Income Tax Appellate Tribunal - Gauhati
Income-Tax Officer vs Gauri Kanta Kalita on 27 October, 1989
Equivalent citations: [1990]32ITD79(GAU)
ORDER
Egbert Singh, Accountant Member
1. The first two appeals are by the revenue and the other two appeals are by the assessee. All relate to the consolidated order of the AAC by which he has partly sustained the order of the ITO. Briefly speaking, the facts and the background of the case are as under.
2. For the assessment years 1980-81 and 1981-82, the assessing officer discussed the facts in details. For the assessment year 1980-81, the return was filed on 1-10-1980 which was assessed under Section 143(1). Later on, the ITO had information that the firm M/s. Garui Kanta Kalita & Co. had income from Huller Rice Mill which was in the earlier years shown as the assessee's income in his individual capacity. The assessing officer completed that assessment at nil observing that the income actually belonged to the assessee in his individual capacity. The ITO, therefore, took action under Section 147(a) and issued notice under Section 148. There was no response from the assessee and no return was filed. The ITO issued notice under Section 142(1) which was served on the assessee and in response to such notice under Section 142(1), Shri J. C. Chakraborty, an employee of the assessee appeared without accounts. The ITO heard the assessee and gave opportunity of being heard. In his detailed order, the ITO dealt with the claim of the assessee and facts as available before him to come to the conclusion that the assessee owned that Huller Rice Mill and, therefore, the income would have to be considered in his hands in his individual capacity. He completed the assessment as such under Section 143(3)/145(2) read with Section 147. The order was passed on 5-1-1985.
3. The assessee went in appeal before the AAC contending that the income as estimated by the ITO had no basis and may be deleted. The AAC mentioned that no additional ground has been raised by the assessee though a new point was tentatively included in the statement of submissions that no notice under Section 148 was served on the assessee. The AAC observed that from all intents, it was evident that the assessee was not relying on this point as his main basis of appeal, as he has not sought leave to adduce additional grounds there from. The AAC further went on to say that the initiation of the assessment under Section 147(b) of the Act was, therefore, to be treated to be in order. Thereafter, the AAC considered the merits of the case and allowed certain relief, for the assessment year 1980-81.
4. For the assessment year 1981-82 also, the ITO completed the assessment on similar lines which was taken by the assessee in appeal before the AAC who passed a consolidated order dated 9-12-85 as indicated above.
5. The assessee took up the matter before the Appellate Tribunal being ITA Nos. 209 (Gau.) & 210 (Gau.) of 1986. In that order, the assessee's contention: were considered and the point was that there was no justification for the ITO to initiate proceedings under Section 147 and the A.A.C. erred in upholding the action of the ITO and that the assessee was not served with the notice under Section 148 and the entire proceedings were bad in law and should be annulled. These grounds were taken for both the years. The Appellate Tribunal heard both the sides and gone through the decisions of the authorities below for its consideration. It noted that the assessee's counsel submitted that at the time of hearing before the A.A.C, additional ground was taken although it was a new point which was not raised in the original grounds of appeal. The said additional ground before the A.A.C. was that no notice under Section 148 was served on the assessee. The A.A.C. in that impugned order observed that from all intents, it was seen that the assessee was not relying on this point as his main basis of appeal as the assessee had not sought leave to adduce additional grounds therefrom. The A.A.C. went on to say that the initiation of proceedings were treated to be in order.
6. After hearing both the sides, the Appellate Tribunal was of the view that this point raised by the assessee before it did arise from the order of the A.A.C. The Appellate Tribunal mentioned that the assessee might not have raised this ground of appeal through the original memorandum, but a legal point can be raised and pleaded at any stage. The Appellate Tribunal observed that service of notice under Section 148 would vest the ITO with the jurisdiction to proceed with the re-assessment proceedings as contemplated by Section 147. The Appellate Tribunal observed that in fact Section 148 requires that before making assessment, re-assessment or recomputation under Section 147, the ITO shall serve on the assessee a notice under Section 148 containing all the requirements which may be included in a notice under Section 139(2) and other procedure would follow suit. The Appellate Tribunal observed further that service of notice was inevitable as unless service was effected, it cannot be said that the re-assessment should be treated to be in order as noted by the A.A.C. on the ground that the assessee has not raised this ground in appeal. The Appellate Tribunal pointed out that the appellate authority would have to consider any plea and dispose of the matter as such. Since the A.A.C. has abruptly come to the conclusion, the said conclusion cannot be sustained. The Appellate Tribunal, therefore, deemed fit to set aside the order of the A.A.C. on the point for fresh disposal by him after dealing with the points raised by the assessee and after he verified the records of the department and after giving both the sides opportunity of being heard. The Appellate Tribunal also observed that both the sides would be at liberty to place fresh facts etc. before the A.A.C. for fresh disposal by him. The order of the Tribunal was dated 25-10-1988.
7. Pursuant to that order of the Appellate Tribunal, the successor Deputy Commissioner of Income-tax (Appeals) took up the matter for fresh disposal in the light of the directions of the Appellate Tribunal mentioned above. The Dy. Commissioner (Appeals) allowed hearing to both the sides. He pointed out that the ITO has not complied ; whereas the assessee's learned counsel responded and requested the Dy. Commissioner (Appeals) to pass necessary orders on the basis of the submissions made by him at the time of hearing of the original appeal. It was specifically urged before the Dy. Commissioner (Appeals) at this stage also that notice under Section 148 was not served on the assessee for both the years and therefore, the re-assessment proceedings are invalid and the same required to be cancelled. The assessee also contended in the alternative that the income estimated by the ITO was excessive.
8. The Dy. Commissioner (Appeals) considered the papers available on record and observed that the assessee did not comply with the notice under Section 48 despite repeated opportunities allowed by the ITO for both the years and that the assessee did not even comply with the notice issued under Section 142(1) subsequently issued to him. The A.A.C. observed that no objection was ever raised before the ITO with regard to the service or otherwise of the notice under Section 148 and that in fact the assessee ignored all the notices issued by the ITO. The A.A.C., therefore, concluded that he cannot permit the assessee to place fresh facts and evidence at the appellate stage which could have been placed before the ITO because no case has been made out for not placing full facts before the ITO. Therefore, the issue which has not been specifically decided by the ITO cannot be adjudicated at the appellate stage.
9. In respect of the estimate of income under various heads, the Dy. Commissioner (Appeals) observed that the assessee has not made any serious effort to challenge the action of the ITO and, therefore, the Dy. Commissioner (Appeals) cannot help the assessee. As a result, the appeals by the assessee were dismissed. Hence these appeals by the assessee before the Appellate Tribunal.
10. Now, there are certain things to be clarified. We have mentioned earlier that the revenue have also filed appeals for both the years against the order of the A.A.C. dated 9-12-85, i.e., predecessor of the present Dy. Commissioner (Appeals) which order has become the subject matter before the Appellate Tribunal in the earlier occasion in the appeal preferred by the assessee being ITA Nos. 209 (Gau.) and 210 (Gau.) of 1986, dated 25-10-1988, which we have discussed in the preceding paragraphs. On reasons recorded in that order and on the appeal by the assessee, the Appellate Tribunal restored back the matter to the A.A.C. for verification of the issue regarding service of notice under Section 148. The order of the A.A.C. was, therefore, set aside for fresh disposal. In view of that fact the order has become final now, the appeal by the revenue being ITA Nos. 247 (Gau.) and 248 (Gau.) of 1986 presently before us which are directed against the order of the first A.A.C. have become infructuous and are dismissed as such.
11. Now the matter pending before us for disposal is regarding the assessee's claim directed against the order of the successor Dy. Commissioner (Appeals), dated 9-1-1989. Again, we have discussed briefly the contents of this second order of the first appellate authority impugned now before us in which the appeals by the assessee for both the years were dismissed. This time, there is no appeal by the revenue, obviously.
12. As mentioned earlier, the appeals by the assessee for both the years are that the re-assessment order made by the ITO. being illegal without authority of law may have to be cancelled as the notice under Section 148 for both the years has not been served on the assessee. At this stage, it is pointed out that the Appellate Tribunal on the earlier occasion had restored back the matter to the A.A.C. for fresh disposal after verification of facts regarding service or otherwise of the notice issued by the ITO under Section 148, which was in pursuance of the action taken by the ITO under Section 147. The Appellate Tribunal has observed in that earlier order that both the parties would be at liberty to place evidence, facts etc. before the A.A.C. for the said purpose but it is not understood as to how the Dy. Commissioner (Appeals) concluded in his impugned order that the assessee having not produced those materials or facts and arguments before the ITO, he cannot permit the assessee to place those fresh material etc. before him. It is urged that the impugned order of the first appellate authority suffered from serious infirmity as the present Dy. Commissioner (Appeals) has exceeded his jurisdiction in not complying with the clear directions given by the Appellate Tribunal specifically on the point. That apart, it is also urged that as regards the issue of notice under Section 148 for both the years, the assessee has got nothing to say as the question of issue of a notice is available only in departmental records over which the assessee has no control. It is emphasised before us by the assessee's learned counsel that notice was never served under Section 148 on the assessee and, therefore, all the subsequent proceedings, action or orders etc. of the ITO have become null and void and inoperative in law. It is urged, therefore, on these premises that the first appellate authority went wrong on different scores and, therefore, his order may be cancelled and as a consequence, the order of assessment also on the premises for both the years have to be annulled.
13. On behalf of the revenue, the learned Departmental Representatives support the order of the Dy. Commissioner (Appeals) and the findings given therein. It is vehemently urged that before the ITO, the assessee did not raise or whisper his grievance regarding non-service of notice under Section 148. It is urged particularly, that the assessee did comply with other notices under Section 142(1) etc. which was taken up by the ITO in consequence of the action taken by him under Section 148. It is pointed out that the assessee through his employee appeared and he was heard which will indicate that the assessee was very much conscious and aware of the fact that the current proceedings were under Section 147 as the original assessment having been completed under Section 143(1) have become final and conclusive. Various references were made to the entries in the order sheet, copies of which have been placed before us on behalf of the revenue to emphasise the stand taken by the revenue that the assessee having complied with the subsequent notices under Section 142(1) etc. should be deemed that he had come to know that the proceedings conducted by the ITO was re-assessment proceedings as contemplated by Section 147. It is urged, therefore, that this action of the assessee cannot but taken to prove that the assessee was fully aware of the current proceedings which were in pursuance of the said notice under Section 148 for both the years. It is urged at length that on the background of the case and in view of the subsequent conduct of the assessee, the denial or non-service of notice under Section 148 was an after-thought which was taken up before the A.A.C. only by way of submission without taking a ground in the regular appeal already instituted by him before the Dy. Commissioner (Appeals). It is urged on behalf of the revenue that service or otherwise of a notice is a matter of record and even assuming that notice under Section 148 had not been served on the assessee, then this would constitute an infirmity in the order of the ITO which is curable and, therefore, the appellate authority has the obligation to restore back the matter to the assessing officer for recommencing the proceedings from that stage in which such irregularity or illegality has crept in. Thus, it is the case of the revenue that as the assessee had complied with the subsequent decision of the ITO which was in consequence of the notice issued under Section 148, the assessee cannot be allowed at this stage to contend that notice under Section 148 was never served on him. At this stage, it may be mentioned here that when the Appellate Tribunal heard both the parties earlier had felt that in view of the attitude and approach of the Dy. Commissioner (Appeals), no useful purpose will be served to restore back the matter to the file of the Dy. Commissioner (Appeals) again and again for giving certain fact finding on the point as mentioned earlier. In order to minimise the litigation, the Appellate Tribunal thought fit not to set aside again the matter to the Dy. Commissioner (Appeals) for verification of the fact nor to remand the matter to him. The Appellate Tribunal decided that the ITO should be asked to give a remand report after verification of the departmental records regarding service of notice under Section 148 of the Act for both the assessment years under consideration. The assessing officer has promptly sent his remand report giving a finding from the records of the case. Copies of such remand report were supplied to the learned counsel for the assessee also. In that remand report, the assessing officer categorically stated that notice under Section 148 was issued for both the years by registered post as established by necessary entries in the file and registers relevant for the purpose. But the assessing officer has categorically stated that acknowledgement slip or indication of service of notice under Section 148 is not available at this stage.
14. Thus, it is urged on behalf of the revenue that issue of notice has not been denied nor disputed by the assessee and in view of the decision of the Hon'ble Supreme Court in the case of R. K. Upadhyaya v. Shanabhai P. Patel [1987] 166 ITR 163/33 Taxman 229 the issue of notice under Section 148 by the ITO is sufficient to authorise the assessing officer to proceed with the assessment proceedings although the service may be effected at a later stage. It is, therefore, urged that on the basis of this ratio, which is binding on all concerned, the proceeding initiated by the ITO for both the years were validly initiated and were proper and sustainable. It is contended, therefore, that the appeals by the assessee having no merits may be dismissed on this point alone.
15. The assessee's learned counsel in reply submits that the decision in the case of R.K. Upadhyaya (supra) has no relevancy to the present issue as that decided case was in connection with limitation matter and, therefore, that ratio would have no applicability to the facts of the case. The assessee's learned counsel reiterates the earlier stand taken before the Dy. Commissioner (Appeals) and before us also as briefly mentioned above.
16. We have gone through the connected papers and the orders of the authorities below along with the submissions made by both the sides for our consideration.
17. At the first instance, it has to be mentioned that true the appellate authority has an obligation to restore the matter to the authorities concerned for recommencing the proceeding from the stage at such irregularity or illegality has crept in. In the case of Kapurchand Shrimal v. CIT [1981] 131 ITR 451, the Hon'ble Supreme Court has in fact observed, as contended by the learned Departmental Representatives before us on the point for recommencing of the proceeding from a particular stage of which the illegality has crept in. But it is equally true that the Hon'ble Supreme Court has stated that such direction can be given provided that it is not prohibited by the statute. In matters of re-assessment and in terms of the provisions of Section 148(1), the notice can be served by the ITO on the assessee before the ITO makes an assessment, re-assessment or re-computation under Section 147. Apparently, there is no time limit for service of such notice. But there is a limitation within which the ITO would have to pass an order of assessment, re-assessment or recomputation under Section 147 as spelled out by Section 153(2) and other connected provisions. The assessment years involved are 1980-81 and 1981-82. Thus in spite of the obligation on the appellate authority to direct re-commencement of proceedings from the stage of illegality, but such direction could not be given at this late stage in view of the clear provisions of Section 153(2) keeping in view the observations of the Hon'ble Supreme Court in the case of Kapurchand Shrimal (supra), in which it has been stated that such direction should be given, if there is no such provision in the statute. But as indicated above, there is provision as contained in Section 153(2) which debars the ITO from passing an order of re-assessment etc. after certain stipulated date. In the case of R. K. Upadhyaya (supra), the facts of the case were different inasmuch as on receipt of the notice issued under Section 148, the assessee approached the Hon'ble High Court with a writ petition for appropriate orders etc. to quash and set aside the said notice issued by the ITO. The order was passed by the Hon'ble High Court on 20-8-73. The matter came up before the Hon'ble Supreme Court, in which it was held that the ITO had issued notice within the limitation period and the appeal by the aggrieved party was allowed and the order of the said High Court was vacated. The Hon'ble Supreme Court directed the ITO to proceed to complete the assessment after complying with the requirements of law. But the facts before us are distinguishable inasmuch as the re-assessments for both the years have been completed but there was no service of notice under Section 148. In the present case of this assessee, there was no stay or writ by any appropriate authority preventing the ITO from passing the re-assessment order. So there was no period for extension in the matter of computation of the time limit within which the re-assessment can be made under Section 153(2). That apart, as could be seen from the decisions of different High Courts, provisions of Section 34 of the Indian Income-tax Act, 1922, are mandatory in nature. The provisions and requirements of Sections 147, 148 and 149 are also mandatory in nature as pointed out by the Hon'ble Gujarat High Court in the case of P. V. Doshi v. CIT [1978] 113 ITR 22. In other words, these provisions are not procedural or mandatory in nature. Therefore, defect or lacuna or violation of the mandatory provisions cannot be considered as a curable defect which will authorise the Appellate Tribunal to direct the assessing officer to recommence the proceedings from the stage at which such illegality has crept in.
18. According to the assessee's learned counsel, the issue of notice would mean also the service of notice on the assessee. Otherwise, the ITO would not have jurisdiction to recommence the proceedings under Section 147.
19. Under the Indian Income-tax Act, 1922, the service of notice under Section 34 of that Act, was a condition precedent to the initiation of proceedings if no notice was issued or even the notice issued is shown to be invalid, then the proceedings would be illegal and void. This was the view of the Hon'ble Supreme Court in the case of CIT v. Thayaballi Mulla Jeevaji Kapasi [1967] 66 ITR 147. It was also observed in that decided case that service of the notice under Section 34(1) (a) of the Indian Income-tax Act, 1922, within the period of limitation being a condition precedent to the exercise of jurisdiction, if the ITO is unable to prove that the notice was duly served upon the assessee within the prescribed period, any return filed by the assessee after the expiry of that period will not invest the ITO with authority to reassess the income of the assessee pursuant to such a return.
20. In the case of CWT v. Kundan Lal Behari Lal [1975] 99 ITR 581, the Hon'ble Supreme Court in a writ petition proceeding and on the facts of that case has observed that the word "issued" in Section 18(2A) of the W.T. Act, 1957, meant "served". In this decided case, the Hon'ble Supreme Court considered the ratio of the decision of the Hon'ble Supreme Court in the case of Banarsi Debi v. ITO [ 1964] 53 ITR 100 in which the expressions "issued" and "served" are used as inter- changeable terms. It was also observed in the case of Kundan Lal Behari Lal (supra) that the dictionary meaning of the expression "issued" takes in the entire process of sending notices as well as service thereof and that the said word used in Section 34 of the Act itself was interpreted by courts to mean 'served'.
21. The decision in the case of Banarsi Debi (supra) was followed by the Hon'ble Gujarat High Court in the case of Shanabhai P. Patel v. R.K. Upadhyaya, ITO [1974] 96 ITR 141 in which the provisions of Sections 147, 148 and 149 of the Income-tax Act, 1961, were dealt with. It was observed in the Gujarat case that these sections confer power of re-assessment on the ITO and these provisions were originally comprehended in the provisions of Section 34 of the Indian Income-tax Act, 1922. Thus, keeping in view the decision in the case of Banarsi Debi (supra), it was held in the Gujarat case held above that the words "service of notice" or issuance of notice have no fixed connotation but rather inter-changeable and, therefore, the same meanings and connotations should be ascribed to the provisions mentioned in Section 148 and also in Section 149. The Hon'ble Gujarat High Court pointed out that there are no two distinct and separate stages of issue of notice and service of notice. It was pointed out that the notice of re-assessment issued against the assessee before limitation, but served on the assessee after limitation would be without jurisdiction, void and ineffective. Similar view was expressed by the Hon'ble Punjab and Haryana High Court in the case of Jai Hanuman Trading Co. (P.) Ltd. v. CIT [1977] 110 ITR 36 (FB) in which the decision in the case of Banarsi Debi (supra) was taken into account. It was observed that the ITO was required to issue the notice prescribed by Section 148 within the period prescribed in Section 149 and this notice must be served before the ITO proceeded for making assessment, re-assessment etc. under Section 147. The Hon'ble Punjab & Haryana High Court pointed out that departure from the old provision in Section 34 of the 1922 Act was a conscious departure and full effect should be given to it.
22. The Hon'ble Delhi High Court in the case of New Bank of India Ltd. v. ITO [1982] 136 ITR 679/8 Taxman 180 has on the facts of that case, held that there was no illegality in the issue of the notice under Section 147(b) for the assessment year 1973-74 on 31-3-78 but served after that date. It considered the provisions of Section 149 and held that the notice had to be issued within the period of four years of the assessment order and there was no limitation prescribed for the service of the said notice.
23. From the brief discussion mentioned above, it is seen that under the provisions of the Indian Income-tax Act, 1922, the word "issued" should also mean "service". But the Hon'ble Delhi High Court in the case of New Bank of India Ltd. (supra) has noticed the difference of the provisions of Section 148 and Section 149 as far as issue and service of notice was concerned. The Hon'ble Punjab & Haryana High Court in the case of Jai Hanuman Trading Co. (P.) Ltd. (supra) has also noticed the difference and it was observed that it cannot accept the contention of the assessee that it was not enough that notice was to be sent by the ITO before the period of limitation, but it was necessary that the notice should have been served on the assessee before the limitation period. It was observed in that decided case that in the scheme of 1961 Act, the limitation is prescribed in Section 149 with reference to the issuance of the notice. It was pointed out by the Hon'ble High Court that the expression "issued" occurring in Section 149 should be given its natural meaning and not the strained, wider meaning "served". The facts of the case of Banarsi Debi (supra) were distinguished.
24. At this stage, it would be helpful to refer to another decision of the Hon'ble Supreme Court in the case of R.K. Upadhyaya {supra) to show that in the present context of the case before us, the issue of the notice having been properly made through registered post, should be considered to have been served on the assessee. In the case of R.K. Upadhyaya (supra), it was observed by the Hon'ble Supreme Court that the scheme of the Income-tax Act, 1961, is quite different from the 1922 Act as far as notice of re-assessment is concerned and that there is clear distinction between the "issue of notice" and "service of notice" under the 1961 Act. It was pointed out that Section 149 provides the limitation within which the notice has to be served under Section 148. Once a notice is issued within the limitation period, the jurisdiction becomes vested in the ITO to proceed to assess. That is why, on behalf of the revenue, it is contended vehemently before us that in the present context of the case, the assessee's learned counsel did not dispute the fact that the notice under Section 148 was issued by the ITO as contained in the remand report submitted by the ITO before us. It was observed by the Hon'ble Supreme Court that service of notice under the new Act is not a condition precedent to conferment of jurisdiction on the ITO and it is only a condition precedent to make the order of assessment. Thus, it is the case of the revenue before us that once a notice under Section 148 was issued, the ITO has got the jurisdiction to proceed with the re-assessment proceedings in terms of the notice under Section 148, keeping in view the ratio of the above decision. There can be no dispute about this proposition. But we have to take note of the other observations of the Hon'ble Supreme Court in the very same case itself in which it has been categorically pointed out that service of notice under Section 148 is a condition precedent to the making of the order of assessment. In other words, once the notice is issued by the ITO under Section 148, the ITO is vested with the jurisdiction to call for return, for production of accounts etc. but before he passed an order of assessment, re-assessment or re-computation in pursuance of the said notice, the ITO should have served the notice as required by Section 149 of the Act. In the present case before us and on the basis of the remand report and the additional remand report, it is seen that the notice under Section 148 was issued by the ITO to the assessee under registered post. But the ITO has reported that no acknowledgement slip is available at this stage. From the photo-copies of the order sheet entries for the assessment years under consideration, it cannot be seen that there was any service of notice under Section 148 to the assessee for both the years. The assessee's learned counsel categorically stressed the claim that no notice under Section 148 was served on the assessee for both the years and, therefore, the entire proceedings became null and void. It is for the ITO to show that notice was duly served on the assessee as contemplated by Section 149 before he makes an order of assessment, re-assessment and re-computation in pursuance of action initiated under Section 147 of the Act. The Hon'ble Supreme Court in the case of R.K. Upadhyaya (supra) has distinguished the case of Banarsi Debi (supra), J.P. Jani, ITO v. Induprasad Devshanker Bhatt [1969] 72 ITR 595 and CIT v. Robert J. Sas [1963] 48 ITR 177. In the case of R.K. Updhyaya (supra), it has been spelled out that what used to be contained in Section 34 in 1922 Act has been spread out into three sections, i.e., 147,148 and 149 in 1961 Act and a clear distinction has been made out between "issue of notice" and "service of notice" under 1961 Act and Section 149 prescribed the limitation period. The Hon'ble Supreme Court pointed out that the mandate of Section 148(1) is that the re-assessment shall not be made until there has been "service" and that the requirement of "issue of notice" is satisfied when the notice is actually issued. Thus, in the present case before us, we find that the notice under Section 148 was actually issued by the ITO for both the years and, therefore, the ITO had the jurisdiction to call for a return, account books etc. for the purpose of re-assessment proceedings. But as pointed out by the Hon'ble Supreme Court that the mandate of Section 148(1) is that re-assessment order shall not be made until there has been service of such notice. In the case of R. K. Upadhyaya (supra), the notice under Section 148 was admittedly issued on the last date of the limitation period, i.e., on 31-3-70, but served on the assessee only on 3-4-70 and it was held that the notice was not barred by limitation and the ITO had jurisdiction to proceed to complete the assessment.
25. As indicated earlier, the assessee denied to have received notice under Section 148 from the ITO for both the years. The ITO in the remand reports, have categorically stated that notice under Section 148 was issued to the assessee under registered post as register maintained, but acknowledgement slip is not available at that stage. Even otherwise, we cannot find any entry or nothing anywhere in the copies of the order sheet or anywhere else to the effect that notice under Section 148 was served on the assessee. This means that the ITO in the present case had the jurisdiction to proceed with the assessment once the notice under Section 148 was issued by him. But he cannot pass an assessment, re-assessment or re-computation order in pursuance of the said notice unless there was a service of such notice on the assessee. Service of notice is a matter to be appreciated from the facts on record and the materials brought before the appellate authorities concerned. In the present case before us, the assessee has been agitating right from the stage of the A.A.C. that there was no service of notice under Section 148 for both the years. The ITO, on the other hand, takes the stand that notices have been issued for both the years under registered post, but acknowledgement slip could not be available at that stage. But as repeatedly mentioned by us above, we cannot find any material to show that service was actually effected on the assessee either by direct or by circumstantial evidence.
26. In this connection, it would be helpful to refer to another decision of the Hon'ble Supreme Court in the case of CIT v. Ramendra Nath Ghosh [1971] 82 ITR 888 in which on the facts of that case, it was held that the question whether the assessee had been served in accordance with the law or not was essentially a question of fact. Of course, in the case of Ramendra Nath Ghosh (supra), the matter went up before the Hon'ble Supreme Court in connection with certain writ petitions. This view was also followed by the Hon'ble Rajasthan High Court in the case of Damodar Lal Kabra v. ITO [1980] 121 ITR 288 while dealing with the writ petition, that a question of service of notice on the assessee is a question of fact and that the question of service of notice should be determined by the ITO himself.
27. We have given our finding of fact in respect of service of notice on the basis of the report given by the ITO and on the facts available on record and after hearing both the sides. Therefore, the Appellate Tribunal cannot direct the ITO to proceed and to make an order of assessment or re-assessment or recomputation in pursuance of the said notice.
28. As pointed out earlier in "the preceding paragraphs, the contention of the revenue is that the assessee was aware and came to know that action under Section 147 had been taken and a notice under Section 148 was issued and that was why the assessee complied with the other notices issued under Section 142(1) asking the assessee to produce the books of account etc. and in fact one Shri Chakraborty, employee of the assessee did appear before the ITO and the case was discussed with him, as evident from the entries in the order sheets as per photostat copies placed in the file. It is, therefore, submitted by the revenue that in such a situation, it has to be concluded that the assessee was fully informed of the issuance of notice under Section 148 and, therefore, the mandatory provisions for making the assessment was properly invoked by the ITO in making the re-assessment order in the present case for both the years. It is, therefore, submitted that the orders of the ITO may be restored.
29. The contention of the assessee, on the other hand, is that no return could have been filed by the assessee for both the years as no notice under Section 148 was received and this being a mandatory provision, no assessment or re-assessment could be made by the ITO. It is pointed out that it is immaterial whether the assessee complies with the mandatory provisions of Section 142(1) etc. under which the assessing officer could ask the assessee to produce account books although no return was filed. The submission of the revenue is also that in this situation, the assessee could be said to have waived the receipt of notice as he had complied with the requirements of Section 142(1) etc. and, therefore, the assessment orders may be maintained. In this connection, it is seen that the Hon'ble Kerala High Court in the case of CIT v. Thayaballi Mulla Jeevaji Kapasi [1963] 47 ITR 184 held that the jurisdiction of the ITO under Section 34 of the Indian Income-tax Act, 1922, did not depend on the issue of a notice though the notice contemplated by Section 34, was a condition precedent to the exercise of jurisdiction vested in the ITO and, therefore, if the assessee chooses to waive the notice, the assessment order of the ITO cannot be considered to be invalid because of matter of jurisdiction and that the principle that by consent of parties jurisdiction cannot be conferred on a court having no jurisdiction, is not applicable to such a case and an assessment will be valid if there was waiver of the assessee of an infirmity in the notice. The Hon'ble Kerala High Court pointed out that there must be conscious and intentional relinquishment of a right and mere asking for time to make a return, to avoid penal consequences would not amount to waiver of an invalid service of notice.
30. But the decision of the Hon'ble Kerala High Court has been reversed by the Hon'ble Supreme Court in the case of that assessee in Thayaballi Mulla Jeevaji Kapasi (supra), as discussed by us above.
31. In the case of P.V. Doshi (supra), the Hon'ble Gujarat High Court has held that notices under Section 148 etc. have indicated that there were three conditions to be complied with and conditions are to be treated to be mandatory, which cannot be waived, acquiesed or estopped as consent cannot give jurisdiction. Similar view was expressed by the Hon'ble Calcutta High Court in the case of Sewlal Daga v. CIT [1965] 55 ITR 406, in which on the facts of that case, it was held that service of requisite notice for an assessment on the assessee, is a condition precedent to the validity of any re-assessment under Section 34 of the Indian Income-tax Act, 1922, and if the notice issued and served on the assessee was obviously invalid, proceedings were consequently illegal, void and consent cannot confer jurisdiction upon a court if the court has no jurisdiction and re-assessment proceedings were invalid. The same Hon'ble High Court in the case of B.K. Gooyee v. CIT [1966] 62 ITR 109, has expressed a similar view that service of a notice without ITO's signature would not confer jurisdiction on the ITO and such irregularity of service of notice under Section 34 of the Indian Income-tax Act, 1922, cannot be waived , by the assessee as the irregularity is not one of a merely procedural nature.
32. The Hon'ble Assam High Court in the case of Tansukhrai Bodulal v. ITO [1962] 46 ITR 325 had the occasion to deal with a similar situation under Section 34 of the Indian Income-tax Act, 1922, regarding the necessity of giving 30 days' time to the assessee for filing return for re-assessment purpose under Section 34. It was held on the facts of that case that the issue of a valid notice under Section 34 of the said Act, was not merely a procedural requirement but is a condition precedent for the exercise of the jurisdiction by the ITO to re-assess the income of the assessee and if the period given in the notice was less than 30 days, the notice did not comply with the requirements of the Act and as such, the notice and subsequent assessment thereon would be invalid and without authority. The Hon'ble High Court observed that there can be no waiver of a notice under Section 34 and that the want of notice affects the jurisdiction of the ITO to proceed with the assessment and affects the validity of the proceedings for assessment. It was further observed by the Hon'ble High Court that by merely filing a return under protest and without prejudice to the contention of the assessee that notice was invalid, it cannot be said that the assessee waived his right to contend that the proceedings were without jurisdiction and illegal. This ruling of our own High Court in the case of Tansukhrai Bodulal (supra) is binding on us.
33. Thus from whatever angle we may look at the problem discussed briefly by us in the preceding paragraphs, we are of the opinion that the re-assessment orders of the ITO for both the years cannot be maintained keeping in view the various decisions of the Hon'ble Supreme Court and other High Courts as indicated earlier. That being the position, we cannot agree with the A.A.C. to say that initiation of the assessments under Section 147(b) for both the years should be treated to be in order as the assessee did not rely on this point specifically as the main basis of appeal by the assessee and that the assessee has not sought leave to adduce additional grounds.
34. In view of what we have decided above, the orders of re-assessment purported to have been made by the ITO for both the years under Section 147 cannot be upheld. Thus, the orders of the authorities below for both the years are cancelled.
35. In the result, the appeals by the assessee being ITA Nos. 34 & 35 (Gau.) of 1989 are allowed. As indicated in the earlier paragraphs of this order, the appeals by the revenue being ITA Nos. 247 (Gau.) and 248 (Gau.) of 1986 relating to the earlier order of the A.A.C. have been dismissed as infructuous.