ITAT, AMRITSAR BENCH Cancellation of reassessment on ground that AO has not followed prescribed procedure for service of notice

Cancellation of reassessment on ground that AO has not followed prescribed procedure for service of notice

The service by affixture is to be made only if it is not possible to effect service through normal means.

ITAT, AMRITSAR BENCH AMRITSAR

DCIT

v.

K. G. Singhania

 ITA No. 281 & 282 (ASR)/2008

May 21, 2009

RELEVANT EXTRACTS:

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11. We have heard both the parties and perused the material available with us especially the impugned order dated 30.01.2008 in which the Ld. first appellate authority has cancelled the reassessment on the ground that the AO has not followed the prescribed procedure as laid down by law for service of notice read with order 5 rule 20 of Civil Procedure Code. The Ld. first appellate authority has highlighted the issue on non-service of notice not only in the original return but also on the revised return filed under protest by the assessee. The ld. firsts appellate authority has cancelled the reassessment after thoroughly going through the procedure laid down under order 5 of rule 20 of civil procedure code and after going through the written submissions of the assessee alongwith various judgments cited on this issue delivered by various High Courts. As per record, the AO issued one notice 28.032003 at the address of brother of the assessee, which is not proper service because brother of the assessee is not authorised by the assessee. Even subsequent notices u/s 148 dated 12.05.2003 and 20.6.2003 were sent, to the Delhi address. As per record, the assessee is an advocate and got a v "Samman Certificate" at the Regional level and as per Samman Scheme the case could only be selected for scrutiny under very special circumstances and with prior approval of the CIT/CGIT. After perusing the record produced by the Ld. DR we found that there is no finding as to why issuance of notice to the assessee is under exceptional circumstanpes. We find that before issuance of notice u/s 148 of the Act no prior approval from the competent authority was taken as the notice was issued after taking prior approval of the Jt. CIT Phagwara in the month of March, 2003. As per argument of the Ld. DR which is based on the record available with us that this approval was , taken only in the month of Octoberr2003. The fact revealed that it is not a case of prior approval from the concerned authority because the AO issued notice u/s 148 dated 28.032003 and he got the approval in the month of October, 2003. Since in this case no prior approval was taken and subsequent proceedings are bad in law and contrary to the commitment made by the department in the Samman Patra. The commitments made by the Revenue authority have to be honoured and these are binding and cannot be ignored. It is held by the Hon'ble Andhra Pradesh High Court in the case of CIT Vs. Smt. Nayana P. Dedhia reported in 192 CTR (AP) 526 (270 ITR 572) that if the assessment made in violation of the circular issued by the GBDT i.e. bad in law. The Ld. counsel for the assessee has attached this decision in the paper book at page 88 and another decision on this issue is of the Hon'ble Delhi High Court in the case of CIT vs Best Plastics P. Ltd. reported in 295 ITR 256 wherein it has been held that the assessee's case was taken up for scrutiny in violation of Board's instructions, the setting aside of the assessment by the CIT(A) was justified. The Ld. counsel for the assessee attached this judgment at page 89 & 90 of the paper book. The Ld. counsel for the assessee also drew our attention towards the decision of the jurisdictional High Court in the case of CIT Vs. Oscar Laboratories reported at 20 DTR 169 wherein while dealing with the issue of instructions issued by the CBDT for filing further appeals by the revenue, it was held that such instructions are mandatory and binding on the revenue. After going through the contents of the 'Samman Patra', we are of the considered opinion that the case of the assessee was taken for scrutiny is ip violation of the commitment made particularly when nothing has been placed dp record to suggest that this was a situation of very exceptional circumstances. In the present case, the assessee has been treated at par with any other assessee mid not as a sammaneeatall.

11.1. As regards to the service of notice u/s 148 of the Act, we are of the considered opinion that the AO has not adopted the prescribed procedure under order 5 rule 20 of civil procedure code, which is mandatory. The service by affixture is to be made only if it is not possible to effect service through normal means. The AO has not brought out any assessment order or comments as to why it was not possible to serve the notice through normal means. The AO has only written that notice u/s 148 of the Act was served by affixture on 29.03.2003 on the last known address of the assessee at Phagwara in the presence of two witnesses, a copy of which was sent by post on 31.03 2003. The AO has also written that issuance of notice u/s 148 of the Act within stipulated period is compulsory, although service of notice u/s 148 has also been made within the period. As per record, the AO had only served the notice u/s 148 of the Act through affixture without even attempting to serve the notice on the assessee. We have seen not a single noting on the record by the AO that assessee has refused to accept the notice. There is no report of the notice server/Inspector in this regard which would justify service through affixture. As discussed above, the assessee has given three addresses: (i) M/s. Singhania Trading Co. Dana Mandi, Phagwara (ii) P-23, Green Park Extension, New Delhi and (iii) 102/103, 10th Floor, Jolly Maker Chambers-II, Nariman Point, Mumbai, but no notice was sent at Mumbai address. As per record notice u/s 148 of the Act dated 28.032003 was despatched at Delhi, address on the brother of the assessee but this cannot be treated as service of notice on the assessee. As per avermejit of the assessee, his brother Sh. Ravi Singhnia is living and working separately and service made on him is not a valid service because the assessee has not authorised him to receive such notice. To support his contention, the Id. counsel for the assessee relied upon the decision of jurisdictional High Court in the case of Kunj Behari Vs. Ito 139 ITR 73 in which the Hon'ble High Court held that service of notice is to be effected on the person concerned personally but where the authority concerned is satisfied that the person concerned is keeping himself out of the way with a view to avoiding service or that for any other reason the summons cannot be served in the .ordinary way, the authority can order the summons be served by affixture. In support of this contention, the Id. counsel for the assessee also relied upon the order of the Hon'ble Kerala High Court in the case of A.A. Kochandi & Others Vs. ITO 110 ITR 406. The Ld. counsel for the assessee also drew our attention towards the order of the Hon'ble Allahabad High Court iruthe case of CIT Vs.Satya Narain Poddar reported in 89 ITR 136, wherein it was held that it was mandatory on the authority to examine the serving officer i.e. the one who went to serve the notice on oath and if does not do so it would be non-compliance of the provisions of jule 19 and will make the service of the notice invalid in law. Another decision of the Hon'ble Madras High Court in the case of Kiran Machines Vs. ITO reported at 295 ITR 4, wherein it was held that the assessing officer cannot resort to substituted service unless there is reason to believe that the assessee is avoiding service and where the address was not known the assessing officer should have ordered publication in a newspaper. The ld. counsel for the assessee also cited various decisions rendered by the ITAT Delhi, Calcutta Benches and Hon'ble Punjab & Haryana High Court supporting his contention mainly on the issue where the notice issued is invalid or notice is not served on the proper person then assessment framed would be illegal and without jurisdiction. In this regard, the decision of the Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Laxmi Narain reported in 168 Taxman 128 and CIT Vs. Avtar Singh 304 ITR 333 cited by the Id. counsel is also applicable. ..

11.2. The Ld, counsel has placed reliance on the judgment of Hon'ble Delhi High Court in the case CIT Vs. Hotline International Pvt. Ltd. 296 ITR 333, wherein it has been held that affixation can be done only when the assessee or his agent refuses to sign the acknowledgement or coyld not be found. Since no efforts were made by the Income-tax Department to serve the notice or locate the assessee, there was no valid service of notice.

11.3. As stated above, the Id. counsej for the assessee filed a paper book containing pages 1 to 107 in which he has attached 20 judgments rendered by various High Courts and Tribunal. We have gone through the decisions/judgments and have also mentioned some of the important judgments/decisions and discussed the same at length. After discussing the above and perusing the relevant record available with us, we are of the considered opinion that in the present case, the AO has not served the assessee notice u/s 148 of the Act by complying with the provisions order 5 rule 20 of Civil Procedure Code. Therefore, the Ld. first appellate authority has rightly cancelled the reassessment in dispute. Keeping in view the facts and circumstances of the case, we are of the considered opinion that no interference is called for in the well reasoned order passed by the Ld. first appellate authority. We uphold the same by dismissing the appeals filed by the Department.

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