellate Tribunal having admitted the objection challenging the issue of notice u/s.148(1), erred in holding such issue of notice is procedural in nature and non issue of the same was merely a defect or an irregularity that can be corrected by remitting the matter back to the stage where the irregularity sets in. The Income-Tax Appellate Tribunal grossly erred in observing that once the notice u/s.148 was not served, limitation provided under the provisions of section 153(2) for completion of reassessment does not apply and the reassessment would not become barred by time and therefore, restoration for removal of irregularity becomes a futile exercise.
(viii) The Income-Tax Appellate Tribunal ought to have appreciated that issue and/or service of notice u/s.148 is not procedural, but mandatory and therefore the same cannot be restored back to Assessing Officer to make proper issue and service of notice at this stage, which would be beyond 6 years from the end of the relevant assessment year and against the mandate of the provisions of section 149(1) of Income Tax Act, 1961.
(ix) The Income-Tax Appellate. Tribunal ought to have appreciated that the mandatory pre-condition for reassessment is proper and valid issuance and service of notice u/s.148 of Income Tax Act, 1961 and such notice is not procedural in nature. The Income-Tax Appellate Tribunal ought to have appreciated that in order to validly assume the jurisdiction,mandatory precondition is valid issue and service of notice u/s.148(1) of Income-Tax Act and such a gross violation to provisions of the Act by the mandatory notice cannot be cured by Section 292BB of the Act, by merely observing that the Assessee had appeared in the proceedings.
(x) The Income-Tax Appellate Tribunal ought to have appreciated that the Appellant can raise the jurisdictional issue at any stage of Appeal and the department cannot take shelter u/s.292BB of the Act, to validate its action in reopening the assessment even without issue and / or service of notice u/s.148 of Income Tax Act, 1961. The Income-Tax Appellate Tribunal ought to have appreciated that the Assessing Officer had issued notice u/s.142(1) on 11.12.2012 and Notice u/s.143(2) and thus it cannot be presumed that the Assessee had appeared or co-operated in response to notice u/s.148 which was neither issued nor served on the Assessee.
(xi) The Income Tax Appellate Tribunal being final fact finding authority is duty bound to give a finding on fact, grossly failed by not admitting the grounds raised in respect of non-service of notice u/s.148 while challenging the jurisdiction of the Assessing Officer in reopening the assessment.
(xii) The Income Tax Appellate Tribunal erred in dismissing the ground Nos.2.1 to 2.3 raised on merits in respect of claim u/s.54 of the Income Tax Act, as not pressed, even after indicating at the time of hearing that if the issue on jurisdiction 1st decided against the Appellant, opportunity would be given to present the case on merits in respect of claim under Section 54 of the Income Tax Act. The Income Tax Appellate Tribunal ought to have afforded an opportunity to the Appellant to present the case on merits and considered the grounds raised in respect of claim u/s.54 of the Income Tax Act."
Heard the learned counsel appearing for the parties and perused the materials available on record.
5. Before adverting to the rival contentions, we deem it fit to extract Sections 147, 148 and 292BB of the Income Tax Act, 1961, as follows:
"147. Income escaping assessment:
If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year) :
Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:
Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:
Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.
Explanation 1.Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.
Explanation 2.For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:
(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax;
(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;
(ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E;
(c) where an assessment has been made, but
(i) income chargeable to tax has been underassessed; or
(ii) such income has been assessed at too low a rate; or
(iii) such income has been made the subject of excessive relief under this Act ; or
(iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed;
(ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;
(d) where a person is found to have any asset (including financial interest in any entity) located outside India.
Explanation 3.For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.
Explanation 4.For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.
148. Issue of notice where income has escaped assessment.
(1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139:
Provided that in a case
(a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and
(b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, re-assessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice :
Provided further that in a case
(a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and
(b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice.
Explanation.For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section.
(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so.
292BB. Notice deemed to be valid in certain circumstances:- 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 upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was,
(a) not served upon him; or
(b) not served upon him in time; or
(c) served upon him in an improper manner:
Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment."
6. Section 147 and Section 148 of the Income-Tax Act, 1961 mandate certain conditions to be fulfilled for invoking the jurisdiction to reopen the assessment. Section 147 empowers the Assessing Officer to reopen an assessment, if the conditions prescribed therein are satisfied. The conditions are:
(i) The Assessing Officer has to record the reason for taking action under section 147. It is on the basis of such reasons recorded in the file that the validity of the order reopening a assessment has to be decided. Recorded reasons must have a live link with the formation of the belief.
(ii) The Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year.
(iii) The jurisdictional condition under section 147 is the formation of belief by the Assessing Officer that income chargeable to tax has escaped assessment for any assessment year.
(iv) No action can be initiated under section 147 after the expiry of 4 years from the end of the relevant assessment year unless the income chargeable to tax has escaped assessment by reason for the failure on the part of the taxpayer to disclose fully and truly all material facts necessary for his assessment.
7. When a notice under section 148 of the Income-tax Act, 1961, is issued, the proper course of action, to be followed is
(a) file the return,
(b) If he so desires, to seek reasons for issuing the notices.
(c) The Assessing Officer is bound to furnish reasons within a reasonable time.
(d) On receipt of reasons, the assessee is entitled to file objections to issuance of notice, and
(e) The Assessing Officer is bound to dispose of the same by passing a speaking order.
(f) The assessee if desires can file a writ challenging the order or can proceed with the assessment. However the assessee has still a right to challenge the reopening of assessment after the assessment order is passed, before Appellate Authority.
8. In Mayawati v. CIT reported in (2010) 321 ITR 349, the Delhi High Court observed as under:-
"Various issues had arisen in that case, none of which, in our opinion, are of any relevance to the determination of the questions which fall for determination by us. In Haryana Acrylic it had, inter alia, been opined that for Section 147 to become operational it is essential that it should be alleged that escapement of income is a consequence of the assessee having failed to fully and truly disclose all material facts necessary for the comprehensive completion of the assessment. What had transpired in that case was that whilst the initiation of the proceedings by the AO for approval of the Commissioner of Income Tax mentioned the failure on the part of the Assessee to disclose fully and truly all material facts relating to the alleged accommodation entries, the "reasons" disclosed to the Assessee on its request merely mentioned those accommodation entries as being the foundation for the belief that income to the extent of Rupees 5,00,000/- had escaped assessment. The distinction between these two situations has been perspicuously emphasised and adumbrated. The finding was that a reason to believe, without the essential concomitant of it being a result of the failure of the assessee to fully and truly disclose all material facts, would render the reassessment under Sections 147/148 unsustainable. In order to overcome this difficulty, it has been argued on behalf of the Revenue that since the AO had duly recorded the failure on the part of the assessee to fully and truly disclose all material facts this notation should be acted upon and the reasons conveyed to the assessee which were predicated on the Commissioner's noting, should be ignored. The contention of the Revenue was that the assessee had been made aware of the opinion of the AO in the Counter Affidavit of the Revenue filed on 5.11.2007. It was in that context that it was observed in Haryana Acrylic that six years had elapsed by that time. GKN Driveshafts (India) Ltd., v. Income Tax Officer (2003) 1 SCC 72 was applied to emphasise the fact that the reasons should have been furnished within a reasonable time. It was clarified that "where the notice has been issued within the said period of six years, but the reasons have not been furnished within that period, in our view, any proceedings pursuant thereto would be hit by the bar of limitation inasmuch as the issuance of the notice and the communication and furnishing of reasons go hand-in- hand. The expression "within a reasonable period of time" as used by the Supreme Court in GKN Driveshafts (supra) cannot be stretched to such an extent that it extends even beyond the six years stipulated in Section 149."
9. In Mayawati's case, the Delhi Court, after considering various decisions of different High Courts, recorded that in the context of Section 143(2) of the Income Tax Act, held that the word "issuance of notice" and "service of notice", are not synonymous and interchangeable, and accordingly, Delhi High Court held that notice under this section would lose all its legal efficacy, if it had not been actually served on the assessee, within the scheduled and stipulated time. The Delhi High Court held that in this dialectic, a fortiori, since the word, "served" is conspicuous by its absence in Section 149 and that the legislature has deliberately used the word "issue", actual service within the period of four and six years specified in the section, would not be critical. The Delhi High Court held as under:-
"5. On a plain reading of these Sections it is palpably plain that Section 148 of the IT Act enjoins that the AO must serve on the assessee a notice requiring him to furnish a return of his income, in respect of which he/she is assessable under this Act during the previous year corresponding to the relevant assessment year. Firstly, the notice contemplated by this Section relates to the furnishing of a return and not to the decision to initiate proceedings under Section 147 of the IT Act; secondly, the period of thirty days (omitted by the Finance Act, 1996) is with regard to the furnishing of the return.
6. In stark contrast, Section 149 of the IT Act speaks only of the issuance of a notice under the preceding Section within a prescribed period. Section 149 of the IT Act does not mandate that such a notice must also be served on the assessee within the prescribed period. Speaking for the Division Bench of this Court, I had occasion to observe in CIT V. Shanker Lal Ved Prakash (2007) 212 CTR (Del) 47: (2008) 300 ITR 243 (Delhi) the decision in CIT v. Jai Prakash Singh (1996) 132 CTR SC 262: 219 ITR 737 (SC) to the effect that failure to serve a notice under Section 143(2) would not render the assessment as null and void but only as irregular. The decision of the Rajasthan High Court in CIT v. Gyan Prakash Gupta (1986) 54 CTR (Raj) 69: (1987) 165 ITR 501 (Raj) opining that an assessment order completed without service of notice under Section 143(2) is not void ab initio and cannot be annulled was noted. Furthermore, from a reading of that judgment, it is evident that it had not been seriously contended that the notice under Section 149 of the IT Act must also be served within the period set-down in that Section since the discussion centered upon Section 27 of the General Clauses ACt, 1897 which specifies that service of such a notice would be presumed to be legally proper as it would be deemed to have been delivered in the ordinary course at the correct address. It had, inter alia, been expressed that: "while there would be no justification for enlarging the period of limitation prescribed by the statute itself, we should also not lose sight of the fact that disadvantage or discomfort of the assessee is only that he has to explain the correctness and veracity of the return filed by him. A reasonable balance of burden of proof must also, therefore, be maintained. In the facts and circumstances of the present case, we are satisfied that because notice was dispatched on August 25, 1998 and was duly addressed and stamped, the Department has succeeded in proving its service before August 31, 1998. On the other hand, the assessee has failed to prove a statement that he received the notice only on 1.9.1998. Where a statute postulates the issuance of a notice and not its service, a fortiori the presumption of fiction of service must be drawn on the lines indicated in Section 27 of the General Clauses Act, 1897.
10. In Commissioner of Income-Tax v. Three Dee Exim reported in 2011 (055) DRT 147, the Delhi High Court, was is in complete agreement with the reasoning of the Hon'ble Division Bench judgment in the aforesaid case of Mayawati (supra) and held that what is contemplated under Section 149 is "issuance of notice" under Section 148 and not the service thereof on the assessee and further held that the "service of notice" under Section 148 is only required before the assessment, reassessment or re- computation. At the end, the Hon'ble Delhi High Court, held as follows:
"18. In view of our discussions as above, we are of the view that service of notice, a contemplated pre-condition before assessment would be a question of fact depending upon the facts and circumstances of each case. In the present case, not only that no objection was raised with regard to non-issue of notice dated 27.03.2006, the assessee vide its letter dated 11 th December, 2006 adopted the return as originally filed as the return in response to the said notice under Section 148. It was only thereafter that the AO proceeded with the reassessment proceedings. During the assessment proceedings, certain queries were raised to which the assessee gave detailed response. Even during the reassessment proceedings no objection was raised of any kind with regard to defect or irregularity in the notice. In a given situation, as in the present case when the assessee appears before the Assessing Officer and is given copy thereof before assessment and also makes correspondence and participates in the assessment proceedings, notice issued at old address available on record may constitute service of notice. In such circumstances, the service of copy of notice also would be service of notice within the ambit of Section 148(1) of the Act."
11. Following the decision in Three Dee Exim's case (cited supra), we are not inclined to interfere with the order of the Income Tax Appellate Tribunal, dated 12.07.2017. All the substantial questions of law are answered against the assessee. Hence, the Tax Case Revision Petition is dismissed. No costs.
(S.M.K., J.) (V.B.S., J.) 06.02.2018 skm To The Income Tax Appellate Tribunal, Bench 'B/SMC', Chennai.
S.MANIKUMAR, J.
AND V.BHAVANI SUBBAROYAN, J.
skm Tax Case (Revision) No.798 of 2017 06.02.2018