Income Tax Appellate Tribunal - Agra
Shri Rajeev Kumar Doneria vs A.C.I.T. on 29 March, 2005
Equivalent citations: [2005]94ITD345(AGRA), (2005)95TTJ(AGRA)732
ORDER
I.S. Verma, Judicial Member
1. In this appeal, the assesses has objected to the order of CIT(A) dated 14.03.2002 by way of following grounds :-
1. Because the Learned Commissioner of Income Tax (Appeals)-I has erred on facts and in law in confirming the assessment made under Section 144 of the Act
2. (a) Because the Learned Commissioner of Income Tax (Appeals)-I has erred in holding that the service of notice under Section 148 on the Chartered Accountant, who had not filed any authority for the assessment year under consideration, in the Individual case of the assessee as valid service.
(b) Because the authorized representative has no contractual authority to receive notices prior to commencement of assessment proceedings, as he comes into picture only when an assessee is entitled or required to attend before any Income Tax Authority as per provisions of Section 288 of the Act.
3. (a). Because Commissioner of Income Tax (Appeals)-I has also erred in holding that, under Section 147, it is sufficient to confer jurisdiction notice if it is issued within the period of limitation.
(b). Because Commissioner of Income-tax (Appeals)-I has erred in considering Section 147 in isolation with Section 148(1) which provides that before making the assessment or re-assessment that shall serve on the assessee a notice.
(c). Because notice under Section 148 confers jurisdiction and has to validly served on the assessee or on his authorized agent.
4. (a). Because the Learned Commissioner of Income Tax Appeals-I has also erred in interpreting the provision of Section 282 only on the basis of head note which uses the word Generally.
(b). Because Sub-section (1) of Section 282 statutorily provide the manner in which the notices may be served and in the assessees case notice under Section 148 had not been served in the manner provided.
5. (a). Because the Learned Commissioner of Income Tax Appeals-I has also erred in holding the ex-parte assessment valid, as notice under Section 142(1) had been served.
(b). Because the service of notice under Section 142(1) does not confer jurisdiction or cure the defect in the foundational notice under Section 148
(c). Because unless the assessment proceedings have been validly initiated, the procedural notice under Section 142(1) has no statutory force.
6.(a). Because the Learned Commissioner of Income Tax (Appeals)-I has also erred in holding that interest under Section 139(8) and 216/217 has been correctly charged.
(b). Because the Learned Commissioner of Income Tax Appeals-I has also erred n upholding the A.Os view that no appeal is against charging of interest.
7. Because the order dated 14.3.2002 is bad in the eyes of law.
2. We have heard the parties.
3. At the time of hearing, the counsel for the assessee preferred not to press ground No. 6 and therefore, the same is rejected as such.
4.1 The brief facts, relevant for the decision of the issue involved in this appeal, which admittedly relates to the- validity of service of notice Under Section 148 for the A.Y. 1988-89 on one Shri M.K. Tyagi Chartered Accountant, are that the assessee was partner of a partnership firm styled as M/s. Doneria Cold Storage and Ice factory, F-19, Kamla Nagar, Agra. In consequence upon the assessment of the partnership firm M/s. Doneria Cold Storage and Ice factory, Fatehabad for the A.Y. 1988-89, the assessees share, which was 25% of the profit and loss of the firm, came to be at Rs. 76,788/-. Since the Assessing Officer having jurisdiction over the assessees case, did not know as to whether the assessee had furnished its return of income for the A.Y. 1988-89 or not, he wrote a letter to the assessee on 3.9.98 (copy placed at page 1 of the Departments paper book), whereby the assessee was called upon to let the Assessing Officer know as to whether the return for the A.Y. 1988-89 had been furnished or not and if furnished. The assessee was required to appear on 7.9.98 alongwith copy of the original return and of the receipt for having furnished the return to the A.Y. 1988-89.
4.2 This letter was served on the assessee personally on 03.09.1998 itself, but, admittedly, there was no compliance to this letter by the assessee, i.e., neither the assessee filed a written reply nor the assessee appeared himself nor the assessee made some one else, i.e., as his representative (Advocate or Chartered Accountant), to appear or to reply to this letter. In the nutshell, this letter remained completely un-complied with and revenue has admitted this fact.
4.3 Thereupon the Assessing Officer issued a notice Under Section 148 of the Act on 15.9.1998 for the A.Y. 1988-89, which, admittedly, was served on one Shri M.K. Tyagi, Chartered Accountant, who put his signatures in the capacity of AR (Authorized Representative). The service was effect on Shri M.K. Tyagi on 09.11.1998. As per this notice, the assessee was required to file is return of income for the A.Y. 1988-89 within a period of 30 days from the date of service. But, admittedly, this notice also remained un-complied with. Thereafter, the Assessing Officer issued notice Under Section 142(1) of the Act on 08.03.2001 and was sent to the assessee by registered post. Another notice Under Section 142(1) of the Act dated 12.3.2001 was also issued at the assessees local address, whereby the date of hearing was fixed for 16.3.2001, but both these notices Under Section 142(1) also remained un-complied with. However, an application dated 22.3.2001, alongwith Vakalatnama in favour of Shri Anupam Sinha, was received in Assessing Officers office asking for Xerox copies of the documents available on record, which were made available to the assessees Authorized Representative Shri Anurag Sinha. Finally, the date of hearing was fixed for 26.3.2001 and since, nobody attended on this date and no adjournment was sought, the Assessing Officer completed the assessment Under Section 144/148 of the Act as per order dated 26.3.2001 on the assessed share. The assessee appealed against the exparte assessment order before the CIT(A) by way of various grounds.
4.3 (a). Before the CIT(A), the assessee, at the outset, objected to the validity of exparte assessment on the ground that service of notice issued Under Section 148 of the Act for the A.Y. 1988-89 in assessees own case on 15.9.98 having been not made upon the assessee, was invalid in the eyes of law, i.e., service of notice Under Section 148 was not valid service in the eyes of law and consequently, all subsequent proceedings including the exparte assessment were illegal and bad in law.
4.3 (b). This submission of the counsel for the assessee before the CIT(A) was on the ground that Shri M.K. Tyagi, Chartered Accountant, on whom the notice Under Section 148 had, admittedly, been served, was not the assessees authorized Representative or authorized agent so as to appear or act for and on behalf of the assessee in the income-tax proceedings for the A.Y. 1988-89.
4.3 (C) The ld. CIT(A) referred the assessees written arguments to the Assessing Officer and after having received the comments of the Assessing Officer, called for assessees comments. It was only thereafter that the ld. CIT(A) held the service of notice Under Section 148 of the Act upon Shri M.K. Tyagi, as valid service in the eyes of law and consequently upheld the assessment order passed Under Section 144/147 of the Act.
4.4. The CIT(A) referred the assessees aforesaid written arguments to the Assessing Officer for his comments and the Assessing Officer while sending the remand report dated 20.02.2002 intimated the CIT(A) that he (Assessing Officer) had seen a power of Attorney executed by the assessee in favour of Mr. M.K. Tyagi, Chartered Accountant, but it seems that after receipt of this remand report and the assessees relevant income-tax records, from the Assessing Officer, the CIT(A) had perused the same in presence of the assessees counsel Mr. Sinha on 06.03.2002 and had noticed that there was no such power of Attorney on record.
4.4(a) This fact was reiterated by the assessee before the CIT(A) as per Mr. Sinhas letter dated 07.03.2002 duly referred to by the CIT(A) in para 3.8 of the appellate order. However, the ld. CIT(A) again considered the issue in presence of the Assessing Officer and accepted the Assessing Officers stand that he had seen a power of attorney executed by the assessee in favour of Mr. M.K. Tyagi, Chartered Accountant. The relevant observations of the ld. CIT(A) as contained in para 3.13 are again reproduced below :-
The AO pointed out that there was a power of attorney in favour of Shri M.K. Tyagi, CA signed by the assessee, particularly for the year Under consideration. Even though it was not challenged by the tearned representative of the appellant in the written rejoinder filed, the same was vehemently denied to be present on the case records during the course of hearing in presence of the present AO. The AO before me, in presence of the counsel of the appellant, stated that he had seen the letter of authority with his own eyes before sending his report-dated 20.2.2002. I am inclined to agree with the AO. He had no reason to mention any fact, which was not correct. The AO had taken over the charge of this case quite recently. The AO is expected to send the submissions after going through the case records. Thus, even though the authority letter was not found available on the record, I believe the version of the AO that he had seen the letter of authority. The same is however, immaterial so far as the decision in this case is concerned.
4.4 (b). The assessees submissions made before the CIT(A), comments of the Assessing Officer, the counter comments of the assessee on the comments of the Assessing Officer and findings of the CIT(A) as contained in para No. 3.1 to 3.18 of the order of CIT(A) are in the following terms :-
"3.1. The learned representative of the appellant has given the facts of the case as under:
(1). That the assessee, during the year under consideration was a partner in the firm M/s Doneria Cold Storage & Ice Factory, Fatehabad, Agra deriving 25% share of the profits and losses of the firm.
(2). That the case of the firm in which assessee was partner was completed under Section 143(3) of the Act and the learned AO separately passed the order under Section 158 of the Act determining assessee share to the tune of Rs. 36,390/-.
(3). That the grounds of appeal No. 2 is in relation to the action of the learned AO in making the assessment under Section 144/148 without serving the notice under Section 148 of the Act.
(4). That after the passage of nearly 9 Years from the date of order passed under Section 143 (3) / 158 of the Act the learned AO is said to have issued notice dated 15.9.1998 under Section 148 of the Act.
(5). That said notice issued against the assessee was in fact not at all served on the assessee, and the order of assessment reveals that a notice / letter prior and post to issuance of this notice under Section 148, addressed to the assessee was served on the assessee at one instance personally and at another by registered post.
3.2 The learned representative of the appellant argued that a notice under Section 148 was foundational notice and its service in person was a mandatory requirement. This requirement could be relaxed only when the person to whom notice was addressed was not found at the given address or refused to accept the notice or evaded the service of notice. The notice under Section 148 for the purpose of initiating the proceedings for reassessment was not a mere procedural requirement. It was a condition precedent to the initiation of a proceeding for the assessment under Section 147. The appellant has relied on the following decisions:
i) CIT v. Thayaballi Mulla Jeevaji Kapasi, (1967)66 ITR 147 (SC)
ii) CIT v. Ishwar Singh & Sons, (1981) 131 ITR 256 (Cal.)
iii) Madan Lal Agarwal v. CIT, (1983) 144 ITR 745 (All.)
iv) CIT v. Har Prasad (1989) 178 ITR 591 (Punjab)
v) P.N. Sasikumar v. CIT (1988) 170 ITR 80 (Ker.)
vi) Kurj Bihari v. ITO (1983) 138 ITR 73, 76 (Punjab)
vii) Addl. CIT v. Prem Kumar Rastogi (1986) 124 ITR 381 (Allahabad)
viii) CIT v. Girdhari Lal (1984) 147 ITR 379 (Raj.) 3.3 The AO in his comments has submitted as under:
...............It is not correct that determined share of the assesse in the firm for the assessment year 1988-89 was Rs. 36,390/-. In this respspect it is submitted that the assessee has not disclosed before your honour the factual position correctly. Originally the assessment of the firm was completed under Section 143(3) in which share of the assessee was determined at Rs. 36,390% but later on assessment of the firm was revised under Section 251 and there after finally under Section 143(3) / 154/251 on 31.3.1997 at Rs. 3,90,970/-. After deducting firms tax share of the assessee was determined at Rs. 76,787/- and this order was duly served on the assessee firm.
(Emphasis supplied) 3.4 Regarding the proper service of notice the A O has mentioned as under:
................................Prior to initiating proceedings under Section 147 a show cause notice was served on the assessee on 3.9.1998 but no compliance was made by the assessee. Thereafter notice under Section 148 was issued and it was received by his authorized representative Shri M.K. Tyagi, CA Shri M.K. Tyagi, CA was authorized representative in all the case of assessees group and proceedings before the Income tax authorities during relevant period were attended by him in all the group cases of the assessee. A power of attorney in favour of Shri M.K. Tyagi was also signed by the assessee particularly for the year under consideration. Thus contention of the assessee that notice under Section 148 was not served is not correct.
3.5. The A0 has brought my attention to the case of Chandra Bhan Bansal v. DY. Commissioner of Income tax wherein the Honble ITAT Agra Bench; Agra held that notice served on the assessee was validly served. The case is reported at 79 TID 639. While deciding the issue in favour of the department the Honble ITAT also discussed the decision of various courts including the decision of Supreme Court in the case of CIT v. Thayaballi Mullajcoraji Kapasi (1967) 66 ITR 147 (SC) and decision of Allahabad High Court in the case of Madan Lal Agarwal v. CIT (1983) 144 ITR 748 (All). The AO has pointed out that notice under Section 148 was served on the authorized representative of the assessee. The assessment order made under Section 144 for non compliance with the notice under Section 142(1) duly served on the assessee was perfectly valid. The appellant had enjoyed taxable income but did not file the return of his income voluntarily under Section 13 9(1) and inspite of valid service of show cause notice before initiating proceedings under Section 148. He also intentionally avoided to extend his co-operation in assessment proceedings inspite of valid service of notice under Section 142(1). The counsel of the assessee Shri Anupam Sinha, Advocate had attended on 16.3.2001 before the AO and filed an application seeking adjournment without any authority. However, the case was adjourned to 20.3.2001 with a direction to file Income tax return on 20.3.2001. Nobody attended on 20.3.2001. However, on 22.3.2001 Shri Anupam Sinha, advocate attended with authority and requested for inspection of file. Inspection was allowed and the case was adjourned to 23.3.2001. On 23.3.2001 also no body attended the hearing nor any application seeking adjournment was received. It was under these circumstances that the assessment was completed under Section 144 as the assessment was getting parred by limitation. The AO has pointed out that the asseessee and his firm were being assessed to tax since long and his share in the firm was determined above the taxable limits and therefore be must have been expecting action under Section 148 but he intentionally avoided filing of return both before the receipt of the show cause notice and after the receipts of the show cause notice as well the notice under Section 148.
3.6 The learned representative of the appellant in his rejoinder has made no comments on the facts of the case as given by the AO. The appellant has again challenged the service of the notice and quoted the following case laws in his support:
i) Fatehchand Agarwal v. CWT (1974) 97, ITR 701 (Ori.) ii). Dina Nath v. CIT, (1993) 204 ITR 667, 673(J&K.) iii) Singhal Electric Works v. CST (1972) 30 STC 112 (All.) iv) Gopi Ram Bhagwan Das v. CIT (1956) 30, FIR 8 (Pat.) v) Thangam Textiles v. First ITO (1973) 90 ITR 412 (Mad.) vi) C.I. Raj Gopal v. State of Mysore (1972) 86 ITR 814 (Mys.) vii) P.N. Sasi Kumar and Ors. v. CIT viii) ITO v. N. Janardhan Reddy 521 TTJ (Hyd.) 11 ix) B. Johar Forest Works v. CIT (1977) 107 ITR 409 (J& K) x) CIT v. Mintu Kalita (2001) 117 Taxman 388 (Gau.) xi) Jayanthi Talkies Distributors v. CIT (1979) 120 ITR 576 (Mad.) xii) Uma Shanker Mishra v. CIT (1982) 136 ITR 330 (M.P.)
3.7 The learned representative of the appellant has also emphasized that the defect in not properly serving a notice under Section 148 can not be cured by Section 292B. He has also argued that the case of Chandra Bhan Bansal v. Dy Commissioner of Income tax, Agra was different so far as the facts are concerned. In this connection he had submitted as under:
That with due respect to the Honble ITAT, it is submitted that the word generally used in the title of this section can not be equated with casualness and carelessness. The word is used for a special reasons to cover the scope of the section to cases where mode of service of notice has not been defuled, since following Sections 283 covers the case of service of notice when family is disrupted or firm is dissolved, Section 284 deal with service of notice in the case of discontinued business, so to widen the scope of this section so as to enlarge it to cases not specifically covered under the provision of Section 283, 284 the terms generally is used by the legislature.
(emphasis supplied) 3.8 The learned representative of the appellant in letter dated 7.3.2002 has also pointed out the fact that:
That during the course of hearing on 6.3.2002 the question of validity of service of notice was argued at length, your honour have also perused the records & file of assessment proceedings under Section 148 of the Act and in the records no such authorization/power of attorney was seen/ found by your honour or by the AO However, if the claim of the assessee as mentioned in this letter is contrary in relation to the facts, the same shall be intimated immediately on receipt of this letter .
3.9. I have considered the arguments of the learned representative of the appellant and the facts as pointed out by the AO and not disputed by the learned representative of the appellant. The facts of the case are that the appellant is a partner in the firm M/s Doneria Cold Storage & Ice Factory, Agra. The assessment in the case of the firm was completed under Section 143(3) in which the share of the assessee was determined at Rs. 36,390/-. The assessment of the firm was however, later on revised and finally determined share of the appellant came to Rs. 76,787/-. Thus, the claim of the appellant that the determined share was Rs. 36,390/- is only giving the facts partly and thus misleading. The AO has clarified this matter and the appellant has not challenged this. It is also argued by the appellant that the period of 9 years had elapsed before the notice under Section 148 was issued. In fact the order under Section 143(3) /154/ 251 was passed on 31.3.1997 in the case of the firm determining the income at Rs. 3,90,970/-. Thus, the appellant was very much aware about its determined share. The matter was not as old as the learned representative of the appellant would like me to believe. The AO issued a letter dated 3.9.1998 to the appellant. In this letter the AO has clearly mentioned that the perusal of the case records showed that the return of income for the assessment year 1988-89 was not filed. The AO, therefore requested the assessee to file a duplicate of the Income tax return if the same had been filed, along with the receipt for the original return having been filed. Time was given to the appellant up to 7.9.1998. This letter has been served on the appellant on 3.9.1998. Thus, the appellant had become aware of its liability to tile the return of income on 3.9.1998. Since no reply wai received by the AO he submitted a proposal to the Addl. Commissioner of Income tax. After obtaining the approval which was granted on 14.9.1998 a notice under Section 148 was issued by the AO dated 15.9.1998. I have seen the office copy of this notice. It is duly received on 6.10.1998 by the A /R. After this notice a notice under Section 142(i) was issued dated 8.2.2001 fixing the date on 18.3.2001. On the back of this notice the AO has mentioned as under:
Kindly produce the books of accounts and Bank Pass Book etc. Another dated 8.3.2001 was issued fixing the date of hearing on 16.3.2001 under Section 143(2). There is a notice dated 12.3.2001 under Section 142(1) fixing the case for hearing on 16.3.2001. Shri Anupam Sinhg the counsel of the appellant filed letter dated 16.3.2001 requesting as under:
In this connection, it is requested that since the assessment records pertains for more than 12 years back, so reasonable time may be allowed to collect and go through assessment records and accordingly correct and proper recourse may be taken.
The AO on this letter has written as under:
File return before 20.3.2001.
The counsel has written on this letter below the remark of the AO as under :
Noted It may be emphasized here that on the date of filing this application Shri Anupam Sinha had not filed his Vakalatnama before the AO. On 20.3.2001 the counsel of the appellant filed its Vakalatnama, a challan of Rs. 50/- and a request for Xerox copies of documents. There is a noting by the counsel of the appellant on this request letter, as under Received Xerox copy for the A. Y 1988-89.
-sd-
22.3.2001.
3.10 From these facts it is clear that the notice was properly served on the authorised representative of the assessee. In response to notice under Section 142(1) Shri Anupam Sinha, Advocate attended. It would have been a very embarrassing situation if the AO had asked him to come and appear only after filing proper Vakalatnama. I am emphasizing this fact to drive home the point that the regular counsel of the appellant are generally heard and entertained by the Officers of the department even without the Vakalatnama being filed. The assessment orders are not passed exparte on taking technical grounds of non compliance. The appellant was aware of its liability to file the return of Income tax for the assessment year 1988-89. A letter was also issued by the AO dated 3.9.1998 to the appellant. However, the appellant chose not to file the return of income. It may be underlined here that the appellant has not challenged the determined share taken by the AO. The same has been accepted. However, even on this determined share which is not at all disputed, the appellant does not want to pay tax because according to him notice under Section 148 was not properly served. During the course of assessment proceedings the counsel of the appellant attended hearing and took Xerox copies of the documents as well as the order sheet. There was nothing more which was required by the appellant to file the return of income if he had any real intention of filing the return of income.
3.11 The learned representative of the appellant has relied on innumerable decisions. Before taking these decisions it is necessary to first clarify one point. The word used in Section 149 is issued and it does not mean served. The position has been finally clarified by the Honble Supreme Court in the case of R.K. Upadhyaya v. Shanabhai P. Patel 166 ITR 163, 165 (SC). It has been held by the Supreme court that the scheme of Income tax Act, 1961 so far as notice for the reassessment is concerned, is quite different from that of 1922 Act. A clear distinction has been made out between issue of notice and service of notice under the 1961 Act. Section 149 of the 1961 Act, which provides the period of limitation, Categorially prescribes that no notice under Section 148 shall be issued after the period prescribed has lapsed. Once a notice is issued within the period of limitation, jurisdiction becomes vested in the Income tax Officer to proceed to reassess. Section 148(1) provides for service of notice as a condition precedent to making the order of assessment. Service, under the new Act, is not a condition precedent to conferment of jurisdiction on the Income tax Officer; it is a condition precedent only to the making of the order of assessment. Since in the present case the notice under section 148 was issued in time after following the necessary condition precedent as prescribed in the Act, the AO validly held the power and jurisdiction to reassess the income of the appellant.
3.12 The next point is the service of the notice. In this connection the Honble ITAT, Agra Bench, Agra which is the jurisdictional ITAT has held as under:
The service of notice under Section 148 on the son of the assessee was a valid service. It was not a case of granting concession of jurisdiction to a person where the conditions necessary for invoking the provisions of Section 148 were not complied with There was another reason for such view. Section 282 which provides for procedure for service of notice has its title service of notice generally. The use of the word generally indicates that it is not mandatory that notice has to be served on the assessee itself. It can be served on others in the special circumstances. The purpose for issue of such notice is that the assessee must be aware of its responsibility and liabilities. So that he can defend himself from he impending action. Section 282 has used the word may This word gives certain leverage to the Assessing Officer regarding service of notice. Section 282 also has not indicated the procedure for service of notice in case of an individual. If somebody went by the logic of the assessee, no notice could be served on the employees of the individual. That was never the intention of Section 282.
3.13 While giving this decision the Honble ITAT have considered the case of CIT v. Thayaballi Mulla Jevaji Kapasi (1967) 66 ITR 147 (SC) and Madan Lal Agarwal v. CIT (1983) 144 ITR 745. Thus, the Honble ITAT has held the service of notice under Section 148 to be valid even when the service of the notice was made on the sons of the appellant. In the present case the notice has been served on the authorized representative of the appellant. Shri M.K. Tyagi, CA had even appeared before the CIT (Appeals)-I in case of the firm from which the appellant derives the share income as a partner, against the order under Section 271 (1)(C) as late as on 23.4.1998. The AO pointed out that there was a power of attorney in favour of Shri M.K. Tyagi, CA signed by the assessee, particularly for the year under consideration. Even though it was not challenged by the learned representative of the appellant in the written rejoinder filed, the same was vehemently denied to be present on the case records during the course of hearing in presence of the present AO. The AO before me, in presence of the counsel of the appellant, stated that he had seen the letter of authority with his own eyes before sending his report dated 20.2.2002. I am inclined to agree with the AO. He had no reason to mention any fact which was not correct. The AO had taken over the charge of this case quite recently. The AO is expected to send the submissions after going through the case records. Thus, even though the authority letter was not found available on the record, I believe the version of the AO that he had seen the letter of authority. The same is however, immaterial so far as the decision in this case is concerned. The learned representative of the appellant has not denied that Shri M.K. Tyagi, CA had been representing the group cases. In fact there is evidence on record to show that Shri M.K. Tyagi, CA had appeared as late as on 23.4.1998 before the CIT (Appeals) in the matter of penalty proceedings under Section 271(1)(C) for the assessment year 1988-89 in the case of the firm viz Doneria Cold Storage & Ice Factory, Agra., Fatehabad, Agra of which the assessee is a partner The notice served on the authorized representative of the appellant is, therefore, treated as valid service of the notice.
3.14 Most of the decisions quoted by the appellant have been considered by the ITAT in the case of Chandra Bhan Bansal v. DCIT reported above. I will discuss some of the other cases to show as to how the facts of those cases are difference from the facts of the present case. I start with the decision in the case of P.N. Sasi Kumar and Ors. v. CIT 170 ITR 80 (Ker.). In this case notice of reassessment of an A.O.P was issued to a member without specifying where it was on the member or principal officer of A.O.P. It was on these facts that the following question was referred before the Honble High Court Whether on the facts and in the circumstances of the case, the Honble ITAT was justified in coming to the conclusion that the proceedings vide notice dated September 2, 1977 were validly initiated. (2) whether on the facts and in circumstances of the case the Appellate Tribunal had material to come to the conclusion that the notice issued to the individual was only a mistake curable and not one which affects the jurisdiction although the assessment was made in the status of an Association of person. The facts of the present case are totally different there is no doubt regarding the identity or the status of the person against whom the proceedings were initiated and the notice under Section 148 was issued and served. While delivering the judgment in this case the Honble High Court relied on the Commentary given in Kanga and Palkhiwala Law and Practice of Income tax Volume -1 page 910. The service of notice has given in Section 282 has been dealt with by the same author on page 1696 of VIII Edition they have mentioned that where a notice is served otherwise than by post, e. g. through a peon or process server, the notice need not be served personally on the assessee. They have given the citation of the case of Rex v. Ismail 1 ITC 192 in this regard. The notice need not be served personally on the assessee. It may be served on his authorized agent. On this point the learned author have quoted the cases of Mithoolal v. CIT 64 ITR 377; Jangi v. CIT 3 ITC 418; Ramanathan v. CIT 2 ITC 474. Service at assessees business premises on an agent exercising authority in respect of Income tax matters, though not authorized in writing in that behalf, is valid service under this section. (Himmatram v. CIT 5 ITC 133; Tiwari v. CIT 46 ITR 236 and CWT v. Ila Pal 82 ITR 936.) In the present case the notice was duly served on the authorized representative of the appellant as mentioned earlier. The AO had the jurisdiction to reassess the income by properly issuing the notice under Section 148. The assessment order was properly and legally completed because the notice under Section 148 was only served on the authorized representative of the appellant. The appellant had been given opportunities by issuing notice under Section 142(1) for filing the return of income before the assessment was completed. The appellant never challenged the jurisdiction of the Assessing Officer at the stage of assessment. The learned representative of the appellant was made aware of the material available on records and also given photo copies there of. In view of this the service of notice and the assessment order framed is held to be valid.
3.15 I am referring to a few other cases relied upon by the learned representative of the appellant. The Addl. CIT v. Prem. Kumar Rastogi (1986) 124 ITR 381 (All.) In this case assessment order was served on one Shri RKR who was not at all agent or a member of the HUF. The appellant obtained a copy of the assessment order after two years and filed the appeal. The question before the Honble High Court was whether the appeal was within time. The Honble High Court in this case decided that the ITAT was justified in holding that the appeal was within time. Thus, the question referred to the High court pertained to the service of the assessment order and the delay in filing the appeal. In the present case no prejudice has been caused to the appellant in the matter of any of its legal rights. The AO had been given enough opportunities to present its case. The assessment has been completed an a determined share about which there is no dispute. Thus, the assessment order passed by the AO is valid and also the service of notice is held to be valid.
3.16 In the case of CIT v. Girdhari Lal (1984) 147 ITR 379 (Raj.) the question before the Honble High Court was whether the authorized representative was authorized to appear in the proceedings under Section 263 when normal assessment proceedings were completed. In the present case the facts are different. The proceedings are under Section 148 for reassessment. These are therefore, assessment proceedings and, thus, the facts of the case relied upon by the appellant are not applicable to this case.
3.17. In the case of Kunj Bihari v. ITO (1983) 139 ITR 73, 76 (Punjab), the assessee had filed return for the assessment year 1983-84 showing an income of Rs. 14,840/-. The assesses claimed that he did tile the return for the relevant year, but according to the Income tax authorities the said return was filed before some ITO who had no jurisdiction to proceed with the assessment, and, consequently a notice was issued by the ITO under Section 139(2) of the Income Act 1961 for filing the return. The assessee claimed that the notice was not served. It was under these circumstances that the Honble High Court had considered that before resorting to substituted mode of service by affixture, it was the duty of the Department to discharge the onus by showing that the authority concerned had reason to believe that the assessee was keeping out of the way for the purpose of avoiding service or that there were other good reasons to come to the conclusion that the summons could not be served in the ordinary way. In the present case the AO served the notice on the authorized representative under normal circumstances which was duly accepted by him. The appellant had not filed any return of income earlier. Thus, the facts of this case are not at all material to the facts of the present case.
3.18 In view of the above position of law and particularly relying on the decision of Honble ITAT Agra Bench Agra in the case of Chandra Bhan Bansal I hold that the service of notice on authorized representative was valid service and consequently the assessment order passed under Section 144 was a valid order in accordance with the law.
4.5. Since the assessee has objected to the order of the CIT(A) before the Tribunal, the ld. Sr. D.R. Mrs. Sunita Bainsla, Addl. CIT, who was representing the Revenue at that time filed an application dated 14.01.2003 alongwith affidavit of Mr. S.H. Rizvi, ACIT, Central Circle, Agra executed on 23.12.2002 requesting for admission of the affidavit of Mr. Rizvi in support of Revenues claim that there was a power of attorney in favour of Mr. M.K. Tyagi and executed by the assessee for the A.Y. 1988-89. The letter of ld. Sr. D.R. and the affidavit thereafter read as under :-
F.No. Misc./Addl. CIT/ITAT/AGRA/2002-2003 Office of the Senior Departmental Representative Income-tax Appellate Tribunal, Room No. 314, Ayakar Bhawan, Agra.
Phone : 2155866 Dated: 14.1.2003 To The Asstt. Registrar, Income-tax Appellate Tribunal, Agra.
Sir, Subject: ITA No. 151 & 152/Agra/02 - Appellate proceedings in the case of Rajeev Kumar Doneria C/o M/s. Doneria Cold Storage & Ice Factory, F-19, Kamla Nagar, Agra. A.Y. 1988-89:
The above appeals have been fixed for hearing on 24.1.2003. In connection with the same kindly find enclosed affidavit of Shri S.H. Rizvi, Central Circle, Agra (the then ACIT-4(1) dated 23.12.2002 in support of the submissions made by the A.O. before the ld. CIT(A)-II, Agra. The affidavit may kindly be placed on record for kind consideration of the Honble Members.
Yours faithfully Sd/-
(SUNITA BAINSLA) Addl.CIT Senior Departmental Representative Income-tax Appellate Tribunal, Agra bench, Agra.
1. Copy to Shri Rajeev Mehrotra, Addl. Commissioner of Income-tax, Range-4, Agra with reference to his letter F.No. Addl.CIT/R-4/AGR/Notice/ITAT/02-03/1790 dated 8.1.2003.
2. copy to the assessee for information to be served on the counsel Shri Anurag Sinha, Advocate, Agra.
(SUNITA BAINSLA) Addl. CIT Senior Departmental Representative Income-tax Appellate Tribunal Agra bench, Agra.
AFFIDAVIT:
Before the Income Tax Appellate Tribunal, Agra Bench Agra.
Affidavit of S.H Rizvi, Assistant Commissioner of Income Tax, Central Circle, Agra.
I, S.H. Rizvi son of Late Sri Abdul Jabbar Rizvi aged 49 years resident of Flat no. 1 Block No. 25, Sanjay Place, Agra, solemnly affirm as under:
1. That during the financial year 2001-2002 I was posted as Assistant Commissioner of Income Tax 4(1) Agra.
2. That in the case of Sri Rajeev Kumar Doneria Partner of M/s Doneria Cold Storage & Ice Factory, Fatehabad, Agra R/o F-19 Kamla Nagar, Agra for the assessment year 1988-89 an appeal was pending before the learned C.I. T (Appeals) Agra.
3. That the learned C.I.T. (Appeals) required my comments on the written submission filed by the Assessee during the hearing of appeal and, therefore, the case record for the assessment 1988-89 was put up before me and comments based on the documents available on records were forwarded by me to the learned C.I.T. (Appeals), Agra.
4. That when I signed the report containing my comments a power of attorney in favour of Sri. M.K. Tyagi C.A, duly signed by the assessee Sri. Rajeev Kumar Doneria, was available on the assessment records.
5. That the contents of Para 1 to 4 are correct and true to the best of my knowledge and belief and nothing has been concealed.
Signed and verified at Agra on this 23rd Day of December, 2002.
Sd/-
Deponent
5. It was in view of the above facts and circumstances of the case that the parties have advanced their respective arguments on the basis of their respective paper books.
6.1. The counsel for the assessee, after referring to the facts on record and various documents placed on assessees paper book as well as relevant Paras of order CIT(A), so far as the question relating to validity of service of notice Under Section 148 dated 15.9.98 for the A.Y. 1988-89 and subsequent proceedings is concerned, had relied upon the written submissions, which were in the following terms :-
(i). That during the course of hearing before the C.I.T. (A), assessee submitted that the impugned assessment was completed without proper service of notice and as such the assessment order has no operational force and is void-ab-initio.
(ii). That it was also submitted that it would be wrong to say that assessee executed power of attorney for the assessment year in question and for the proceedings in hand through which Sri. M.K Tyagi can be said to be the authorized representative of the assessee.
(iii). That the matter was also argued before the Ld. C.I.T. (A) in the presence of the A.O as is apparent from the order of the Ld. C.I.T. (A) and the Ld. Authorities were of the opinion that on the strength of that Power of Attorney and on the fact that Sri. M.K Tyagi appearance before the C.I.T. (A) as late as on 23-04-1998 that power of Attorney also holds good for service of notice issued Under Section 148.
(iv). That youre Honour Sir, as could be seen from the impugned order of the Ld. C.I.T. (A) great importance has been attached to Sri. M.K Tyagi appearance before the C.I.T. (A) in the case of erstwhile firm of the assessee as late as on 23-04-1998. It has also been said that assessee is one of the partner, in that firm and the proceedings are said to be the same assessment year.
(v) Your Honour Sir, it is submitted that Power of Attorney has limited application and though it is said to for the same assessment year yet it cannot be extended to any other proceedings for the same assessment year in respect of a different assessee.
(vi). That the Income Tax Act recognizes the dual capacity of the assessee one as a partner in the firm and the other one as an individual. That further a Power of Attorney authorizes to represent the assessee before authorities, it does not authorizes to receive notices of any other proceedings that may be taken up by the department in future.
(vii). That your Honour Sir, as could be appreciated from the facts of the case that there is no whisper in the order of C.I.T. (A) that Sri. M.K Tyagi ever appeared before the A.O in connection with the proceedings Under Section 148 of the Act and when this fact with even with reference to the Order Sheet cannot be proved then it would be highly uncharitable to argue the case that the service was made on a authorized representative of the assessee.
(viii). The objection was also made at the time of personal hearing and the Ld. A.O before the C.I.T. (A) was invited to show that whether there is any slightest indication in the order sheet that could prove Sri. M.K Tyagi appearance or the impugned fact of his filing Power of Attorney during the proceedings under question. But this question does not find answer in even the order of Ld. C.I.T. (A).
(ix). That your Honour Sir, it is beyond understanding that how the assessee can be expected to give Power of Attorney in advance for a proceedings of which he has no inkling or that may be taken against him by the department. That Prior to issuance of notice a letter dated 03-09-1998 was issued but it is an undisputed fact that it was not complied. So the occasion of either filing the Power or Attorney by Sri. M.K Tyagi or its execution by the assessee cannot be canvassed.
(x). The above facts clearly speaks that in this case service has been made without proper authorization and the learned A.O. in the case of Rajeev Kumar Doneria probably found a old power of attorney and made reference to that power of attorney and when strong objection about its validity and its application to other proceedings came into question and when the question of production of that power of attorney arose, a answer of its being misplaced came into existence.
(xi). On the facts and in the circumstances of the case, your Honour would kindly appreciate that in the present case no such power of attorney ever existed and the service of notice has been made on a person who was not authorized by the assessee to receive notice issued under Section 148 and on these facts, the learned C.I.T. (A) greatly erred on facts and on the basis of material on record in concluding that the notice was served validly.
(xii). That in this connection it is respectfully submitted before your Honour that it is really difficult to understand the position of law and analogy as developed by the C.I.T. (A). It appears that the Ld. C.I.T. (A) has not addressed himself to. the central issue of the case which goes to the root of the matter and relates to service of the notice which is a foundational notice and which gives jurisdiction to the A.O to make the assessment. When the jurisdiction was not properly acquired by the A.O further incidental powers if exercised if without jurisdiction and as such any order passed in furtherance of a notice which is proved to have never been served any such order is void-ab-initio. Section 149 of the I.T. Act as referred by the C.I.T. (A) has no relevance to the controversy in question.
(xiii). That further the C.I.T. (A) has held that since assesses counsel has attended the proceedings before the A.O and also carried out inspection of file so the very purpose of serving notice is to bring the proposed proceedings to the knowledge of the assessee is fulfilled and now the issue of service of notice cannot be challenged.
(a). With respect to above observation of the CIT(A), the ld. Counsel submitted that in this connection it was submitted before the authorities below that assessee attended the proceedings in compliance with notice dated: 22-03-2001 Under Section 142 and such compliance cannot be equated with having knowledge of the proceeding Under Section 148, and in this connection, your Honours attention is invited to the following decision of the Honble Gauhati High Court, in the case of C.I.T. v. Mintu Kalita (2001) 117 Taxman 388, (Gau).wherein it has been held:
Service of notice prescribed by Section 148 for the purpose of initiating the proceeding for re-Assessment is not a mere procedural requirement it is a condition precedent to the initiation of a proceeding for the assessment under Section 147. Mere issuance of notice is not sufficient. There was not material to show that the employee appeared in pursuance of notice Under Section 148. He appeared only in response to a notice Under Section 142(1) Section 142(1) deals with enquiry before Assessment and the appearance of the employee in terms of this notice to produce such accounts or documents as the A. O. may require, could not be deemed to be the knowledge of the proceeding Under Section 147.
That being the position, no notice was served Under Section 148 and the appearance of a person in response to a notice Under Section 142(1) could not be deemed to be the knowledge of proceeding Under Section 147.
(b). The ld. Counsel relied upon another decision in case of B. Johar Forest Works v. C.I.T. (1997) 107 ITR, 409 (J&K) for the following observations :
Knowledge about the assurance of a notice otherwise then by its Service on the person concerned is one thing and the service of the notice on the person is another. Such knowledge cannot be considered to be equivalent to or a substitute for the service of the notice on the Assessee . The partners of the assessee firm or its manager may have Knowledge about the issuance of a notice but that does not mean that the service had been affected on them.
(xiv). That while passing the order the Ld. C.I.T. (A) as placed reliance to the decision of Honble Agra Tribunal in the case of Chandrabhan Bansal (Supra).
In this case decided by the Honble ITAT, Agra Bench, Agra ,the facts were that a notice was issued under Section 148 and was served on the major son of the assessee and assessee acted on that notice and file return of income showing total income of Rs. 165,000/- and even paid due tax on it.
(xv). In the facts in the present case, the status of the person on whom the alleged service is made is under dispute, the assessee did not acted on notice under Section 148 of the I.T. Act, did not file Return of income. Otherwise also the Honble ITAT, Agra Bench, Agra has confirmed the settle the legal position that service of notice on major son is a valid service. It was upon these facts that the service of notice in the case of Chandra Bhan Bansal (supra) was held to be a valid service.
(xvi) That further the authorities below has relied upon the judgment of Chandra Bhan Bansal (supra) in which it has been held that notice need not be served on the assessee himself, it can be served on others, in these special circumstances.
(xvii). It would be highly improper to place reliance to this part of the order as though the Honble Bench, has authorized that notice can be served on others but a condition is attached to it and that is it can be but in the special circumstances. That so far no special circumstances, is brought on records so as to necessitate service of notice on an authorized person it is pertinent to mention here that prior to and post issuance of notice under Section 148, all notices/letters were either been served in person or through registered post So in the circumstances, reliance place to the judgment of Chandrabhan Bansal (supra) is misplaced.
(xviii). That further the authorities below has relied to the judgment of the Honble Allahabad High Court in the case Mithoo Lal Tek Chand v. C.I.T. (1967) 64 ITR,377 (All.). The facts of the case are totally different with the facts of the present case in your Honour hands has in that case, the notice was served Munim of the assessee and the Court held that the impropriety and irregularity, if any, in the service of notice must be deemed to have been waived because the assessee has filed the return without any protest the court further held that it was an admitted fact that all the members of the assessee were present when the postman had brought the notice and there was no good and sufficient reason why the postman should pick the munim , leaving out the members of the family, to have a acknowledgement due receipt signed by him. The Honble High Court was of the view that it had been stage managed.
(xix) In Commissioner of Wealth Tax v. Mrs. Ila Pal Chaudhary and Ors. (1971) 82, ITR 936 (Cal);
The facts were that the notice for reassessment was served on assessees accountant and assessee filed returns in response the notices, it was upon these facts the Honble High Court held that assessee having filed returns in response to notice for reassessment served on his accountant without any objection, there was proper service of notice, in the facts and circumstances of the cases.
(xx) In K.C. Tiwari & Sons v. C.I.T. (1962) 46, ITR 236 (Bom). The facts of case were that the notice was served on the manager of the assessee, the assessee admitted to have received notice, he filed reply requesting the A.O. for adjournment. It was upon these facts that the Honble High Court held that the assessee must be deemed to have waived that irregularity by admitting that he had received the notice and having thereafter proceeded to obtain a further adjournment.
(xxi). That your Honour Sir, from the perusal of case laws being relied upon by the revenue, a common feature in all the cases can be pointed out and that though in above cases assessee disputed the service of notice but in three of the above mentioned cases, have filed returns in pursuance of said notices and in the last case admitted to have received notice and sought adjournment on said notice.
(xxii). That in the present case before your Honour assessee is all along and consistently stating that no notice under Section 148 was received by him and no return of income have been filed in instant case so no reliance can be placed to the above referred authorities.
6.2. Reliance was further placed on the following decisions - specially the observations extracted there under :-
(i) Addl. C.I.T. v. Prem Kumar Rastosi [1986] 129 ITR 381 (All.)
Observations:
The fact that in the past notices used to be served on R and the assessee never took any objection that the services of notices on R were improper and invalid shall not make R an authorized or recognized agent of the assessee. On the findings, R was neither a recognized nor and authorized agent, nor an agent who was carrying business of the assessee. He was not an adult member of the assessee family. Delivery of notice to R was not valid according to the provisions of CPC. That delivery of the Notice on R was not a valid service.
(ii) C.I.T. v. Girdhari Lal [1984] 147 ITR 379 (Raj) Observations:
Revision- Opportunity of being heard- Power of Attorney given contemplated powers relating to assessment and appellate proceedings- After completion of assessment or for that matter after decision in appeal from the same, the assessee could not contemplate any proceedings for revision under Section 263- Notice was served on the assessee for initiating action under Section 263- Same received back with postal endorsement Left without address- Subsequently notice issued on One RS holding the said power of attorney- RS requested the CIT to grant adjournment and communicate directly with the assessee as RS had no instruction from assessee in this regard. - CIT in spite thereof took action under Section 263- Not Justified. .
(iii). Jayanthi Talkies Distributors v. C.I.T. [1979] 120 ITR 576 (Mad.)
Observations:
Reassessment under Section 147(b)- Validity of service of notice under Section 148- Service of Notice under Section 148 by process-server on manager of the assessee-firm who was not specifically authorized to receive notices on behalf of the firm was invalid and hence the consequent reassessment.
(iv). I.T.O. v. Mukesh Kumar [2002] 123 Taxman 55 (P&H)
Observations:
There is nothing on file that S was ever authorized by M to receive the said notice. Even at the hearing, nothing had been pointed out to show that merely because S was working as a Chartered Accountant for the assessee he had the authority to accept notice on behalf of M or that service of notice on the accountant shall be deemed to be service on the assessee. If the contention of the petitioner is accepted, the result can be unfair the accountant may be negligent. He may not even inform the assessee. Yet, he would be liable the Court has come to the positive conclusion that the notice under Section 148 is not proved to have been served on the assessee. Infact, even on the department own showing it was served only on S. In this situation, the view taken by the trial court was a possible one. In any case, it was not perverse. It is not contrary to the evidence on records. Thus, no ground for the grant of leave is made out. The petition is, therefore dismissed in limine.
(v). Dina Nath v. C.I.T. [199] 1204 ITR 667 (J&K)
Observations:
The object of issuing the notice of summons is to intimate the concerns to appear and answer the queries sought to be clarified by any Court or authority. As serious consequences are likely to follow a notice or summons must necessarily be issued and served in the form and manner prescribed by the law. The authority issuing the notice cannot be permitted to substitute its own procedure for the service of the notice. The agent contemplated under Order 5 CPC, upon whom a notice can be served for and on behalf of the defendant is such person who has been fully authorized in that behalf in terms of Order III, Rule 6, CPC. Under Sub-rule (2) of Rule 6 Such appointment may be special or general and shall be made by a instrument in writing signed by the principal and such instrument or if the appointment is general, a certified copy thereof shall be filed in court. A combined reading of Order 3, Rule 6 and Order 5, Rule 9, CPC leaves no doubt that the empowering of an agent can be made only in the manner detailed in Order 3, Rule 6 and verbal authorities is not enough. .
(vi). Y. Naryana Chetty and Anr. v. I.T.O. and Ors. [1959] 35 ITR 388 (S.C.)
Observations:
The service of the requisite notice on the assessee is a condition precedent to the validity of any reassessment made under Section 34; and if a valid notice is not issued as required, proceedings taken by the I.T.O. in pursuance of invalid notice and consequent order of reassessment passed by him would be void and inoperative. The notice prescribed by Section 34 cannot be regarded as a mere procedural requirement; it is only if the said notice is served on the assessee as required then the I.T.O. would be justified in taking proceedings against him. If no notice is issued or if the notice issued is shown to be invalid then the validity of proceedings taken by I.T.O. without a notice or in pursuance of an invalid notice would be illegal and void.
(vii). Kesav Narain Banarjee v. C.I.T. and Anr. [1999] 238 ITR 694 (Cal) Observations:
Reassessment-Service of notice-Service by Registered Post- At no stage of the proceedings the revenue set up any plea that the notices were served on the assessee by registered post- On the contrary it had been the consistent stand of the revenue all along that the notices could not be served by registered post and service was effected by affixation- Further there was no endorsement on the cover of either refusal of service or even return of the envelope to the sender- There is therefore no material to justify the inference that service by registered was effected or should be deemed to have been accomplished- In the absence of service of notice order under Section 147 are bad in law- Therefore the proceedings under Section 263 originating from such order are also not valid.
(viii). M.O. Thomas v. C.I.T. [1963] 47 ITR 775 (Ker) Observations:
Reassessment under Section 34 of 1922 Act- Validity- Notice under Section 34, invalidly served would invalidate the reassessment proceedings-Assessee having head office at Trichur and Branch at Kozhikode-Notice under Section 34 served by affixtures on the business premises of the assessee at Kozhikode with the report that the assessee was permanently residing at Trichur and notice at Trichur served by affixtures or residential premises of the assessee with the report that assessee was not available--Provision of Section 63 r/w Order 5 of C.P.C. not compiled with- Service of notice improper and so also consequent reassment proceedings.
(ix) Madan Lal Agarwal v. C.I.T. [1983] 144 ITR 745 (All.) Observations:
Issuing of a valid notice to the assessee under Section 148 within the period specified unders Section 149 of the Act is a condition precedent to the validity of any assessment to be made against such assessee under Section 147. Accordingly, where no such notice has been issued or if the notice issued is not valid or the same has not been served on the assessee in accordance with law, it will not be possible to sustain the eventual assessment made under Section 147 on the basis of such notice.
(x). C.I.T. v. Mintu Kalita (2001) 117 Taxman 388, (Gau).
Observations:
Service of notice prescribed by Section 148 for the purpose of initiating the proceeding for re-assessment is not a mere procedural requirement it is a condition precedent to the initiation of a proceeding for the assessment under Section 147. Mere issuance of notice is not sufficient. There was not material to show that the employee appeared In pursuance of notice Under Section 148. He appeared only in response to a notice Under Section 142(1) Section 142(1) deals with enquiry before Assessment and the appearance of the employee in terms of this notice to produce such accounts or documents as the A.O. may require could not be deemed to be the knowledge of the proceeding Under Section 147 that being the position, no notice was served Under Section 148 and the appearance of a person in response to a notice Under Section 142(1) could not be deemed to be the knowledge of proceeding Under Section 147.
(xi). B. Johar Forest Works v. C.I.T. (1997) 107 ITR, 409 (J&K) Observations:
Knowledge about the assurance of a notice otherwise then by its Service on the person concerned is one thing and the service of the notice on the person is another. Such knowledge cannot be considered to be equivalent to or a substitute for the service of the notice on the Assessee. The partners of the assessee firm or its manager may have Knowledge about the issuance of a notice but that does not mean that the service had been affected on them .
(xii). Shree Chansdeo Sugar Mills Ltd. v. I.T.O. [1984] 18 TTJ (Bom) 201
Observations:
Service of notice on one D who was engaged in connection with some other matters, could not be treated as service of notice on assessee in as much as no authority was given by D in this regard-Ex-parte order passed by the Tribunal without serving a proper notice on assessee, therefore invalid. .
6.3 With regard to the findings of the CIT(A) in para 13 of his order, where the ld. CIT(A) has, after having found on examination of assessees income-tax records in the proceedings Under Section 148 of the Act, that there existed no power of attorney in favour of Mr. M.K. Tyagi given by the assessee for the A.Y. 1988-89, the ld. Counsel submitted that the CIT(A) was not justified in believing the assessing Officers version that he had seen a power of attorney in favour of Mr. A.K. Tyagi.
6.4 With respect to the Revenues request for admission of affidavit of Assessing Officer, the counsel for the assessee has filed a counter affidavit of the assessee, which reads as under :-
BEFORE THE HONBLE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA.
Counter Affidavit of Shri. Rajeev Kumar Doneria aged about 37 Years, Son of Shri. Rashuvir Prasad Doneria R/o F-19 Kamla Nagar, Agra The deponent above named do hereby solemnly affirms and states on oath as under:
1. That the deponent is appellant in ITA No. 151 (Agra) 2002 / A.Y. 1988-1989; is an old Income Tax assessee, and as such is fully aware of about the proceedings in ITA No 151 (Agra) 2002 A.Y 1988-1989 filed against the assessment order dtd. 26-03-2001 passed Under Section 144/148 of the Act. Thus the deponent is capable of executing this affidavit.
2. That the deponent has read the Affidavit dtd. 23-12-2002 filed by Sri. S.H Rizvi, the Assistant Commissioner of Income Tax, Central Circle, Agra, and have fully understood the contents thereof.
3. This is reply to Para 1 of Affidavit, it is submitted that it is matter of records and needs no comment.
4. That the averment in this Para No. 2 is vague. It is not mentioned as to of which assessment year the appeal was pending with which CIT (A). For the sake of arguments it is submitted that when the affidavit was executed there was no appellate proceedings pending before CIT (A)-I, Agra.
5. That the first contents of part of Para 3 is a matter of records and cannot be commented, and the later part is denied by the deponent for want of knowledge. However, it is admitted that a report under the signature of Shri S.M. Rizvi was provided to the appellant by CIT(A).
6. That contents of Para 6 are denied. Deponent has not given any power of attorney authorizing Shri. M.K. Tyagi, C.A. to appear in assessment proceedings for A. Y 1988-89, arising out of service of notice Under Section 148 of IT-Act. Even, otherwise the contents of this Para executed by Sri. S.H. Rizvi are very vague.
Verification:
The deponent hereby verifies that the contents of Para No. 1 to 6 true and correct to the best his knowledge and belief. Nothing has been concealed or misstated therein.
Verified this on 21st day of October 2004 at Agra.
Deponent 6.5 In view of the above affidavit and Revenues request, the ld. Counsel for the assessee submitted that for the decisions in the following cases and the observations thereof, the Revenues petition for admission of affidavit of the Assessing Officer in support of its claim that there existed power of attorney executed by the assessee in favour of Mr. M.K. Tyagi, should not be accepted.
(i) Velji Deoraj & co. v. CIT (1968) 68 ITR 708 (Bom.) Observations:
Appeal (Tribunal) -- Additional evidence--Admissibility of additional evidence in appeal depends solely on the requirement of Court pronouncing its judgment or for the purpose of curing some inherent lacuna which it has itself discovered--In the instant case, Tribunal found no difficulty in pronouncing its judgment in absence of further evidence nor did it discover any lacuna or defect - Further, where parties had opportunity to produce evidence at proper stage but failed to do so, same cannot be admitted - Tribunal, therefore, justified in refusing to allow additional evidence.
(ii) CIT v. Smt. Kamal C. Mahboobbani (1995) 214 ITR 15 (Bom.) Observations:
Rule 29 of ITAT Rules is couched in negative language so far as the rights of the parties to produce additional evidence before the Tribunal is concerned. It clearly says that the parties to the appeal shall not be entitled to produce additional evidence either oral or documentary. In that view of the matter, the question of a party claiming a right to adduce additional evidence cannot arise. The Tribunal has, however, been given a power to require any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass order or for any other sufficient cause. For this purpose also, the Tribunal has to records the reasons.
(iii) CIT v. Sarat Chandra Bose (1950) 18 ITR 669 (Cal.) Observations:
Reference--Jurisdiction of High Court--Exercise of discretion by Tribunal in refusing to entertain a new point and adduce new evidence not being arbitrary, it could not be directed to state a case on that point - The powers Tribunal under Rule 29 of the Tribunal Rules, 1946, being strictly limited, the Tribunal did not act arbitrarily in refusing leave to raise new point and to adduce evidence to establish it--Tribunal cannot be directed to state a case .
(iv) CIT v. Babulal Nim (1963) 47 ITR 864 (M.P)
Observations:
Affidavit filed not for the reason that Tribunal found itself unable to decide the appeal on materials before it--Nor assessee prayed for being allowed to file evidence in support of his statement--In these circumstances, there was no justification to Rule 29 of ITAT Rules, 1946 - Evidence must be excluded from consideration.
(v) CIT v. Rao Raja Hanut Singh (2001) 252 ITR 528 (Raj.)
Observations:
Reference - Question of law - Production of additional evidence before Tribunal - Revenues application for permitting to lead additional evidence disallowed by Tribunal on the ground that apart from the pleading interest of justice, no other cause was pleaded for adducing additional evidence -Admission of additional evidence--Admission of additional evidence at the appellate stage is absolutely within the discretion of the Tribunal and cannot be claimed as a matter of right -- Question whether discretion has been exercised judiciously or not cannot be ordinarily a question of law unless it can be disputed or found that in exercising that discretion, Tribunal has ignored some well-settled legal principles. No contention has been raised that the Tribunal has not correctly enunciated principle on the basis of which the discretion is to be exercised--No question of law arises out of its appellate order.
(vi) State of U.P. v. M.L. Srivastava AIR (1957) S.C. 912
Observations:
Additional evidence should not be permitted to be produced to enable the party to fill up a lacuna, especially if the party could have produced such evidence before the lower authority but failed to do so without sufficient cause for the same. It should therefore be noted that this decision does not in all cases rule out the reception of additional evidence to fill up a lacuna in the case of the appellant. It rules it out only in cases where he failed to produce the same before the lower authority without sufficient cause therefore. That is why in Rule 23 of the CEGA T (Procedure) Rules it is declared that such an opportunity should be given if sufficient cause is shown for reception of the same.
(vii) R. Vishwa Nathan and Ors. v. Abdul Wazib. (1984) 146 ITR 140 (M.P.) Observations:
Evidence was in affidavits, which do not appear to have been ordered and could not, for that reason, be read as evidence. Such evidence as there was highly interested and uncorroborated from any independent source.
(viii) Smt. Gunwanti Bai Ratilal v. CIT. (1984) 146 ITR 140 (M.P.) Observations:
An affidavit is a piece of evidence, which, along with other material on record, has to be taken into consideration by the Tribunal before arriving at a finding. There was material on record which was considered by the Tribunal along with the affidavits and the Tribunal found that no reliance could be placed on the affidavits. A statement by a deponent can be held to be unreliable by the Tribunal either on the basis of cross-examination of the deponent or by reference to other material on record leading to the inference that the statement made in the affidavit, cannot be held to be true. The tribunal arrived at its finding on a consideration of the entire material on record including the affidavits. The fact that, apart from the affidavits filed by the assessee, there was other relevant material on record, was not disputed on behalf of the assessee. If the veracity of statements in the affidavits was according to the Tribunal disproved by the material on record, the finding of the Tribunal cannot be held to be vitiated, because the Tribunal arrived at the finding by not placing reliance on the affidavits.
7.1 The ld. D.R., on the other hand, in addition to supporting the order of the CIT(A), relied upon the decision in the following cases specially pointing out to various observations extracted in relevant order for various pleas considered hereunder :-
(i). Since the conduct of assessee shows contempt of Law and hence, reluctance to pay tax, so deserves no favour. Reliance was placed on the decision of Honble Supreme Court in 154 ITR 148 McDowell & CO. LTD., where the Honble Court has observed as under:
The evil consequences of tax avoidance are manifold. First there is substantial loss of much needed public revenue, particularly in a welfare state like India. Next there is the serious disturbance caused to the economy of the country by the piling up of mountains of black money, directly causing inflation, then there is the large hidden loss to the community by some of the best brains in the country being involved in the perpetual war waged between the tax-avoider and his expert team of advisers, law years and accountants on one aide and the tax gatherer and perhaps not so skillful, advisers on the other side. Then again there is the sense of injustice and inequality which tax avoidance arouses in the breasts of those who are unwilling or unable to profit by it. Last but not the least is the ethics (to be precise, the lack of it) of transferring the burden of tax liability to the shoulders of the guideless, good citizens from those of the artful dodgers.
(ii). The assessees delaying tactics be deprecated and relief be refused and us purpose reliance was placed on the following decisions :-
(a) Simplex Enterprises and Ors. v. Union of India and Ors., wherein Honble Court has held as under :-
The petitioners have not come to the Court with clean hands. It cannot be said that the said orders have been passed treating them ex parte. On the contrary, it will have to be said that the petitioners were playing delaying tactics for avoiding the liability of paying the taxes. When such tactics are played for delaying the hearing and false grounds are attempted to be created for future defense, they need to be deprecated. Thus, with disapproval of the behavior of the petitioners, the petition stands dismissed.
(Assessee writ petition against order of assessment and CIT refusal to revive it)
(b). Decision of Honble Allahabad High Court in CMWP No. 432 of 2002 in the case of Dr. P.P. Agarwal v. Commissioner of Income-tax, wherein the Honble court, as per judgment dated 15.3.2002 dismissed the writ petition of the assessee on the grounds that writ petition was filed only to delay and to avoid the payment of taxes.
SLP of assessee dismissed by the Apex Court by its order dated 29-08-2002, 257 ITR 54.
(iii). Referring to the Powers of Tribunal, it was submitted that it should protect the interest of the Revenue and in support relied on the decision in the case of C.I.T. v. Rayala Corporation (P) Ltd. 215 ITR 883 (Madras), specially on the following observations :-
The Tribunal has got to protect, on the one hand, the interest of the assessee in the sense that he is not subjected to any amount of tax in excess of what he is bound to pay, and on the other hand, it has a duty to protect the interests of the Revenue and to see that no one dodged the Revenue and escaped without paying the tax.
ii). Decision in the case of C.I.T. v. Ramnath Goenka and Ors. (2001) 252 ITR 653 (Mad), was relied upon to the extent of following observations:
Tribunal entitled to pass such orders as would ensure assessment of the correct tax liability.
iii) Decision in the case of Estate of Late Ranglal Jajodia v. C.I.T., 79 ITR 505 (SC), was relied on to the extent of following observations:-
The lack of a notice does not amount to the Revenue authority having had no jurisdiction to assess, but that the assessment was defective by reason of notice not having been given to her. An assessment proceeding does not cease to be a proceeding under the Act merely by reason of want of notice. It will be a proceeding liable to be challenged and corrected.
(iv). With respect to the service of notice Under Section 148 on Shri M.K. Tyagi, C.A., it was submitted that (i) first of all, he was duly authorized by the assessee to appear in Income-tax Proceedings in assessees case for the A.Y. 1988-89 and for that purpose relied on the Assessing Officers remand report sent to CIT(A). Proceeding further, it was submitted that even Mr. M.K. Tyagi, being regularly appeared in past - in assessees case and in the group cases including firm, where assessee was partner, the service was valid. Reliance in this respect was placed on the following decisions :
(a). A.K.M. GOVINDASWAMY CHETTIAR v. I.T.O. 244 ITR 559 (Mad), to the extent of following observations :-
148 notice issued on various agents (acting)- compliance made. Service held to be valid.
(b). Decision in the case CHANDRA BHAN BANSAL v. DCIT (2001) 79 ITD 639 (Agra), where the Bench Observed;
Section 282 which provides for procedure for service of notice has its title service of notice generally. The use of the word generally indicates that it was not mandatory that notice has to be served on the assessee itself.
(c). Decision in the case of Himmatram v. CIT 5 ITC 133, K.C. TIWARI & SONS v. CIT 46 ITR 236 & CWT v. ILA Pal 82 ITR 936, was relied upon to the extent of following observations :-
Service at assessee business premises on an agent exercising authority in respect of Income Tax Matters though not authorized in writing in that behalf is valid service under this section.
(d). Decision in the case of Rex v. Ismail 1 ITC 192 (Page 1696 Vol VIII EDITION Chaturvedi & Pithisaria) was relied upon to the extent of following observations :-
When a notice is served through a peon or a notice server it need not be served on the assessee personally. It may be served on his authorized agent.
Reliance was further placed on the following decisions and observations of different courts, extracted hereunder :-
(i). Ramesh Khosla v. ITO (1985) 154ITR 556 (Punjab) A mere averment by the assessee that the notice has not been received by him is not sufficient to rebut such presumption.
(ii). Azad Crown Works v. CIT (1976) 37 STC 570 (Bombay). -
When it was found that on previous occasion service of notice was effected on a particular other person and the assessee accepted it as good service & preferred appeal; etc. on the assessment order so - served it was held that the Tribunal finding of fact that person served was former agent of the assessee service was justified.
(iii). Commercial Motor Finance Ltd. v. ACIT 76 TTJ 918 (Lucknow):-
Validity of service of notice- assessee having fully acquiesced by its conduct in acknowledging the receipt of notice Under Section 10 through its employee the service has be deemed to be a proper service.
(iv). R.K. Upadhyaya v. Shanabhai P. Patel 166 ITR 163 (SC) CIT v. Major Tikka Khuswant Singh (1995) 212 ITR 650 (SC). 148 notice -180 ITR 355 (P&H), CIT v. Shea Kumari Debi (1986) 157 ITR 13 (Patna) F.B:-
148-Notice must be issued within limitation period, service not a prerequisite.
(v). Birla Cotton Spinning and Weaving Mills Ltd. v. ITO (1994) 209 ITR 34:-
Having participated in assessment proceedings the petitioners cannot complain the assessment was illegal because of want of notice to it.
(vi) CIT v. Bhorji Konji Shop (1968) 68 ITR 416 (Guj):-
Followed Bombay H.C. judgment in K.C. Tewari & Sons v. CIT (1962) 6 ITR 236- procedural irregularities in notices service of reassessment but assessee admits the receiving or conduct shows-service of notice valid.
(vii). Mahendra Kumar Agarwal v. ITO (1976) 103 ITR 688 (MP):-
Reassessment proceedings not invalid for want of proper service-service on clerk not authorized to receive.
(viii). CIT v. Jai Prakash Singh 219 ITR 737 (SC):-
an omission to serve or any defect in the service of notices provided by procedural provisions does not efface or erase the liability to pay tax where such liability is created by distinct substantive provision [charging sections]. Any such omission or defect may render the order made irregular depending upon the nature of the provision not complied with but certainly not void or illegal.
7.2 The ld. D.R., further, while supporting the request for admission of the affidavit relied upon the decision of Honble High Court of Allahabad in the case of Sohan Lal Gupta v. CIT, 33 ITR-786, where the Honble High Court has held that;
It is not open to the Tribunal to reject the plea taken by the assessee in his affidavit merely on the ground that no documentary evidence has been flled in support of the pleas. The rejection of an affidavit by an assesseeis not justified unless the assessee has either been cross examined or called upon to produce documentary evidence in support of the affidavit sworn by him
8. In rejoinder, the counsel for the assessee tried to meet out various submissions of the ld. Sr. D.R. by submitting as under :-
(i). With respect to the D.R.s claim that Shri M.K. Tyagi, Chartered Accountant has been appearing in assessees and his group cases earlier and had been receiving notices, the ld. Counsel submitted that that fact is not relevant because it is the service of the concerned notice, which is relevant and since Mr. M.K. Tyagi, Chartered Accountant had not been authorized by the assessee to deal with the assessees income-tax matters for the A.Y. 1988-89, the service on him was invalid service. For this view he relied upon the decision of Allahabad High Court in the case of Addl. CIT v. Prem Kumar Rastogi (supra)
(ii). Similarly with respect to the D.R.s submission that the assessee could have anticipated the proceedings in question, the ld. Counsel refuted the submissions made by the ld. D.R. by relying on the decision of CIT v. Girdhari Lal-147 ITR-379(Raj.) and observations there under, which are as follows:-
Revision--Opportunity of being heard--Power of Attorney given contemplated powers relating to assessment and appellate proceedings - After completion of assessment or for that matter after decision in appeal from the same, the assessee could not contemplate any proceedings for revisions under Section 263 -- Notice was served on the assessee for initiating action under Section 263 -- same received back with the postal endorsement Left without address --Subsequently notice issued on one RS holding the said power of attorney - RS requested the CIT to grant adjournment and communicate directly with the assessee as RS had no instruction from assessee in this regard.--CIT in spite thereof took action under Section 263 - Not justified.
(iii). With respect to specific authority and specific authorization to receive notice, the counsel submitted that for assuming jurisdiction Under Section 148 service of notice Under Section 148 of the Act or provisions of Civil Procedure Code and for this purpose relied upon the decision in the case of ITO v. Mukesh Kumar (2002) 123 Taxman 55 (P&H), Dina Nath v. CIT, 204 ITR-667 (J&K), Shree Changdeo Sugar Mills Ltd. v. ITO, 18 TTJ (Bom.) 201 and Jayanthi Talkies Distributors v. CIT, 120 ITR-576(Mad.).
(iv). With respect to Sr. D.R.s claim that the assessee having appeared before the Assessing Officer in response to notice Under Section 142(1) of the Act, he was aware of proceedings Under Section 147/148 of the Act and therefore, the service in question was valid, the assessee relied upon various observations made by various courts in the following decisions as under :-
(a). CIT v. Mintu Kalita, (2001) 117 Taxman 388 (Gau.):-
Observations:
Service of notice prescribed by Section 148 for the purpose of initiating the proceeding for re-assessment is not a mere procedural requirement it is a condition precedent to the initiation of a proceeding for the assessment under Section 147. Mere issuance of notice is not sufficient. There was not material to show that the employee appeared In pursuance of notice Under Section 148. He appeared only in response to a notice Under Section 142(1) Section 142(1) deals with enquiry before Assessment and the appearance of the employee in terms of this notice to produce such accounts or documents as the A.O. may require, could not be deemed to be the knowledge of the proceeding Under Section 147. That being the position, no notice was served Under Section 148 and the appearance of a person in response to a notice Under Section 142(1) could not be deemed to be the knowledge of proceeding Under Section 147.
(b). Laxmi Narain Anand Prakash v. C.S.T. (1980) UPTC 125 (All)(FB):-
Observations:
Section 21, U.P. Sales Tax Act, 1948 -- Scope--Service of notice on stranger--Improve service--Assessee participating in assessment proceedings - Notice having been improperly served, initiation of proceeding, held, was without jurisdiction - Proceedings cannot be validated by assessees participation in proceedings -Service of notice--Is condition precedent to assume jurisdiction--Jurisdiction explained--Estoppel, a principle of equity -- Not applicable to taxation proceedings - After issuing notice--Meaning .
(c). B. Johar Forest v. CIT, (1997) 107 ITR 409 (J.K.):-
Observations:
Knowledge about the issuance of a notice otherwise then by its Service on the person concerned is one thing and the service of the notice on the person is another. Such knowledge cannot be considered to be equivalent to or a substitute for the service of the notice on the Assessee. The partners of the assessee firm or its manager may have Knowledge about the issuance of a notice but that does not mean that the service had been affected on them .
(iv). With respect to mandatory requirement of service of notice Under Section 148, the ld. Counsel relied upon the following decisions and observations made there under :
(a). Y. Narayana Chetty and Anr. v. ITO and Ors. (1959) 35 ITR 388 s.C. :-
Observations:
The service of the requisite notice on the assessee is a condition precedent to the validity of any reassessment made under Section 34; and if a valid notice is not issued as required, proceedings taken by the I.T.O. in pursuance of invalid notice and consequent order of reassessment passed by him would be void and inoperative. The notice prescribed by Section 34 cannot be regarded as a mere procedural requirement; it is only if the said notice is served on the assessee as required then the I.T.O. would be justified in taking proceedings against him. If no notice is issued or if the notice issued is shown to be invalid then the validity of proceedings taken by I.T.O. without a notice or in pursuance of an invalid notice would be illegal and void.
(b) Madan Lal Agarwal v. CIT(1983) 144 ITR 745 (All.):-
Observations:
Issuing of a valid notice to the assessee under Section 148 within the period specified under Section 149 of the Act is a condition precedent to the validity of any assessment to be made against such assessee under Section 147. Accordingly, where no such notice has been issued or if the notice issued is not valid or the same has not been served on the assessee in accordance with law, it will not be possible to sustain the eventual assessment made under Section 147 on the basis of such notice .
(c). Laxmi Narain Anand Prakash v. C.S.T., (1980) UPTC 125 (F.B.): Observations:
Section 21, U.P. Sales Tax Act, 1948 - Scope - Service of notice on stranger--Improve service--Assessee participating in assessment proceedings--Notice having been improperly served, initiation of proceeding, held, was without jurisdiction - Proceedings cannot be validated by assessees participation in proceedings -Service of notice--Is condition precedent to assume jurisdiction--Jurisdiction explained--Estoppel, a principle of equity--Not applicable to taxation proceedings--After issuing notice--Meaning .
Service of a notice for purpose of initiating proceedings under Section 21 is not a mere procedural requirement but is a condition precedent. If no notice is issued or the notice is shown to be invalid or no notice has been served on the dealer the proceeding and the consequential order under Section 21 will be illegal and void irrespective of the fact that the dealer gets knowledge of the proceedings under Section 21.
(d). CIT v. Jagannath Pd. Nankoo Pd., (1996) 222 ITR 58 (Alld.):-
Observations:
We have heard Shri. Shekhar Srivastava, for the Department, and Shri. Vikram Gulati, for the assessee. The relevant assessment year is 1962-63 in which the income assessed by the income-tax Officer was Rs. 83,700/- but it was ultimately reduced to Rs. 54,111/- by the Tribunal. Proceedings under Section 148 were initiated and a reassessment order was passed and penalty imposed. The appeal of the assessee before the Appellate Assistant Commissioner failed, but in further appeal the Tribunal held that there was no valid notice under Section 148 served on the assessee and the condition precedent for issuing notice under Section 142(1) was lacking. These are findings of fact and hence we cannot in advisory jurisdiction that we may also refer to a decision of this court in the case of Addl. CIT Shri. Prem Kumar Rastogi (1980) 124 ITR 381, where it has been held that notice on an unauthorized person is not valid.
(v). With respect to D.R.s claim that the matter in question was covered by the order of the ITAT, Agra in the case of Chandra Bhan Bansal v. Dy. CIT, -79 ITD-639 (Agra), the ld counsel for the appellant, relying upon the earlier submissions, further relied on the decision of Gujrat High Court in the case of Pakash Ami Chand Shah v. State of Gujrat, AIR 1986(SC) 468 and the relevant observations are as under :-
A decision often takes it colour from the question involved in the case in which it is rendered. The scope and authority of a precedent should never be extended unnecessarily beyond the needs of a given situation .
(vi). In view of the above, the counsel submitted that this decision is not applicable to the assessees case.
9. We have considered the rival submissions, facts & circumstances of the case and various decisions, referred to and relied upon by both the parties.
9.1 After having considered the totality of facts and circumstances, first of all, we are of the opinion that one of the vital issues raised in this appeal for our consideration is as to whether the Revenues affidavit should be admitted or not and since the question of rejection or acceptance of affidavit arises only after its admission, the decision of Honble Allahabad High Court in the case of Sohan Lal Gupta, 33 ITR-786 cannot be said to be applicable only if the affidavit is admitted.
9.2 After having considered the totality of facts and circumstances of the case and also the provisions of Indian Evidence Act, 1972, we are of the opinion that though normally, the Income-tax Proceedings are not governed by the Indian Evidence Act, and are also aware that the Income-tax Proceedings except for the purpose specified Under Section 136 of the I.T. Act, are not judicial proceedings, but at the same time it is settled law that the Income-tax Proceedings are quasi judicial in nature and therefore, we are of the opinion that when it comes to the issue relating to establishing a material fact or the issue relating to establishing the existence of a document on record, the issue to that extent goes out of the strict provisions of I.T. Act - at least with respect to applicability of Indian Evidence Act; and consequently comes within the provisions of India Evidence Act - meaning thereby that existence or non-existence of a particular document has to be established in accordance with the provisions of Indian Evidence Act. In other words, when a party during the course of Income-tax proceedings, claims the existence of a particular document on the official records in the custody of a person - may he/she be either Govt. Officer or a subject (assessee), they are entitled to revert back to the provisions of Indian Evidence Act and can establish the existence or non-existence of such documents by resorting to the provisions of Indian Evidence Act.
9.3 So far as the provisions of Indian Evidence Act are concerned, we are of the opinion that it is necessary to consider the provisions of Section 61, 62, 63, 64 & 65 of the Indian Evidence Act, which are in the following terms :-
Section 61: Proof of contents of documents. - The contents of documents may be proved either by primary or by secondary evidence.
Section 62.- Primary evidence means the document itself produced for the inspection of the court.
Explanation 1.-- Where a document is executed in several parts, each part is primary evidence of the document;
Where a document is executed in counterpart, each counterpart being executed by one or some of the parties only, each counter part is primary evidence as against the parties executing it.
Explanation 2.-- Where a number of documents are all made by one uniform process, as in the case of printing, lithography or photography, each is primary evidence of the contents of the rest; but, where they are all copies of a common original, they are not primary evidence of the contents of the original.
Section 63. Secondary evidence.--Secondary evidence means and includes (1). Certified copies given under the provisions hereinafter contained;
(2). Copies made from the original by mechanical processes which in themselves ensure the accuracy of the copy, and copies compared with such copies;
(3). Copies made from or compared with the original;
(4). Counterparts of the documents as against the parties who did not execute them;
(5). Oral accounts of the contents of a document given by some person who has himself seen it.
Section 64.--Proof of documents by primary evidence--Documents must be proved by primary evidence except in the cases hereinafter mentioned.
Section 65. - Cases in which secondary evidence relating to documents may be given-- Secondary evidence may be given of the existence, condition or contents of a document in the following cases:-
(a). When the original is shown or appears to be in the possession or power--of the person against whom the document is sought to be proved, or Of any person out of reach of, or not subject to, the process of the Court, or Of any person legally bound to produce it, And when, after the notice mentioned in Section 66, such person does not produce it;
(b). When the existence, condition or contents of the original have been proved to be admitted in writing by the person against whom it is proved or by his representative in interest;
(c). When the original has been destroyed or lost, or when the party offering evidence of its contents cannot, for any other reason not arising from his own default or neglect, produce it in reasonable time
(d). When the original is of such a nature as not to be easily moveable;
(e). When the original is a public document within the meaning of Section 74;
(f). When the original is a document of which a certified copy is permitted by this act, or by any other law in force in (India), to be given in evidence;
(g). When the originals consists of numerous accounts or other documents which cannot conveniently be examined in Court, and the fact to be proved is the general result of the whole collection.
In case of (a), (c) and (d), any secondary evidence of the contents of the documents is admissible.
In case (e) or (f), a certified copy of the document, but no other kind of secondary evidence, is admissible.
In case (g), evidence may be given as to the general result of the documents by any person who has examined them, and who is skilled in the examination of such documents.
9.4 From the provisions of Section 61, it is clear that the contents of documents can be proved either by primary or by secondary evidence and the primary evidence and secondary evidence as defined Under Section 62 and 63 are as under :-
(i). The primary evidence is the document itself and is to be produced for inspection of the court.
It is further prescribed that if the document is executed in several parts, then each part falls within the definition of Primary evidence of the document and if document is executed in counter parts, then each counter part is primary evidence as against the parties executing it. Explanation No. 1 & 2 to this section further elaborate on the subject as to which document is primary evidence.
(ii). Section 63 defines the secondary evidence and according to it, the secondary evidence is of five kinds; (i) certified copy given in the provisions contained in the Evidence Act; (ii) Copies made from the original by Mechanical process, which in themselves ensure the accuracy of copies and copies compared with such copies; (iii) copies made from or compared with the original; (iv) counter parts of the documents as against parties, who did not execute them and (v) oral accounts of the contents of the documents given by some person, who was himself seen it.
9.5 The provisions of Section 64, on the other hand, speaks of proof of primary evidence and according to these provisions, to establish the proof of document by considering the same as primary evidence, the documents must be proved except in the case mentioned in other provisions of the Act.
9.6 So far as Section 65 is concerned, it prescribes the circumstances under which the existence of a document, can be established by way of secondary evidence -when it cannot be proved by way of primary evidence.
10.1 So far as the present case is concerned, the admitted facts are that it is the claim of the Assessing Officer that he had seen a power of Attorney in favour of Mr. M.K. Tyagi for the A.Y. 1988-89 executed by the assessee, but since the same was not found available on record at the time of examination of the records by the CIT(A), we are of the opinion that the Revenue has right to establish the existence of the same byway of secondary evidence as provided Under Section 61 to 65 of the Indian Evidence Act and if we consider the various eventualities specified Under Section 65(supra), we are of the opinion that only sub-clause, which can come to the rescue of the Revenue, should be the Sub-clause (c) of Section 65, which speaks that when the original had been destroyed or lost or when party offering evidence of its content cannot, for any other reason, not arising from his own default or neglect, produce it in reasonable time, but we are afraid that in the facts and circumstances of the present case, which we will elaborate hereinafter, this clause also do not help the Revenue because, for the reasons discussed hereunder, the document claimed by the Revenue to be on record has either been destroyed or lost because of revenues own default: --
Reasons:
(i) From the facts and circumstances of the case, it is observed that the Assessing Officer, while sending the remand report to the CIT(A) had claimed to have seen the power of attorney executed by the assessee in favour of Mr. M.K. Tyagi, but when the CIT(A) examined the assessees assessment records, which might have been sent by the Assessing Officer by post or by special Messenger (through some of the official of his office), the CIT(A) had not found any such power of attorney. This fact has been admitted by the Revenue. The Revenue has neither during the course of arguments, nor in the affidavit has claimed the misplacement of the concerned document and silence of the Revenue with respect to this angle leads to the presumption that either there was no such document as is being claimed by the then Assessing Officer Shri S.H. Rizvi, ACIT or if there was such document, then same got destroyed or lost or stolen during the period the Assessing Officer sent the assessees assessment records to the CIT(A) -meaning thereby that if at all the document was on record, the same was destroyed or lost or stolen when the records were in the custody of the Revenue and if that was the case, then the offence fell within the category of Criminal Offence. Since, it is settled law that if a Govt. Authority comes to know of commission of a criminal offence, he or she is duly bound to report the same to the police, in the present case, the CIT(A), who just after the examination of assessees records should have referred the matter to the police or to the Chief Commissioner of Income-tax for taking necessary action in this respect, but it is also an admitted fact (The ld. D.R. admitted at the time of hearing of this appeal) that neither the CIT(A) nor the C.C.I.T. nor the-C.I.T. nor the concerned Assessing Officer had either lodged a complaint with the police or had made any departmental enquiry so as to fix the responsibility of the person, from whose custody, the relevant document got destroyed or lost or stolen.
In view of the above admitted fact and circumstances, we are of the opinion that there was no power of attorney executed by the assessee in favour of Mr. M.K. Tyagi, which Mr. Rizvi could see.
(ii). Without prejudice to our above findings, even if we assume for a moment, for the sake of discussion, that there was such power of attorney when the Assessing Officer opened the file, but got destroyed or lost or stolen during the period the Assessing Officer closed the file and was opened by the CIT(A), then the same has happened for the default or neglect on the of the Revenue itself and it is so because the Revenue has neither intimated the offence to the police nor has conducted any departmental enquiry to fix the liability and penalize the concerned person. Consequently, benefits of Section 65(c) of the Indian Evidence Act are also not available to the Revenue.
(iii). Further, an affidavit is to be filed only online requirement of the court or the Tribunal and not of its own.
In the present case, the Tribunal had not required the revenue to establish the existence of the power of attorney by way of an affidavit and, therefore, the Revenue has no right to file the affidavit to establish or in defense of its own shortcomings or negligence or default - whatever the nature of the default may be.
(iv)(a). Further, as per provisions of Section 253(2) of the I.T. Act, the Assessing Officer can file an appeal to the appellate Tribunal against the order of the CIT (A) passed Under Section 154 or Under Section 250 of the Act only if the Assessing Officer is directed to do so by the Commissioner - meaning thereby that all the petitions or the appeal before the Tribunal starting from the stage of filing of appeal, though can be taken by the Assessing Officer i.e., the Officer who at the relevant point of time holds the jurisdiction over the assessees case, but only with express directions of the Commissioner and if any petition or appeal is filed by the person other than the Assessing Officer or by the Assessing Officer or person other than the Assessing Officer without directions of the Commissioner, the same is inadmissible under law and hence, non-est and cannot be admitted for consideration of the Tribunal. In other words, in petition or appeal etc. filed by the Assessing Officer or by an Officer other than Assessing Officer and without directions of the Commissioner to do so, is non-est and cannot be considered by the Tribunal.
(iv)(b). So far as the present case is conserned, the affidavit under reference is sought to be admitted on the basis of letter dated 14.1.2003 written by the ld. Sr. D.R. without enclosing or even mentioning the directions of the Commissioner of Income-tax. Since the request for admission of the affidavit has been made without there being any directions of the CIT(A) to do so, we are of the opinion that under the provisions of Section 253(3), this request of the Revenue cannot be acceded to.
(v). Similarly, the affidavit executed by Shri S.H. Rizvi, which speaks of his being acting as ACIT 4(1), Agra during the F.Y. 2001-2002 goes to show that in December, 2002, he was not the Assessing Officer of the assessee and therefore, had no right to file an affidavit without there being any directions of the CIT to do so.
11. In view of the above facts and circumstances of the case, we are of the opinion that the Revenue is not entitled to establish is claim by way of secondary evidence and therefore, request of the ld. Sr. D.R. dated 14.01.2003 for the admission of affidavit of Mr. S.H. Rizvi, cannot be acceded to and consequently, the affidavit in question is not admitted.
12.1 Coming to the merits of the case, we are of the opinion that;
(i)(a). First of all we, in view of foregoing facts and circumstances that the assessee had not executed any power of attorney in favour of Shri M.K. Tyagi, Chartered Accountant, as has been claimed by the revenue and this finding of ours gets support from other supporting facts such as non-compliance by the assessee of Assessing Officers letter dated 07.03.2002, which was served on the assessee on 29.3.2001.
(b). In the present case it is an admitted fact that the first action taken in assessees case by the Assessing Officer was by way of a letter dated 7.3.2002, which, admittedly, remained un-complied with and therefore, there could not be any reason for the assessee to execute a power of attorney in favour of the Mr. M.K. Tyagi for the A.Y. 1988-89.
(c). The second proceeding taken in the present case was by way of issuance of a notice Under Section 148 on 15.09.1998, which also admittedly remained un-complied with. Under these circumstances, the possibility of assessees executing of power of attorney in favour of Mr. M.K. Tyagi could be either while complying with the letter dated 07.03.2002 or, at the most, at the time of service of notice Under Section 148 of the Act, but this possibility also cannot be considered in revenues favour. Even the theory of preponderance and probability cannot apprehend the execution of a power of attorney by the assessee in favour of Mr. M.K. Tyagi when it is an admitted fact that there was no compliance by the assessee or its representative to the letter dated 07.03.2002 and also to the notice Under Section 148 dated 15.9.1988. So far as the possibility of executing a power of attorney while receiving the notice Under Section 148 is concerned, we are afraid because such miracle could happen only if the assessee could foresee that the Assessing Officer will issue a notice Under Section 148 and will proceed to serve on Mr. M.K. Tyagi.
(ii). So far as various decisions relied upon by the ld. Sr. D.R. are concerned, we have no hesitation to observe that none of these decisions except the decision of ITAT Agra Bench in the case of Chandra Bhan Bansal v. DCIT, 79 ITD-639, which we would like to discuss in the subsequent part of this order, relates to the mandatory requirement of service of notice Under Section 148 of the Act. For example, (1) reliance of the ld. Sr. D.R. on the decision, jn the case of Ramesh Khosla v. ITO, 154 ITR 556 for the proposition that a mere averment by the assessee that the notice has not been received by him is not sufficient to rebut such presumption is not applicable to the present case because in the present case, the Revenue has admitted that notice Under Section 148 of the Act for the A.Y. 1988-89 was not served on the assessee i.e., Shri Rajeev Kumar Doneria or on his Authorized Representative;
(ii). Similarly, the reliance of the ld. Sr. D.R. on the decision in the case of Azad Crown Works v. CIT (1976) 37 STC 570 (Bom.) is also of no use for the reason stated in para (i) above.
(iii). The reliance by the ld. Sr. D.R. on the decision in the case of Commercial Motor Finance Ltd. v. ACIT, 76 TTJ 918 (Lucknow) is also of no help to the Revenue because in the present case, the assessee did not acquiesce the mandatory requirement of service of notice Under Section 148.
(iv). The decisions in the cases of R.K. Upadhyaya v. Shanabhai P. Patel 166 ITR 163 (SC), CIT v. Major Tikka Khuswant Singh 212 ITR 650(SC) and CIT v. Shea Kumari Debi 157 ITR 13 were relating to the limitation, during which a notice Under Section 148 could be issued as provided Under Section 149 of the Act, but not with respect to the service of the said notice and therefore, the reliance on these decisions is also of no help to the Revenue.
(v) The Revenues reliance on the decision in the case of Birla Cotton Spinning and Weaving Mills Ltd. v. ITO, 209 ITR-434 is also not of any help to the Revenue because in the present case, the assessee had not participated in the proceedings and moreover, the issue in that case was not with respect to validity of service of notice Under Section 148 of the Act.
(vi). The decision in the case of Bhorji Konji Shop, 68 ITR-416 (Guj.) is also not of any help to the Revenue because in that case the assessee had filed the return in response to the notice Under Section 148, whereas in the instant case, the assessee did not file any return.
(viii). The decision in the case of Mahendra Kumar Agarwal v. ITO 103 ITR 688 (MP) is also of no help to the Revenue because in that case the service had been made on the assessees clerk whereas in the present case, admittedly, the notice Under Section 148 has not been served either on assessee or on his Authorized Representative. This decision is also of no help to the Revenue.
(ix). Revenues reliance on the decision in the case of CIT v. Jai Prakash Singh, 219 ITR 737 (SC) is also of no help to the Revenue because the issue before the Honble Supreme Court was with respect to service of notice Under Section 143 (2) as it existed prior to insertion of the proviso, limiting the period for service of such notices. At that time, the issuance of notice Under Section 143(2) was considered to be a procedural requirement and therefore, it was in context of that law that the Supreme Court had held that an omission to serve or any defect in the service of notice provided by procedural provisions does not efface or erase the liability to pay tax where such liability is created by distinct-substantive provision (charging sections). Any such omission or defect may render the order made irregular depending upon the nature of the provision not complied with but certainly not void or illegal. There is no dispute with regard to the proposition of law as held by the Honble Supreme Court (supra), but so far as the present case is concerned, the issue being with respect to mandatory requirement of service of notice Under Section 148, we with respect, are of the opinion that this decision is also of no help to the Revenue.
(ix) Coming to the reliance on the decision in the case of Mc. Dowell & Co. Ltd. v. Commercial Tax Officer, 154 ITR 148, we are again of the opinion that for the discussion, made hereunder, this decision is also of no help to the Revenue :-
(ix)(i)(a). The facts in the case of Mc. Dowell & Co. Ltd. (supra) were that the assessee was manufacturing and selling Indian liquor on whole sale and retail basis at Hyderabad. The manufacturing and sales activities were regularized by Andhra Pradesh Excise Act, 1968, Andhra Pradesh Distillery Rules, Andhra Pradesh Indian Liquor (Storage in Bond) Rules and Andhra Pradesh Foreign Liquor and Indian Liquor Rules, all made under the Andhra Pradesh Excise Act.
(b). The excise duty was leviable on manufacturing of liquor and manufacturer could not remove the liquor so manufactured from the distillery without paying excise duty on such liquor.
(c). The buyers of assessees liquor were getting distillery passes for release of liquor after making payment of excise duty, which was not reflected in assessees books of accounts.
(d). The assessee paid Sales Tax under the Andhra Pradesh Sales Tax Act on its turnover without including Excise Duty paid by the purchasers.
(e). Assessments were completed, but later on the Taxing Authorities called upon the assessee by way of a show cause notice, as to why the Excise duty paid by the buyers/purchasers be not considered as part of assessees turnover and assessments be reopened.
(f). The assessee challenged the show cause notice before the Honble High Court but failed. On appeal by the assessee, the Honble Supreme Court as per decision dated 25.10.96 reported in 39 STC-151 held as under :-
We hold that intending purchasers of the India Liquor who seek to obtain distillery passes are also legally responsible for payment of the excise duty which is collected from them by the authorities of the excise department.
This court then proceeded to determine whether excise duty paid directly to the excise authorities or deposited directly in the state Exchequer in respect of India Liquor by the buyers before removing the same from the distillery could be said to form part of the taxable turnover of the appellant distillery. Precedents were referred to and the court came to the conclusion that excise duty did not go into the common till of the appellant and did not become a part of the circulating capital. Therefore, the sales tax authorities were not competent to include in the turnover of the appellant, the excise duty which was not charged by it, but was paid directly to the excise authorities by the buyers of the liquor. The appellant, therefore, succeeded before this court and the notices issued by the sales tax authorities were quashed.
Thereafter Rule 76 and 79 of the Distillery Rules were amended with effect from 04.08.1981 and the amended Rules provide as under:-
No spirit or liquor manufactured or stored shall be removed unless the excise duty specified in rule 6 has been paid by a holder of D-2 license before such removal.
It is not disputed that the appellant is the holder of a D-2 license, under the law. Amended rule 79(1) provides :
79(1). On payment of excise duty by the holder of D-2 license, a distillery pass for the removal of spirit fit for human consumption may be granted in favour of any of the following persons only, namely :-
(a). a person holding a license in the Andhra Pradesh or in other Sates for sale of spirit by wholesale or retail and when the spirit is to be transported or exported beyond the limits of the district in which the distillery is situated to a person holding a permit signed by the Excise Superintendent of the District of destination or an officer of that district authorized in this behalf.
(b). A person hold a permit signed by he Officer of any other State referred to in clause (a) above for the export of such spirit from the Andhra Pradesh into that that.
(c). A person holding a permit signed by an Officer duly authorized in that behalf for export of such spirit to an Union Territory.
(d) A person hold a permit from the Excise Superintendent of any district in the Andhra Pradesh or from an Officer referred to in Clause (a) above of any other state to transport or export rectified spirits or wine, to such district or state.
(ix)(ii). The Sales-tax Authorities on the basis of rules so amended issued notice to the assessee for inclusion of Excise Duty since paid by the purchasers in its turnover.
(ix)(iii). The assessee went before the Honble High Court for quashing of the notice by way of writ but the Honble High Court after considering the amended rules and also earlier decision, dismissed the writ petition.
(ix)(iv). On appeal by the assessee, Honble Supreme Court dismissed the appeal and the relevant part of the order of the Honble Supreme Court reads as under :-
We think that the time has come for us to depart from the Westminster Principle as emphatically as the British courts have done and to dissociate ourselves from the observations of Shah J. and similar observations made elsewhere. The evil consequences of tax avoidance are manifold. First, there is substantial loss of much needed public revenue, particularly in a welfare state like ours. Next, there is the serious disturbance caused to the economy of the country by the piling up of mountains of black money, directly causing inflation. Then there is the large hidden loss to the community (as pointed out by Master Sheatcroft in 18 Modern Law Review 209) by some of the best brains in the country being involved in the perpetual war waged between the tax-avoider and his expert team of advisers, lawyers and accountants on the one side and tax gatherer and his perhaps not no skillful advisers on the other side. Then again there is the sense of injustice and inequality which tax avoidance arouses in the breasts of those who are unwilling or unable to profit by it. Last, but not the least is the ethics (to be precise, the lack of it) of transferring the burden of tax liability to the shoulders of the guideless, good citizens from those of the artful dodgers. It may, indeed, be difficult for lesser mortals to attain the state of mind of Mr. Justice Holmes, who said, Taxes are what we pay for a civilized society. I like to pay taxes. With hem I buy civilization. But, surely, it is high time for the judiciary in India too to part its ways from the principle of Westminster and the alluring logic of tax avoidance. We now live in a welfare State whose financial needs, if backed by the law, have to be respected and met. We must recognize that there is behind taxation laws as much moral sanction as behind any other welfare legislation and it is a pretence to say that avoidance of taxation is not unethical and that it sands on no less a moral plane than honest payment of taxation. In our view, the proper way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally or liberally, nor whether the transaction is not unreal and not prohibited by the state, but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it. A hint of this approach is to be found in the judgment of Desai J. in wood-polymer Ltd. In re & Bengal Hotels Limited, in re (1977)47 Comp Cas 597 (Guj), where the learned judge refused to accord sanction to the amalgamation of companies as it would lead to avoidance of tax.
It is neither fair nor desirable to expect the legislature to intervene and take care of every device and scheme to avoid taxation. It is up to the court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of emerging techniques of interpretation as was done in Ramsay, Burma Oil and Dawson, to expose the devices for what they really are and to refuse to give judicial benediction.
12.2 After having carefully considered the decision of Honble Supreme Court in the case of Mc. Dowell & Co. Ltd.(supra) word by word, sentence by sentence and para by para, we are of the opinion that so far as the proposition of law laid down by the Honble Supreme Court is concerned, there is no dispute, but so far as the observations of Honble Supreme Court, which have been relied upon by the ld. D.R. in the present case, are concerned, we, with all respect to the Honble Apex Court, are of the opinion that there cannot be any conflict with the proposition of law propounded by the Honble Apex Court, but while applying the same, care has to be taken with respect to the facts and the context, in which, the law has been propounded and so far as case of Mc. Dowell & Co. (supra) is concerned, the law was propounded with respect to the theory of Tax Planning. In other words, the law was propounded with respect to the issue as to which tax planning comes within the ambit of tax avoidance and which comes within the ambit of tax evasion. This was in the facts and in the context of above theories that the Honble Supreme Court came to the conclusion that while construing the provisions of law while considering a device to avoid tax is not to ask whether the provisions should be construed literally or liberally nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is device to avoid tax and whether the transaction is such that the judicial process may accord its approval to it.
12.3 So far as the present case before us is concerned, the issue involved is neither of tax planning nor of the aspect as to how the provisions be construed or what is the nature of the transaction or whether the transaction will result any avoidance of payment of tax or any evasion of payment of tax. The issue before us is with respect to subjects (assessees) right to challenge the action of a quasi-judicial authority, which is claimed by such authority to be in accordance with the provisions of law. The right to challenge the action of quasi judicial authority, so far as Income-tax Act is concerned, and specially, the validity of service of notice Under Section 148 is concerned, the same having been given by the statute itself, the observations referred to and relied upon by the ld. Sr. D.R.(from order of Honble S.C. in the case of Mc. Dowell & Co (supra)) in our opinion, are of no help to the Revenue. In other words, the Tribunal cannot, and should not, while considering the subjects (assessees) objection that notice Under Section 148 was not validly served as per law, go for researching or digging out the intention of the subject (assessee) while availing statutory right to challenge the action of a quasi judicial authority. Whether the objection raised by subject (assessee) results in avoidance of tax or not, is not at all relevant.
12.4 In view of the above, discussion, we are of the opinion that the reliance of the ld. Sr. D.R. on the decision in the case of Mc. Dowell & CO. Ltd. (supra) is also of no help.
13. Similarly, the reliance of the ld. Sr. D.R. on the decision in the case of Simplex Enterprises and Ors., the decision of Honble Allahabad High Court, CMWP No. 432 of 2002 in the case of Dr. O.P. Agarwal, the decision in the case of CIT v. Rayala Corporation (P) Ltd. 215 ITR-883(Mad.), decision in the case of Estate of Late Ranglal Jajodia v. CIT, 79 ITR 505(SC), decision in the case of AKM Govindaswamy Chettiar v. ITO, 244 ITR-559(Mad), decision in the case of Himmatram v. CIT, 5 ITC 133, decision in the case of Rex v. Ismail 1 ITC 192, decision in the case of Mithoo Lal v. CIT 64 ITR 377 and the decision in the case of Kangi v. CIT, 3 ITC 418, are of no help to the revenue because the issues and the context involved in all these decisions were different than the issue involved in appeal before us--meaning thereby that these decisions are distinguishable on facts as well as in law and therefore, are of no help to the Revenue.
14. The last decision, relied on by the Revenue in support of their claim that the service of notice Under Section 148 for the A.Y. 1988-89 on Shri M.K. Tyagi, the Chartered Accountant, who admittedly had not been authorized by the assessee to act on behalf of the assessee or to deal with the assessees income-tax matters relating to A.Y. 1988-89, was valid service, is the decision of ITAT, Agra in the case of Chandra Bhan & Sons v. DCIT, 79, ITO-639 and therefore, we consider it necessary to discuss this decision.,
15. From the decision, it is revealed that the issue for the decision of Honble Tribunal was the validity of service of notice Under Section 148 of the Act for the A.Y. 1988-89 having been effect on the assessees adult son. During the course of appellate proceedings, the assessee is stated to have relied upon various decisions including the decision of Honble Supreme Court in the case of CIT v. Thayaballi Mulla Jevaji Kapasi 66 ITR 147 and decision of Honble Jurisdictional High Court of Allahabad in the case of Madan Lal Agarwal v. CIT, 144 ITR-745. The Honble Tribunal, though referred to assessees reliance on the decision in the case of Madan Lal Agarwal v. CIT, 144 ITR-745 (Allahabad), but while considering various decisions omitted to discuss this decision, as is evident from para No. 2.4 to 2.9, wherein the Honble Tribunal has discussed various other decision and it, in our opinion, was rightly so because in the decision of Honble Allahabad High Court in the case of Madan Lal Agarwal, the question of service on the assessees elder son was not involved and also due to the fact that as per the provisions of Section 282 of the I.T. Act and the provisions of order No. V Rule No.......of Civil Procedure Code, the service of a mandatory notice on adult person of the family is valid service.(emphasis supplied)
16. After careful consideration of the facts and decision in the case of Chandra Ban Bansal (supra), we are of the opinion that this decision was rightly given by the Honble ITAT and has no application to the facts & circumstances of the present case. So far as the observations of the CIT(A) that ITAT had considered the decision of Allahabad High Curt in the case of Madan Lal Agarwal (supra), we are unable to approve the observations because as already discussed, the Honble ITAT has, though of course, mentioned this decision as having been relied upon by the assessee, but has nowhere discussed the applicability of this decision, meaning thereby that the Honble Tribunal in the case of Chandra Bhan Bansal, having not discussed or distinguished the decision in the case of Madan Lal Agarwal (supra), if cannot be said that the decision of Allahabad High Court, which is binding, in the case of Madan Lal Agarwal is not applicable to the case of the assessee presently in appeal before us.
17. Coming to the assessees reliance on various decision, including he decision of Honble Allahabad High Court in the case of Madan Lal Agarwal v. CIT, 144 ITR 745 (Allhd.), Addl. CIT v. Prem Kumar Rastogi, 129 ITR-381(All.), CIT v. Jagannath Pd. Nankoo Pd., 222 ITR 58 (Alld.), in the case of Laxmi Narain Anand Prakash, (1980) UPTC(FB)(Alld.) and various other decisions of Honble Supreme Court as well as other high courts, we would like, even for the sake of repetition; to discuss, at least, the decisions of Honble High Court of Allahabad as under:-
(i). Decision ofAddl. CIT v. Prem Kumar Rastogi, 129 ITR-381:
(a). In this case, the Honble High Court has held that;
The fact that in the past notices used to be served on R and the assessee never took any objection that the services of notices on R were improper and invalid shall not make R an authorized or recognized agent of the assessee. On the findings, R was neither a recognized nor and authorized agent, nor an agent who was carrying business of the assessee. He was not an adult member of the assessee family. Delivery of notice to R was not valid according to the provisions of CPC. That delivery of the notice on R was not a valid service.
(b). The aforesaid decision refutes the stand of the Revenue that Shri M.K. Tyagi, Chartered Accountant had been appearing in assessees case as well as in the firms case, where the assessee was partner in the past and supports the assessees objection that service on Shri M.K. Tyagi, who had not been authorized by the assessee to deal with the Income-tax matters of the assessee relating to the A.Y. 1988-89, was not a valid service.
(ii). Laxmi Narain Anand Prakash v. CST, 1980 UTPC-125(FB)(Alld.):
(a). In this case, the Honble High Court was to consider the scope of service of notice on an stranger and it was, after considering the issue, held that;
Service of notice for the purpose of initiating proceedings Under Section 21 is not a mere procedural requirement, but is a condition precedent. If not notice is issued or the notice is shown to be invalid or not notice has been served on the dealer, the proceedings and the consequential order Under Section 21 will be illegal and void irrespective of the fact that the party gets knowledge of the proceedings Under Section 21.
(b). So far as aforesaid decision is concerned, we are of the opinion that Section 21 of the U.P. Sales Tax Act being in pari materia with the provisions of Section 147/148 of the I.T. Act and also the fact that the requirement of service of notice Under Section 148 on the assessee has been held to be mandatory in nature, the assessees case is fully covered in his favour by this decision.
(iii). Decision in the case of CIT v. Jagannath Pd. Nankoo Pd.,222 ITR-58(Alld):
(a) In this case, the Honble High Court while discussing the validity of service of notice Under Section 148 of the Act, has held as under :-
We have heard Shri Shekhar Srivastava, for the Department, and Shri Vikram Gulati, for the assessee. The relevant assessment year is 1962-63 in which the income assessed by the income-tax officer was Rs. 83,700/- but it was ultimately reduced to Rs. 54,111/- by the Tribunal. Proceedings under Section 148 were initiated and a reassessment order was passed and penalty imposed. The appeal of the assessee before the Appellate Assistant Commissioner failed, but in further appeal, the Tribunal held that there was no valid notice under Section 148 served on the assessee and the condition precedent for issuing notice under Section 142(1) was lacking. These are findings of fact and hence, we cannot in advisory jurisdiction that we may also refer to a decision of this court in the case of Addl. CIT v. Shri Prem Kumar Rastogi (1980) 124 ITR 381, where it has been held that notice on an unauthorized person is not valid.
(b). In view of the above decision of Honble Allahabad High Court, we have no hesitation to hold that the issue involved in the present case is squarely covered in assessees favour and against the Revenue - meaning thereby that the service of notice Under Section 148 for the A.Y. 1988-89 on Shri M.K. Tyagi, Chartered Accountant, who admittedly had not been authorized by the assessee to deal with assessees income-tax matters for the A.Y. 1988-89, was not valid service in the eyes of law.
(iv). Madan Lal Agarwal v. CIT, 144 ITR-745 (All.):
(a). In this case the Honble High Court has held as under :-
Issuing of a valid notice to the assessee under Section 148 within the period specified under Section 149 of the Act is a condition precedent to the validity of any assessment to be made against such assessee under Section 147. Accordingly, where no such notice has been issued or if the notice issued is not valid or the same has not been served on the assessee in accordance with law, it will not be possible to sustain the eventual assessment made under Section 147 on the basis of such notice.
(b). This decision is fully applicable to the present case because the service of notice Under Section 148 for A.Y. 1988-89 in assessees case has been held to be invalid and bad in law.
18. Respectfully following the aforesaid decisions, and in view of the above facts and circumstances, we are of the opinion that the notice Under Section 148 of the Act for the A.Y. 1988-89 in assessees case was not validly served and therefore, the Assessing Officer could not have valid/legal jurisdiction to proceed with the subsequent assessment proceedings.
19.1 Having held the service of notice Under Section 148 of the Act dated 15.9.98 made on unauthorized person, namely Mr. M.K. Tyagi, Chartered Accountant, as invalid and bad in law, the next question for our decision is as to whether the subsequent proceedings including the assessment Under Section 144/148 dated 26.3.2001 were illegal in the eyes of law or were illegal.
19.2 After careful consideration of the provisions of Section 148 of the Act, which prescribes the service of a valid notice Under Section 148 on the assessee before making the assessment, re-assessment or re-computation Under Section 147 of the Act, we are of the opinion that a valid service of a valid notice Under Section 148 of the Act, is not a mere procedural requirement, but is a condition president to the validity of any assessment, re-assessment or re-computation to be made Under Section 147 of the Act and it is so because of use of words shall serve on the assessee and also the requirement to the effect before making the assessment, re-assessment or re-computation Under Section 147 in the section itself -- meaning thereby that if no notice Under Section 148 is issued or if the notice so issued is shown to be invalid, or the service of notice so issued, is shown to be invalid, the Assessing Officer cannot proceed with the subsequent proceedings for making assessment, re-assessment or re-computation Under Section 147 of the Act. In other words, if the Assessing Officer, in such circumstances, proceeds with the subsequent proceedings, the same will be illegal and void. This proposition of law has been held by the Honble Supreme Court in the case of Y. Narayana Chetty and Anr. v. ITO and Ors., 35 ITR 388, 392 (SC), CIT v. Thayaballi Mulla Jeevaji Kapasi, 66 ITR 147 (SC), in the case of CIT v. Kurban Hussain Ibrahim Ji Mithiborwala 82 ITR 821 (SC), Madan Lal Agarwal v. CIT, 144 ITR-745 (All.), Vijay Kumar Jain v. CIT, 99 ITR 349, 353 (Pb.), CIT v. Ishwar Singh & Sons, 131 ITR-480 (Alld.) and many more.
19.3 Under the aforesaid provisions of Section 148 of the Act, it is not enough that a notice issued Under Section 148 some how finds its way to the proper assessee or that assesses the proper assessee appeared and filed an objection to the proceedings. Unless, the notice is served on the proper person in the manner prescribed Under Section 282, the service is insufficient and the Assessing Officer does not have jurisdiction to re-assess the escaped income. This proposition of law is supported by the decisions of Madras High Court in the case of Thangam Textiles v. First ITO, 90 ITR 412 (mad) by decision of Mysore High court in the case of Laxmi Bai v. ITO 86 ITR 804 and C.T. Raj Gopal v. State of Mysore, 86 ITR 814 and by the decision of Bombay High Court in the case of S.K. Manekia v. C.S.T., 39 STC 426 (Bom.) and in the case of CST v. Shrimal Shekher Chand, 57 STC-224, 235.
20. Respectfully following the various decisions referred to in aforesaid para, we, after having held the service of notice Under Section 148 on Shri M.K. Tyagi, Chartered Accountant as invalid in the eyes of law, are further of the opinion that all subsequent proceedings including the exparte assessment framed on 26.03.2001 in assessees case were illegal and void ab-initio.
21. In the result, the appeal of the assessee is allowed.