SUKHDEV ATMARAM NARANG, MUMBAI V. ACIT 14(1), MUMBAI

ITA 3598/MUM/2012

• Counselvise Citation: 359819914 RSA 2012
• Duration Of Justice: 2 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 18-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 21-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: B P PUROHIT
• Keywords: Principle of natural justice; Non compliance
• Section: 143(3); 142(1); 148

Judgement Text

, BZ BZBZ BZ INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH , !' , ! BEFORE S/SH.JOGINDER SINGH, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.3598/MUM/2012, # # # # $ $ $ $ / ASSESSMENT YEAR-2008-09 SHRI SUKHDEO ATMARAM NARANG, 17, SWASHRAY, 81, N.S. ROAD, MARINE DRIVE, MUMBAI-400020 PAN: AABPN0405D # VS. ACIT 14(1), EARNEST HOUSE, R. NO. 203, NARIMAN POINT, MUMBAI-400021 ( %& / APPELLANT) ( '(%& / RESPONDENT) #)* #)* #)* #)* + + + + ! !! ! / ASSESSEE BY :SHRI B.P.PUROHIT , + ! / REVENUE BY : SHRI NEIL PHILIP # # # # , ,, , *- *- *- *- / DATE OF HEARING : 09 -02-2015 .$ , *- / DATE OF PRONOUNCEMENT : 09 -02-2015 # # # # , 1961 , ,, , 254(1) ! !! ! ** ** ** ** !/ !/ !/ !/ ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M. ! !' ! # : CHALLENGING THE ORDER DATED 19.03.2012 OF THE CIT(A )-25,MUMBAI,THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) HAS ERRED IN SUSTAINING ASSESSMENT ORDER BY REJECTING OUR GROUND OF APPEAL THAT 'THE LEARNED AO HAS ERRED IN PASSING IMPUGNED ORDER WITHOUT LAWFUL SERVICE OF NO TICE U/S 143(2) THEREBY WITHOUT ACQUIRING JURISDICTION TO ASSESS U/S 143(3). THE IMPUGNED ASS ESSMENT ORDER IS THEREFORE VOID AND ILLEGAL.' DESPITE AO ADMITTING THAT NO NOTICE U/S 1 43(2) IS ISSUED IN THE NAME OF, OR SERVED TO, THE APPELLANT AND THE APPELLANT HAVING R AISED HIS OBJECTION IN WRITING DURING ASSESSMENT PROCEEDING ITSELF. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) HAS ERRED IN UPHOLDING DISALLOWANCE OF RS. 661342/- WITHOUT PROPERLY APPRE CIATING THE EVIDENCES SUBMITTED AND SUBMISSION MADE BY THE APPELLANT PROVING THAT THE A MOUNT ON WHICH THE INTEREST IN QUESTION IS PAID WERE USED FOR THE PURPOSE OF THE BUSINESS OF THE AP PELLANT, HENCE, THE SAID INTEREST PAID WAS ALLOWABLE U/S 36(1)(III)/37(1). 3) YOUR APPELLANT THEREFORE HUMBL Y PRAYS THAT THE IMPUGNED ASSESSMENT PASSED WITHOUT SERVICE OF N OTICE U/S 143(2) BE QUASHED/ ANNULLED. ALTERNATIVELY THE DISALLOWANCE OF RS. 661342/- MAY KINDLY BE DELETED. 4) YOUR HUMBLE APPELLANT CRAVES LEAVE TO ADD TO AME ND, DELETE ANY OF THE ABOVE GROUNDS AND/OR ADD ANY NEW GROUNDS THERETO. THE FIRST GROUND OF APPEAL IS ABOUT NON-SERVICE OF NOTICE U/S 143(2) OF THE ACT.IT IS THUS JURISDICTIONAL ISSUE.THE ASSESSEE, AN INDIVIDUAL, F ILED HIS RETURN OF INCOME ON 11.09.2008 DECLARING TOTAL INCOME AT RS. 3.66 LAKHS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE WA S ENGAGED IN THE BUSINESS OF MACHINE HIRING AND HAD SHOWN BUSINE SS INCOME THEREFROM AS WELL AS FROM OTHER SOURCES.THE ASSESSING OFFICER (AO) COMPLETED THE AS SESSMENT U/S 143(3) OF THE ACT,ON 29.12. 2010,DETERMINING THE INCOME OF THE ASSESSEE AT RS. 23.40 LAKHS. 2 THE AO,DURING THE ASSESSMENT PROCEEDINGS, FOUND THA T THE ASSESSEE HAD CLAIMED INTEREST OF RS. 6.61 LAKHS,THAT SAME WAS REDUCED FROM THE INTEREST RECEIVED OF RS. 4.43 LAKHS UNDER THE HEAD 'INCOME FROM OTHER SOURCES'.HE DIRECTED THE ASSESSE E TO EXPLAIN THE NEXUS WITH THE INCOME EARNED AND EXPENSES(INTEREST INCURRED) UNDER THE SA ID HEAD,VIDE HIS SHOW-CAUSE DATED 26.10. 2010. 2 ITA NO. 3598/M/2012 SHRI SUKHDEO ATMARAM NARANG THE AO FIXED HEARING ON 01.11.2010.IN REPLY TO IT,T HE ASSESSEE FIELD A LETTER DATED 01.11.2010 RAISING THE OBJECTION REGARDING LAWFUL SERVICES OF NOTICE U/S 143(2) OF THE ACT .HE FILED A LETTER ON 22.10.2010 WHEREIN IT WAS STATED THAT HE HAD RECEIV ED NOTICE ISSUED U/S 142(1) DATED 06.04.2010, THAT WAS THE FIRST NOTICE RECEIVED FROM THE OFFICE OF THE AO, THAT NO NOTICE U/S 143(2) WAS RECEIVED BY HIM, THAT NOTICE CLAIMED TO HAVE BEEN ISSUED U/S 143(2) OF THE ACT ON 14.09.2010 AND CLAIMED TO HAVE BEEN SERVED ON THE ASSESSEE WAS NOT RECEIVE D BY HIM OR ANY OF HIS AUTHORISED PERSON. THE ASSESSEE REQUESTED THE AO TO SUPPLY HIM THE COPY OF PROOF OF EVIDENCING LAWFUL SERVICE OF THE SAID NOTICE. THE ASSESSEE AGAIN RAISED OBJECTION AB OUT THE SERVICE OF THE NOTICE STATING THAT THE NOTICE DID NOT BEAR HIS NAME,THAT IT WAS ISSUED TO SON OF THE ASSESSEE, THAT NAME OF THE ASSESSEE WAS WRITTEN IN HAND, THAT NOTICE ISSUED TO VIKASH S UKHDEO NARANG I.E. TO THE SON OF THE ASSESSEE DID NOT PROVE THAT NOTICE WAS ISSUED TO THE ASSESSE E.IN THIS REGARD THE AO HELD THAT NOTICE WAS GENERATED BY THE COMPUTER FOR SCRUTINY CASES SELECT ED THROUGH CASS, THAT WHILE PROCESS OF GENERA -TING NOTICE U/S 143(2) THE SYSTEM MADE A MISTAKE, THAT NOTICE WAS GENERATED IN THE NAME OF SON OF THE ASSESSEE I.E. VIKASH SUKHDEO NARANG THOUGH THE PAN NO. IN THE NOTICE WAS OF THE ASSESSEE, THAT THE CASE OF SON OF THE ASSESSEE FOR AY 2008-09 WAS ALSO SELECTED FOR SCRUTINY THROUGH CASS. HE WAS OF THE OPINION THAT THE NOTICE WAS ISSUE WAS SERVED UPON THE ASSESSEE AS PER THE PROVISIONS OF LAW.HE MADE CERTAIN ADDITIONS TO THE INCOME OF T HE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM, THE ISSUE OF LAWFUL SER VICE OF NOTICE U/S 143(2) WAS RAISED AS GROUND NO.1.IT WAS STATED BEFORE HIM THAT ALLEGED N OTICE U/S 143(2) WAS ISSUED IN THE NAME AND ADDRESS OF SON OF THE ASSESSEE,THAT IN THE RETU RN FILED BY THE = ADDRESS OF THE ASSESSEE WAS DIFFERENT FROM THE ADDRESS MENTIONED IN THE NOT ICE, THAT NOTICE U/S 143(2) FOR THE AY. 2007-08 WAS ISSUED AND SERVED ON DIFFERENT ADDRESS BY THE SAME AO,THAT THE ASSESSEE HAD RAISED OBJECTION DURING THE ASSESSMENT PROCEEDINGS. THE FAA CALLED FOR A REMAND REPORT FROM THE AO AND IN THE REPORT THE AO STATED THAT NO TICE U/S 143(2) OF THE ACT DATED 14.09.2009 WAS GENERATED ONLINE AND SERVED ON 22.09 .2009 ON VIKAS SUKHDEO NARANG.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, REMAND REPORT AND THE ASSESSMENT ORDER THE AO HELD THAT THE PAN NO.OF THE ASSESSEE WAS APPEARING ON TH E NOTICE,THAT SERVICE OF NOTICE WAS NOT IN DISPUTE, IT WAS SERVED ON THE SON OF THE ASSESSEE, IT WAS NOT A CASE THAT NO NOTICE U/S 143(2) OF THE ACT WAS ISSUED, THAT DUE TO AUTOMATIC SELECTION THR OUGH COMPUTERS ONLINE SYSTEM THERE WAS MIS- DESCRIPTION IN THE NAME,THAT THE NOTICE WAS SERVED ON THE SON OF THE ASSESSEE, THAT NOTICE U/S 142(1) WAS ISSUED ON 06.04.2010 WHICH WAS DULY SERV ED ON THE ASSESSEE,THAT IN THE NOTICE U/S 142(1)AO HAD SPECIFICALLY REFERRED TO U/S 143(2) OF THE ACT DATED 14.09.2009,THAT IN THE SUBSEQUE -NT NOTICES THE AO HAD REFERRED ABOUT THE NOTICE, T HAT THE ASSESSEE HAD RAISED OBJECTION ABOUT THE NOTICE ON 22.10.2010, THAT THE ASSESSEE HAD NOT RAI SED THE ISSUE AT THE FIRST AVAILABLE OPPORTUNITY, THAT THERE WAS NO DOUBT THAT THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT, IF ALL THE FACTS WERE CONSIDERED IN HOLISTIC MANNER IT WAS ESTABLISHED TH AT NOTICE U/S 143(2) OF THE ACT WAS ISSUED AND SERVED BY PITH AND SUBSTANCE. REFERRING TO THE JUDG MENT OF JAGAT NOVEL EXHIBITORS PVT. LTD. (18 TAXMANN.COM 138) OF THE HON'BLE DELHI HIGH COURT, H E HELD THAT THE MISTAKE IN THE NAME WAS PROTECTED U/.S 292B OF THE ACT. 4 .BEFORE US,AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT AO NEVER ISSUED OR SERVED ANY NOTICE U/S 143(2) OF THE ACT ON THE ASSESSEE,THAT ASSESSEE HAD RAISED THE OBJECTION IN THIS REGARD DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF,THAT IN THE RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION THE ADDRESS GIVEN BY THE ASSESSEE WAS NOT THE ADDRESS ON WHICH 143(2) NOTICE WAS ISSUED,THAT THE ASSESSEE HAD NEVER AUTHORIZED HIS SON OR ANYBODY ELSE TO RECEIVE THE NOTICE, THAT PROVISIONS OF SECTION 292B WERE NOT APPLICABLE. HE REFERRED TO PAGES NO. 1-4,18,21,25OF PAPER BOOK.DEPARTMENTAL REPRESENTATIVE (DR)CONTENDED THAT A VALID NOTICE WAS ISSUED AND WAS SERVED UPON THE SON OF THE ASSESSEE, THAT ASSESSEE RAISED THIS OBJECTION VERY LATE,THAT THE FAA HAD DEALT 3 ITA NO. 3598/M/2012 SHRI SUKHDEO ATMARAM NARANG THE ISSUE EXTENSIVELY, THAT ANY LAPSE WAS COVERED B Y PROVISIONS OF SECTION 292B OF THE ACT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT,WITH REGARD TO THE ISSUE OF NOTICE U/S 143(2) AND ITS SE RVICE,THE AO IN THE REMAND REPORT AND THE FAA HAS CLEARLY MENTIONED THAT NOTICE WAS GENERATED BY COMPUTER.WE HAVE SEEN THE COMPUTER GENERAT -ED NOTICE AND IT IS A FACT THAT IT IS NOT IN THE N AME OF THE ASSESSEE,THAT THE NAME OF THE ASSESSEE WAS WRITTEN ABOVE THE COMPUTER GENERATED NOTICE BY SOMEBODY.IN OUR OPINION THAT CLEARLY PROVES THAT THERE WAS HUMAN INTERVENTION IN THE NOTICE GEN ERATED BY THE COMPUTER.IIT IS ALSO FOUND THAT THE ADDRESS MENTIONED IN THE RETURN BY THE ASSESSEE IS NOT APPEARING IN THE NOTICE ISSUED U/S 143(2) OF THE ACT.NOTICE U/S.143(2)FOR THE AY.2007-08 WAS ISS UED AT DIFFERENT ADDRESS.IN OUR OPININ,ISSUE OF NOTICE AND VALID SERVICE OF THE NOTICE ARE TWO DIFF ERENT THINGS.THERE ARE SOME NOTICES WHERE THE VALIDITY OF SERVICE IS NOT TO BE PROVED- SIMPLE ISS UE OF NOTICE IS ENOUGH. BUT IN OTHER CASES ISSUE AS WELL AS VALID SERVICE IS PRE-REQUISITE.THE NOTICE U /S 143(2) IS ONE OF THE SUCH NOTICES WHERE VALID SERVICES HAD TO BE PROVED BY THE AO,AS IT IS PART O F PRINCIPLES OF NATURAL JUSTICE.IN THE CASE UNDER CONSIDERATION, THE AO HAS NOT BROUGHT ON RECORD ANY DOCUMENTARY EVIDENCES THAT COULD PROVE THAT NOTICE WAS VALIDLY SERVED UPON THE ASSESSEE OR ITS AUTHORISED REPRESENTATIVE AS ENVISAGED BY SECTION 282 OF THE ACT.THE SAID SECTION PROVIDES HO W NOTICES UNDER THE ACT ARE TO BE SERVED. ANY NOTICE UNDER THE ACT HAS TO BE SERVED ON THE PERSON NAMED THEREIN EITHER BY POST OR AS IF IT WERE A SUMMONS ISSUED BY COURT UNDER THE CODE OF CIVIL PRO CEDURE.IN THE CASE OF RAJESH KUMAR SHARMA, THE HONBLE DELHI HIGH COURT(311ITR215),HAD DEALT T HE ISSUE.IN THAT MATTER NOTICE U/S.148 WAS SERVED ON A PERSON WHO WAS NOT AUTHORISED TO RECEIV E THE SAME.AFTER CONSIDERING THE RIVAL SUBMISSION THE HONBLE COURT HELD AS UNDER: SECTION 282(1) OF THE INCOME-TAX ACT, 1961, PROVID ES THAT A NOTICE OR REQUISITION UNDER THE ACT MAY BE SERVED ON THE PERSON NAMED, EITHER BY POST O R AS IF IT WERE A SUMMONS ISSUED BY A COURT UNDER THE CODE OF CIVIL PROCEDURE, 1908. ORDER V, RULE 12 OF THE CODE OF CIVIL PROCEDURE PRO VIDES THAT WHEREVER IT IS PRACTICABLE SERVICE SHALL BE MADE ON THE DEFENDANT IN PERSON, UNLESS HE HAS AN AGENT EMPOWERED TO ACCEPT SERVICE, IN WHICH CASE SERVICE ON SUCH AGENT SHALL BE SUFFICIEN T. A JOINT READING OF RULES 13 , 14 AND 15 SUGGESTS THAT ONLY IF A SUMMONS IS ACCEPTED BY A PE RSON WHO IS AUTHORISED TO DO SO, CAN IT BE SAID THAT THE DEFENDANT HAS RECEIVED THE SUMMONS OR THAT THAT SERVICE IS GOOD SERVICE. THE PROVISO TO ORDER V, RULE 9(5) OF THE CODE OF CI VIL PROCEDURE PROVIDES THAT THE SUMMONS MUST BE PROPERLY ADDRESSED AND SENT BY REGISTERED POST. THAT THERE WAS NOTHING TO SUGGEST THAT L WAS IN ANY MANNER AUTHORISED TO RECEIVE ANY SUMMONS ON BEHALF OF THE ASSESSEE. IT WAS NEVER THE CASE OF TH E REVENUE THAT L WAS AUTHORISED TO ACCEPT ANY NOTICE ON BEHALF OF THE ASSESSEE OR WAS AN AGENT OF THE ASSESSEE WHO WAS ENTITLED TO RECEIVE THE NOTICE UNDER SECTION 148 OF THE ACT. IT COULD NOT B E HELD THAT RECEIPT OF THE NOTICE BY L AMOUNTED TO SERVICE OF THE NOTICE ON THE ASSESSEE. (II) THAT THE NOTICE SENT THROUGH SPEED POST WAS NO T ADDRESSED TO THE ASSESSEE. IT WOULD HAVE BEEN A DIFFERENT MATTER IF THE REVENUE HAD BEEN ABLE TO SHOW FROM THE ENVELOPE THAT IT WAS ADDRESSED TO THE CORRECT PERSON BUT THE RECEIPT PREPARED BY THE POSTAL DEPARTMENT WAS INCOMPLETE.HOWEVER, FOR PROVING THAT, THE ONUS WOULD HAVE BEEN ON THE REVEN UE, PARTICULARLY WHEN THE ASSESSEE HAD CATEGORICALLY DEEMED RECEIPT OF THE NOTICE. THE REV ENUE DID NOT DISCHARGE THIS BURDEN. THEREFORE IT COULD NOT BE SAID THAT THE NOTICE WAS CORRECTLY ADD RESSED TO THE ASSESSEE. FOLLOWING THE ABOVE WE FIND THAT THERE WAS NO VALID SERVICE OF THE NOTICE IN THE CASE UNDER CONSIDERATION.WE ALSO HOLD THAT THE AO CANNOT RESOR T TO SECTION 292B OF THE ACT TO VALIDATE THE MANDATORY REQUIREMENT OF SERVICE AS POSTULATED UNDE R SECTION 143(2) OF THE ACT. THEREFORE, NON COMPLIANCE WITH SECTION 143(2) OF THE ACT COULD NOT BE TREATED AS A DEFECT IN SERVICE OF NOTICE WHICH COULD BE CURED UNDER SECTION 292B OF THE ACT. THE NOTICE SERVED UNDER SECTION 143(2) OF THE ACT WAS INVALID.CONSIDRING THE PECULIAR FACTS A ND CIRCUMSTANCES OF THE CASE,WE HOLD THAT THE AO HAS NOT PROVED VALID SERVICE OF NOTICE ON THE AS SESSEE,ISSUED U/S.143(2)OF THE ACT.THEREFORE, REVERSING THE FINDING GIVEN BY THE FAA,WE DECIDE TH E JURISDICTIONAL ISSUE IN FAOVUR OF THE ASSESSEE.AS A RESULT, ASSESSMENT ORDER PASSED BY TH E AO IS HELD TO BE INVALID. WE HAVE DECIDED 4 ITA NO. 3598/M/2012 SHRI SUKHDEO ATMARAM NARANG THE JURISDICTIONAL ISSUE IN FAVOUR OF THE ASSESSEE, THEREFORE,REMAINING GROUNDS ARE NOT BEING ADJUDICATED. AS A RESULT, APP EAL FILED BY THE ASSESSEE STANDS ALLOWED. 0*1 #)* 2 3 , 4 , * 5 . ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH ,FEBRUARY,2015. !/ , .$ ! 6 7# 9, 08- , 201 5 , 9 SD/- SD/- ( /JOGINDER SINGH) ( !' / RAJENDRA) / JUDICIAL MEMBER ! ! ! ! / ACCOUNTANT MEMBER / MUMBAI, 7# /DATE:09.02.2015 SK !/ !/ !/ !/ , ,, , '*: '*: '*: '*: ;!:$* ;!:$* ;!:$* ;!:$* / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / %& 2. RESPONDENT / '(%& 3. THE CONCERNED CIT(A)/ < = , 4. THE CONCERNED CIT / < = 5. DR E BENCH, ITAT, MUMBAI / :> '*# BZ BZBZ BZ , . . . 6. GUARD FILE/ 0 (:* '* //TRUE COPY// !/# / BY ORDER, ? / DY./ASST. REGISTRAR , /ITAT, MUMBAI