Anil Khatri, Pune V. ITO (International Taxation), Pune

ITA 1111/PUN/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2451 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 20-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Assessee Lawyers: GIRISH DAVE MS KADAMBARI DAVE
• Keywords: Invalid notice; Salary income; Double taxation relief; Deemed dividend; Validity of assessment; Reason to believe; Reassessment proceedings
• Section: 142(1); 148; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1111/PN/2013 %' ( ')( / ASSESSMENT YEAR : 2007-08 ANIL KHATRI, FLAT NO. 604, A WING, ANGELINA, RAHEJA GARDEN, WANAWADI, PUNE-411020 PAN : ADMPK5329H ....... / APPELLANT ' / V/S. INCOME TAX OFFICER, (INTERNATIONAL TAXATION), PUNE / RESPONDENT ASSESSEE BY : SHRI GIRISH DAVE/ MS. KADAMBARI DAVE REVENUE BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 10-03-2016 / DATE OF PRONOUNCEMENT : 31-03-2016 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-IT/TP, PUNE DATED 18 -03-2013 FOR THE ASSESSMENT YEAR 2007-08. 2 ITA NO. 1111/PN/2013, A.Y. 2007-08 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS AN EMPLOYEE OF HONEYWELL AUTOMATION INDIA LIMITE D. DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDE R APPEAL THE ASSESSEE WAS SENT ON ASSIGNMENT TO BEIJING, CHINA. DURIN G THE PERIOD OF ASSIGNMENT THE ASSESSEE WAS PAID PART OF SALARY BY HO NEYWELL AUTOMATION INDIA LIMITED IN INDIA BUT THE SAME WAS ULTIMAT ELY BORNE BY THE BEIJING OFFICE OF HONEYWELL. ACCORDING TO THE ASSESS EE, THE SALARY RECEIVED BY ASSESSEE FROM INDIA ENTITY OF HONEYWELL IS NOT TAXABLE UNDER THE PROVISIONS OF INCOME TAX ACT, 1961, AS WELL AS UNDER T HE INDIA- CHINA DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). THE ASS ESSING OFFICER DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE AN D HELD THAT THE SALARY RECEIVED BY HIM DURING THE RELEVANT PERIOD IN INDIA AND AS WELL AS IN CHINA AGGREGATING TO ` 41,95,468/- WAS TAXABLE IN INDIA. THE ASSESSING OFFICER VIDE ORDER DATED 24-12-2009 ASSESSED T HE TAXABLE INCOME OF THE ASSESSEE AS ` 42,03,760/-. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFER RED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). TH E COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE PROVISIO NS OF INDIA-CHINA DTAA ARE NOT APPLICABLE TO THE ASSESSEE AND THE SALARY INCOME RECEIVED BY THE ASSESSEE IN INDIA IS CORRECTLY TA XED UNDER THE DOMESTIC LAW AND DISMISSED THE APPEAL OF THE ASSESSEE. N OW, THE ASSESSEE HAS COME IN SECOND APPEAL BEFORE THE TRIBUNA L ASSAILING THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS). 3. BEFORE THE TRIBUNAL APART FROM CHALLENGING THE ORDER O F FIRST APPELLATE AUTHORITY ON MERITS, THE ASSESSEE HAS RAISED AD DITIONAL GROUNDS CHALLENGING THE VALIDITY OF ASSESSMENT PROCEEDINGS ON THE GROUND THAT THERE WAS NO VALID SERVICE OF NOTICE ISSUED U /S. 143(2) OF 3 ITA NO. 1111/PN/2013, A.Y. 2007-08 THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT). THE CONTENTION OF THE ASSESSEE IS THAT THE SERVICE OF NOTICE ISSUED U/S. 143(2) TO THE ASSESSEE WAS NOT IN ACCORDANCE WITH THE P ROVISIONS OF SECTION 282 OF THE ACT. IN THE FIRST INSTANCE ITSELF THE NO TICE WAS SERVED ON THE ASSESSEE THROUGH AFFIXATION WHICH IS NOT PERMITTED AND HENCE, THERE WAS NO PROPER SERVICE OF NOTICE. BEFORE DECIDING THE APPEAL ON MERITS IT WOULD BE RELEVANT T O FIRST DECIDE THE ISSUE RAISED BY THE ASSESSEE IN ADDITIONAL GROU ND WITH RESPECT TO VALIDITY OF NOTICE ISSUED U/S. 143(2) SERVED TO THE ASSESSEE THROUGH AFFIXATION AND THE SUBSEQUENT PROCEEDINGS ARISING THERE FR OM. 4. SHRI GIRISH DAVE AND MS. KADAMBARI DAVE APPEARING ON BE HALF OF THE ASSESSEE SUBMITTED THAT THERE WAS NO VALID SERVICE OF NOTICE ISSUED U/S. 143(2). AS PER THE PROVISIONS OF SECTION 282 AS WERE APPLICABLE DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2007 -08 THE NOTICE WAS REQUIRED TO BE SERVED ON THE ASSESSEE IN THE FIRST INSTANCE BY POST OR AS IF THEY WERE SUMMONS ISSUED BY THE COURT UNDER T HE CODE OF CIVIL PROCEDURE. IN THE PRESENT CASE, NO EFFORT WAS MADE BY THE DEPARTMENT TO SERVE THE NOTICE TO ASSESSEE THROUGH REGISTERED PO ST OR UNDER THE NORMAL COURSE. NO REASON WHATSOEVER HAS BEEN GIVEN FOR SERVICE OF NOTICE BY AFFIXATION. THE LD. AR PLACED ON RECORD A COPY O F SERVICE REPORT ALONG WITH PANCHNAMA DATED 30-09-2008. THE LD. A R SUBMITTED THAT NO VALID REASON HAS BEEN GIVEN IN THE SERVICE REPOR T OR PANCHNAMA FOR SUBSTITUTED METHOD OF SERVICE. IN SUPPORT OF HIS SUBM ISSIONS, THE LD. AR PLACED RELIANCE ON THE DECISION OF HON'BLE DELHI HIGH CO URT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. CHETAN GUPTA IN ITA 72 OF 2014 DECIDED ON 15-09-2015 AND THE DECISION OF MUMBAI BE NCH OF THE 4 ITA NO. 1111/PN/2013, A.Y. 2007-08 TRIBUNAL IN THE CASE OF SHRI SANJAY BADANI VS. DCIT IN ITA NO. 5221/MUM/2014 DECIDED ON 09-09-2014. 4.1 THE LD. AR SUBMITTED THAT THE PROVISIONS OF SECTION 292 BB WILL NOT APPLY IN THE ASSESSMENT YEAR 2007-08 AS THE SECT ION WAS INSERTED BY THE FINANCE ACT, 2008 W.E.F. 01-04-2008. THE LD. AR FURTH ER SUBMITTED THAT IN THE ABSENCE OF VALID SERVICE OF NOTICE ISS UED U/S. 143(2) IT SHALL BE DEEMED THAT THERE WAS NO SERVICE OF NOT ICE AT ALL AND IN THE ABSENCE OF MANDATORY NOTICE THE SUBSEQUENT PROC EEDINGS ARE LIABLE TO BE SET ASIDE. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR PLACED RELIANCE ON THE JUDGMENT RENDERED BY HON'BLE SUPREME C OURT OF INDIA IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX AND A NOTHER VS. HOTEL BLUE MOON REPORTED AS 321 ITR 362 (SC). 5. ON THE OTHER HAND SHRI HITENDRA NINAWE REPRESENTING T HE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF AUTHORITIES BELO W AND SUBMITTED THAT THIS ISSUE HAS BEEN RAISED BY THE ASSESS EE FOR THE FIRST TIME BEFORE THE TRIBUNAL. THE LD. DR FURTHER SUBMITTED T HAT THE ASSESSEE HAS PARTICIPATED IN THE ASSESSMENT PROCEEDINGS AND NO OBJECTION WHATSOEVER WAS RAISED BY THE ASSESSEE AT TH AT TIME. THE LD. DR FURTHER DRAWS SUPPORT FROM THE PROVISIONS OF SECTION 2 92 BB AND SUBMITTED THAT SINCE THE ASSESSEE HAS PARTICIPATED IN TH E ASSESSMENT PROCEEDINGS THE NOTICE SHALL BE DEEMED TO HAVE BEEN SERVED. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENT ATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE ASSESSEE IN THE FIRST INSTANCE HAS CHALLENGED THE VALIDITY O F ASSESSMENT PROCEEDINGS IN THE ABSENCE OF PROPER SERVICE OF NOTICE ISSUED U/S. 143(2) OF THE ACT. BEFORE ADVERTING TO THE FACTS OF THE CA SE IT WOULD BE 5 ITA NO. 1111/PN/2013, A.Y. 2007-08 RELEVANT TO FIRST EXAMINE THE PROVISIONS OF SECTION 282 AS WERE APPLICABLE FOR THE ASSESSMENT YEAR 2007-08. THE RELEVAN T EXTRACT OF THE SAME ARE REPRODUCED HERE-IN-INDER: 282. SERVICE OF NOTICE GENERALLY (1) A NOTICE OR REQUISITION UNDER THIS ACT MAY BE SERVED ON THE PERSON THEREIN NAMED WITHER BY POST OR AS IF IT WERE A SUMMONS ISSUED BY A COURT UNDER THE CODE OF CIVIL PROCEDURE, 1908 (5 OF 1908). 7. THE PROVISIONS RELATING TO SERVICE OF NOTICE TO THE DEFE NDANTS ARE CONTAINED IN ORDER V RULE 12 OF THE CODE OF CIVIL PROCEDURE . THE SAME ARE REPRODUCED HERE-IN-UNDER: 12. SERVICE TO BE ON DEFENDANT IN PERSON WHEN PRAC TICABLE, OR ON HIS AGENT WHEREVER IT IS PRACTICABLE, SERVICE SHALL BE MAD E ON THE DEFENDANT IN PERSON, UNLESS HE HAS AN AGENT EMPOWER ED TO ACCEPT SERVICE, IN WHICH CASE SERVICE ON SUCH AGENT SHALL BE SUFFICIENT. THE PROCEDURE RELATING TO SUBSTITUTED SERVICE IS CONTAINE D IN ORDER V RULE 17 OF THE CODE OF CIVIL PROCEDURE. THE SAME READS AS UNDER: 17. PROCEDURE WHEN DEFENDANT REFUSES TO ACCEPT SER VICE, OR CANNOT BE FOUND.- WHERE THE DEFENDANT OR HIS AGENT OR SUCH OTHER PERSON AS AFORESAID REFUSES TO SIGN THE ACKNOWLEDGM ENT, OR WHERE THE SERVING OFFICER, AFTER USING ALL DUE AND REASONABLE DILIGENCE, CANNOT FIND THE DEFENDANT, WHO IS ABSENT FROM HIS RESIDENCE AT THE TIME WHEN SERVICE IS SOUGHT TO BE EFFECTED ON HIM AT HIS RESIDENCE AN D THERE IS NO LIKELIHOOD OF HIS BEING FOUND AT THE RESIDENCE WITHIN A REASON ABLE TIME AND THERE IS NO AGENT EMPOWERED TO ACCEPT SERVICE OF THE SUMMONS ON HIS BEHALF, NOR ANY OTHER PERSON ON WHOM SERVICE CAN BE MADE, THE S ERVING OFFICER SHALL AFFIX A COPY OF THE SUMMONS ON THE OUTER DOOR OR SO ME OTHER CONSPICUOUS PART OF THE HOUSE IN WHICH THE DEFENDANT ORDINARILY RESIDES OR CARRIES ON BUSINESS OR PERSONALLY WORKS FOR GAIN, AND SHALL TH EN RETURN THE ORIGINAL TO THE COURT FROM WHICH IT WAS ISSUED, WITH A REPOR T ENDORSED THEREON OR ANNEXED THERETO STATING THAT HE HAS SO AFFIXED THE COPY, THE CIRCUMSTANCES UNDER WHICH HE DID SO, AND THE NAME A ND ADDRESS OF THE PERSON (IF ANY) BY WHOM THE HOUSE WAS IDENTIFIED AN D WHOSE PRESENCE THE COPY WAS AFFIXED. 6 ITA NO. 1111/PN/2013, A.Y. 2007-08 THE CIRCUMSTANCES WHERE THE COURT CAN ORDER SUBSTITUT ED SERVICE ARE STATED IN RULE 20. THE SAME IS AS UNDER: 20. SUBSTITUTED SERVICE.- (1) WHERE THE COURT IS SATISFIED THAT THERE IS REASON TO BELIEVE THAT THE DEFENDANT IS KEEPING OUT OF THE WAY FOR THE PURPOSE OF AVOIDING SERVICE, OR THAT FOR ANY OTHER REASON THE SUMMONS CANNOT BE SERVED IN THE ORDINARY WAY, THE COURT SHA LL ORDER THE SUMMONS TO BE SERVED BY AFFIXING A COPY THEREOF IN SOME CON SPICUOUS PLACE IN THE COURT HOUSE, AND ALSO UPON SOME CONSPICUOUS PART OF THE HOUSE (IF ANY) IN WHICH THE DEFENDANT IS KNOWN TO HAVE LAST RESIDED O R CARRIED ON BUSINESS OR PERSONALLY WORKED FOR GAIN, OR IN SUCH OTHER MANNER AS THE COURT THINKS FIT. (1A) WHERE THE COURT ACTING UNDER SUB-RULE (1) ORDE RS SERVICE BY AN ADVERTISEMENT IN A NEWSPAPER, THE NEWSPAPER SHALL B E A DAILY NEWSPAPER CIRCULATING IN THE LOCALITY IN WHICH THE DEFENDANT IS LAST KNOWN TO HAVE ACTUALLY AND VOLUNTARILY RESIDED, CAR RIED ON BUSINESS OR PERSONALLY WORKED FOR GAIN. (2) EFFECT OF SUBSTITUTED SERVICESERVICE SUBSTITUT ED BY ORDER OF THE COURT SHALL BE AS EFFECTUAL AS IF IT HAD BEEN M ADE ON THE DEFENDANT PERSONALLY. (3) WHERE SERVICE SUBSTITUTED, TIME FOR APPEARANCE TO BE FIXED WHERE SERVICE IS SUBSTITUTED BY ORDER OF THE COURT, THE COURT SHALL FIX SUCH TIME FOR THE APPEARANCE OF THE DEFENDANT AS TH E CASE MAY REQUIRE. 8. THUS, FROM A PERUSAL OF PROVISIONS OF SECTION 282 OF THE ACT AND THE METHOD OF SERVICE OF NOTICE AS SPECIFIED UNDER THE CO DE OF CIVIL PROCEDURE IT IS CLEARLY EVIDENT THAT IN THE FIRST INSTANCE THE EFFORT HAS TO BE MADE TO SERVE THE NOTICE/SUMMONS TO THE ASSESSEE THROUGH NORMAL COURSE I.E. POST. WHERE THE ASSESSEE IS AVOIDING SERVICE O R COULD NOT BE SERVED IN THE ORDINARY WAY, THE SERVICE MAY BE AFFECTED IN A SUBSTITUTED MANNER. IN THE PRESENT CASE THE ASSESSEE HAS ALLEGED THAT NO EFFORT WAS MADE BY THE REVENUE TO SERVE HIM IN THE ORDINARY MANNE R BY SERVING THE NOTICE THROUGH RPAD. THE NOTICE IN THE FIRST INSTANC E ITSELF WAS 7 ITA NO. 1111/PN/2013, A.Y. 2007-08 SERVED THROUGH AFFIXATION. THE COPY OF REPORT AND PANC HNAMA PLACED ON RECORD ARE REPRODUCED HERE-IN-UNDER : REPORT SIR, AS PER THE DIRECTIONS OF INCOME TAX OFFICER (INTERN ATIONAL TAXATION)-I, PUNE I HAVE SERVED THE NOTIES U/S. 143 (2) AND 142(1) DTD. 26- 09-208 FOR A.Y. 2007-08 BY AFFIXTURE ON THE ASSESSE E SHRI ANIL S. KHATRI [PAN ADMPK 5329H] RESIDING AT 604-A WING, ANGELINA, RAHEJA GARDEN, WANAWADI, PUNE TODAY I.E. ON 30/09/2008 IN THE PRES ENCE OF TWO WITNESS AS PER PANCHNAMA ENCLOSED HERE WITH. SUBMITTED SIR. YOURS FAITHFULLY, PUNE SD/- DATE 30/09/2008 _______ 30/9/08 (M.B. SAYYED) INSPECTOR. PANCHNAMA AS DIRECTED BY THE INCOME TAX OFFICER (INTERNATIONA L TAXATION)-I, PUNE, I SHRI M.B. SAYYED, INSPECTOR, PUT MAXIMUM EF FORTS TO SERVE THE NOTICES UNDER SECTION 142(1) & 143(2) DT. 26/9/2008 FOR A.Y. 2007-08, TO THE ASSESSEE SHRI ANIL S. KHATRI [PAN ADMPK 5329H] ON THE GIVEN ADDRESS AT 604-A WING, ANGELINA, RAHEJA GARDEN, WAN AWADI, PUNE-20. ON LOCAL ENQUIRY THE WHERE ABOUTS OF THE SAID ASSES SEE COULD NOT BE TRACED OUT. THEREFORE, THE ABOVE SAID NOTICES I S SERVED BY ME BY AFFIXTURE ON THE MAIN DOOR OF THE ASSESSEE FLAT ON THE ABOVE GIVEN ADDRESS IN PRESENCE OF TWO WITNESSES AVAILABLE AT T HAT TIME, AT THAT PLACE. THE SIGNATURE OF THE TWO WITNESS HAVE BEEN PLACED ON BOTH THE NOTICES ALONG WITH DATES. SUBMITTED SIR, PUNE SD/- DATE 30/09/2008 _______ 30/9/08 (M.B. SAYYED) INSPECTOR. SIGNATURE & NAME & ADDRESS OF THE WITNESS 1) LOKESH SD/- 2) BALWALKI SD/- 30-9-08 30/09/08 LOKESH R. PEDNEKAR CHETAN B. BALWALKI MUKUNDNAGAR, PUNE-37 BALEWADI, PUNE-45 BEHIND C.G.H.S. HOSPITAL NEAR PMC SCHOOL, OPP. OF WISHAL-RUKHMANI MANDIR. 8 ITA NO. 1111/PN/2013, A.Y. 2007-08 9. A PERUSAL OF PANCHNAMA AND THE REPORT SHOWS THAT N O REASON HAS BEEN GIVEN AS TO WHY THE NOTICE WAS SERVED IN SUBS TITUTED MANNER BY AFFIXATION. WHAT EFFORTS WERE MADE TO TRACE THE ASSES SEE AND HOW MANY ATTEMPTS WERE MADE TO SERVE THE NOTICE IN THE OR DINARY COURSE TO THE ASSESSEE OR HIS AGENT. THE REVENUE HAS NOT BROUG HT ON RECORD TO SHOW THAT ANY EFFORT WAS MADE TO SERVE NOTICE U/S. 143(2 ) TO THE ASSESSEE IN THE NORMAL COURSE THROUGH REGISTERED POST. A CLOSE SCR UTINY OF THE PANCHNAMA WOULD ALSO REVEAL THAT THE ASSESSEE IS A RESIDENT OF RAHEJA GARDEN, WANWADI, PUNE, WHEREAS THE PERSONS WHO HAVE WITNESSED THE PANCHNAMA ARE NOT FROM THE VICINITY OR THE SAME AREA BUT ARE FROM FAR OF PLACES. ONE OF THE WITNESSES IS RESIDEN T OF MUKUNDNAGAR, PUNE AND THE OTHER IS FROM BALEWADI, PUNE. BOTH THESE PLACES ARE FAR AWAY FROM THE RESIDENCE OF ASSESSEE. THER E IS NO MENTION IN THE PANCHNAMA THAT ENQUIRIES WERE MADE FROM N EIGHBORS OF THE ASSESSEE IN RESPECT OF HIS WHEREABOUTS. THE REASON S FOR JOINING THE WITNESS FROM FAR OF LOCATION AND WHETHER THE WITNESSES WE RE ABLE TO IDENTIFY THE NAME AND ADDRESS OF THE ASSESSEE, THE REAS ONS FOR NOT JOINING THE WITNESS FROM LOCAL AREA ARE ALSO NOT SPECIFIED. THUS, RAISING A CLOUD OF SUSPICION ON THE GENUINENESS OF SERVICE EVEN T HROUGH AFFIXATION. ORDER V OF RULE 20 CLEARLY STATES THAT THE CO URT SHALL ORDER FOR SUBSTITUTE SERVICE IF IT IS SATISFIED THAT THERE IS REASON TO BELIEVE THAT THE DEFENDANT IS PURPOSELY AVOIDING SERVICE OR THE SUMMO NS COULD NOT BE SERVED OR THERE ARE ANY SPECIAL REASONS THAT SUMMO NS COULD NOT BE SERVED IN ORDINARY WAY. IN THE PRESENT CASE WE FIND THA T NO SUCH SATISFACTION HAS BEEN RECORDED BY THE ASSESSING OFFICER BE FORE DIRECTING SERVICE OF NOTICE THROUGH SUBSTITUTED MANNER. 10. THE HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. HOTLINE INTERNATIONAL P. LTD. REPORTED AS 296 ITR 333 9 ITA NO. 1111/PN/2013, A.Y. 2007-08 (DEL) HAS HELD THAT IN THE ABSENCE OF PROPER SERVICE OF NOT ICE THE REASSESSMENT PROCEEDINGS WERE BAD IN LAW. THE RELEVANT EXTRACT OF THE FINDINGS OF THE HON'BLE HIGH COURT READS AS UNDER: 23. UNDER ORDER V, RULE 17 OF THE CODE OF CIVIL PR OCEDURE, THE AFFIXATION CAN BE DONE ONLY WHEN THE ASSESSEE OR HI S AGENT REFUSES TO SIGN THE ACKNOWLEDGMENT OR COULD NOT BE FOUND. HERE , IN THE PRESENT CASE, NO EFFORT WAS MADE BY THE INCOME-TAX DEPARTME NT TO SERVE THE NOTICE UPON THE ASSESSEE, SINCE THE COMPANY OF THE ASSESSEE WAS CLOSED DUE TO HOLI FESTIVAL HOLIDAYS, AND ADMITTEDLY NO EF FORT WAS MADE BY THE SERVING OFFICER TO LOCATE THE ASSESSEE. 24. EVEN OTHERWISE, AS PER ORDER V, RULE 19A OF THE CODE OF CIVIL PROCEDURE, THE NOTICE SENT BY REGISTERED POST OUGHT TO HAVE BEEN SENT ALONG WITH ACKNOWLEDGMENT DUE BUT ADMITTEDLY IT WAS NOT SENT ALONG WITH ACKNOWLEDGMENT DUE. 25. SO, FROM THE ENTIRE MATERIAL AVAILABLE ON RECOR D WE HAVE NO HESITATION IN HOLDING THAT THERE HAS BEEN NO VALID SERVICE OF NOTICE UNDER SECTION 148 OF THE ACT UPON THE ASSESSEE AS THE SAM E WAS NEITHER TENDERED TO THE ASSESSEE OR HIS AGENT, NOR THE SAME WAS REFUSED BY EITHER OF THEM. 26. SINCE THERE HAS BEEN NO PROPER SERVICE OF NOTIC E ON THE ASSESSEE, WE HOLD THAT THE REASSESSMENT PROCEEDINGS, RESULTIN G IN THE ORDER DATED JANUARY 30, 2003, ARE BAD IN LAW. 11. THE HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. CHETAN GUPTA (SUPRA) HAS TAKEN A SIMILAR V IEW WHERE THE NOTICE U/S. 148 OF THE ACT WAS NOT PROPERLY SERVED TO THE ASSESSEE IN ACCORDANCE WITH PROVISIONS OF THE ACT. THE HON'BLE HIGH COURT AFTER CONSIDERING CATENA OF JUDGMENTS RENDERED BY THE HON'BLE APEX COURT AND VARIOUS HON'BLE HIGH COURTS CONCLUDED AS UNDER: 46. TO SUMMARIZE THE CONCLUSIONS: (I) UNDER SECTION 148 OF THE ACT, THE ISSUE OF NOTI CE TO THE ASSESSEE AND SERVICE OF SUCH NOTICE UPON THE ASSESSEE ARE JURISD ICTIONAL REQUIREMENTS THAT MUST BE MANDATORILY COMPLIED WITH. THEY ARE NO T MERE PROCEDURAL REQUIREMENTS. 10 ITA NO. 1111/PN/2013, A.Y. 2007-08 (II) FOR THE AO TO EXERCISE JURISDICTION TO REOPEN AN ASSESSMENT, NOTICE UNDER SECTION 148 (1) HAS TO BE MANDATORILY ISSUED TO THE ASSESSEE. FURTHER THE AO CANNOT COMPLETE THE REASSESSMENT WIT HOUT SERVICE OF THE NOTICE SO ISSUED UPON THE ASSESSEE IN ACCORDANCE WI TH SECTION 282 (1) OF THE ACT READ WITH ORDER V RULE 12 CPC AND ORDER III RULE 6 CPC. (III) ALTHOUGH THERE IS CHANGE IN THE SCHEME OF SEC TIONS 147, 148 AND 149 OF THE ACT FROM THE CORRESPONDING SECTION 34 OF THE 1922 ACT, THE LEGAL REQUIREMENT OF SERVICE OF NOTIC E UPON THE ASSESSEE IN TERMS OF SECTION 148 READ WITH SECTION 282 (1) AND SECTION 153 (2) OF THE ACT IS A JURISDICTIONAL PRE-CONDITION TO FINALI ZING THE REASSESSMENT. (IV) THE ONUS IS ON THE REVENUE TO SHOW THAT PROPER SERVICE OF NOTICE HAS BEEN EFFECTED UNDER SECTION 148 OF THE ACT ON THE A SSESSEE OR AN AGENT DULY EMPOWERED BY HIM TO ACCEPT NOTICES ON HIS BEHA LF. IN THE PRESENT CASE, THE REVENUE HAS FAILED TO DISCHARGE THAT ONUS . (V) THE MERE FACT THAT AN ASSESSEE OR SOME OTHER PE RSON ON HIS BEHALF NOT DULY AUTHORISED PARTICIPATED IN THE REASSESSMENT PR OCEEDINGS AFTER COMING TO KNOW OF IT WILL NOT CONSTITUTE A WAIVER O F THE REQUIREMENT OF EFFECTING PROPER SERVICE OF NOTICE ON THE ASSESSEE UNDER SECTION 148 OF THE ACT. (VI) REASSESSMENT PROCEEDINGS FINALISED BY AN AO WI THOUT EFFECTING PROPER SERVICE OF NOTICE ON THE ASSESSEE UNDER SECT ION 148 (1) OF THE ACT ARE INVALID AND LIABLE TO BE QUASHED. (VI) SECTION 292 BB IS PROSPECTIVE. IN ANY EVENT TH E ASSESSEE IN THE PRESENT CASE, HAVING RAISED AN OBJECTION REGARDING THE FAILURE BY THE REVENUE TO EFFECT SERVICE OF NOTICE UPON HIM, THE M AIN PART OF SECTION 292 BB IS NOT ATTRACTED. 12. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SHRI S ANJAY BADANI VS. DCIT (SUPRA) HAD OCCASION TO DEAL WITH THE SIMILAR SITUATION WHERE NOTICE U/S. 143(2) WAS NOT SERVED TO THE ASSESSEE IN ACCORDANCE WITH PROVISIONS OF THE ACT. THE TRIBUNAL AFTER APPRECIATING THE FACTS OF THE CASE AND THE DECISION OF HON'BLE SUPREME COURT OF IN DIA IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX AND ANOTHER VS. HOTEL BLUE MOON (SUPRA) HELD THAT THE ASSESSMENT ORDER PASSED WITH OUT VALID 11 ITA NO. 1111/PN/2013, A.Y. 2007-08 SERVICE OF NOTICE U/S. 143(2) IS NULL AND VOID. THE RELEVANT E XTRACT OF THE FINDINGS OF THE TRIBUNAL ARE AS UNDER: 13. AS PER SUB-SECTION (1) OF SECTION 282, THE NOT ICE IS TO BE SERVED ON THE PERSON NAMED THEREIN EITHER BY POST OR AS IF IT WAS A SUMMONS ISSUED BY COURT UNDER THE CODE OF CIVIL PROCEDURE, 1908 (V OF 1908). THE RELEVANT PROVISION FOR EFFECTING OF SERVICE BY DIFF ERENT MODES ARE CONTAINED IN RULES 17, 19 AND 20 OF ORDER V OF CPC. RULES 17, 19 AND 20 OF ORDER VOF CPC LAY DOWN THE PROCEDURE FOR SERVICE OF SUMMONS/NOTICE AND, THEREFORE, THE PROCEDURE LAID DOWN THEREIN CAN NOT BE SURPASSED BECAUSE THE INTENTION OF THE LEGISLATURE BEHIND THE SE PROVISIONS IS THAT STRICT COMPLIANCE OF THE PROCEDURE LAID DOWN THEREI N HAS TO BE MADE. THE EXPRESSION AFTER USING ALL DUE AND REASONABLE DILIG ENCE' APPEARING IN RULE 17 HAS BEEN CONSIDERED IN MANY CASES AND IT HAS BEE N HELD THAT UNLESS A REAL AND SUBSTANTIAL EFFORT HAS BEEN MADE TO FIND THE DEFENDANT AFTER PROPER ENQUIRIES, THE SERVING OFFICER CANNOT BE DEE MED TO HAVE EXERCISED 'DUE AND REASONABLE DILIGENCE'. BEFORE TAKING ADVAN TAGE OF RULE 17, HE MUST MAKE DILIGENT SEARCH FOR THE PERSON TO BE SERV ED. HE THEREFORE, MUST TAKE PAIN TO FIND HIM AND ALSO TO MAKE MENTION OF HI S EFFORTS IN THE REPORT. ANOTHER REQUIREMENT OF RULE 17 IS THAT THE SERVING OFFICER SHOULD STATE THAT HE HAS AFFIXED THE COPY OF SUMMONS AS PE R THIS RULE. THE CIRCUMSTANCES UNDER WHICH HE DID SO AND THE NAME AN D ADDRESS OF THE PERSON BY WHOM THE HOUSE OR PREMISES WERE IDENTIFIE D AND IN WHOSE PREMISES THE COPY OF THE SUMMON WAS AFFIXED. THESE FACTS SHOULD ALSO BE VERIFIED BY AN AFFIDAVIT OF THE SERVING OFFICER. 14. THE REASON FOR TAKING ALL THESE PRECAUTIONS IS THAT SERVICE BY AFFIXTURE IS SUBSTITUTED SERVICE AND SINCE IT IS NOT DIRECT O R PERSONAL SERVICE UPON THE DEFENDANT, TO BIND HIM BY SUCH MODE OF SERVICE THE MERE FORMALITY OF AFFIXTURE IS NOT SUFFICIENT. SINCE THE SERVICE HAS TO BE DONE AFTER MAKING THE NECESSARY EFFORTS, IN ORDER TO ESTABLISH THE GE NUINENESS OF SUCH SERVICE, THE SERVING OFFICER IS REQUIRED TO STATE H IS FULL ACTION IN THE REPORT AND RELIANCE CAN BE PLACED ON SUCH REPORT ONLY WHEN IT SETS OUT ALL THE CIRCUMSTANCES WHICH ARE ALSO DULY VERIFIED BY THE W ITNESSES IN WHOSE PRESENCE THE AFFIXTURE WAS DONE AND THUS THE AFFIDA VIT OF THE SERVING OFFICER DEPOSING SUCH PROCEDURE ADOPTED BY HIM WOUL D ALSO BE ESSENTIAL. IN THE INSTANT CASE, THE WHOLE THING HAD BEEN DONE IN ONE STROKE. IT WAS NOT KNOWN AS TO WHY AND UNDER WHICH CIRCUMSTANCES A NOTHER ENTRY FOR SERVICE OF NOTICE BY AFFIXTURE WAS MADE ON 27-7-201 2 WHEN SUFFICIENT TIME WAS AVAILABLE THROUGH NORMAL SERVICE TILL 30-9 -2012. NOR THERE IS ANY ENTRY IN THE NOTE-SHEET BY THE AO DIRECTING THE INSPECTOR FOR SERVICE BY AFFIXTURE AND HAD ONLY RECORDED THE FACT THAT TH E NOTICE WAS SERVED BY 12 ITA NO. 1111/PN/2013, A.Y. 2007-08 THE AFFIXTURE. IT APPEARS THAT THE REPORT OF THE IN SPECTOR WAS OBTAINED WITHOUT ISSUING ANY PRIOR DIRECTION FOR SUCH PROCES S OR MODE. HOWEVER, THE FACT REMAINED THAT SERVING OFFICER HAD NOT SET OUT REASON FOR PASSING SUBSEQUENT ENTRY NOR FOR ADOPTING THE MODE FOR SERV ICE BY AFFIXTURE AND WITHOUT STATING THE REASONS FOR DOING SO, THE ADOPT ION OF THE MODE OF SUBSTITUTED SERVICE COULD NOT BE LEGALLY JUSTIFIED. NOTICE WAS SERVED BY AFFIXTURE. THE REASONS FOR SERVICE THROUGH AFFIXTUR E HAS NOT BEEN NOTED BY THE AO IN THE NOTESHEET NOR HE HAS ISSUED ANY DIREC TION FOR ISSUING NOTICE THROUGH AFFIXTURES. THE NEXT ENTRY OF NOTE SHEET DA TED 28-7-2012 JUST INDICATES THAT LETTER WAS FILED BY THE INSPECTOR RE GARDING SERVICE OF NOTICE BY AFFIXTURES, DATED 17-7-2012. THUS, ON 17-7-2012, THE FIRST ENTRY WAS MADE AND WITHOUT RECORDING ANY APPREHENSION ABOUT T HE DELAY BY SUCH MODE SECOND ENTRY FOR AFFIXATION WAS MADE ON 28-7- 2012 WITHOUT SHOWING JUSTIFICATION FOR THE SAME. THUS, IT IS CLE AR THAT REPORT OF THE INSPECTOR WAS OBTAINED WITHOUT ISSUING ANY PRIOR DI RECTION FOR SUCH PROCESS OR MODE. THUS, THE ADOPTION OF MODE OF SUBS TITUTED SERVICE WAS NOT LEGALLY JUSTIFIED. IT IS ALSO CLEAR FROM THE IN SPECTORS REPORT THAT THERE IS NO MENTION OF NAME AND ADDRESS OF THE PERSON WHO HAD IDENTIFIED THE HOUSE OF THE ASSESSEE AND IN WHOSE PRESENCE THE NOT ICE U/S.143(2) WAS AFFIXED. THERE IS NO EVIDENCE OR INDICATION IN THE REPORT OF INSPECTOR THAT HE HAD PERSONAL KNOWLEDGE OF THE PLACE OF THE BUSIN ESS OF THE ASSESSEE AND WAS, THUS, IN A POSITION TO IDENTIFY THE SAME. THEREFORE, NEITHER THE PROCEDURE LAID DOWN UNDER ORDER V. RULE 17 HAD BEEN FOLLOWED NOR THAT LAID DOWN UNDER ORDER V RULES 19 AND 20 HAD BEEN AD HERED TO. NEITHER BEFORE TAKING RECOURSE TO SERVICE BY AFFIXTURE, THE ASSESSING OFFICER OR THE CONCERNED OFFICER HAD RECORDED THE FINDINGS TO JUST IFY THE SERVICE BY THIS MODE NOR AFTERWARDS CALLED FOR THE AFFIDAVIT OR CER TIFICATE OF SERVICE BY AFFIXTURE FROM THE SERVING OFFICER. HE HAD NOT CERT IFIED THAT THE SERVICE HAD BEEN EFFECTED BY ADOPTING THIS COURSE. 15. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THERE WA S NO VALID SERVICE OF NOTICE U/S.143(2) BY WAY OF AFFIXATION. SINCE IN TH E INSTANT CASE, THE DEPARTMENT HAS NOT BEEN ABLE TO DEMONSTRATE THAT NO TICE U/S.143(2) WAS SERVED WITHIN THE STATUTORY TIME LIMIT, THE ASSESSME NT MADE ON THE BASIS OF SUCH INVALID NOTICE COULD NOT BE TREATED TO BE V ALID ASSESSMENT AND, HENCE, SUCH ASSESSMENT ORDER DESERVES TO BE TREATED AS NULL AND VOID AND LIABLE TO BE QUASHED AND ANNULLED. ACCORDINGLY, WE ALLOW ASSESSEES APPEAL ON LEGAL ISSUE REGARDING NON-SERVICE OF NOTI CE U/S.143(2). AS WE HAVE ALREADY ALLOWED ASSESSEES APPEAL ON LEGAL ISS UE, WE ARE NOT GOING TO DISCUSS THE MERITS OF THE ADDITION MADE ON ACCOU NT OF DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT. 13 ITA NO. 1111/PN/2013, A.Y. 2007-08 13. IN THE PRESENT CASE, SINCE, THE NOTICE U/S. 143(2) HAS NOT BEEN VALIDLY SERVED ON THE ASSESSEE THE PROCEEDINGS ARISING T HERE FROM ARE VITIATED. THUS, IN VIEW OF THE PROVISIONS OF THE ACT AND VAR IOUS DECISIONS DISCUSSED ABOVE WE ARE OF CONSIDERED VIEW THAT PROPER SERVICE OF NOTICE U/S. 143(2) IS MANDATORY. THE DEPARTMENT CANNO T TAKE THE SHELTER OF SECTION 292 BB WHERE THERE IS NO PROPER SERVI CE OF NOTICE U/S. 143(2) AND THE ASSESSEE HAS PARTICIPATED IN ASSESSMENT P ROCEEDINGS. NON-SERVICE OF NOTICE U/S. 143(2) IS FATAL TO THE ASSESSMENT PROCEEDIN GS. IN THE ABSENCE OF PROPER AND VALID SERVICE OF NOTICE, THE PROCEEDINGS ARISING THEREFROM ARE NULL AND VOID AND ARE THUS LIABLE TO BE ANNULLED. 14. DURING THE COURSE OF SUBMISSIONS, THE LD. DR HAS RAISED AN OBJECTION THAT THE ASSESSEE HAS RAISED THE ISSUE REGAR DING VALIDITY OF SERVICE OF NOTICE BEFORE THE TRIBUNAL FOR THE FIRST TIME. THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF NATIONAL THERMAL POW ER CO. LTD. VS. COMMISSIONER OF INCOME TAX REPORTED AS 229 ITR 383 (SC) HAS HELD THAT THE TRIBUNAL HAS JURISDICTION TO EXAMINE A QUESTION O F LAW WHICH ARISES FROM THE FACTS AND HAVE BEARING ON THE TAX LIABILITY OF THE ASSESSEE. THE VALID SERVICE OF NOTICE ISSUED U/S. 143(2) GOE S TO THE ROOT OF ASSESSMENT PROCEEDINGS WHICH OF COURSE HAVE BEARING O N THE TAX LIABILITY OF THE ASSESSEE. ACCORDINGLY, WE DO NOT FIND ANY ME RIT IN THE OBJECTION RAISED BY THE LD. DR IN RESPECT OF ADDITIONAL GROU ND RAISED BY THE ASSESSEE IN THE GROUND OF APPEAL. 15. SINCE, WE HAVE ACCEPTED THE PRELIMINARY ISSUE RAISED B Y ASSESSEE RELATING TO VALIDITY OF ASSESSMENT PROCEEDINGS IN THE ABSEN CE OF PROPER SERVICE OF NOTICE, THE GROUNDS RAISED BY ASSESSEE CHALLENG ING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) ON MERITS HAVE BECO ME ACADEMIC. THEREFORE, WE ARE NOT ADJUDICATING THE SAME. 14 ITA NO. 1111/PN/2013, A.Y. 2007-08 16. IN THE RESULT, THE IMPUGNED ORDER IS SET ASIDE AND T HE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 31 ST DAY OF MARCH, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 31 ST MARCH, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-IT/TP, PUNE 4. THE DIT (IT/TP), PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE