COMMISSIONER OF INCOME TAX II JALANDHAR V. SUNIL KUMAR CHHABRA

ITA/85/2011

AI Insights

The case involves two Income Tax Appeals (ITA No. 85 of 2011 and ITA No. 287 of 2011) filed by the Commissioner of Income Tax against Sunil Kumar Chhabra and M/s Khanna Malleable respectively. The appeals challenged the orders of the Income Tax Appellate Tribunal, Amritsar, which had dismissed the revenue's appeals on the grounds of improper service of notices under Section 143(2) of the Income Tax Act, 1961. The High Court's decision focused on whether the notices were properly served within the statutory period, a procedural requirement that was not met in both cases, leading to the dismissal of the appeals.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 718979 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 01-02-2012
• Assessment Year: misc
• Other Referred Cases: V.R.A. Cotton Mills (P) Ltd. v. Union of India, Banarsi Devi v. The Income Tax Officer, District IV, Calcutta, Collector of Central Excise, Madras v. M/s M.M. Rubber and Co., Tamil Nadu, Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co., State of Punjab v. Khemi Ram, Assistant Commissioner of Income Tax v. Hot Hotel Blue Moon, Kunj Behari v. Income Tax Officer, District-II (VI), Amritsar, Commissioner of Sales Tax v. Subhash and Co., Commissioner of Income Tax v. AVI-OIL India P. Ltd.
• Laws Referred To: Income Tax Act, 1961, General Clauses Act, 1897
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: ARUN JAIN; K S DHILLON
• Assessee Lawyers: VIVEK SETHI
• Keywords: Appeal; Assessment; Commission; Income Tax; Jurisdiction; Notice; Service; TDS
• Section: 143(3); 143(2); 143(1); 260A; 194H; 40(ia)

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. Date of Decision: February 1, 2012 1. ITA No. 85 of 2011 (O&M) Commissioner of Income Tax, Jalandhar-II, Jalandhar …Appellant Versus Sunil Kumar Chhabra …Respondent 2. ITA No. 287 of 2011 (O&M) Commissioner of Income Tax, Jalandhar-I, Jalandhar …Appellant Versus M/s Khanna Malleable, Jalandhar …Respondent CORAM: CORAM: CORAM: CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE HON’BLE MR. JUSTICE HON’BLE MR. JUSTICE HON’BLE MR. JUSTICE ALOK SINGH ALOK SINGH ALOK SINGH ALOK SINGH Present: Mr. Vivek Sethi, Advocate, for the appellant-revenue. Mr. Arun Jain, Senior Advocate, with Mr. K.S. Dhillon, Advocate, for the respondent-assessee (in ITA No. 85 of 2011) 1. To be referred to the Reporters or not? 2. Whether the judgment should be reported in the Digest? \u0001 M.M. KUMAR, J. M.M. KUMAR, J. M.M. KUMAR, J. M.M. KUMAR, J. 1. This order shall dispose of ITA Nos. 85 and 287 of 2011 preferred by the revenue under Section 260A of the Income Tax Act, 1961 (for brevity, ‘the Act’), against the order(s) dated 10.9.2010 and 15.6.2011 respectively, passed by the Income tax Appellate Tribunal, Amritsar Bench, Amritsar (for brevity, ‘the Tribunal’) because common question of law and facts are involved ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) 2 in these appeals. 2. Facts of these appeals may first be noticed. ITA No. 85 of 2011 ITA No. 85 of 2011 ITA No. 85 of 2011 ITA No. 85 of 2011: 3. The assessee-respondent during the relevant assessment year 2006-07 has been doing the business of Bucks and Quickies (Agencies). On 10.1.2007, the assessee-respondent filed his return declaring an income of `2,48,660/-, which was processed by the Assessing Officer under Section 143(1) of the Act. The case was taken up for scrutiny and a notice under Section 143(2) of the Act was issued on 26.10.2007. The Assessing Officer also issued other statutory notices to the assessee-respondent. In response, the assessee-respondent appeared from time to time and furnished all the information. After completing all the formalities, the Assessing Officer added an income of `43,91,913/- and accordingly assessed the income of the assessee-respondent as `46,40,573/- as against the returned income of `2,48,660/-, vide order dated 19.12.2008. The Assessing Officer came to the conclusion that disallowance of rebate and discount paid by the assessee-respondent to the customers was not rebate and discount but commission paid by him to the customers on which no TDS as required under Section 194H of the Act, was deducted and thus, it violated the provisions of Section 40(ia) of the Act (A-1). 4. The assessee-respondent preferred an appeal before the Commissioner of Income-tax (Appeals), Jalandhar, against the order dated 19.12.2008, inter alia, raising the ground that the Assessing Officer has exceeded the jurisdiction under Section 143(2) of the Act because the notice dated 26.10.2007, issued under Section 143(2) of the Act, was sent to an address at which the assessee- respondent was not available. Therefore, no presumption of service ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) 3 of notice upon the assessee-respondent, under Section 143(2) of the Act, within the period of limitation of 12 months of the end of the month in which the return was filed, could be drawn. On 13.11.2009, the CIT (Appeals), Jalandhar, allowed the appeal by holding that for assuming jurisdiction to pass an assessment order under Section 143(3) of the Act, service has to be effected by the Assessing Officer within 12 months of the end of the month in which the return was filed. The CIT (Appeals), Jalandhar, set aside the order dated 19.12.2008, passed by the Assessing Officer (A-2). 5. Feeling aggrieved, the revenue-appellant filed an appeal before the Tribunal. The Tribunal has found that the notice dated 26.10.2007 under Section 143(2) of the Act was sent to the assessee-respondent on the address i.e. ‘M/s Chhabra Agencies, Attari Bazar, Jalandhar City’, whereas in the return filed by him the address given was ‘8, G.T.B. Nagar extension, Jalandhar’. No evidence has been placed on record showing that the said notice was delivered on the assessee-respondent or his authorised representative. It has also come on record that the next notice under Section 143(2) of the Act, dated 17.6.2008, was issued on the correct address, which was served personally on the assessee’s counsel. Accordingly, the Tribunal has dismissed the appeal of the revenue-appellant vide order dated 10.9.2010 (A-3). ITA No. 287 of 2011 ITA No. 287 of 2011 ITA No. 287 of 2011 ITA No. 287 of 2011: 6. In this case, the assessee-respondent during the relevant assessment year 2005-06 was doing the business of manufacturing and sale/purchase of pipe fitting items. On 31.10.2005, a return of income was filed declaring total income at `1,24,114/-. On 27.9.2006 a survey under Section 133A of the Act was carried out at the business premises of the assessee-respondent and certain ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) 4 incriminating documents were found and impounded. The case was selected for scrutiny as per the instructions of the Central Board of Direct Taxes (CBDT). On 24.10.2006, a notice under Section 143(2) of the Act was issued to the assessee-respondent for hearing on 2.11.2006. The notice is claimed to have been served on the assessee-respondent on 26.10.2006. No one appeared on behalf of the assessee-respondent on 2.11.2006. Later on the proceedings were attended by Shri K. Bhagat, Chartered Accountant along with Shri R.K. Khanna, partner of the assessee-respondent firm. On 28.12.2007, the Assessing Officer finalised the assessment proceedings determining the total income at `62,25,279/- (A-1). 7. The assessee-respondent challenged the order dated 28.12.2007 by filing an appeal before the Commissioner of Income Tax (Appeals), Jalandhar. Initially the ground of service of notice under Section 143(2) of the Act was not pleaded in the grounds of appeal. However, during the course of the proceedings before the CIT (A), an additional ground was taken that the assessee- respondent was not served the notice under Section 143(2) of the Act within the prescribed period of limitation. On 22.3.2010, the CIT (A), Jalandhar, allowed the appeal of the assessee-respondent by holding that there is no evidence of service of notice under Section 143(2) of the Act upon the assessee-respondent within the prescribed period. The CIT (A) has noticed that though there was a mention in the order of the Assessing Officer about issuance of notice under Section 143(2) on 24.10.2006 but the entry is undated and there is no evidence in the shape of office copy of the said notice on record. It has been further noticed that the assessment record is page numbered and there were no missing pages. The questionnaire allegedly sent along with the notice dated ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) 5 24.10.2006, was dated 9.11.2006 (A-2). 8. The revenue-appellant filed further appeal before the Tribunal challenging the order dated 22.3.2010 passed by the CIT(A), Jalandhar. The Tribunal after extracting the relevant paras of the findings recorded by the CIT(A), sustained the order dated 22.3.2010 and dismissed the appeal of the revenue-appellant vide order dated 15.6.2011 (A-3). 9. Having heard learned counsel for the parties and perusing the paper books we are of the considered view that no substantial question of law arises in these appeals for determination by this Court. The Tribunal has recorded pure findings of facts. In so far as ITA No. 85 of 2011 is concerned, it has come on record that the notice dated 26.10.2007 under Section 143(2) of the Act was sent on a wrong address. Furthermore, the revenue-appellant has not brought on record any evidence showing delivery of the said notice on the assessee-respondent or his authorised representative. Therefore, under no circumstances it could be presumed that notice has been served on the assessee- respondent within the prescribed period of limitation as per Section 143(2)(ii) of the Act, which requires that the notice has to be served on the assessee after the expiry of twelve months from the end of the financial year in which the return is furnished. Section 27 of the General Clauses Act, 1897, explains the meaning of ‘service’ by post and reads as under: “27. Meaning of service by post.- Where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression \"serve\" or either of the expressions \"give\" or \"send\" or any other expression is ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) 6 used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.” (emphasis by us) 10. From the bare perusal of Section 27 of the General Clauses Act it is clear that service would be deemed to be sufficiently effected if a letter containing the document is properly addressed, prepared and posted by registered post. In the present case the notice in question has not been properly addressed, which is amongst a condition precedent for inferring ‘service’. 11. Similarly, in the other case, the revenue-appellant has not been able to substantiate from the record of the assessment proceedings that any notice under Section 143(2) of the Act was issued on 24.10.2006. It has been categorically observed by the CIT(A) in his order dated 22.3.2010 that the return was processed under Section 143(1) on 23.3.2006 and in the noting of first order sheet no date has been mentioned by the Assessing Officer. The first notice under Section 143(2) of the Act, which is available on the assessment record, is dated 9.11.2006. Therefore, we see no legal infirmity in the view taken by the Tribunal as well as the CIT(A), Jalandhar in both the cases. There is no merit in these appeals warranting admission. 12. The learned counsel for the revenue-appellant has placed reliance on the Division Bench judgment of this Court rendered in the case of V.R.A. Cotton Mills (P) Ltd. V.R.A. Cotton Mills (P) Ltd. V.R.A. Cotton Mills (P) Ltd. V.R.A. Cotton Mills (P) Ltd. v. v. v. v. Union of India Union of India Union of India Union of India and others and others and others and others (CWP No. 18193 of 2011, decided on 27.9.2011) (CWP No. 18193 of 2011, decided on 27.9.2011) (CWP No. 18193 of 2011, decided on 27.9.2011) (CWP No. 18193 of 2011, decided on 27.9.2011). The ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) 7 Division Bench in the said case has interpreted the expressions ‘serve’ and ‘issue’ in the light of the judgments of Hon’ble the Supreme Court rendered in the cases of Banarsi Devi Banarsi Devi Banarsi Devi Banarsi Devi v. v. v. v. The Income The Income The Income The Income Tax Officer, District IV, Calcutta Tax Officer, District IV, Calcutta Tax Officer, District IV, Calcutta Tax Officer, District IV, Calcutta, AIR 1964 SC 1742; , AIR 1964 SC 1742; , AIR 1964 SC 1742; , AIR 1964 SC 1742; Collector of Collector of Collector of Collector of Cen Cen Cen Central Excise, Madras tral Excise, Madras tral Excise, Madras tral Excise, Madras v. v. v. v. M/s M.M. Rubber and Co., Tamil Nadu M/s M.M. Rubber and Co., Tamil Nadu M/s M.M. Rubber and Co., Tamil Nadu M/s M.M. Rubber and Co., Tamil Nadu, 1992 , 1992 , 1992 , 1992 Supp (1) SCC 471; Supp (1) SCC 471; Supp (1) SCC 471; Supp (1) SCC 471; Bhagwandas Goverdhandas Kedia Bhagwandas Goverdhandas Kedia Bhagwandas Goverdhandas Kedia Bhagwandas Goverdhandas Kedia v. v. v. v. Girdharilal Girdharilal Girdharilal Girdharilal Parshottamdas & Co. Parshottamdas & Co. Parshottamdas & Co. Parshottamdas & Co., AIR 1996 SC 543; , AIR 1996 SC 543; , AIR 1996 SC 543; , AIR 1996 SC 543; State of Punjab State of Punjab State of Punjab State of Punjab v. v. v. v. Khemi Khemi Khemi Khemi Ram Ram Ram Ram, AIR 1970 SC 214; , AIR 1970 SC 214; , AIR 1970 SC 214; , AIR 1970 SC 214; Assistant Commissioner of Income Tax Assistant Commissioner of Income Tax Assistant Commissioner of Income Tax Assistant Commissioner of Income Tax v. v. v. v. Hot Hot Hot Hotel Blue Moon el Blue Moon el Blue Moon el Blue Moon, (2010) 3 SCC 259; , (2010) 3 SCC 259; , (2010) 3 SCC 259; , (2010) 3 SCC 259; Kunj Behari Kunj Behari Kunj Behari Kunj Behari v. v. v. v. Income Tax Income Tax Income Tax Income Tax Officer, District Officer, District Officer, District Officer, District- - - -II (VI), Amritsar II (VI), Amritsar II (VI), Amritsar II (VI), Amritsar, 1983 (139) ITR 73; , 1983 (139) ITR 73; , 1983 (139) ITR 73; , 1983 (139) ITR 73; Commissioner of Commissioner of Commissioner of Commissioner of Sales Tax Sales Tax Sales Tax Sales Tax v. v. v. v. Subhash and Co. Subhash and Co. Subhash and Co. Subhash and Co., (2003) 3 SCC 454 , (2003) 3 SCC 454 , (2003) 3 SCC 454 , (2003) 3 SCC 454 and a Division Bench judgment of this Court rendered in the case of Commissione Commissione Commissione Commissioner r r r of Income Tax of Income Tax of Income Tax of Income Tax v. v. v. v. AVI AVI AVI AVI- - - -OIL India P. Ltd. OIL India P. Ltd. OIL India P. Ltd. OIL India P. Ltd., (2010) 323 ITR 242 , (2010) 323 ITR 242 , (2010) 323 ITR 242 , (2010) 323 ITR 242. In the penultimate para of the judgment rendered in the case of V.R.A. V.R.A. V.R.A. V.R.A. Cotton Mills (P) Ltd. (supra) Cotton Mills (P) Ltd. (supra) Cotton Mills (P) Ltd. (supra) Cotton Mills (P) Ltd. (supra) the Division Bench has observed as under: “ ……The expression serve means the date of issue of notice. The date of receipt of notice cannot be left to be undetermined dependent upon the will of the addressee. Therefore, to bring certainly and to avoid attempts of the addressee to evade the process of receipt of notice, the purpose of the statute will be better served, if the date of issue of notice is considered as compliance of the requirement of proviso to Section 143(2) of the Act. In fact that is the only conclusion that can be arrived at to the expression ‘serve’ appearing in Section 143(2) of the Act.” 13. However, we are of the considered view that the Division Bench judgment in the case of V.R.A. Cotton Mills (P) Ltd. (supra) V.R.A. Cotton Mills (P) Ltd. (supra) V.R.A. Cotton Mills (P) Ltd. (supra) V.R.A. Cotton Mills (P) Ltd. (supra) is ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) ITA Nos. 85 and 287 of 2011 (O&M) 8 totally distinguishable on the facts of the present cases because it has been established that in one case the revenue-appellant has sent the notice under Section 143(2) of the Act on a wrong address and in the other case the revenue-appellant has not been able to substantiate by adducing any evidence that any notice under Section 143(2) was issued within the prescribed period of limitation. 14. As a sequel to the above discussion, these appeals fails and the same are accordingly dismissed. A photocopy of this order be placed on the file of connected appeal. (M.M. KUMAR) (M.M. KUMAR) (M.M. KUMAR) (M.M. KUMAR) JUDGE JUDGE JUDGE JUDGE ( ( ( (ALOK SINGH ALOK SINGH ALOK SINGH ALOK SINGH) ) ) ) February February February February 1 1 1 1, 201 , 201 , 201 , 2012 2 2 2 JUDGE JUDGE JUDGE JUDGE PKapoor "