Income Tax Appellate Tribunal - Delhi
World Wide Exports (P) Ltd. vs The Income-Tax Officer on 8 June, 2004
Equivalent citations: [2004]91ITD519(DELHI), [2005]272ITR162(DELHI)
ORDER
P.N. Parashar, Judicial Member
1. This appeal has been filed by the assessee against the order of the Id. Commissioner of Incometax (Appeals) dated 25. 2. 1999 for the assessment year 1994-95.
2. The assessee has taken the following ground in this appeal:
"Notice served Under Section 143(2) was TIME BARRED"
The Id. CIT(A)-XV has erred in deciding that the notice Under Section 143(2) was validly served within the time allowed under the Act and the same was not duly and properly served before 31.10.1995. Service of the notice by affixture on the 30.10.1995 in a due and proper manner as laid down in Rule 17 & 19 from Order V of Civil Procedure Code, Vol. II is and should be a matter of record, The notice issued on the 30.10.95 was served on the assessee's AR by Redg. AD post on 20.11.1995, again a matter of record."
3. Shri R. V. Sinha, appeared for the assessee whereas Shri Lav Saxena the Departmental Representative represented the Department.
4. The facts relevant for deciding the controversy in the ground of appeal taken by the assessee are that the return was filed by the assessee on the 28.10.1994 for the assessment year 1994-95. This return was processed under Section 143(1) (a) on 30.12.1994. Thereafter, a notice under Section 143(2) was issued. The contention of the assessee before the Id. CIT(A) was that notice under Section b 143(2) was served only on 20.11.1995 and that the same was time barred. Before him the assessee took additional ground to this affect which is as under:
"The Id. ITO has erred in serving the 1st notice under Section 143(2) after 31st October, 1995 as it was done after the lapse of 12 months and thus time barred."
5. It was submitted before the Id. CIT(A) that since the period of 12 months expired on 31.10.1995 and as the notice under Section 143(2) could not be served by that date, the proceedings of assessment were invalid.
6. The written submission of the assessee before the CIT(A) were as below:
"12 months, therefore, expired on 31.10.95. Hence service of notice on 20.11.95, i.e. after the notice issued and the registered envelope and can also be verified from officer record of the I.T.O., Coy. Ward 3(2), New Delhi.
(ii) This fact of late serving of the notice was also brought to the knowledge of the learned ITO.
(iii) Even at a later stage, the fact was brought to the notice of the learned ITO, Coy, Ward 3(2) on 26.4.96.
(iv) It is most improbable that a notice prepared on the 30.10.95, even if dispatched by Registered Post on the very day could have reached the assessee before 1st Nov. 95, i.e. within 12 months."
7. On this written submission of the assessee which has been incorporated in para. 2 by the Id. CIT(A), the Assessing Officer was required to file comments. The Assessing Officer submitted that notice under Section 143(2) was issued on 30.10.1995 and one copy of the notice was sent on that date by registered post and another notice was served by affixture on the last known address of the assessee at C-408, Defence Colony, New Delhi. Thus, the contention of the Assessing Officer was that since notice was served though process server by affixture on 30.1095, the service was within the time provided under the Act, and, therefore, the contention of the assessee was not acceptable. The Id. AR of the assessee in rejoinder submitted before the Id. First Appellate Authority that there was no evidence to the effect that assessee was trying to evade service of notice. It was further submitted that the process service did not make any effort to find out assessee and, therefore, service by affixture was not justified. The Id. CIT(A) considered the entire factual position and rejected the additional ground taken before him by observing as under:
"I have carefully considered the matter. On being confronted the Id AR conceded that the change of address of business premises was not intimated to the I.T. Department. The Id AR also reiterated that the point at issue is not whether the notice was indeed served before 31.10.1995 but whether the said notice was duly and properly served. I am afraid the Id AR is indulging in hair splitting. There is absolutely no doubt that the said notice Under Section 143(2) was served on 30th October, 1995 by affixture. In fact, there was a failure on the part of the assessee to intimate the Assessing Officer regarding the change of address. In these circumstances it can not be said that the Assessing Officer was ill advised to serve the notice by affixture. The said notice has been validly served within the time allowed under the Act. Accordingly, the additional ground is decided against the appellant."
8.The Id. Counsel for the assessee Shri Sinha vehemently contended that the Assessing Officer has not followed the procedure laid down in Civil Procedure Code for effecting service by affixture. In this regard he invited our attention to Order 5 of Civil Procedure Code and made specific mention to Order 5 Rule 17 and submitted that since service by affixture has not been done in the manner laid down in the provisions contained under Order 5 Rule 17, such service cannot be treated to be valid and sufficient service. The Id. Counsel also placed reliance on several decisions including the following:
1. Smt. Yallawwa v. Smt. Shantavva, AIR 1997, SC 35 (Para 5 at pg. 39)
2. (2002) 5 SCC 377 Sushil Kumar Sabhrawal v. Gurpreet Singh & Ors. (Paras 7, 8, 9 and 13)
3. CITAP in Hydrabad Deccan Liquor Syndicate (1974) 95 ITR 139 (Page 139, Para 4, at page 143 Para 5)
4. (1978) 89 ITR at page 136 (IT UP v. Satya Narayan Poddar) 5 (1978) 110 ITR 27 : Jagannath Pd. v. CIT, Lucknow page 28-30
6. (1959) ITR 493 Gopi Ram Agarwala v. 1st Addl. ITO and Ors. (at pg. 497 to 498)
7. 1967 (56) DLT - 56 Punjab and Expeller Co. v. Mad Lab & Ors. Paras 6, 7.
9. On the other hand, the learned CIT, DR Shri Lav Saxena supported the order of the Id. CIT(A). He specifically averred that the service effected by affixture upon the assessee was sufficient service and, therefore, the additional ground taken before the Id. CIT(A) was correctly rejected. The other contention of the Id. CIT, DR was that the AR of the assessee attended on 12.11.1995 and stated that he could not appear on 8.11.1995 and he received a notice under Section 143(2) from the assessee late. On this basis, it was argued by him that the assessee had notice of the said date and had appeared subsequently and, therefore, the service should be deemed to be sufficient.
10 We have carefully considered the entire material on record. The photo copy of the order sheet has been filed on record by the department and as per this document, vide entry dated 30.10.95, it is mentioned that:
"the case was selected for scrutiny on random basis. Notice Under Section 143 (2) issued for 8.11.95"
Thereafter, there is another entry dt. 30.10.95 which is as under:
"Notice served by affixture at C-4-8, Defence Colony, New Delhi as company does not exist at this address. Service of notice was not possible and affixture was made."
Against the order sheet entry dated 8.11.1995, it is mentioned: "None attended" On 22.11.1995, the Assessing Officer has made the following note:
"Shri R. N. Dastar, CA, attended and stated that he could not attend on 8.11.1995. Since he received the notice Under Section 143(2) from the assessee late. A fresh notice under Section 143(2) has been served on him for final hearing on 27.11.1995. He has been requested to file the details."
A photo copy of the report of the process server has also been filed by the Department. The report is as under:
"The Company of the name M/s. World Wide Export (P) Ltd. is existing at the redg. Office 408-C, Defence Colony. Notice therefore is affixed at the last known addresses."
It may be pointed out here that the Assessing Officer has signed this report on 30.10.1995 by making the endorsement "seen" He has not recorded any finding regarding sufficiency of service by affixture or otherwise.
11. On going through the report of process server also, it is found that he has effected the notice on the last known address, the details of last known address have been given in the report. It is not clear as to who gave information about the last known address to the process server. The process server or the Serving Officer has not given the name and address of the person who identified the place, where affixture of notice was done nor the name an address of the witness, before whom affixture was made. The contention of the learned counsel for the assessee in this regard was that the address of their officer is still at 408, Defence Colony, New Delhi and there is no change in the address. On this basis, the correctness of the report of the process server has been challenged. It has been pointed out that the registered notice issued on 30.10.95 and sent at this address was received and in compliance to the said registered notice, the AR of the assessee appeared and, therefore, it cannot be said that the assessee had changed the address.
12. In the present case, the assessee is a company and, therefore, for the purpose of service of notice etc., the provisions contained under Section 282 are to be followed.
Section 282 Service of notice generally.
(1) A notice or requisition under this Act may be served on the person therein named either by post or as if it were a summons issued by a Court under the Code of Civil Procedure, 1908 (5 of 1908).
(2) Any such notice of requisition may be addressed-
(a) in the case of a firm of a HUF, to any member of the family'
(b) in case of a local authority or company, to the principal officer thereof'
(c) in case of any other association or body of individuals to the principal officer or any member thereof;
(d) in the case of any other person (not being an individual), to the person who manages or controls his affairs.
In view of Clause (b) of Clause (2) in the case of company, the notice is to be addressed to Principal Officer of he company. As per Clause (1) of Section 282, the notice is to be served on the person named therein either by post or as it was summons issued by Court under CPC.
13. The relevant provision for effecting of service by different modes are contained in Order 5 of CPC Rule 17 of Order I of CPC which deals with substituted service is as under:
"ORDER - V : Rule 17 : Procedure when defendant refuses to accept service, or can not be found When the defendant or his agent or such other person as aforesaid refuses to sign the acknowledgement, or where the serving officer, after using all due and reasonable diligence, can not find the defendant who is absent from his residence at the time when service is sought to be effected on him at his residence and there is no likelihood of his being found at the residence within a reasonable time, and there is no agent empowered to accept service of the summons on his behalf, nor any other person on whom service can be made, the serving officer shall affix a copy of the summons on the outer door or some other conspicuous part of the house in which the defendant ordinarily resides or carries on business or personally works for gain, and shall then return the original to the Court from which it was issued, with a report endorsed thereon or annexed thereto stating that he has so affixed the copy, the circumstances under which he did so, and the name and address of the person (if any) by whom the house was identified and in whose presence the coy was affixed."
Rule 19 relates to serving Officer which reads as under:
Rule 19: Examination of serving Officer:
"Where a summons is returned under Rule 17, the court shall, if the return under that rule has not been verified by the affidavit of the serving officer and may, if it has been so verified, examine the serving officer on oath or cause him to be so examined by another court, touching his proceedings, and may make such further inquiry in the matter as it thinks fit and shall either declare that the summons has been duly served or order such service as it thinks fit."
"Rule 20. Substituted Service -(1) Where the Court is satisfied that there is a reason to believe that the defendant is keeping out of the way for the purpose of avoiding service, or that for any other reason the summons cannot be served in the ordinary way, the Court shall order the summons to be served by affixing a copy thereof in some conspicuous place in the Court-House, and also upon some known to have last resided or carried on business or personally worked for gain, or in such other manner as the Court thinks fit."
14. The above rules lay down the procedure for service of summons/notice and, therefore, the procedure laid down therein cannot be surpassed because the intention of the legislature be behind these provisions is that strict compliance of the procedure laid down therein has to be made.
15. The expression "after using all due and reasonable diligence" appearing in Rule 17 has been considered in many cases and it has been held that unless a real and substantial effort has been made to find the defendant after proper enquiries, the serving officer cannot be deemed to have exercised "due and reasonable diligence". Before taking advantage of Rule 17, he must make diligent search for the person to be served. He therefore, must take pain to find him and also to make mention of his efforts in the report.
16. Another requirement of Rule 17 is that the serving officer should state that the had affixed the copy of summons as per this rule. The circumstances under which he did so and the name and the address of the person by whom the house or premises were identified and in whose premises the copy of the summon was affixed. In the case of Rajesh Kochar v. Babu Ram, AIR 1984 NOC 119 HP, it was held that these facts should also be verified by an affidavit of he serving officer.
17. The reason for taking all these precautions appears to be that service by affixture is substituted service and since it is not direct or personal service upon the defendant, to bind him by such mode of service the mere formality of affixture is not sufficient. Since the service has to be done after making the necessary efforts, in order to establish the genuineness of such service, the serving officer is required to state his full action in the report and reliance can be placed on such report only when it sets out all the circumstances which are also duly verified by the witnesses in whose presence the affixture was done and thus the affidavit of the serving officer deposing such procedure adopted by him would also be essential. In the present case, the whole thing has been done in one stroke. The first entry which is dated 30.10.1995, and which has been reproduced above, is silent about the mode adopted for service. It is not known as to why and under which circumstances, another entry is made on the same sate. The reason for making such subsequent entry has not been noted by the Assessing Officer. He has also not issued any direction for issuing notice simultaneously for service by affixture and has only recorded the fact that the notice is served by the affixture. Thus, on 30.10.95, the first entry is made and without recording its compliance and without recording any apprehension about delay by such mode, second entry is made without showing justification for the same. It appear that the report of the process server/serving officer is obtained without issuing any prior direction for such process or mode and after obtaining the report dated 30.10.95, another order sheet entry is made. Besides these facts, the manner and style of writing in which the subsequent entry on 30.10.95 is made also, creates much doubt although we are not investigating into this aspect of the matter. However, the fact remains that serving officer had not set out reasons for passing subsequent entry not for adopting the mode for service by affixture and without stating the reasons for doing so, the adoption of the mode of substituted service cannot be legally justified.
18. In view of the above facts, it is obvious that neither the procedure laid down under Order V. Rule 17 has been followed nor that laid down under Order V, Rule 19 and Rule 20 has been adhered to. Neither before taking recourse to service by affixture, the Assessing Officer or the concerned Officer has recorded the finding to justify the service by this mode nor afterwards called for the affidavit or certificate of service by affixture from the serving officer. He had not certified that the service has been effected by adopting this course. In the case of Dr. KC Verma v. ACIT, 84 ITD Delhi SMC Bench-I, page 33 has considered similar matter and held that since the compliance of Rule 17 and 20 was not ensured before effecting service by affixture, the service cannot be treated to be a valid service and thus the assumption of jurisdiction was not justified. On this basis, the assessment made under Section 144 in that case was held to be void ab initio. On the facts and circumstances of the instant matter which has been discussed above, the decision in the case of DR. K. C. Verma is fully applicable.
19. In the case of Yallawwa v. Shantavva, AIR 1997 SC 35, it has been observed that it must be kept in view that substituted service to be resorted as the last resort when a defendant can not be served in ordinary way and the court is satisfied that there is reason to believe that the defendant is keeping out of way for the purpose of avoiding service or for any other reason, summons cannot be served in ordinary way.
20. In the case of Ramendra Nath Ghosh v. CIT, 82 ITR 888, the Hon'ble Supreme Court has confirmed the order of High Court by holding that on the facts that service of notices was not in accordance with law and, therefore, it could not be said that the assessee had been given a proper opportunity to put forward their case as required by Section 33B of the Incometax Act. The facts in this case were that the Inspector of Incometax who had to serve notices under Section 33B of the Incometax Act, 1922, claimed to have served the notice by affixing them on the assessee's place of business but in his report did not mention the names and addresses of the persons who identified the place of business of the assessee, nor did he mention in his report or in the affidavit filed by him that he personally knew the place of business of the assessee. The assessee, however, claimed that they had closed their business long before the notice were issued. On writ petitions filed by the assessee, the High Court held that there was no proper service on the assessee and the orders of the Commissioner pursuant thereto could not be sustained.
21. It is also a settled legal position that before service by affixture is accepted, the court should satisfy itself of the conditions set out in Rule 17, of Order V of CPC. In the case of Gurana v. Kshetre, Air 1944 P. 247, it was held that where there is no evidence to show that thee was any enquiry as to whether there was any local agent or relative competent to accept the service, service by affixture cannot be accepted. In the case of Sambhu Nath v. Girish Chand Mohapatra, 1985 AIR (Ori.) 215, it was observed that where the defendant denies the service of notice made though process server, onus of proof shifts to the plaintiff who should prove the essential ingredients of the Order 5 Rule 17 by examining the process server. IN the present case, though the assessee company denies the service by way of affixtution from the very beginning but neither the learned CIT(A) called report from the Assessing Officer nor took his affidavit nor recorded his statement to the effect that the affixture was done him under the circumstances required under Rule 17 of Order V of C.P.C.
22. In the case of Sri Krishan v. CIT, the Hon'ble Delhi High Court has held that the service of notice by affixture was bad in law, as it was not in conformity with the order V. Rule 17 of Code of Civil Procedure, read with Section 63 of the Incometax Act. It was further held that the fact that the assessee had knowledge of the proceedings was not sufficient since the jurisdiction to start an assessment Under Section 34 depended on the very service of notice.
23. Another submission of the Id. Dr was that the registered notice was sent on 30.10.95 and the same should have been served on the same day or on the next day i.e. on 31.10.1995. There is no force in the submission too. Firstly because, it is not the stand of the department that service was effected by the registered post upon the assessee. Neither the Assessing Officer not the CIT(A) has recorded such finding and secondly because, there is no evidence to prove the same. If the department wanted to ascertain such facts, then the onus was upon it to prove it by documentary evidence or otherwise. The very fact that the another mode for service was adopted ,i.e. by affixture and the same was resorted on the same date goes to shows that the department was not sure that the service by Registered Post was possible within one day. On the other hand, the assessee has submitted that the registered notice was received on 20.10.95, This contention of the assessee has neither been controverted nor disproved. In the absence of any proof, no presumption can be raised against the service by registered post within one day. The presumption of service by registered post can be raised under Order 5 Rule 19A of CPC and since the department has not filed any acknowledgement, the presumption of service under the provisions of rule 19A can be raised only after 30 days after the issuance of notice. In view of this position, the argument of the learned Departmental Representative is not tenable.
24. It was pointed out by the learned Departmental Representative that the fault was with the assessee as it has not intimated the change of its address. The learned CIT(A) has also observed that the assessee conceded that he did not intimate the change of address. This observation does not appear to be correct, firstly because, the assessee has taken this stand that the registered notice which was sent on old address was received at that very address and secondly even if the assessee did not intimate the change of address, then also the obligation regarding the service of notice under Section 143(2) was very much there upon the revenue.
25. The issue relating to limitation for service of notice under Section 143(2) was also considered by the Hon'ble Kerala High Court in the case of P. Abdul Kadar Hamza v. CIT, 246 ITR 14. In that case, the assessee filed the return and intimation under Section 143(1)(a) was issued on 26th February, 1993. Later on, the case was selected for scrutiny under Section 143(2) and notice proposing to complete the assessment under Section 143(3) was sent. Notice under Section 143(2) was issued on 2nd June, 94. The contention of the assessee in that case was that the period of 12 months expired on 26th Feb., 93, notice under Section 143(2) issued on 2nd June, was beyond the period of one year provided under proviso to Section 143(3). The issue was not decided by he Tribunal. Therefore, the matter was restored to it for deciding the same. However, the Hon'ble Court observed as under:
"It must be noted here that under the proviso to Section 143(3) of the Act, the notice is required to be served on the assessee within a period of 12 months from the end of the month in which the return is filed."
From the above observatins of the Hon'ble Court, it is clear that the notice has to be served upon the assessee and mere issuance of notice within a period of 12 month is not sufficient. It may be pointed out here that in the order sheet entry dt. 22.11.1995 itself it has been mentioned that the notice under Section 143(2) was received from the assessee late and not that the assessee had received the notice before 01.11.1995. In any case, from this entry is it not established that any notice was served upon the assessee on 31.10.1995 on which date 12 months expired from the date of filing return. Thus, this argument of the Id. CIT, DR can not be accepted. As the Department has not been able to demonstrate that the notice under Section 143(2) was served within 12 months from the date of furnishing of the return, the assessment made on the basis of such invalid notice cannot be treated to be a valid assessment and hence such assessment order is to be treated as null and void ab initio and is liable to be quashed and annulled.
26. On the basis of facts and circumstances stated in the foregoing paras., we conclude that the service mode adopted by the department though affixation was neither initiated in accordance with the relevant rules not the service by such mode was done as per the rules referred to above and hence such service cannot be accepted to be a legally valid service of notice under Section 143(2) of the Incometax Act. We, therefore, hold that there was no valid service of notice by affixation . In view of our discussions in paras. 21 to 25, We also hold that three was no service by a Registered post before 1.11.95. Thus, in our view, the notice under Section 143(2) was not served within 12 months of the filing of the return.
27. In view of the factual and legal position set out as above, we are unable to concur with the findings recorded by the Id. CIT(A) for rejecting the additional ground taken before him. Hence we set aside his finding and hold that there was no valid and proper service of notice within the period prescribed i.e. before the expiry of 12 months from the date of filing of the return and, therefore, the assessment made by the Assessing Officer on the basis of such invalid has to be declared `null' and `void' and is to be quashed accordingly.
28. Consequently, the ground taken by the assessee is allowed in its favour.
29. In the result, the appeal of the assessee is allowed.