LM Wind Power Blades (Indai) Private Ltd, Bangalore V. ACIT, Bangalore

ITA 1091/BANG/2010

• Counselvise Citation: 109121114 RSA 2010
• Duration Of Justice: 4 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-09-2014
• Assessment Year: 2000-2001
• Appeal Filed On: 20-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S RAMASUBRAMANIAN
• Keywords: Depreciation; Period of limitation; Retrospective amendment; Validity of assessment; Assessment record; Reason to believe; Reassessment proceedings
• Section: 142(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO.1091/BANG/2010 ASSESSMENT YEAR : 2000-01 LM WIND POWER BLADES (INDIA) PRIVATE LTD., [FORMERLY L M GLASSFIBER (INDIA) PVT. LTD.], NELAMANGALA TALUK, DOBASPET, NO.85, KIADB INDUSTRIAL AREA, BANGALORE DISTRICT. PAN: AAACL 3093R VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 11(5), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI S. RAMASUBRAMANIAN, C.A. RESPONDENT BY : SHRI FARAHAT HUSSAIN QURESHI, CIT-II(DR) DATE OF HEARING : 28.11.2014 DATE OF PRONOUNCEMENT : 09.01.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 2.7.2010 OF CIT(APPEALS), BANGALORE RELATING TO ASSESSMENT YEAR 2000-01. ITA NO.1091/BANG/2010 PAGE 2 OF 15 2. THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURE, SALE AND SERVICING OF FRP ROTOR BLADES FOR WINDMILLS. THE ASSESSEE WA S EARLIER KNOWN AS L M GLASSFIBER (INDIA) PVT. LTD. AND HAS CHANGED ITS NAME TO LM WIND POWER BLADES (INDIA) PRIVATE LTD. THE R ETURN OF INCOME FILED BY THE ASSESSEE FOR AY 2000-01 WAS PROCESSED U/S. 143(1) O F THE ACT ON 27.3.2002. IN THE SAID RETURN, ASSESSEE HAD CLAIME D DEPRECIATION OF TECHNICAL KNOW HOW OF A SUM OF RS.31,44,375. ACCOR DING TO THE ASSESSEE, IT HAD UNDER AN AGREEMENT DATED 17.1.2000 ACQUIRED TECHNOLOGY FOR MANUFACTURE OF ROTOR BLADES LAM 15.4. IT IS ALSO C LAIM OF THE ASSESSEE THAT TECHNOLOGY WAS USED BY THE ASSESSEE DURING THE PREV IOUS YEAR AND ASSESSEE HAD MANUFACTURED LM 15.4 BLADES AND SOLD T HEM TO ONE OF ITS CUSTOMERS UNDER INVOICE LMGI 038/99-2000 DATED 11.2 .2000. ACCORDING TO THE ASSESSEE, IT WAS THEREFORE ENTITLED TO CLAIM DE PRECIATION ON THE CAPITALISED VALUE OF TECHNICAL KNOW-HOW, AS THE TEC HNOLOGY HAS BEEN ACQUIRED AND USED BY THE ASSESSEE DURING THE PREVIO US YEAR. THE ASSESSEE EARNED INTEREST INCOME OF RS.65,64,857 ON DEPOSITS WITH BANKS. ACCORDING TO THE ASSESSEE, THE DEPOSITS WERE MADE O UT OF SALE PROCEEDS OF BLADES MANUFACTURED BY IT. IT WAS THE CLAIM OF THE ASSESSEE THAT IT WAS ENTITLED TO CLAIM DEDUCTION U/S. 80IA OF THE ACT. THE ASSESSEE HAD INCLUDED THE INTEREST ON DEPOSITS ALSO AS INCOME OR PROFITS ON WHICH DEDUCTION U/S. 80IA OF THE ACT HAS TO BE ALLOWED. ACCORDING TO TH E ASSESSEE, THE SOURCE OF DEPOSITS WAS BUSINESS AND THEREFORE INTEREST INC OME HAS TO BE CONSIDERED AS ELIGIBLE PROFITS FOR THE PURPOSE OF D EDUCTION U/S. 80IA OF THE ITA NO.1091/BANG/2010 PAGE 3 OF 15 ACT VIZ., BUSINESS OF MANUFACTURE OF ARTICLE OF THI NG. AS ALREADY STATED THE RETURN OF INCOME OF THE ASSESSEE WAS ACCEPTED U/S.1 43(1) OF THE ACT AND THE CLAIM OF THE ASSESSEE FOR DEPRECIATION AS WELL AS THE CLAIM OF THE ASSESSEE FOR INCLUSION OF INTEREST INCOME AS INCOME ELIGIBLE FOR DEDUCTION U/S.80-IA OF THE ACT, WAS ACCEPTED 3. THE ASSESSING OFFICER INITIATED PROCEEDINGS U/S. 147 OF THE ACT BY RECORDING THE FOLLOWING REASONS:- REASONS FOR THE REOPENING THE ASSESSMENT U/S. 14 7 : ON PERUSAL OF THE RECORDS PERTAINING TO ASST. YEAR 2000-01, I T WAS OBSERVED THAT THE ASSESSEE COMPANY HAS CAPITALIZED A SUM OF RS.2,51,55,000/- ON TECHNICAL KNOW-HOW PURCHASED FR OM OUTSIDE INDIA AND CLAIMED DEPRECIATION @ 12.5%, I.E. RS.31, 44,375/-. ALSO, THE ASSESSEE COMPANY HAS INCLUDED A SUM OF RS .65,64,857/- WHILE ARRIVING AT THE ELIGIBLE PROFIT FOR ITS CLAIM OF DEDUCTION U/S. 80 IA THOUGH THE ABOVE SUM IS INTEREST EARNED FORM FIXED DEPOSITS MADE OUT OF SURPLUS FUNDS. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT ACCO RDINGLY AND IT IS A FIT CASE TO REOPEN U/S 147 IN ORDER TO BRIN G THE ESCAPED AMOUNT TO TAX. 4. ACCORDINGLY NOTICE U/S. 148 OF THE ACT DATED 19. 9.2005 WAS ISSUED. THE AO HAS OBSERVED IN THE ORDER OF ASSESSMENT AS F OLLOWS:- NOTICE U/S. 148 WAS ISSUED TO THE ASSESSEE ON 19.9 .05. IN RESPONSE TO THE NOTICE U/S. 148 OF THE I.T. ACT, 19 61 SHRI BALASUBRAMANIAN CA AND SHRI BHASKAR CA APPEARED AND THE CASE DISCUSSED. ITA NO.1091/BANG/2010 PAGE 4 OF 15 5. THEREAFTER THE AO PROCEEDED TO DISALLOW DEPRECIA TION ON TECHNICAL KNOW-HOW ON THE GROUND THAT ON PAYMENT MADE TO NON- RESIDENT FOR ACQUIRING THE KNOW-HOW, THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE U/S. 195 OF THE ACT, NOR HAD THE ASSESSEE PAID THE COST TO T HE NON-RESIDENT. THE AO ALSO HELD THAT INTEREST INCOME CANNOT BE CONSIDERED AS PROFITS ELIGIBLE FOR DEDUCTION U/S. 80IA OF THE ACT. 6. IN APPEAL BEFORE THE CIT(APPEALS), THE ASSESSEE SUBMITTED THAT THE NOTICE U/S. 148 OF THE ACT WAS NOT SERVED ON THE AS SESSEE AND THEREFORE THE ORDER PASSED U/S. 147 OF THE ACT HAS TO BE QUAS HED AS A NULLITY. THE ASSESSEE FURTHER POINTED OUT BEFORE THE CIT(A) THAT THE ONLY NOTICE RECEIVED BY IT WAS THE NOTICE U/S. 143(2) AND 142(1) AND IN RESPONSE TO THE SAID NOTICE DATED 28.11.06, THE AR OF THE ASSESSEE APPEA RED BEFORE THE AO ON 27.12.06. THE ASSESSEE SUBMITTED THAT THIS NOTICE HAD BEEN SERVED ON THE ASSESSEE AT THE ADDRESS MENTIONED IN THE RETURN OF INCOME WHICH IS ALSO REGISTERED OFFICE OF THE ASSESSEE VIZ., PLOT NO.61 AND 62, KORAMANGALA INDUSTRIAL AREA, HOSKOTE, BANGALORE 562 114. THE A SSESSEE ALSO POINTED OUT THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS BE FORE THE AO, THE AR OF THE ASSESSEE ORALLY SUBMITTED THAT NO NOTICE U/S. 1 48 OF THE ACT WAS SERVED ON THE ASSESSEE. IT WAS ALSO CLAIMED THAT THE AO I NFORMED THE AR THAT IT WOULD HAVE BEEN SERVED. ON THE BASIS OF THE AFORES AID ALLEGATIONS MADE BY THE ASSESSEE BEFORE CIT(A), THE LD. CIT(A) CALLE D FOR A REMAND REPORT FROM THE AO AND AFTER CONSIDERING THE SAME DEALT WI TH THE ISSUE OF NON- SERVICE OF NOTICE U/S.148 OF THE ACT AND OBSERVED O N THE SAME AS UNDER:- ITA NO.1091/BANG/2010 PAGE 5 OF 15 5.3. THE A.O. DR. K J DIVYA APPEARED PERSONALLY A ND SHOWED THE ASSESSMENT RECORDS. SHE ARGUED THAT ON 29-11-20 00 THE APPELLANT HAD FILED A COVERING LETTER ALONG WITH TH E RETURN OF INCOME OF A.Y.2000-0L. THE COVERING LETTER REVEALED THE FOLLOWING ADDRESSES - L M GLASSFIBER (INDIA) LIMITED, OFF: 310, RAHEJA ARCADE, 1/1, KORAMANGALA INDUSTRIAL LAYOUT, BANGALORE -560 095. REGD. OFF/FAC: PLOT NO.61 & 62, KASABA INDUSTRIAL AREA, HOSAKOTE -562 114 TEL: 98440 - 26413/26414 TELEFAX: 08111 - 71320 /71701 5.3.1. SHE POINTED OUT THAT, IN VIEW OF THE ABOVE, THERE IS NOTHING STRANGE IF THE A.O. HAD ISSUED THE NOTICE U/S.148 O F I.T.ACT IN ONE OF THE ADDRESSES MENTIONED IN THE LETTER PAD OF THE ASSESSEE EVEN IF IT IS DIFFERENT FROM THAT OF ADDRESS MENTIONED I N THE RETURN OF INCOME. 5.4. I HAVE CONSIDERED THE ABOVE. FOR BETTER UNDER STANDING OF THE FACT, THE LETTER PAD AND THE ACKNOWLEDGMENT COP Y OF ITS-1 DATED 29-11-2000 ARE ENCLOSED HEREWITH AS ANNEXURE- 1 AND 2 RESPECTIVELY. THE BASIC ISSUE INVOLVED IN THIS CASE IS WHETHER THE NOTICE U/S.148 OF I.T.ACT SENT TO AN ADDRESS ME NTIONED IN THE LETTER PAD OF THE ASSESSEE DIFFERENT FROM THAT OF THE RETURN CAN BE SAID TO HAVE BEEN SERVED DULY ON THE ASSESSE E SO AS TO PROVIDE JURISDICTION TO THE A.O. TO INITIATE PROCEE DINGS U/S.148 OF I.T.ACT? AFTER CONSIDERING THE EVIDENCES ON THE RECORD, I F IND THAT NOTICE U/S.148 HAD BEEN SENT TO THE ASSESSEE I N ITS RAHEJA ARCADE ADDRESS AND EVEN IF IT IS NOT ASCERTAINED, W HO HAS RECEIVED THE SAME ON BEHALF OF THE ASSESSEE. I HOLD THAT THE NOTICE HAS BEEN SERVED PROPERLY BECAUSE THE INITIAL NOTICE OF HEARI NG DATED 28-11- 2006 HAD BEEN GIVEN THE HEADING NOTICE U/S.143(2) R.W.S.147 OF I.T.ACT WHICH DISTINGUISHES THE FACTS OF THIS CASE FROM THE FACTS OF THE CITED CASE OF MINTU KALITA VIDE SUPRA WHEREIN T HE HEARING WAS COMMENCED BY A NOTICE U/S.142(1) OF I.T.ACT ONLY. I N VIEW OF THE ITA NO.1091/BANG/2010 PAGE 6 OF 15 ABOVE, I FIND THE A.O. HAS ASSUMED THE JURISDICTION PROPERLY AND ALSO STARTED THE HEARING PROCEEDING PROPERLY BY ISS UANCE AND SERVICES OF NOTICE U/S.148 OF I.T.ACT DATED 19-9-20 05 AND NOTICE U/S.143(2) R.W.S.147 OF I.T.ACT DATED 28-11-2006. 7. AGGRIEVED BY THE AFORESAID FINDINGS OF THE CIT(A PPEALS), THE ASSESSEE HAS RAISED GROUND NO.3 BEFORE THE TRIBUNAL . WE DEEM IT APPROPRIATE TO TAKE UP THE SAID GROUNDS FOR CONSIDE RATION AS A PRELIMINARY ISSUE. 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEF ORE US THAT IT IS MANDATORY FOR THE AO TO SERVE NOTICE U/S. 148 OF TH E ACT. IT WAS HIS SUBMISSION THAT THIS IS A FUNDAMENTAL REQUIREMENT B EFORE COMPLETING THE ASSESSMENT U/S. 147 OF THE ACT. IN THIS REGARD R ELIANCE WAS PLACED ON THE DECISION OF THE HONBLE GAUHATI HIGH COURT IN CIT VS MINTU KALITA 253 ITR 334 . IT WAS HELD THEREIN THAT IN VIEW OF THE SUPREME C OURT DECISION IN R.K. UPADHYAYA VS SHANABHAI P. PATEL, 166 ITR 163 , SERVICE UNDER THE NEW ACT IS NOT A CONDITION PRECEDENT TO C ONFERMENT OF JURISDICTION ON THE INCOME TAX OFFICER TO DEAL WITH THE MATTER B UT IT IS A CONDITION PRECEDENT TO THE MAKING OF THE ORDER OF REASSESSMEN T. IN MINTU KALITAS CASE (SUPRA), IT WAS HELD THAT IN THE ABSENCE OF A PROPER SERVICE OF NOTICE U/S 148, THE AO CANNOT MAKE AN ASSESSMENT U/S 147 O F THE ACT. IT WAS FURTHER HELD THAT JUST BECAUSE THE ASSESSEE RESPOND S TO NOTICE ISSUED U/S 142(1), IT CANNOT BE SAID THAT THERE IS A RESPONSE TO NOTICE U/S 148. THEREFORE, IT WAS SUBMITTED THAT THE NON-SERVICE OF NOTICE ON THE ASSESSEE ITA NO.1091/BANG/2010 PAGE 7 OF 15 AT THE PROPER ADDRESS IS FATAL TO THE ORDER U/S 147 FOR THE AY 2000-01. IT WAS ALSO SUBMITTED THAT THE LEARNED CIT (A) HAS HEL D THAT THE NOTICE HAS BEEN ISSUED TO THE ADDRESS GIVEN IN THE COVERING LE TTER. THE LEARNED COUNSEL DREW OUR ATTENTION TO THE COVERING LETTER R EFERRED TO IN THE CIT(A) ORDER AND SUBMITTED THAT PERUSAL OF THE LETTER WOUL D SHOW THAT IT CLEARLY CONTAINS THE ADDRESS OF THE REGISTERED OFFICE AND F ACTORY AND ALSO THE OFFICE ADDRESS AT RAHEJA ARCADE. HE QUERIED AS TO WHY THE AO CHOSE ONLY THE OFFICE ADDRESS AT RAHEJA ARCADE. THE RETURN FILED BY THE ASSESSEE SHOWS THE HOSKOTE INDUSTRIAL AREA AS THE ADDRESS OF THE A SSESSEE. HE POINTED OUT THAT ALL OTHER NOTICES ISSUED BY THE ASSESSING OFFI CER WERE ADDRESSED TO THE HOSKOTE ADDRESS. ACCORDING TO HIM THEREFORE, IT IS A BIT STRANGE TO FIND THAT ONLY THE NOTICE U/S 148 OF THE ACT WAS ISSUED TO TH E RAHEJA ADDRESS. WITHOUT PREJUDICE TO HIS CONTENTION THAT THERE IS N O EVIDENCE ON RECORD TO SHOW THAT SUCH A NOTICE WAS ISSUED TO THE OFFICE AD DRESS AT RAHEJA ARCADE, IT WAS SUBMITTED BY HIM THAT EVEN IF SUCH N OTICE HAS BEEN ISSUED, IT IS NOT A PROPER NOTICE. ACCORDING TO HIM, THE LAW IS WELL SETTLED THAT THE NOTICE SHOULD BE ADDRESSED TO THE CORRECT ADDRESS O F THE ASSESSEE. ISSUE OF NOTICE TO A WRONG ADDRESS IS NOT PERMITTED UNDER THE LAW. IN THIS CONNECTION THE ASSESSEE RELIED ON THE FOLLOWING DEC ISIONS WHEREIN IT WAS HELD THAT THE SERVICE OF NOTICE ON THE CORRECT ADDR ESS IS A MANDATORY REQUIREMENT:- A) CIT VS MASCOMTEL INDIA LTD (345) ITR 58 B) HIND BOOK HOUSE VS INCOME TAX OFFICER (274) ITR (AT)61. ITA NO.1091/BANG/2010 PAGE 8 OF 15 IT WAS THUS SUBMITTED BY HIM THAT THE FINDING OF TH E LEARNED CIT(A) THAT THERE IS A PROPER SERVICE OF THE NOTICE U/S 148 IS LIABLE TO BE QUASHED. 8. IT WAS FURTHER URGED BY HIM THAT IT IS ALSO NEC ESSARY THAT THE NOTICE SHOULD BE SERVED ON AN ASSESSEE OR HIS AUTHORIZED A GENT. DRAWING OUR ATTENTION TO PARA 5.4 OF THE APPELLATE ORDER, HE AR GUED THAT IT IS NOT EVEN KNOWN WHO HAS RECEIVED THE NOTICE. IT WAS SUBMITTED THAT WHEN THE IDENTITY OF THE PERSON WHO HAS RECEIVED THE NOTICE IS NOT KN OWN IT CANNOT BE DETERMINED WHETHER SUCH A PERSON CONSTITUTES AN AUT HORIZED AGENT OF THE ASSESSEE TO RECEIVE NOTICES. ACCORDING TO HIM THE B URDEN OF PROOF IS ON THE INCOME TAX DEPARTMENT TO PROVE THAT THERE IS A VALI D SERVICE OF NOTICE ON THE AUTHORIZED PERSON. RELIANCE WAS PLACED ON THE DECIS ION IN THE CASE OF CIT VS MISCOUNTED INDIA LTD. 345 ITR 58 & HIND BOOK HOU SE VS INCOME TAX OFFICER 274 ITR (AT) 6L . ACCORDING TO HIM THE CIT(A) FAILED TO APPRECIATE THAT THE SERVICE OF NOTICE U/S 148 OF THE ACT IS A CONDITION PRECEDENT TO MAKING AN ASSESSMENT. JUST B ECAUSE A NOTICE U/S 143(2) R.W.S 147 WAS SERVED ON THE ASSESSEE IT CANN OT BE SAID THAT IT IS A VALID SERVICE OF NOTICE U/S 148. THE NON-VALID SERV ICE OF THE NOTICE U/S. 148 CANNOT BE CURED BY ISSUING A NOTICE U/S 143(2). IT WAS SUBMITTED THAT THE DISTINCTION MADE BY THE LEARNED CIT(A) THAT IN MINTU KALITA S CASE THE NOTICE U/S 142(1) IS INVOLVED WHEREAS THE PRESENT C ASE INVOLVES A NOTICE U/S 142(2) RWS 147 IS TOTALLY ERRONEOUS. IT WAS SUBMITT ED THAT A NOTICE U/S 142(1) DEALS WITH ENQUIRY BEFORE ASSESSMENT AND THE APPEARANCE OF THE ITA NO.1091/BANG/2010 PAGE 9 OF 15 EMPLOYEE IN TERMS OF THIS NOTICE TO PRODUCE SUCH BO OKS OR DOCUMENTS AS THE ASSESSING OFFICER MAY REQUIRE CANNOT BE DEEMED TO BE KNOWLEDGE OF THE PROCEEDINGS U/S 147 OF THE ACT. IT WAS HIS SUBM ISSION THAT THE LEARNED CIT(A) HAS COMPLETELY FAILED TO NOTICE THAT THE NOT ICES U/S 143(2), 142(1) ARE TO BE ISSUED ONLY AFTER THE VALID SERVICE OF NO TICE U/S 148. IF THERE IS NO VALID SERVICE OF NOTICE U/S 148, THE QUESTION OF IN ITIATING ASSESSMENT PROCEEDINGS BY ISSUING NOTICE U/S 143(2), 142(1) DO ES NOT ARISE AT ALL. SUCH NOTICES ARE NULL AND VOID AS HELD BY THE HONBLE TR IBUNAL IN HIND BOOK HOUSE 274 ITR (AT) 61 . HENCE, IT WAS SUBMITTED THAT THE ASSESSMENT MADE U/S. 147 IS VOID AND LIABLE TO BE QUASHED. 9. IT WAS FURTHER SUBMITTED THAT JUST BECAUSE THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER IN RESPONSE TO NOTICE U/S 143(2) OF THE ACT, IT CANNOT BE SAID THAT IT HAS ACQUIESCED IN THE PROCEEDINGS. IT WAS SUBMITTED THA T S.292 BB OF THE ACT IS NOT APPLICABLE FOR THE AY 2000-2001. OUR ATTENTION WAS DRAWN TO THE DECISION OF THE SPECIAL BENCH OF HONBLE ITAT IN KUBER TOBACCO PRODUCTS PVT LTD DCIT 310 ITR (AT) 300 WHEREIN IT WAS HELD THAT PROVISION OF S.292BB WOULD APPLY ONLY W.E.F AY 2008 -09 AND NOT FOR THE EARLIER ASSESSMENT YEARS. THEREFORE, IT WAS PERMISS IBLE FOR AN ASSESSEE TO QUESTION THE JURISDICTION IN APPEAL PROCEEDINGS EVE N IF HE HAD APPEARED BEFORE THE ASSESSING OFFICER IN RESPONSE TO ANY NOT ICE. SO ALSO, AN ITA NO.1091/BANG/2010 PAGE 10 OF 15 ASSESSEE CAN CHALLENGE THE VALIDITY OF THE ASSESSME NT AT THE APPELLATE STAGE. 10. THE LD. DR REITERATED THE STAND OF THE REVENUE AS REFLECTED IN THE ORDER OF THE CIT(A). 11. WITH A VIEW TO VERIFY THE FACTS WITH REGARD TO SERVICE OF NOTICE U/S. 148, ASSESSMENT RECORDS WERE CALLED FOR. IT IS SEE N FROM THE ASSESSMENT RECORDS THAT NOTICE U/S. 148 OF THE ACT DATED 19.9. 05 IS AVAILABLE ON THE RECORD, BUT THERE IS NO EVIDENCE FOR THIS NOTICE HA VING BEEN DISPATCHED TO THE ASSESSEE. ANOTHER ASPECT WHICH WE NOTICED WAS THAT ADDRESS OF THE ASSESSEE AS GIVEN IN THE RETURN OF INCOME WHICH IS ALSO ITS REGISTERED OFFICE HAS BEEN WRITTEN, BUT STRUCK OFF AND THE ADDRESS OF 310, RAHEJA ARCADE, 1/1, KORAMANGALA INDUSTRIAL LAYOUT, BANGALORE, IS FOUND. A COPY OF THE POSTAL ACKNOWLEDGMENT FOR HAVING DISPATCHED THE AFO RESAID NOTICE BY RPAD WAS CALLED FOR AS THERE WAS NO ACKNOWLEDGMENT. THE SAID NOTICE ALSO CONTAINS AN ENDORSEMENT THAT IT WAS SENT BY RP AD. FOR BETTER APPRECIATION OF THE FACTS, THIS NOTICE IS ENCLOSED AS ANNEXURE-I TO THE ORDER . IT WAS ALSO SUBMITTED BY THE AO IN HIS LETTER DATE D 20.12.13 TO THE CIT FILED BEFORE US THAT THE DESPATCH REGISTER RELE VANT FOR THE PERIOD 2005- 06 IS NOT AVAILABLE IN THE OFFICE AND THE RECORDS F OR THE SAID PERIOD WERE WEEDED OUT. THERE IS NO EVIDENCE IN THE FORM OF PO STAL ACKNOWLEDGMENT WHEN A LETTER IS LODGED FOR BEING SENT BY RPAD. TH E LD. DR, HOWEVER, SUBMITTED THAT SINCE THE ASSESSEE HAS PARTICIPATED IN THE ASSESSMENT ITA NO.1091/BANG/2010 PAGE 11 OF 15 PROCEEDINGS, THE PROVISIONS OF SECTION 292BB OF THE ACT WILL BE APPLICABLE AND THEREFORE THE ASSESSEE CANNOT BE PERMITTED TO C HALLENGE SERVICE OF NOTICE AND ON THAT GROUND SEEK TO SET ASIDE THE ORD ER OF ASSESSMENT AS A NULLITY. 12. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. IT IS CLEAR FROM THE RECORDS THAT THERE IS NO EVIDE NCE FOR THE NOTICE U/S. 148 OF THE ACT DATED 19.9.05 HAVING BEEN DISPATCHED. T HERE IS NO EVIDENCE, ADMITTEDLY, FOR THE SAID NOTICE HAVING BEEN SERVED ON THE ASSESSEE AS WELL. IT IS ALSO CLEAR FROM THE NOTICE DATED 19.9.05 THAT THE AO ORIGINALLY STARTED WRITING THE ADDRESS GIVEN IN THE RETURN OF INCOME, BUT FOR THE REASONS BEST KNOWN TO HIM, HAD STRUCK OFF THE SAID ADDRESS AND H AS ADDRESSED THE NOTICE TO 310, RAHEJA ARCADE, 1/1, KORAMANGALA IND USTRIAL LAYOUT, BANGALORE. THESE CIRCUMSTANCES THROW SUSPICION ON WHETHER NOTICE U/S. 148 WAS ISSUED AT ALL TO THE ASSESSEE. FROM THE EV IDENCE AVAILABLE ON THE RECORD, WE ARE OF THE VIEW THAT REVENUE HAS FAILED TO ESTABLISH THE ISSUE OF NOTICE U/S. 148 OF THE ACT AS WELL AS ITS SERVICE O N THE ASSESSEE. 13. THE HONBLE SUPREME COURT IN THE CASE OF R.K. UPADHYAYA V. SHANABHAI P. PATEL, 166 163 (SC) HAD TO DEAL WITH A CASE WHERE NOTICE U/S. 148 OF THE ACT WAS ISSUED WITHIN THE PE RIOD OF LIMITATION, BUT IT WAS SERVED ON THE ASSESSEE BEYOND THAT PERIOD. THE VALIDITY OF SUCH PROCEEDINGS WAS IN CHALLENGE BEFORE THE HONBLE APE X COURT. THE HONBLE SUPREME COURT HELD THAT ONCE A NOTICE IS ISSUED WIT HIN THE PERIOD OF ITA NO.1091/BANG/2010 PAGE 12 OF 15 LIMITATION, THE AO GETS POWER TO PROCEED TO REASSES S. IT WAS FURTHER HELD THAT SERVICE OF NOTICE U/S. 148(1) IS MANDATORY FOR MAKING AN ORDER OF ASSESSMENT. SUCH SERVICE OF NOTICE U/S. 148 IS NOT A CONDITION PRECEDENT FOR ASSUMING JURISDICTION, BUT IT IS A CONDITION ON LY FOR MAKING AN ORDER OF ASSESSMENT. FOLLOWING WERE THE OBSERVATIONS OF THE HONBLE SUPREME COURT:- (AT PAGE-165) THE MANDATE OF S. 148(1) IS THAT REASSESSMENT SHAL L NOT BE MADE UNTIL THERE HAS BEEN SERVICE. THE REQUIREMENT OF THE ISSUE OF NOTICE IS SATISFIED WHEN A NOTICE IS ACTUALLY IS SUED. IN THIS CASE, ADMITTEDLY THE NOTICE WAS ISSUED WITHIN THE P RESCRIBED PERIOD OF LIMITATION AS 31ST MARCH, 1970, WAS THE L AST DAY OF THAT PERIOD. SERVICE UNDER THE NEW ACT IS NOT A CONDITIO N PRECEDENT TO CONFIRM OF JURISDICTION ON THE ITO TO DEAL WITH THE MATTER BUT IT IS A CONDITION PRECEDENT TO THE MAKING OF THE ORDER OF ASSESSMENT. 14. THE HONBLE GAUHATI HIGH COURT IN THE CASE OF CIT V. MINTU KALITA, 253 ITR 334 (GAU) HAS HELD THAT SERVICE OF NOTICE FOR PROCEEDINGS U/S. 147 IS MANDATORY AND THAT APPEARAN CE OF EMPLOYEE OF THE ASSESSEE BEFORE THE ITO IN RESPONSE TO NOTICE U/S. 142(1) CANNOT BE A SUBSTITUTE FOR NON-SERVICE OF NOTICE U/S. 148 OF TH E ACT. 15. IN THE LIGHT OF THE AFORESAID JUDICIAL PRONOUNC EMENTS, WE ARE OF THE VIEW THAT THE REASSESSMENT PROCEEDINGS AND ORDER OF REASSESSMENT HAVE TO BE HELD TO BE A NULLITY AND LIABLE TO BE ANNULLE D. WE HOLD ACCORDINGLY. 16. WITH REGARD TO THE RELIANCE PLACED BY LD. DR ON THE PROVISIONS OF SECTION 292BB OF THE ACT, WE FIND THAT THE AFORESAI D PROVISIONS ARE ITA NO.1091/BANG/2010 PAGE 13 OF 15 APPLICABLE ONLY WITH REFERENCE TO ASSESSMENT YEAR 2 008-09 AND THEREAFTER. THE PROVISIONS OF SECTION 292BB ARE AS FOLLOWS:- 292BB. WHERE AN ASSESSEE HAS APPEARED IN ANY PROCEEDING O R CO-OPERATED IN ANY INQUIRY RELATING TO AN ASSESSMEN T OR REASSESSMENT, IT SHALL BE DEEMED THAT ANY NOTICE UN DER ANY PROVISION OF THIS ACT, WHICH IS REQUIRED TO BE SERV ED UPON HIM, HAS BEEN DULY SERVED UPON HIM IN TIME IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT AND SUCH ASSESSEE SHALL BE P RECLUDED FROM TAKING ANY OBJECTION IN ANY PROCEEDING OR INQUIRY U NDER THIS ACT THAT THE NOTICE WAS ( A ) NOT SERVED UPON HIM; OR ( B ) NOT SERVED UPON HIM IN TIME; OR ( C ) SERVED UPON HIM IN AN IMPROPER MANNER: PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY WHERE THE ASSESSEE HAS RAISED SUCH OBJECTION BEFORE THE C OMPLETION OF SUCH ASSESSMENT OR REASSESSMENT. 17. THE SPECIAL BENCH OF THE DELHI TRIBUNAL IN THE CASE OF KUBER TOBACCO PRODUCTS PVT. LTD. V. DCIT, 310 ITR (AT) 30 0 (DEL) (SB) HELD AS FOLLOWS:- NO DOUBT, THE ISSUE OF NOTICE AS WELL AS SERVICE OF NOTICE IS A PROCEDURAL SECTION, BUT WHEN THE SAME HAS TIME LIMI TATION, THE OBLIGATION OF THE DEPARTMENT TO ISSUE NOTICE WITHIN A PRESCRIBED TIME BECOMES THE RIGHT OF THE ASSESSEE TO RECEIVE T HAT NOTICE IN TIME TO VALIDLY COMMENCE THE PROCEEDINGS AND VALIDL Y COMPLETING THE SAME. FIRST AND FOREMOST RULE OF CONSTRUCTION O F INTERPRETATION IS THAT IN THE ABSENCE OF ANYTHING IN THE ENACTMENT TO SHOW THAT IT IS TO HAVE RETROSPECTIVE OPERATION, THE SAID ENACTM ENT CANNOT BE CONSTRUED TO HAVE RETROSPECTIVE OPERATION AND WHEN AMENDMENT RELATING TO A PROCEDURAL PROVISION RESULTS INTO CRE ATING A NEW DISABILITY OR OBLIGATION AND WHICH IMPOSES NEW DUTY IN RESPECT OF TRANSACTIONS ALREADY COMPLETED, THEN, THE SAID PROC EDURAL PROVISION ALSO CANNOT BE APPLIED RETROSPECTIVELY. SIMILAR IS THE POSITION WHERE ITA NO.1091/BANG/2010 PAGE 14 OF 15 A STATUTE WHICH NOT ONLY CHANGES THE PROCEDURE, BUT ALSO CREATES NEW RIGHTS AND LIABILITIES WHICH SHALL BE CONSTRUED TO BE PROSPECTIVE IN OPERATION UNLESS OTHERWISE PROVIDED EITHER EXPRE SSLY OR BY NECESSARY IMPLICATION. SEC. 292BB HAS BEEN MADE EFF ECTIVE BY THE LEGISLATURE FROM 1ST APRIL, 2008 AND THERE IS NOTHI NG IN THE ENACTMENT TO SHOW THAT S. 292BB HAS RETROSPECTIVE O PERATION. IF IT IS SO, ACCORDING TO RULE OF INTERPRETATION, S. 292B B CANNOT BE CONSTRUED RETROSPECTIVELY. NO DOUBT, ISSUE AND SERV ICE OF NOTICE THOUGH MAY RELATE TO PROCEDURAL LAW, BUT WHERE PROC EDURAL STATUTE CREATES A NEW DISABILITY OR OBLIGATION AND IMPOSES NEW DUTIES IN RESPECT OF TRANSACTIONS ALREADY ACCOMPLISHED, THEN THE STATUTE CANNOT BE CONSTRUED TO HAVE RETROSPECTIVE EFFECT. I SSUE AND SERVICE OF NOTICE IN THE MANNER PRESCRIBED BY THE STATUTE H AVE PLAYED A VITAL ROLE IN DETERMINING THE VALIDITY OR OTHERWISE OF ASSESSMENT/REASSESSMENT AND OTHER PROCEEDINGS UNDER THE ACT AND WHERE THE COURTS HAVE FOUND DEFECT EITHER IN THE NO TICE OR IN ITS PROPER SERVICE, THE VALIDITY OF ASSESSMENT/REASSESS MENT AND OTHER PROCEEDINGS HAVE BEEN STRUCK DOWN BY THE COURTS SUB JECT, OF COURSE, TO S. 292B INTRODUCED W.E.F. 1ST OCT., 1975 . THUS, TO CHALLENGE THE VALIDITY OF A PARTICULAR ACTION OF TH E DEPARTMENT OF MAKING ASSESSMENT OR REASSESSMENT ON THE BASIS OF I NVALIDLY ISSUANCE/SERVICE OF NOTICE HAD BECOME RIGHT OF LITI GANT ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS EVEN THO UGH SUCH CONTENTION WAS NEVER RAISED DURING THE COURSE OF AS SESSMENT PROCEEDINGS. BY INSERTION OF S. 292BB SUCH RIGHT OF THE ASSESSEE TO CHALLENGE THE VALIDITY OF ASSESSMENT OR REASSESSMEN T PROCEEDINGS DURING THE COURSE OF APPELLATE PROCEEDINGS HAS BEEN TAKEN AWAY BY THE STATUTE W.E.F. 1ST APRIL, 2008. IT IS ALSO OBSE RVED THAT THE ISSUE AND SERVICE OF NOTICE RELATE TO PROCEDURAL LAW, BUT , AT THE SAME TIME, IT CREATED A NEW DISABILITY ON THE ASSESSEE L ITIGANT TO THE EXTENT THAT HE IS DEBARRED FROM TAKING A PLEA IN TH E APPELLATE PROCEEDINGS TO CHALLENGE THE VALIDITY OF THE SAME O N THE GROUND OF VALID ISSUANCE/SERVICE OF NOTICE REQUIRED TO BE GIV EN BY THE STATUTE IN A CASE WHERE ASSESSEE HAS APPEARED IN SUCH PROCE EDINGS OR CO- OPERATED IN THE INQUIRY RELATING TO ASSESSMENT OR R EASSESSMENT. THEREFORE, IT HAS TO BE HELD THAT S. 292BB CANNOT B E CONSTRUED TO HAVE RETROSPECTIVE OPERATION AND IT HA S TO BE APPLIED PROSPECTIVELY. HAVING ARRIVED AT THE CONCLU SION THAT S. 292BB HAS NO RETROSPECTIVE EFFECT AND IS TO BE C ONSTRUED PROSPECTIVELY, IT HAS TO BE HELD THAT PRIOR TO 1ST APRIL, 2008 I.E., UPTO 31ST MARCH, 2008, AS PER S. 292BB, THE A SSESSEE IS NOT PRECLUDED FROM TAKING ANY OBJECTION REGARDING I NVALIDITY OF ASSESSMENT/REASSESSMENT ON THE GROUND OF IMPROPER/INVALID ISSUANCE/SERVICE OF A NOTICE . (EMPHASIS SUPPLIED) 18. IN THE LIGHT OF AFORESAID JUDICIAL PRONOUNCEMEN TS, WE ARE OF THE VIEW THAT THE OBJECTIONS RAISED BY THE LD. DR BEFORE US CANNOT BE SUSTAINED. ITA NO.1091/BANG/2010 PAGE 15 OF 15 19. IN VIEW OF THE FACT THAT THE ORDER OF REASSESSM ENT IS ANNULLED ON THE PRELIMINARY ISSUE, WE DO NOT DEEM IT NECESSARY TO T AKE UP THE OTHER ISSUES RAISED BY THE ASSESSEE ON MERITS. 20. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF JANUARY, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEM BER ENCL: ANNEXURE-I BANGALORE, DATED, THE 9 TH JANUARY, 2015. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.