MRs. Shefali Bagaria, New Delhi V. ITO, New Delhi

ITA 1330/DEL/2010

• Counselvise Citation: 133020114 RSA 2010
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 26-03-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 26-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUSHA KHURANA
• Keywords: Gift; Income from undisclosed sources; Validity of assessment
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.G. BANSAL ITA NO. 1330(DEL)/2010 ASSESSMENT YEAR: 2003-04 SMT. SHEFALI BAGARI, INCOME-TAX OFFICER, 264, KATRA PYARE LAL, VS. WARD 29(4), NEW DELHI. CHANDNI CHOWK, DELHI. PAN;AANPB1758P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANOOP SHARMA, ADVO CATE RESPONDENT BY : MS. ANUSHA KHURANA, SR. DR DATE OF HEARING : 14.09.2011 DATE OF PRONOUNCEMENT: 22.09.2011. ORDER PER K.G. BANSAL : AM THE ASSESSEE HAS TAKEN TWO SUBSTANTIVE GROUNDS I N THE APPEAL, IN WHICH FRAMING OF THE ASSESSMENT U/S 147 HAS BEEN CHALLENGED AND THE ADDITION OF RS. 10.00 LAKH MADE IN RESPECT OF GIF T HAS ALSO BEEN CHALLENGED. HOWEVER, BEFORE US, THE LD. COUNSEL FOR THE ASSES SEE PRESSED ONLY GROUND NO. 2(III) THAT THE MODUS OF ALLEGED SERVICE O F INITIAL NOTICE U/S 148 DATED 18.1.2008 BY AFFIXTURE IS ALSO NOT FULLY PR OVED IN ABSENCE OF COMPLETE DETAILS FURNISHED IN THIS BEHALF. ITA NO. 1330(DEL)/2010 2 2. THE FACTS OF THE CASE ARE THAT THE AO RECEI VED INFORMATION FROM THE INVESTIGATION WING THAT GIFT OF RS. 10.00 LACK RECEIVED BY THE ASSESSEE FROM SHRI C.P. AGARWAL ON 24.3.2003 BY WAY OF A CHEQUE DRAWN ON STATE BANK OF BIKANER AND JAIPUR, NEW ROHTAK ROAD, NEW D ELHI, WAS NOT GENUINE. ACTING ON THE INFORMATION A NOTICE U/S 148 DATED 18.01.2008 WAS DRAWN FOR SERVICE AND HANDED OVER TO THE IN SPECTOR, SHRI S.K. KALSI. HE REPORTED THAT NO SUCH PERSON LIVES IN FLAT NO. 28, VANDANA APARTMENT, SECTOR-13, ROHINI, DELHI. THEREAFTER, HE WAS DI RECTED TO SERVE THE NOTICE BY AFFIXTURE. THE INSPECTOR SERVED THE NOTICE A ND FILED A REPORT TO THE EFFECT THAT HE COULD NOT SERVE THE NOTICE EVEN AFTER USING ALL DUE AND REASONABLE DILIGENCE BECAUSE THE PERSON IS NOT FOU ND AT THE GIVEN ADDRESS AND THERE IS NO BODY EMPOWERED BY HER TO RECEIVE THE NOTICE AT THE ADDRESS. UNDER THE CIRCUMSTANCES, THE NOTICE HAS B EEN SERVED BY AFFIXTURE IN PRESENCE OF KUNWAR PAL SINGH, NOTICE SERVER. THE NOTICE SERVER HAS ACTED AS WITNESS AND SIGNED ON THE SERVICE REPORT. TH EREAFTER, THE AO DECLARED THE SERVICE TO BE VALID. THE ASSESSMENT WAS COM PLETED ON 29.12.2008 AT TOTAL INCOME OF RS. 12,63,250/-, CONSISTING OF TH E RETURNED INCOME OF RS. 2,63,250/- AND INCOME FROM UNDISCLOSED SOURCES OF RS. 10.00 LAKH. THE ASSESSEE CHALLENGED THE ORDER BOTH ON ITS VALID ITY AND THE MERIT OF THE ADDITION. IN RESPECT OF THE VALIDITY IT IS MENTI ONED BY THE LD. CIT(A) IN ITA NO. 1330(DEL)/2010 3 PARAGRAPH NO. 5.4 THAT THE OBJECTIONS RAISED BY THE ASSESSEE ON THE ISSUE OF AFFIXTURE ARE SPECULATIVE AND BASED ON U NSUBSTANTIATED PRESUMPTION, THEREFORE, DESERVE OUTRIGHT REJECTION. IT IS E VIDENT FROM THE RECORD THAT DUE PROCESS WAS FOLLOWED WHILE SERVING THE NOTIC E BY AFFIXTURE. THIS PART OF THE FINDING HAS BEEN CHALLENGED BEFORE US. 3. THE LD. COUNSEL RELIED ON THE DECISION OF A BENCH OF THE TRIBUNAL IN THE CASE OF AJAY BAGARIA IN ITA NO. 1329(DEL )/2010 FOR ASSESSMENT YEAR 2003-04 DATED 30.09.2010, A COPY OF WHICH H AS BEEN PLACED BEFORE US. IT IS SUBMITTED THAT THIS CASE IS THAT OF T HE HUSBAND OF THE ASSESSEE AND THE FACTS ARE IDENTICAL. THE TRIBUNAL HELD THAT NOTICE U/S 148 HAS NOT BEEN VALIDLY SERVED AND, THEREFORE, THE AO HAS NOT A SSUMED JURISDICTION TO MAKE ASSESSMENT U/S 147 VALIDLY. THE RELEVANT P ORTIONS OF THE DECISION ARE REPRODUCED BELOW:- 3. IN THIS CASE, THE NOTICE U/S 148 WAS ISSUED ON 18.1.2008. A COPY OF NOTICE ALONG WITH NOTINGS THEREUPON AND R EPORT REGARDING SERVICE OF NOTICE BY AFFIXTURE IS PLACED BEFORE US. THE NOTICE IS DATED 18.1.2008. IN THE NOTICE, A NOTE I S MENTIONED STATING AS NO PERSON LIVE IN THE FLAT, AS PER LOCA L ENQUIRY REVEALS. THIS IS THE REPORT STATED TO BE MADE BY INSPECTOR. THE AO THEN DIRECTED INSPECTOR TO SERVE THE NOTICE THRO UGH AFFIXTURE. INSPECTOR THEN SERVED THE NOTICE BY AFFIXTURE IN TH E PRESENCE OF SHRI KUNWAR PAL SINGH, NOTICE SERVER. FROM THE NOT E OF THE INSPECTOR, IT IS THUS, CLEAR THAT IN THE CONCERNED FLAT, NO PERSON ITA NO. 1330(DEL)/2010 4 WAS RESIDING. SERVICE BY AFFIXTURE IS PERMISSIBLE ONLY WHERE THE AO BONA FIDE BELIEVES THAT ASSESSEE WAS RESIDING IN THE HOUSE OR CARRYING ON BUSINESS PERSONALLY AT THE PLACE WHE RE THE AFFIXTURE OF NOTICE WAS MADE. IF THE AO KNEW THAT THE ASSESSEE HAD LEFT THAT PLACE, THE AFFIXTURE OF THE NOTICE ON THAT PLACE IS MEANINGLESS. RULE 17 AND 19 OF ORDER V OF CODE OF C IVIL PROCEDURE ARE MADE APPLICABLE IN THIS REGARD. THE O BJECT OF RULE 17 & 19 OF ORDER V OF CODE OF CIVIL PROCEDURE IS THAT THE NOTICE IS SERVED IN SUCH A WAY THAT THE ASSESSEE CO ULD OBTAIN KNOWLEDGE OF SUCH SERVICE AND THE AO BONAFIDELY BEL IEVE THAT THE ASSESSEE COULD OBTAIN KNOWLEDGE OF SUCH SERVICE LATER. IN THE PRESENT CASE, THERE IS NO REPORT OF THE INSPECT OR THAT ASSESSEE WAS RESIDING IN THAT FLAT AT THE MATERIAL POINT OF TIME. IT IS ALSO NOT THE CASE OF THE INSPECTOR THAT THE ASSESSEE WAS AVOIDING SERVICE OF NOTICE. FURTHER, THERE IS NO MATERIAL A BOUT THE IDENTIFICATION OF THE FLAT BY ANY INDEPENDENT PERSO N. THE AFFIXTURE HAS NOT BEEN MADE IN THE PRESENCE OF INDE PENDENT WITNESSES. IN THIS RESPECT, THE LEARNED COUNSEL FO R THE ASSESSEE HAS RELIED UPON THE RECENT DECISION OF HONBLE P&H HIGH COURT IN THE CASE OF NAVEEN CHANDER (2010) 323 ITR 449 (P &H) WHERE THE HONBLE HIGH COURT HAS DISCUSSED THE FACT S AND FINDINGS OF THE TRIBUNAL AS UNDER: THE BASIC CONTROVERSY RAISED IS AS TO WHETHER THE ASSESSEE RESPONDENT WAS SERVED U/S 158BD OF THE ACT AT HIS LAST KNOWN ADDRESS ON JULY 23, 2001, BY WAY OF AFFIXTURE. THE TRIBUNAL CONSIDERED THE AFORESAID ISSUE AS A FUNDAMENTAL CONTROVERSY BECAUSE IT WAS NECESSARY TO ESTABLISH THAT SUCH A NOTICE WAS SERVED TO CONFER JURISDICTION. THE TRIBUNAL PLACED RELIANCE ON THE PROVISIONS OF ORDER V, RULE 17 OF THE CODE OF CIVIL PROCEDURE, 1908 (FOR BREVITY THE CODE) AND HAS CONCLUDED ON PRINCIPLE THAT WHERE NOTICE OF SERVICE IS CLAIME D TO HAVE BEEN SERVED BY AFFIXATION UNDER ORDER V, RULES 17, 18 AND 19 OF THE CODE THEN IT BECOMES NECESSARY TO EXAMINE WHETHER SUCH SERVICE HAS BEEN MADE IN ACCORDANCE WITH THE PROCEDURE, AS IT IS MANDATORY. THE FIRST REQUIREMENT IS TO ENSURE ITA NO. 1330(DEL)/2010 5 THAT THE PLACE IS PROPERLY IDENTIFIED AND, SECONDLY , THE REPORT IS AUTHENTICATED BY INDEPENDENT PERSONS TO AVOID ANY ATTEMPT BY THE PROCESS SERVER TO PREPARE THE REPORT SITTING IN HIS OFFICE. THE TRIBUNAL HAS REFERRED TO THE REPORT DATED JULY 23, 2001, ISSUED BY THE PROCESS SERVER. ACCORDING TO THE REPORT OF THE INSPECTOR/NOTICE SERVER DATED JUL Y 23, 2001, THE NOTICE WAS AFFIXED ON THE MAIN DOOR OF SHOP NO.334, ANAJMANDI, MULLANPUR. THERE WAS NO EVIDENCE OF ANY LOCAL PERSON HAVING BEEN ASSOCIATED WITH IN IDENTIFYING THE PLACE OF BUSINES S OF THE ASSESSEE-RESPONDENT AND THE REPORT IS NOT WITNESSED BY ANY PERSON AT ALL. IT HAS BEEN FOUND TO BE FLAGRANT VIOLATION OF RULE 17 OF ORDER V OF T HE CODE WHICH LAYS DOWN A PROCEDURE TO SERVE NOTICE BY AFFIXTURE. THE CONCLUSION IS RECORDED IN PARAGRAPHS 13 AND 14 OF THE ORDER WHICH READS THUS: 13. SO, HOWEVER, IN THE REPORT OF THE INSPECTOR/NOTICE SERVER, WHO CLAIMED TO HAVE AFFIXED THE NOTICE, THERE IS NO EVIDENCE OF ANY INDEPENDENT LOCAL PERSON HAVING BEEN ASSOCIATED WITH THE IDENTIFICATION OF THE PLACE OF BUSINESS OF THE ASSESSEE. IN FACT SUCH REPORT IS NOT WITNESSED BY ANY PERSON AT ALL. EVIDENTLY, IT IS IN CLEAR VIOLATION OF THE MANDATE OF RULE 17 OF ORDER V OF THE CIVIL PROCEDURE CODE, WHICH LAYS DOWN THE PROCEDURE TO SERVE NOTICE BY AFFIXTURE. IT MANDATES THAT THE SERVING OFFICER SHALL AFFIX THE NOTICE ON THE OUTER DOOR OR SOME OTHER CONSPICUOUS PART OF THE HOUSE IN WHICH THE PERSON ORDINARILY RESIDES OR CARRIES ON BUSINESS OR PERSONALLY WORKS FOR GAIN AND SHALL THEREAFTER REPORT THAT HE HAS SO AFFIXED THE COPY, THE CIRCUMSTANCES UNDER WHICH HE DID SO AND, THE NAME AND ADDRESS OF THE PERSON BY WHOM THE HOUSE WAS IDENTIFIED AND IN WHOSE PRESENCE THE COPY WAS AFFIXED. ITA NO. 1330(DEL)/2010 6 THE IMPUGNED REPORT OF THE INSPECTOR/NOTICE SERVER IS BEREFT OF ANY SUCH LAWFUL REQUIREMENTS ENSHRINED IN THE CODE OF CIVIL PROCEDURE. IN FACT IT WOULD NOT BE OUT OF PLACE TO OBSERVE THAT THERE IS NO ASSERTION EVEN BY THE INSPECTOR/NOTICE SERVER THAT THEY HAD PERSONALLY CHECKED THE BUSINESS PLACE OF THE ASSESSEE AND WERE IN A POSITION TO IDENTIFY THE SAME. FOR ALL THE ABOVE REASONS, AN INFERENCE WHICH CANNOT ESCAPE, IS THAT THERE HAS BEEN NO VALID SERVICE OF NOTICE ISSUED UNDER SECTION 158BD UPON THE ASSESSEE. 14. BEFORE CONCLUDING, WE OBSERVE THAT HAVING REGARD TO THE REPORT OF THE INSPECTOR/NOTICE SERVER DATED MARCH 27, 2001, THE REQUIREMENTS OF THE CODE OF CIVIL PROCEDURE HAVE NOT BEEN FULFILLED AND, THEREFORE, IN VIEW OF THE AFORESAID DISCUSSION AND THE CASE LAW REFERRED TO, WE ARE OF THE VIEW THAT THERE HAS BEEN NO VALID SERVICE OF NOTICE ISSUED U/S 158BD ON THE ASSESSEE. SINCE THERE HAS BEEN NO PROPER SERVICE OF NOTICE ON THE ASSESSEE, IT HAS TO BE HELD THAT THE IMPUGNED ASSESSMENT PROCEEDINGS RESULTING IN THE ORDER DATED JUNE 27, 2003, ARE BAD IN LAW. THE SAME IS HEREBY SER ASIDE. THE ASSESSING OFFICER CAN ISSUE AFRESH NOTICE, IF SO AUTHORIZED UNDER THE LAW. IT IS THUS OBVIOUS THAT FINDING WITH REGARD TO SERVICE OF NOTICE TO CONFER JURISDICTION IS ABSENT. FROM THE SAID DECISION, IT IS, THUS, CLEAR THAT ONE OF THE CONDITIONS IS THAT THE SERVICE REPORT IS TO BE AUTH ENTICATED BY INDEPENDENT PERSON. THE PROCESS FOLLOWED BY THE AO IN DIRECTING THE AO TO SERVE NOTICE THROUGH AFFIXTURE IS ALSO NOT PROPER. IN THIS VIEW OF THE MATTER, WE HOLD THAT T HE NOTICE U/S ITA NO. 1330(DEL)/2010 7 148 WAS NOT VALIDLY SERVED UPON THE ASSESSEE, AND, THEREFORE, THE AO HAS NOT ASSUMED VALID JURISDICTION TO MAKE A SSESSMENT U/S 147 OF THE ACT. WE, THEREFORE, CANCEL THE ASSES SMENT AND DECIDE THIS PRELIMINARY ISSUE IN FAVOUR OF THE ASSE SSEE. 3.1 IN REPLY, THE LD. DR RELIED ON THE PROVISI ON CONTAINED IN SECTION 292BB OF THE ACT AND SUBMITTED THAT THE ASSESSEE ATTENDED TO THE PROCEEDINGS AND, THEREFORE, THE NOTICE HAS TO BE TAKEN AS DULY SERVED ON HER. 3.2 IN THE REJOINDER, THE LD. COUNSEL RELIED ON TH E DECISION OF THE SPECIAL BENCH OF DELHI TRIBUNAL IN THE CASE OF KUBER TOB ACCO PRODUCTS (P) LTD. VS. DCIT, (2009) 117 ITD 273. IT HAS BEEN HELD T HAT SECTION 292BB HAS BEEN INTRODUCED IN THE ACT BY FINANCE ACT, 2008 W ITH EFFECT FROM 01.04.2008. BY DINT OF THIS PROVISION, THE ASSE SSEE HAS BEEN PRECLUDED FROM TAKING ANY OBJECTION REGARDING VALIDITY OF ASSESSMENT OR RE- ASSESSMENT ON THE GROUND OF INVALID SERVICE OF NOTICE. HOWEVER, SUCH A GROUND WAS AVAILABLE TO THE ASSESSEE UP TO 31.03 .2008. SINCE PROVISION TAKES AWAY A VESTED RIGHT, IT IS PROSPECTIVE I N NATURE AND IT CANNOT BE CONSTRUED RETROSPECTIVELY. ACCORDINGLY, THE PROV ISION IS APPLICABLE FOR THE PROCEEDINGS OF ASSESSMENT YEAR 2008-09 AND SU BSEQUENT YEARS. ITA NO. 1330(DEL)/2010 8 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. ADMITTEDLY, THE FACTS OF THE CASE ARE IN PARI-MATERIA WITH THE FACTS OF THE CASE OF AJAY BAGARIA (SUPRA). THE ONLY OBJECTION TAKEN BY THE LD. DR IS BASED ON SECTION 292BB OF THE ACT. TH E SPECIAL BENCH OF THE TRIBUNAL HAS HELD THAT THIS PROVISION IS APPLICAB LE TO THE PROCEEDINGS OF ASSESSMENT YEAR 2008-09 AND SUBSEQUENT YEARS AND THAT THE PROVISION DOES NOT APPLY TO EARLIER YEARS. THUS, THERE IS NO FORCE IN THE OBJECTION OF THE LD. DR. THUS, RELYING ON THE DECISION IN THE CASE OF AJAY BAGARIA (SUPRA), IT IS HELD THAT THE AO HAS NOT PROPERLY ASSUMED JURISDICTION TO MAKE ASSESSMENT U/S 147. 5. IN THE RESULT, THE APPEAL IS ALLOWED. SD/- SD/- (R.P. TOLANI) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- SMT. SHEFALI BAGARIA, CHANDNI CHOWK, DELHI. ITO, WARD -29(4), NEW DELHI. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.