Income Tax Appellate Tribunal - Amritsar
Prem Kumar Bhagat,, Distt. Jalandhar vs Assessee on 18 July, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR.
BEFORE SH. A.D. JAIN, JUDICIAL MEMBER
AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER
ITA No.182(Asr)/2014
Assessment Year:2005-06
PAN: ANWPB0092L
Sh. Prem Kumar Bhagat, vs. Director of Income Tax
VPO Bara Pind, Tehsil Goraya (International Taxation)
Distt. Jalandhar. Chandigarh.
(Appellant) (Respondent)
Appellant by: S/Sh. J. S. Bhasin & Anil Miglani, Adv
Respondent by: Sh. Umesh Takkyar, DR
Date of hearing: 18/05/2016
Date of pronouncement: 18/07/2016
ORDER
PER A.D. JAIN, JM:
This is the assessee's appeal for the assessment year 2005-06, against the order dated 23.01.2014, passed by the ld. CIT(A), Jalandhar. The assessee has raised the following grounds of appeal:
"1. That the Id. CIT(A), in the given facts of the case and on law, has grossly erred in upholding that -
a) the ITO Phagwara, was competent to assume jurisdiction and issue notice under section 148;
b) the service of notice u/s 148 by ITO Phagwara, on one Smt. Teena Sharma was lawful;
c) the notice u/s 148 was served within specified time;2 ITA No.182(Asr)/2014
A.Y. 2005-06
d) the subsequent transfer of case to DDIT (International Taxation), Chandigarh, and passing of impugned order by him was proper;
e) the additional evidence, filed by assessee. though admitted, did not require any cognizance;
2. That the Id.CIT(A) further fell into grave error, on a misreading of the relevant documents, to hold that assessee purchased the demised property for Rs. 4 crores, against the apparent consideration of Rs. 2.30 crores evidenced by 'registered sale deed'.
3. That in the same context, the Id.CIT(A) also erred in holding that assessee paid advance of Rs. 2,50,41,909/- as per agreement dated 8.5.2004 (including cash of Rs.
1,70,00,000/-) and in finally, sustaining addition of Rs. 1,71,41,909/- as undisclosed investment.
4. That the Id.CIT(A), while deleting the addition of Rs.
1,49,58,091/- as it pertained to next year, was not justified either on facts or in law, in impliedly asking the AO to take action against the assessee for AY 2006-07."
2. As per Ground no. 1(b), service of notice under section 148 of the Act on one Smt. Teena Sharma is not lawful.
3. The AO found that notice u/s 148 of the Act was issued to the assessee on 29.03.2012, after recording the reasons , by the ITO, Ward-
3, Phawara. The notice was served on one Smt. Teena Sharma, one of the family members of the assessee, on 31.03.2012. Since no return was filed in response to the notice u/s 148 , a letter dated 30.05.2012 was issued to the assessee by the AO, asking him to file the return. The assessee filed a return in response, on 05.10.2012, alongwith the remarks that " in response to notice u/s 148 of the Act, return filed under 3 ITA No.182(Asr)/2014 A.Y. 2005-06 protest as the notice under section 147 is time barred, not served on me or my representative within specified time and without jurisdiction".
4. The AO, however, went ahead and framed the assessment order under section 144 of the Act, vide order dated 28.03.2013. Apropos the issue of service of notice u/s 148, the AO observed as follows:
"Information was also received from the banks and the statements of various accounts and the account opening form were also furnished by the banks. As per the account opening form as provided by the State Bank of Patial, Barapind branch account no.55059774207 was in the name of Sh. Prem Kumar Bhagat, Smt. Tina Sharma w/o Sanjiv Kumar and Smt. Shilpa w/o Sandeep Kumar and the address of the account holders mentioned in the form is VPO Barapind. The address in the bank account form very well proves that she was resident of same house as that of the assessee. Thus, the claim of the assessee that Smt. Teena Sharma did not stay at his residence has been proved to b incorrect. Since it is very well established that she was resident of same house as that of the assessee and the fact that she was an adult the service of notice u/s 148 is correct and valid."
5. Thus, the AO concluded that the service of notice u/s 148 of the Act on Smt. Teena Sharma was a correct and valid service, since Smt. Teena Sharma was a resident of the same house as that of the assessee and she was an adult.
6. The ld. CIT(A) called for a remand report on this issue. The relevant observations hereof stand reproduced by the ld. CIT(A) in the impugned order in para 5.4 and the same are as follows:
"1. On service of notice u/s. 148 While banking upon a number of opportunities granted to assessee, the Id. AO is striving hard to justify service of notice u/s. 148 on Smt Teena Sharma, as a valid. He is also seeking to rely upon a joint 4 ITA No.182(Asr)/2014 A.Y. 2005-06 bank account as also her relationship with assessee, to make a point that since Smt Teena Sharma was not a stranger, the service on her was good in law. By further commenting it to be not sensible now to file additional evidence showing her living in a separate house, the Id.AO is further reiterating that she being resident of same village and having same address in bank account opening form, service of notice in time cannot be denied by assessee on account of her separate residence. He is also seeking to take advantage of the appearance made by assessee as also his counsel before him on couple of occasions, when service of notice was not objected to, which to his mind, is now an afterthought and so, deserves rejection on this premise.
Be that as it may, the Id.AO, while commenting as above, has conveniently chosen to maintain stark silence on the preliminary issue raised by assessee as to how, even when he is now himself justifying service oj notice on Smt Teena Sharma, by relying upon the NRO Bank account of assessee, which fact shows beyond doubt that the AO was aware of the NR1 status of the assessee before service of notice, how the impugned notice, still came to be issued by the 1TO Phagwara, when the jurisdiction over this case, undisputedly vested with the International Taxation Wing at Chandigarh. The assessee's claim that such a service bv 1TO Phagwara, was intended only to save time limitation, also gets impliedly approved with the AO's act of remaining silent to rebut the same.
Now all the points taken to his stride to justify service of notice on Smt Teena Sharma, would not carry any weight, when the assessee's supporting contentions on law and facts touching the issue, as detailed in paras 2.1 to 2.7 have not invited any comment from the Id. AO's desk. How the above manner of service fitted into any of the provisions of CPC, which were specifically quoted to show the violation thereof has not been spelled out even remotely. How service on a relative living in same village, but not in same house, would be service on a non-resident assessee ? How, the appearance before ITO Phagwara on 18.6.12 and 14.08.12, who was not even vested with competent jurisdiction, would legalise the invalid service made on an earlier point of time on 31.3.2012. Rather a look at the order sheet, now suvvlied by Id.AO as Annex-6, would show that on 10.10.2012, when he received the case on transfer, he urn' not even possessed of the basis on which notice u/s. 148 was issued. It is indeed highly intriguing how the Id.AO is now defending his action, when the foundational defects have remained uncured. The vital aspect of appointing an agent u/s.163(1), when the assessee was not in India, as taken in para 2.5 of the written submissions, was 5 ITA No.182(Asr)/2014 A.Y. 2005-06 the least, the AO should have responded to. None of the case laws cited by the Id.AO to support his version of service of notice, has facts identical to one of this case. The assessee has discharged his onus that notice was not served on him by leading tangible evidence that Smt Teena Sharma was neither her agent, nor her family member nor lived in the same house. Thus on simple averment of a few disputed facts, the comments of the Id.AO on the issue, have no force to reckon with"
7. The ld. CIT(A) decided the issue against the assessee, holding as follows:
"5.5 I have considered the observations of the Assessing Officer as made in the assessment order as well as remand report on the issue under reference. I have also considered the written submissions of the assessee as well as his counter comments on the remand report of the Assessing Officer. I have further considered the judicial pronouncements relied upon by the assessee and the Assessing Officer. I have again considered the other material brought on record. On careful consideration of the reasons mentioned in the application of the assessee for admission of additional evidence, remand report of the Assessing Officer and counter comments of the assessee, 1 am of the opinion that the reasons cited by the assessee for not producing the additional evidence during the course of assessment proceedings are just an afterthought. In my opinion, the assessee and his counsel attended the assessment proceedings on some dates and the evidences which have now been produced as additional evidence could have been produced at that time. Moreover, there is nothing new in the additional evidences now being produced. The assessee has also not brought anything on record to corroborate the fact that he was advised by some counsel who advised him that the proceedings in his case are illegal and likely to be dropped. Hence bona-fide belief of the assessee has no basis. The affidavit filed by the assessee is also a self serving document as it has not been supported by any third party evidence. The certificate from the village Sarpanch will also not help the assessee in any way as Smt. Teena Sharma who is the wife of assessee's nephew is closely related to the assessee and having separate residences will not make any difference. It has also been noticed that the assessee along with his two nephews namely Sh. Sanjeev Kumar (Husband of Smt. Teena Sharma) and Sh. Sandeep Kumar jointly entered into an 'agreement' dated
08.05.2004 with the owners of the 'City Plaza Complex' to purchase that property for Rs.4 Crores. This fact itself prove that Smt. Teena 6 ITA No.182(Asr)/2014 A.Y. 2005-06 Sharma was not a stranger to the assessee as her husband jointly with the assessee entered into an agreement to purchase the property in question. Not only this, the assessee is also having a joint account in State Bank of Patiala, Bara Pind with that of Smt. Teena Sharma w/o Late Sh. Sanjiv Kumar and Smt. Shilpa w/o Sh. Sandeep Kumar, the wives of other two co-executants of the 'agreement'. These facts again prove that Smt. Teena Sharma is very closely related to the assessee and the service of notice u/s 148 of the Act on Smt. Teena Sharma is a valid service. In my opinion, the objections raised by the assessee to the service of notice is just an afterthought. The Assessing Officer has also objected to the admission of the additional evidence on the ground that there is nothing new in the additional evidences and these are not going to help in any way to the assessee. On careful consideration on the facts on record, and in view of the above discussion, 1 am also of the opinion that the admission or non admission of additional evidences is not going to help the assessee in any way. However, to meet the end of Justice I, admit the additional evidence produced at the appellate stage but none of the evidence produced now will help the assessee in any way and no cognizance of these evidences can be taken. In my opinion, the Assessing Officer has clearly established that Smt. Teena Sharma is very closely related to the assessee and service of notice u/s 148 of the Act on her on 31.03.2012 is a valid service . I would also like to make it clear that there is nothing wrong in issuing the notice u/s 148 of the Act by 1TO, Ward-Ill, Phagwara as prior to filing of return by the assessee it was not in his knowledge ^that the assessee is an NRl In my further opinion there is also nothing wrong in | continuing the same proceedings by the Assessing Officer who framed assessment. The moment, the Income Tax Officer at Phagwara came to know that the jurisdiction over the case of the assessee lies with Deputy Director of Income Tax (International Taxation), Chandigarh, he immediately transferred the case records to the Assessing Officer at Chandigarh. Prior to the filing of return by the assessee nobody knows that the jurisdiction over the case of the assessee lies with International Taxation, the assessee being NRI.
5.6 In these facts and in the circumstances of the case of the assessee, I am of the considered opinion that there is nothing wrong in the service of notice u/s 148 of the Act as it was validly served on Smt. Teena Sharma who is closely related to the assessee and the service of notice on her should be treated as service on the assessee. I am also of the opinion that having different residences in the same village will not make any difference as Smt. Teena Sharma is a close relative of the assessee. I also hold that the assessment has also been framed within prescribed time as the 7 ITA No.182(Asr)/2014 A.Y. 2005-06 notice has been found to be served within specified time. In the result, grounds of appeal No. 1 & 2 taken by the assessee are dismissed."
8. Challenging the above findings of the ld. CIT(A) on this issue, on behalf of the assessee, it has been contended as under:
2.By way of second ground, without prejucie to the outcome of first ground of appeal, service of notice u/s 148 has been brought into dispute. Firstly, during the relevant period, assessee was not in India, as evident from the copy of his passport appended at pg.19-
23. So, in his absence, as discernible from the impugned order itself, the notice u/s. 148 was served on one Mrs Teena Sharma, who neither communicated, nor was she obliged to intimate service of any who neither communicated, nor was she obliged to intimate service of any notice to the appellant. In the course of proceedings below, service of notice on Mrs Teena Sharma was denied and challenged, vide letter. dated 22.01.2013, she not being authorised by appellant to receive any notice on his behalf. An endeavour has been made by the AO in para 4 on page 3 of the order to justify this service as valid by relying upon a bank a/c opening form, collected from State Bank of Pataial, Barapind, to the effect that address of the assessee as also of Mrs Teena Sharma, as given in the bank account opening form, was of VPO Bara Pind. It is not disputed that the assessee as also Mrs Teena Sharma, were residents of village Bara Pind. But the fact is that Mrs Teena Sharma never resided in the house of assessee in village Bara Pind. She being daughter-in-
law of assessees's brother, resided in a separate house. Thus she was never a member of appellant's family so that service of notice on her could be justified as service on assessee. A certificate from the village Sarpanch is appended herewith at pg.24 as additional evidence certifying that Smt Teerna Sharma, and the appellant, resided separately in their respective houses in village Bara Pind. This certificate is prayed to admitted under rule 46A(1), as its necessity arose only after the earlier request made in assessment that Mrs Teena Sharma did not reside in appellant's house, stood rejected by the AO.
2.1 Hon'ble Supreme Court in Calcutta Discount Co. Ltd., v. ITO (1961) 41 ITR 191 (SC) held that a notice prescribed under Section 148 of the act for initiating reassessment proceedings is not a mere procedural requirement; the service of the prescribed notice on the assessee is a condition precedent to the validity of any reassessment made under Section 147. If no notice is issued or if the 8 ITA No.182(Asr)/2014 A.Y. 2005-06 notice issued is shown to be invalid then the proceedings taken by the Income-tax Officer without a notice or in pursuance of cm Invalid notice would be illegal and void.-See also the decision of the Supreme Court in Narayan Chettv v. Income-Tax Officer, Nellore, (1959) 35 I T R 383: (A I R 1959 S C 213).
2.2. Significantly, service of statutory notices, which provide jurisdiction to any authority, to saddle the assessee with civil consequences, has to be strictly ensured in the manner prescribed u/s.282(1) of I.T Act, 1961, which mandates service of notice on the person therein named either by post o r as if it were a summons issued by a court under the Code of Civil Procedure, 1908(5 of 1908). The relevant provisions of the CPC therefore, as applicable to the facts of this case, call for a close look:
-Order V, of the Code of Civil Procedure, 1908 Rule 12 - Service to be on defendant in person when practicable, or on his agent 'wherever it is practicable., service shell be made on the defendant, unless he has an agent empowered to accept service, in which case service on such agent shall be sufficient'. Rule 16 - Person served to sign acknowledgement - Where the serving office delivers or tenders a copy of the summons to the defendant personally, or to an agent or other person on his behalf, he shall require the signature of the person to whom the copy is so delivered or tendered to an acknowledgment of service endorsed on the original summons.
Rule 17 - Procedure when defendant refuses to accept service, or cannot be found - where the defendant or his agent or such other person as aforesaid refuses to sign the acknolwedgment, or where the serving officer, after using all due and reasonable diligence cannot 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 rnade. 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 copy was affixed.9 ITA No.182(Asr)/2014
A.Y. 2005-06 Rule 18 - Endorsement cf time and manner of service - The serving officer shall in all cases in which the summons has been served under rule 16, endorse or annex, or cause to be endorsed or annexed, on or to the original summons, a return stating the time when and the manner in which the summons was served and the name and address of the person, if any, identifying the person served and witnessing the delivery or tender of the summons.
Rule 19 - Examination of serving officer - N.A. Rule 20 - Substituted service - (1) where the court is satisfied that there is 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 conspicuous part of the house (if any) in which the defendant is known to have last resided or carried on business or personally worked for gain, or in such other manner as the Court thinks fit. (1A) - Where the court acting under sub- rule (1) orders service by an advertisement in a newspaper, the newspaper shall be a daily newspaper, circulating in the locality in which the defendant is last known to have actually and voluntarily resided carried on business or personally worked for gain.
(2) Effect of substituted service - Service substituted by order of the Court shall be as effectual as if it has been made on the defendant personally. Now if the facts of the present case are tested on the touchstone of above mentioned rules o Order V of the CPC, it is the second limb of rule 17, dealing with the defendant who cannot be found, which directly comes into play. The language is explicit enough not to be quoted again. It mandates service by affixture on the outer door or some other conspicuous part of the house in which the defendant ordinarily resides and the original to be returned to court with the report endorsed thereon stating the circumstances under which affixture made and name/address of the person if any by whom the house was identified and who witnessed the affixture of notice. Importantly, the second limb of rule 17, also mandates as a precondition before it is given recourse to - that the failure of serving officer to find the defendant - should be subsequent to his using all due and reasonable diligence.
2.4 A cursory look at the order impugned, as also the other material on record, shows that none of the essential ingredients of rule 12 or rule 17 were even remotely taken care of to ensure proper service of the statutory notice u/s.148 dated 29.03.2012. As per rule 12, 10 ITA No.182(Asr)/2014 A.Y. 2005-06 service of notice has to be effected on defendant or his agent. It has not been unfolded in the order, as to under what circumstances and at whose instance, the notice was served on Mrs Teena Sharma How she was found to be an authorised person or agent of the appellant, when the appellant was not found at his residence. The moment the ITO Phagwara learnt that appellant was not in India, it was enough a trigger to put him on alert to exercise due and reasonable diligence in the matter as envisaged under Rule 17 supra, to serve the notice by affixture at his residence rather than allowing the notice to be served on any other unauthorised person in the village. When the assessee was not found at his residence, the least expected of the ITO was to put in more efforts first to satisy that the appellant could not be found and was likely not to be found at the given address within a reasonable time, and there being no agent empowered to accept service of notice, then to effect service by affixture, after meeting further requirements therefore as enshrined in law. But, in this case, oblivious of all the above legal mandates, the notice was allowed to be served on a third person, out of the anxiety of the ITO Phagwara to ensure service on or before 31.3.2013, that being the last date, as if it was a necessary formality. This manner of service on last date, to save limitation, was not approved by HoiVble P&H High Court in the case of CIT v Kishan Chand 328 ITR 173 (P&H), where also, the notice served by affixture, without meeting the legal formalities, on the last date, was held to be bad in law. In the case of CiT v Mam Kakar (2009) 18 DTR (Del)145, where notice u/s 148 was found not served, not only the assessment was quashed, but even the benefit of section 292BB, as sought for by the revenue was not allowed, holding that it was applicable from 1.4.2008 whereas the year under consideration was AY 2001-- 02. Hon'ble Delhi High Court in CIT Vs. Hotline International (2008) 296 ITR 333 (Delhi) held that where the notice u/s. 148 was not served on assessee or his agent, nor the same was refused by either of them„ the reassessment proceeding* were bad in lew. In the flf Hatel Blue Moon 321 ITR 302(SC), where the notice u/s.143(2) was not served on assessee, the block assessment was held to be bad. Useful support can also be drawn from 173 ITR lO(Orissa); 194 ITR 748(AII); & CIT v Mintu Kalita (2002) 253 ITR 334(Gau) al! supporting the appellant's above contention. In a very recent decision dt 21.06.2013, the ITAT Delhi 'B' Bench, in the case of Shri Chetan Gupta v ACIT CC-5, Delhi, HA No.1891,1892 & 1893/Del/2012, following the decision o Delhi High Court in Hotline International and Hotel Blue Moon (SC) supra, helc that notice u/s. 148 served on one Mr Ved Parkash, who was neither an employee nor an authorised agent of assessee, was invalid and hence the reassessment was quashed.
11 ITA No.182(Asr)/2014A.Y. 2005-06 2.5 Furthermore, this being a case of non-resident, which fact was already on record with the authorities below, procedure as laid down in section 163(1), ought to have been given recourse to, by appointing someone, may be Mrs Teena Sharma, if the ITO was satisifed that she could be so appointed as agent of the non resident, after due notice to such person. But, here also the lower authorities have failed on all counts. Therefore, by any reckoning service of notice on a third person, not authorised by appellant, is bad in law, and such a service could not ipso facto, vest jurisdiction in me ITO - Phagwara to pursue the matter any more.
2.6 It may well be significant to mention at this very juncture that even the provisions of section 292BB would also not come to the rescue of revenue, inasmuch as it is a case, where on receipt of a subsequent notice, the objection as to non service of notice u/s.148 on assessee, was duly raised before the ITO/DIT, well before the passing of impugned order. Hence, even on this count, the appellant's case stand to be fully endorsed.
2.7 To sum up, the facts narrated hereinabove, the relevant provisions of CPC and the authorities relied upon, conclusively establish of a serious infirmity having occurred in the service of statutory notice. As a result thereof, the impugned order deserves to be held as void, having been passed by the AO without assuming proper jurisdiction".
9. Reliance has been placed on the following decisions:
i) 'M/s. Ashoka Industrial Corporation vs. Income Tax Officer', ITAT, Amritsar (SMC) Bench, ITA No.694(Asr)/2014 for the A.Y. 2004-05, dated 18.11.2015 (copy placed on record).
ii) 'DCIT vs. Usha Stud & Agricultrual Farms (P) Ltd', Delhi Bench of the Tribunal, (authored by the JM vide order dated 25.10.2013) in ITA No.910 to 912/Del/2010 (copy placed on record.
iii) 'Gurcharan Singh of S. Dalip Singh vs. I.T.O, Ward 2(II)', Amritsar Bench of the Tribunal vide order dated 19.02.2015, passed in ITA No.331/Asr/2014 for the A.Y. 2006-07 (Authored by the JM) (copy placed on record).
12 ITA No.182(Asr)/2014 A.Y. 2005-06 iv) 'Hind Book House vs. I.T.O.', 92 ITD 415 (Del. Trib.) v) 'CIT vs. Rajesh Kumar Sharma', 311 ITR 235 (Del.) vi) 'Dina Nath vs. CIT', 204 ITR 667 vii) 'Bhagirath Rajput vs. CIT', 36 DTR 372
viii) 'CIT vs. Hotline International (P) Ltd.', 296 ITR 333 (Del.)
10. On the other and, the ld. DR relied on the impugned order on this issue.
11. The facts are not disputed. The notice u/s 148 was served not on the assessee, but on Smt. Teena Sharma who is a close relative of the assessee, staying in the same house as that of the assessee. The question is to whether this service is in accordance with law. In the case of 'DCIT vs. Usha Stud & Agricultural Farms (P) Ltd.', ITAT, Delhi Bench, in ITA Nos. 910 to 912/Del/2010, vide order dated 25.10.2013, has discussed the issue, as follows:
"6.4 Now, reference is to be made to the relevant statutory provisions in this regard. Firstly, I refer to sub-section (1) of section 148 Which reads as under:
"148(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 he 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 section 139."
Thus, the mandate of section 148 is that notice should be served on the assessee.
6.5 In regard to service of notice, reference is made to section 13 ITA No.182(Asr)/2014 A.Y. 2005-06
282. Section 282 prescribes specific mode of service of notice. This section reads as under:
"282(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 l908)."
A bare reading of this section clearly indicates that the notice under the Act can be served on the person either by post or if not by post then in the same manner in which summons issued by the court under or the Code of Civil Procedure, 1908 are to be served. As the service of s through notice server of the Department and not by post, the procedure contemplated by the Code of Civil Procedure under Order V for service of been followed. Order V and III of Code of Civil Procedure are relevant in this regard and we reproduce relevant rules from the said order in order to decide been effected in accordance with law or not.
Rule 6 of Order III is relevant to find out as to who may be appointed as agents to accept service of processes and how. That provision is as follows:
"(1) Besides the recognized agents described in rule 2 any person residing within the jurisdiction of the Court may be appointed an agent to accept service of process.
(2) Such appointment may be special or general and shall be made by an instrument in writing signed by the principal, and hutch instrument, or, if the appointment is general, a certified copy there p1[shall be filed in court".
Rule 9(1) of Order V "Where the defendant resides within the jurisdiction of the court in which the suit is instituted, or has an agent resident within that jurisdiction who is empowered to accept the service of the summons, the summons shall, unless the court otherwise directs, be delivered or sent to the proper office to be served by him or one of his subordinates,"
Rules 12,13,15,16 & 18 of Order V "12. Service to be on defendant in person when practicable; or on his agent - Wherever it is practicable, service Mall be made on the defendant in person, unless he has an agent empowered to accept service, in which case service on such agent shall be sufficient.
13. Service on agent by whom defendant carries on business - (1) in a suit relating to any business or work against a person who does not reside within the local limits of the jurisdiction of the Court from which the summons is issued, service on any manager or e of service, personally carries on such business or work for such Its, shall be deemed good service.14 ITA No.182(Asr)/2014
A.Y. 2005-06
15. Where service may be on an adult member of defendant's family Where in any suit the defendant is absent from his residence at the time when the service of summons is sought to his residence and there is no likelihood of his being found at the reasonable time and he has no agent empowered to accept service of the if service may be made on any adult member of the family, whether residing with him.
16. Person served to sign the acknowledgement - Where the service officer serves or tenders a copy of the summon to the defendant personally, or to an agent or to other person on his behalf he shall require the signature of the person to whom the copy is so delivered or tendered to an acknowledgement of service endorsed on the original summons.
18. Endorsement of time and manner of service - The serving officer shall, in all cases in which the summons has been served under Rule 16, endorse or annex, or cause to be endorsed or annexed, on or to the original summons, a return stating the time when and the manner in which the summons was served and the name and address of the person (if any) identifying the person served and witnessing the delivery or tender of the summons."
6.6 From Rule 6 of Order III reproduced above, it is evident that written, authority to receive notice is necessary either by way of special or general power given in this regard. The person should have been specifically empowered to receive notice, From the analysis of the Rules reproduced above it is evident that the mandate of Legislature is that as far as possible the service of summons should be effected on the person named in the notice and, if it is not possible, then same should be effected on the person who is duly vested with the authority to receive such notice by the person named in the summon. The Legislature has further provided that in order to ensure proper service of notice acknowledgement of the person served should be obtained and person serving should also record necessary details so as to avoid any dispute in this regard.
6.7 It is settled law that it is the duty of the revenue to establish that the service of an order or a notice was made on the assessee himself or on somebody duly authorized by him in that behalf. When the assessee pleads that he has not been properly served with any notice, it is for the Department to place the relevant material to substantiate the plea that the assessee was served with prior notice. In the present case, no material is on record to show that the person to whom the notice is alleged to have been served was specifically authorized to receive notice, rather that person is not identifiable. Till date despite repeated requests made on behalf of the appellant and even after instructions by the undersigned, the A,O, has not been able to name the person to whom the notice was served. The most fundamental requirement on service has not been established. If notice in some way or the other reached the assessee 15 ITA No.182(Asr)/2014 A.Y. 2005-06 then it cannot be treated as proper service of notice since statute prescribes specific mode of service to be followed. When the statute provides that a notice should be served in a particular mode, it is not possible to hold that there has been a proper service of notice merely from the fact that the person to whom the notice had been addressed had received the notice through some other source or that he has become aware of the contents of the notice. In Paparruna Rao v. Revenue Divisional Officer AIR 1918 Mad. 589, a Division Bench of Madras High court while dealing with the manner of service contemplated by section 45(2) of the Land Acquisition Act, which also attracts the provisions of the Code of Civil Procedure, in 1-hp, matter of service of notices, expressed the view that unless a person is appointed as agent o accept service of processes by an instrument in writing signed by the principal, the service on him cannot be said to be valid. The view taken in that case was that an oral authority is not sufficient but there should be a written authority. Similar view has been taken in CIT V. Baxirarn Rodmal [1934] 2 ITR 438 (Nag.), CIT v. Dey Brothers [1935] 3 ITR 213 (Rang.) and C.N. Nataraj v. Fifth ITO [1965] 56 ITR 250 (Mys.). In CIT v. Baxiram Rodmal [194] 2 ITR 438 (Nag.) it has been held that the mere fact that a person had accepted notices on behalf of the assessee on previous occasions and appeared for the assessee would not constitute him an agent on whom a notice or requisition under the Act would be validly served nor would any statement made by him bind the assessee. In C.N. Nataraj v. Fifth ITO ([1965] 56 ITR250, the Mysore High Court took the view that the service of notice under section 148 on a clerk of the assessee's father who was neither an agent of the assesse nor authorized by him to accept notices on his behalf was not valid and, therefore, the assessee would not be assessed under section 147 in pursuance of such service of notice 6.8 Thus, in order that there should be a valid service, the person on whom service is effected must have valid authorization given to him in writing to receive such notice and mere implied authority will not be enough. Alternatively, if for argument sake, it is to be held that implied authority is sufficient for service of notice, then that too is not present in the present case. It is also not the case where the assessee has avoided the service of notice on her. Even in the situation where the assessee would have avoided the service of notice, as per Order V, Rule 20 of code of Civil Procedure, it is the duty of the department to discharge its onus showing that the authority concerned has reason to believe that the assessee was keeping out of the for the purpose of avoiding service or that otherwise there were other good reasons to come to the conclusion that the notice could not be served in the ordinary way.
6.9 The ratio of the decisions cited above had also been consistent that acquiescence is not going to confer jurisdiction which otherwise is lacking from the very beginning. As observed earlier, the Assessing Officer can proceed to complete the re- assessment only when he issued notice and served the same on the assessee. In view of these findings, the Assessing Officer cannot assume jurisdiction to complete assessment for want of notice even though assessee had appeared before him and filed return and also participated in the reassessment proceedings. The 16 ITA No.182(Asr)/2014 A.Y. 2005-06 procedural irregularities can be waived, off by the assessee, but at the same time the conduct the assessee in participating in assessment proceedings will not be sufficient to confer the jurisdiction on the Assessing Officer without service of notice on the assessee. It was fundamental requirement to get the notice served on the assessee before proceeding to complete the reassessment and as it is lacking, this jurisdictional defect cannot be cured by conduct of persons on behalf of the assessee and thus assessment is liable to be quashed on this point."
12. This position has been duly taken into consideration in 'DCIT vs. Usha Stud & Agricultural Farms (P) Ltd.' (supra).
13. The other decisions relied on by the assessee are to the same effect.
14. Herein, there is nothing on record to suggest that Smt. Teena Sharma was in any manner authorized to receive summons/notice on behalf of the assessee. It has never been the case of the Department that she was authorized to accept any notice on behalf of the assessee, or that she was an agent of the assessee, entitled to receive notice u/s 148 of the Act. As such, it cannot be held that the receipt of the notice by Smt. Teena Sharma amounted to service of notice on the assessee.
15. No decision contrary to those cited by the assessee has been pressed by the department before this Bench.
16. For the above discussion, the assessee's contention by way of Ground no.1(b) is found to be justified and is accepted as such.
Accordingly, it is held that no notice u/s 148 stands proved as served on the assessee. As such, the reopening proceedings are bad in law.
17 ITA No.182(Asr)/2014A.Y. 2005-06 Consequently, the impugned order passed in pursuance of such proceedings is also invalid. Accordingly, the same is cancelled. Nothing else survives for adjudication. Hence, the remaining grounds are not required to be gone into.
17. In the result, the appeal is allowed.
Order pronounced in the open court on 18/07/ 2016.
Sd/- Sd/-
(T.S. KAPOOR) (A.D. JAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
/SKR/
Dated: 18/07/2016
Copy of the order forwarded to:
1. The Assessee:Sh. Prem Kumar Bhagar
2. The Dy. Director of Income Tax (International Taxation, Chandigarh.
3. The CIT(A)
4. The CIT
5. The SR DR, ITAT, Amritsar.
True copy By order (Assistant Registrar) Income Tax Appellate Tribunal, Amritsar Bench: Amritsar.