SANJAY BADANI, MUMBAI V. DCIT 10(3), MUMBAI

ITA 5221/MUM/2014

• Counselvise Citation: 522119914 RSA 2014
• Duration Of Justice: 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 14-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRITA MISRA
• Assessee Lawyers: HARSHVARDHANA DATAR
• Keywords: Invalid notice; Application of stay; Retrospective amendment; Deemed dividend; Procedural lapse; Assessment record; Block assessment; Reason to believe
• Section: 143(3); 148; 6

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI , BEFORE SHRI H.L.KARWA, PRESIDENT & SHRI R.C.SHARMA, AM SA NO. 21 6 / MUM/20 1 4 (ARISING OUT OF ITA NO . 522 1 /MUM/2014) ( ASSESSMENT YEAR S : 200 8 - 09 ) SHRI SANJAY BADANI, C/O JAYESH SANGHRAJKA & CO CHARTERED ACCOUNTANTS, UNIT NO. 405 HIND RAJASTHAN CENTRE, D.S.PHALKE ROAD, DADAR (E) , MUMBAI - 14 VS. DCIT - 10(3), MUMBAI - 20 PAN/GIR NO. : A ABPB 9926 B ( APPELLANT ) .. ( RESPONDENT ) AND SA NO. 21 5 / MUM/20 14 (ARISING OUT OF ITA NO.522 2 /MUM/2014) ( ASSESSMENT YEARS:2008 - 09 ) SHRI NILESH BADANI , C/O JAYESH SANGHRAJKA & CO CHARTERED ACCOUNTANTS, UNIT NO.405 HIND RAJASTHAN CENTRE, D.S.PHALKE ROAD, DADAR (E), MUMBAI - 14 VS. DCIT - 10(3), MUMBAI - 20 PAN/GIR NO. : A ABPB 9926 B ( APPELLANT ) .. ( RESPONDEN T ) AND ITA NOS. 522 1 /MUM/2014) ( ASSESSMENT YEARS:2008 - 09 ) SHRI SANJAY BADANI, C/O JAYESH SANGHRAJKA & CO CHARTERED ACCOUNTANTS, UNIT NO.405 HIND RAJASTHAN CENTRE, D.S.PHALKE ROAD, DADAR (E), MUMBAI - 14 VS. DCIT - 10(3), MUMBAI - 20 PAN/GIR NO. : A ABPB 9926 B ( APPELLANT ) .. ( RESPONDENT ) SA NO S . 21 6 & 21 5 /20 1 4 & ITA NOS. 522 1 & 522 2 /14 2 AND ITA NOS.5222/MUM/2014) ( ASSESSMENT YEARS:2008 - 09 ) SHRI NILESH BADANI, C/O JAYESH SANGHRAJKA & CO CHARTERED AC COUNTANTS, UNIT NO.405 HIND RAJASTHAN CENTRE, D.S.PHALKE ROAD, DADAR (E), MUMBAI - 14 VS. DCIT - 10(3), MUMBAI - 20 PAN/GIR NO. : A ABPB 9926 B ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI HARSHVARDHANA DATAR /REVENUE BY : MS. AMRITA MISRA DATE OF HEARING : 9 TH SEPTEMBER , 201 4 DATE OF PRONOUNCEMENT : 9 TH SEPTEMBER , 201 4 O R D E R BY BENCH : TH ESE STAY APP LICATION S AROSE OUT OF THE APPEAL S FILED BY THE ASSESSEE BEFORE ITAT IN ITA NO. 522 2 & 522 1 /M UM /2014 , IN THE MATTER OF ORDER PASSED U/S. 143(3) R.W.S. 147 OF THE I .T. ACT FOR THE ASSESSMENT YEAR 200 8 - 09. 2 . IN THE SE STAY APPLICATIONS, THE ASSESSEE HAS BASIC ALLY ARGUED LEGALITY OF THE ASSESSMENT FRAMED U/S. 143(3) R.W.S.147 IN VIEW OF THE FACT THAT THERE WAS NO SERVICE OF NOTICE U/S. 143(2). IT WAS CONTENDED BY LEARNED AR THAT IN RESPECT TO NOTICE U/S. 148 DATED 30 - 8 - 2011, THE ASSESSEE HAS FILED RETURN OF INCOME ON 10 - 10 - 2011. THE STATUTORY TIME LIMIT TO SERVE NOTICE U/S. 143(2) WAS TILL 30 - 9 - 2012, IE. SIX MONTHS FROM END OF THE FINANCIAL YEAR IN WHICH RETURN WAS FURNISHED. AS PER LEARNED SA NO S . 21 6 & 21 5 /20 1 4 & ITA NOS. 522 1 & 522 2 /14 3 AR NO NOTICE U/S. 143(2) HAS EVER BEEN ISSUED AND SERVED ON THE ASSESSEE BEFO RE COMPLETION OF ASSESSMENT. DUE TO NON - COMPLIANCE OF STATUTORY NOTICE U/S. 143(2), THE ASSESSEE HAS FILED OBJECTION AGAINST THE JURISDICTION, VIDE LETTER DATED 10 - 10 - 2012 SUBMITTED AT THE OFFICE OF AO ON 2 - 11 - 2012 IN ACCORDANCE WITH THE PROVISIONS OF SECTI ON 292BB OF THE ACT. AS PER LEARNED AR THE OBJECTION RAISED BY THE ASSESSEE HAS NOT BEEN DISPOSED BY THE AO AND HE PROCEEDED WITH THE ASSESSMENT. THE BASIC THRUST OF LEARNED AR TO SUBSTANTIATE THE PRIMA FACIE CASE IN ASSESSEES FAVOUR FOR GRANT OF STAY WAS NON - SERVICE OF NOTICE U/S.143(2) , WHICH GOES TO THE ROOT OF VALIDITY OF THE ASSESSMENT SO FRAMED. 3 . AS THE ISSUE OF NOTICE U/S.143(2) GOES TO THE ROOT OF VALIDITY OF THE ASSESSMENT SO FRAMED, THE BENCH CONSIDERED IT APPROPRIATE TO HEAR THIS ISSUE AND DE CIDE THE APPEAL S ON MERITS. ACCORDINGLY, LEARNED DR WAS DIRECTED TO PRODUCE THE ASSESSMENT RECORDS. THE CASE WAS ADJOURNED TO 9 - 9 - 2014 FOR ALLOWING DR TO PRODUCE THE NECESSARY ASSESSMENT RECORDS. ASSESSMENT RECORDS WERE PRODUCED BY LEARNED DR ON 9 - 9 - 2014 W HICH WERE EXAMINED BY THE BENCH AND MATTER IS NOW DECIDED ON LEGALITY OF THE ASSESSMENT SO FRAMED U/S. 143(3) R.W.S.147 WITHOUT SERVICE OF NOTICE U/S. 143(2) OF THE I.T.ACT. 4 . THE ASSESSEE IN ITS APPEALS, HAS TAKEN THE FOLLOWING GROUNDS : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LEG LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE REOPENING THE ASSESSMENT IN ABSENCE OF REASON TO BELIEVE AND SA NO S . 21 6 & 21 5 /20 1 4 & ITA NOS. 522 1 & 522 2 /14 4 MATERIAL ON RECORDS AND SUCH REOPENING OF THE ASSESSMENT IS BAD LAW AND ERRONEOUS IN FACTS AND IT IS LIABLE TO BE QUASHED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LEQAL PROPOSITIONS; HON'BLE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ASSESSMENT/REASSESSMENT ORDER IN SPITE OF THE FACT THAT NOTICE UNDER SECTION 143(2) OF 'INCOME TAX ACT, 1961 WAS NOT SERVED TO THE ASSESSEE. HENCE, THE ASSESSMENT .IS BAD IN LAW AND LIABLE TO BE ANNULLED. 3. ON THE GIVEN FACTS: CIRCUMSTANCES AND JUDICIAL PRONOUNCEMENTS LD. ASSESSING OFFICER ERRED IN MAKING ADDITION OF LOAN/ADVANCES BET WEEN M/S NISHOTECH SYSTEMS PVT LTD AND M/S SANITECH ENGINEERING PVT LTD. BY TREATING THE SAME AS DEEMED DIVIDEND U/S 2(22)( E), IGNORING THE FACT THAT SUCH ADDITION IS BAD IN LAW AND ERRONEOUS IN FACTS AND LIABLE TO BE DELETED. 5 . LEARNED AR VEHEMENTLY A RGUED THAT NEITHER THERE WAS SERVICE OF NOTICE U/S. 143(2) BY POSTAL AUTHORITIES NOR THERE WAS PROPER SERVICE BY AFFIXTURES. 6 . ON THE OTHER HAND, THE CONTENTION OF LEARNED DR WAS THAT SINCE NOTICE SENT U/S. 143( 2 ) BY POSTAL AUTHORITIES WERE RETURNED UNSER VED, THEREFORE, THE INSPECTOR SERVED THE NOTICE THROUGH AFFIXTURES. OUR ATTENTION WAS ALSO INVITED TO THE INSPECTORS REPORT PLACED IN THE PAPER BOOK WHEREIN VIDE LETTER DATED 27 - 7 - 2012, THE INSPECTOR HAS REPORTED TO DCIT - 10 (3) THAT HE HAS VISITED ASSESSEE S PREMISES ON 27 - 7 - 2012 TO SERVICE THE NOTICE U/S.143(2) FOR THE A.Y. 2008 - 09 IN THE CASE OF SANJAY BADANI. AS PER THE INSPECTOR, ON REACHING THE SAID PREMISES, IT WAS FOUND THAT THE SAID PREMISES WAS LOCKED. THEREFORE, THE SAID NOTICE WAS SERVED ON ASSES SEE BY AFFIXTURE ON 27 - 7 - 2012. 7. IT WAS ARGUED BY THE LEARNED AR THAT IN SPITE OF ASKING UNDER RIGHT TO INFORMATION, THE DEPARTMENT HAS NOT SERVED PROOF OF DISPATCH OF NOTICE NOR THE MODE OF SERVICE THROUGH AFFIXTURES NOR THE REPORT OF SA NO S . 21 6 & 21 5 /20 1 4 & ITA NOS. 522 1 & 522 2 /14 5 INSPECTOR FOR SUCH SERVICE THROUGH AFFIXATION . ACCORDINGLY, COPY OF THE INSPECTORS REPORT WAS PROVIDED TO THE LEARNED AR INDICATING SERVICE OF NOTICE THROUGH AFFIXATION ON 27 - 7 - 2012. IT WAS VEHEMENTLY ARGUED BY LEARNED AR THAT AS PER THE INSPECTORS REPORT DATED 27 - 7 - 2012, THERE WAS NO VALID SERVICE BY AFFIXTURES INSOFAR AS NEITHER THERE IS MENTION OF ANY NAME AND ADDRESS OF THE WITNESSES WHO HAVE IDENTIFIED THE HOUSE OF THE ASSESSEE AND IN WHOSE PRESENCE THE NOTICE WAS AFFIXED . HE CONTENDED THAT IN CASE OF SERVICE OF NOTIC E BY AFFIXTURES, THE SERVING OFFICER SHOULD STATE IN HIS REPORT THE N AME AND ADDRESS OF THE PERSON BY WHOM HOUSE OR PREMISES WERE IDENTIFIED AND IN WHOSE PREMISES COPY OF SUMMON WAS AFFIXED AND THESE FACTS SHOULD ALSO BE VERIFIED BY AN AFFIDAVIT OF SERVING OFFICER, OTHERWISE SUCH SERVICE SHOULD NOT BE ACCEPTED TO BE LEGALLY VALID SERVICE OF NOTICE U/S. 143(2). FOR THIS PURPOSE, RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RA MENDRA NATH GHOSH, 82 ITR 888 . 8. IN VIEW OF THE ABOVE FACTUAL POSITION, WE HAVE TO DECIDE WHETHER THERE WAS SERVICE OF NOTICE U/S. 143(2) MUCH LESS A PROPER SERVICE AS PER RULE 17 OF ORDER V OF CPC, WHICH REQUIRES THAT BEFORE SERVICE OF NOTICE BY AFFIXTURE, NOTICE SERVER/SERVICE OFFICER MUST MAKE DI LIGENT SEARCH FOR PERSON TO BE SERVED AND, HE, THEREFORE MUST TAKE PAIN TO FIND HIM AND ALSO TO MAKE MENTION OF HIS EFFORTS IN REPORT. THE SERVING OFFICER SHOULD ALSO STATE IN HIS REPORT THE CIRCUMSTANCES UNDER WHICH HE DID SO AND THE NAME AND ADDRESS OF T HE PERSON BY WHOM HOUSE OR SA NO S . 21 6 & 21 5 /20 1 4 & ITA NOS. 522 1 & 522 2 /14 6 PREMISES WERE IDENTIFIED AND IN WHOSE PREMISES COPY OF SUMMON WAS AFFIXED, OTHERWISE SUCH SERVICE COULD NOT BE ACCEPTED TO BE A LEGALLY VALID SERVICE OF NOTICE U/S. 143(2). 9 . WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE SCHEME OF THE ACT BROADLY PERMITS THE ASSESSMENT IN THREE FORMATS; (I) ACCEPTANCE OF THE RETURNED INCOME;(II) ACCEPTANCE OF RETURNED INCOME SUBJECT TO PERMISSIBLE ADJUSTMENTS U/S.143(L) OF THE ACT BY ISSUAN CE OF INTIMATION; AND (III) SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THIS SCHEME WAS ORIGINALLY INTRODUCED BY DIRECT TAX LAWS (AMENDMENT) ACT,1989 WITH EFFECT FROM 1.4.1989. THE ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE ACT IS IN THE COURS E OF ASSESSMENT IN THE THIRD MODE, NAMELY, SCRUTINY ASSESSMENT. SECTION 143(2) OF THE ACT REQUIRES THAT WHERE RETURN HAS BEEN FILED BY AN ASSESSEE, IF THE ASSESSING OFFICER CONSIDERS IT NECESSARY OR EXPEDIENT TO ENSURE THAT THE ASSESSEE HAS NOT UNDERSTATED THE INCOME, OR HAS NOT COMPUTED EXCESSIVE LOSS, OR HAS NOT UNDER - PAID TAX IN ANY MANNER, HE SHALL SERVE ON THE ASSESSEE A NOTICE REQUIRING HIM EITHER TO ATTEND HIS OFFICE, OR TO PRODUCE, OR CAUSE TO BE PRODUCED THERE, ANY EVIDENCE ON WHICH THE ASSESSEE MA Y RELY IN SUPPORT OF THE RETURN. THEREFORE, THE LANGUAGE OF THE MAIN PROVISION REQUIRES ASSESSING OFFICER TO PRIMA FACIE ARRIVE AT SA NO S . 21 6 & 21 5 /20 1 4 & ITA NOS. 522 1 & 522 2 /14 7 SATISFACTION OF EXISTENCE OF ANY ONE OF THE THREE CONDITIONS. PROVISO UNDER THE SAID SUB - SECTION REQUIRE S THAT NO NOTICE SHAL L BE SERVED ON THE ASSESSEE AFTER THE EXPIRY OF SIX MONTHS FROM THE END OF THE RELEVANT FINANCIAL YEAR IN WHICH THE RETURN IS FURNISHED. ON A PLAIN READING OF THE LANGUAGE IN WHICH THE PROVISO IS COUCHED IT IS APPARENT THAT THE LIMITATION PRESCRIBED THEREI N IS MANDATORY, THE FORMAT OF PROVISION BEING IN NEGATIVE TERMS. THE POSITION IN LAW IS WELL SETTLED THAT IF THE REQUIREMENTS OF A STATUTE WHICH PRESCRIBES THE MANNER IN WHICH SOMETHING IS TO BE DONE ARE EXPRESSED IN NEGATIVE LANGUAGE, THAT IS TO SAY, IF T HE STATUTE ENACTS THAT IT SHALL BE DONE IN SUCH A MANNER AND IN NO OTHER MANNER, SUCH REQUIREMENTS ARE, IN ALL CASES ABSOLUTE AND NEGLECT TO ATTEND TO SUCH REQUIREMENT WILL INVALIDATE THE WHOLE PROCEEDING. 10. THE HONBLE APEX COURT IN THE CASE OF ASSISTA NT COMMISSIONER OF INCOME - TAX VS. HOTEL BLUE MOON REPORTED IN [2010] 321 ITR 362 HAS CONSIDERED THE VERY ISSUE. THE APEX COURT HELD THAT THE ASSESSING OFFICER HAS TO NECESSARILY FOLLOW THE PROVISIONS OF SECTION 142 AND SUB - SECTIONS (2) AND (3) OF SECTION 1 43. IT DID NOT ACCEPT THE SUBMISSION OF THE REVENUE THAT THE REQUIREMENT OF THE NOTICE UNDER SECTION 143 (2) CAN BE DISPENSED WITH AND THE SAME IS MERE PROCEDURAL IRREGULARITY. IN THE WORDS OF THE APEX COURT, IT IS HELD AS UNDER: SA NO S . 21 6 & 21 5 /20 1 4 & ITA NOS. 522 1 & 522 2 /14 8 ' 16. THE CASE OF THE REVENU E IS THAT THE EXPRESSION 'SO FAR AS MAY BE APPLY' INDICATES THAT IT IS NOT EXPECTED TO FOLLOW THE PROVISIONS OF SECTION 142, SUB - SECTIONS(2) AND (3) OF SECTION 143 STRICTLY FOR THE PURPOSE OF BLOCK ASSESSMENTS. WE DO NOT AGREE WITH THE SUBMISSIONS OF THE L EARNED COUNSEL FOR THE REVENUE, SINCE WE DO NOT SEE ANY REASON TO RESTRICT THE SCOPE AND MEANING OF THE EXPRESSION ' SO FAR AS MAY BE APPLY' . IN OUR VIEW, WHERE THE ASSESSING OFFICER IN REPUDIATION OF THE RETURN FILED UNDER SECTION 158BC(A) PROCEEDS TO MA KE AN ENQUIRY, HE HAS NECESSARILY TO FOLLOW THE PROVISIONS OF SECTION 142, SUB - SECTIONS (2) AND (3) OF SECTION 143.' 11 . DURING THE COURSE OF HEARING, THE BENCH SPECIFICALLY ASKED THE LEARNED AR WITH REGARD TO THE REQUIREMENTS OF SECTION 292BB INTRODUCED W.E.F. 1 - 4 - 2008 WITH RETROSPECTIVE EFFECT. IN REPLY, LEARNED AR CONTENDED THAT AS PER PROVISO TO SECTION 292 BB, WHERE THE ASSESSEE HAS RAISED OBJECTION REGARDING ISSUE OF NOTICE BEFORE THE COMPLETION OF SUCH ASSESSMENT OR REASSESSMENT , THE PROVISIONS CONT AINED U/S. 292BB WILL NOT BE APPLIED. WE FOUND THAT PROVISIONS OF SECTION 292BB WAS INTRODUCED W.E.F. 1 - 4 - 2008 RELEVANT TO A.Y. 2008 - 09 UNDER CONSIDERATION , ACCORDING TO WHICH, W HERE AN ASSESSEE HAS APPEARED IN ANY PROCEEDING OR CO - OPERATED IN ANY INQUIRY R ELATING TO AN ASSESSMENT OR REASSESSMENT, IT SHALL BE DEEMED THAT ANY NOTICE UNDER ANY PROVISION OF THIS ACT, WHICH IS REQUIRED TO BE SERVED UPON HIM, HAS BEEN DULY SERVED UPON HIM IN TIME IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT AND SUCH ASSESSEE SHA LL BE PRECLUDED FROM TAKING ANY OBJECTION IN ANY PROCEEDING OR INQUIRY UNDER 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. WE FOUND THAT IN THE INSTANT SA NO S . 21 6 & 21 5 /20 1 4 & ITA NOS. 522 1 & 522 2 /14 9 CASE, ASSESSEE HAS FILED HIS OBJECTION BEFORE THE AO AND SUCH OBJECTION HAS ALSO BEEN NOTED BY THE AO IN HIS ASSESSMENT ORDER TO THE EFFECT THAT ASSESSEE HAS OBJECTED NON SERVICE OF NOTICE U/S. 143(2) DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF. THUS, PARTICIPATIO N OF ASSESSE E IN THE ASSESSMENT PROCEEDINGS WILL NOT DISENT ITLE THE ASSESSE E HIS RIGHT TO OBJECT TO THE SERVICE OF NOTICE U/ S.143 ( 2) OF THE I.T . ACT, 1961. 12 . AFTER GOING THROUGH THE ASSESSMENT RECORDS, WE FOUND THAT NOTICE ISSUED U/S.143(2) DATED 17 - 7 - 2 012 RETURNED UNSERVED BY POSTAL AUTHORITIES. THEREAFTER NOTICE WAS AFFIXED BY THE INSPECTOR ON 28 - 7 - 2012. FOR SUCH SERVICE BY FIXTURE THE INSPECTOR HAS GIVEN HIS REPORT VIDE LETTER DATED 27 - 7 - 2012 WHICH READS AS UNDER : - IN CONNECTION WITH THE SUBJECT MAT TER IT IS BROUGHT TO YOUR KIND NOTICE THAT THE UNDERSIGNED VISITED THE ASSESSEES PREMISES AT 23/24, VORA CHS LTD., PLOT NO.52, U.B.LANE, GHATKOPAR(E), MUMBAI - 400 077 ON 27.07.2012 TO SERVE THE NOTICE U/S.143(2) FOR A.Y.2008 - 09 IN THE CASE OF SHRI SANJAY BADANI BEARING PAN AABPB 9926B. HOWEVER, ON REACHING THE SAID PREMISES IT WAS FOUND THAT THE SAID PREMISES WAS LOCKED. THEREFORE, THE SAID NOTICE WAS SERVED ON THE ASSESSEE BY AFFIXTURE BY ME ON 27.07.2012. HERE W E HAVE TO EXAMINE AS TO WHETHER SERVICE O F NOTICE BY AF FIXTURE WAS PROPER IN TERMS OF PROVISIONS OF ORDER V, RULE 17 TO 20 OF CPC. AS PER PROVISIONS OF SECTION 282 OF THE I.T. ACT, 1961 , NOTICE UNDER THE ACT IS TO BE SERVED EITHER BY POST OR AS IF IT IS SUMMONED UNDER THE CODE OF CIVIL PROCEDURE . NOTICE DATED 17 - 7 - 2012 HAS BEEN CLAIMED TO HAVE BEEN SERVED THROUGH AFFIXTURE ON 27 - 7 - 2012 AS PROVIDED IN CODE OF CIVIL PROCED URE. HERE PROVISIONS OF ORDER V RULES 17 TO 20 OF CPC ARE SA NO S . 21 6 & 21 5 /20 1 4 & ITA NOS. 522 1 & 522 2 /14 10 RELEVANT. AFTER TAKING NOTICE OF ABOVE STATUTORY PROVISIONS. THEIR LOR DSHIPS OF SUPREME COURT IN THE CASE OF CIT V. RAMENDRA NATH GHOSH [1971] 82 ITR 888 , HELD (PAGES 890 & 891) AS UNDER : - ADMITTEDLY, THE ASSESSEES HAVE NOT BEEN PERSONALLY SERVED IN THESE CASES. THEREFORE, WE HAVE TO SEE WHETHER THE ALLEGED SERVICE BY AF FIXATION WAS IN ACCORDANCE WITH LAW. IT IS NECESSARY TO MENTION THAT, ACCORDING TO THE ASSESSEES, THEY HAD NO PLACE OF BUSINESS AT ALL. THEY CLAIM THAT THEY HAVE CLOSED THEIR BUSINESS LONG BEFORE THE NOTICES WERE ISSUED. HENCE, ACCORDING TO THEM, MR. NEOGI MUST HAVE GONE TO A WRONG PLACE. THIS CONTENTION OF THE ASSESSEES HAS BEEN ACCEPTED BY THE APPELLATE BENCH OF THE HIGH COURT. BEARING THESE FACTS IN MIND, LET US NOW PROCEED TO CONSIDER THE RELEVANT PROVISIONS OF LAW. SECTION 63(1) OF THE ACT READS: A NO TICE OR REQUISITION UNDER THIS ACT MAY BE SERVED ON THE PERSON THEREIN NAMED EITHER BY POST OR, AS IF IT WERE A SUMMONS ISSUED BY A COURT, UNDER THE CODE OF CIVIL PROCEDURE , 1908 (V OF 1908). 9. RULE 17 OF ORDER V OF THE CIVIL PROCEDURE CODE READS: WHERE THE DEFENDANT OR HIS AGENT OR SUCH OTHER PERSON AS AFORESAID REFUSES TO SIGN THE ACKNOWLEDGMENT, OR WHERE THE SERVING OFFICER, AFTER USING ALL DUE AND REASONABLE DILIGENCE, CANNOT FIND THE DEFENDANT, AND THERE IS NO AGENT EMPOWERED TO ACCEPT SERVICE OF TH E SUMMONS ON HIS BEHALF, NOR ANY OTHER PERSON ON WHOM SERVICE CAN BE MADE, THE SERVING OFFICER SHALL AFFIX A COPY OF THE SUMMONS ON THE OUTER DOOR OR SOME OTHER CONSPICUOUS PART OF THE HOUSE IN WHICH THE DEFENDANT ORDINARILY RESIDES OR CARRIES ON BUSINESS OR PERSONALLY WORKS FOR GAIN, AND SHALL THEN RETURN THE ORIGINAL TO THE COURT FROM WHICH IT WAS ISSUED, WITH A REPORT ENDORSED THEREON OR ANNEXED THERETO STATING THAT HE HAS SO AFFIXED THE COPY, THE CIRCUMSTANCES UNDER WHICH HE DID SO, AND THE NAME AND ADD RESS OF THE PERSON (IF ANY) BY WHOM THE HOUSE WAS IDENTIFIED AND IN WHOSE PRESENCE THE COPY WAS AFFIXED. (EMPHASIS APPLIED) AS SEEN EARLIER THE CONTENTION OF THE ASSESSEES WAS THAT AT THE RELEVANT TIME THEY HAD NO PLACE OF BUSINESS. THE REPORT OF THE S ERVING OFFICER DOES NOT MENTION THE NAMES AND ADDRESSES OF THE PERSON WHO IDENTIFIED THE PLACE OF BUSINESS OF THE ASSESSEES. THAT OFFICER DOES NOT MENTION IN HIS REPORT NOR IN THE AFFIDAVIT FILED BY HIM THAT HE PERSONALLY KNEW THE PLACE OF BUSINESS OF THE ASSESSEES. HENCE, THE SERVICE OF NOTICE MUST BE HELD TO BE NOT IN ACCORDANCE WITH THE LAW. THE POSSIBILITY OF HIS HAVING GONE TO A WRONG PLACE CANNOT BE RULED OUT. THE HIGH COURT AFTER GOING INTO THE FACTS OF THE CASE VERY ELABORATELY, AFTER EXAMINING SEVE RAL WITNESSES, HAS COME TO THE CONCLUSION THAT THE SERVICE MADE WAS NOT A PROPER SERVICE. HENCE, IT IS NOT POSSIBLE TO HOLD THAT THE ASSESSEES HAD BEEN GIVEN SA NO S . 21 6 & 21 5 /20 1 4 & ITA NOS. 522 1 & 522 2 /14 11 A PROPER OPPORTUNITY TO PUT FORWARD THEIR CASE AS REQUIRED BY SECTION 33B. 13. AS PER SUB - SECTIO N (1) OF SECTION 282, THE NOTICE IS TO BE SERVED ON THE PERSON NAMED THEREIN EITHER BY POST OR AS IF IT WAS A SUMMONS ISSUED BY C OURT UNDER THE CODE OF CIVIL PROCEDURE, 1908 (V OF 1908) . THE RELEVANT PROVISION FOR EFFECTING OF SERVICE BY DIFFERENT MO DES AR E CONTAINED IN RULES 17, 1 9 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 CANNOT BE SURPASSED BECAUSE THE INTENTION OF THE LEGISLATURE BEH IND THESE PROVISIONS IS THAT STRICT COMPLIANCE OF THE PROCEDURE LAID DOWN THEREIN HAS TO BE MADE. THE EXPRESSION AFTER USING ALL DUE AND REASONABLE DILIGENCE' APPEARING IN RULE 17 HAS BEEN CONSIDERED IN MANY CASES AND IT HAS BEEN HELD THAT UNLESS A REAL AN D SUBSTANTIAL EFFORT HAS BEEN MADE TO FIND THE DEFENDANT AFTER PROPER ENQUIRIES, THE SERVING OFFICER CANNOT BE DEEMED TO HAVE EXERCISED 'DUE AND REASONABLE DILIGENCE'. BEFORE TAKING ADVANTAGE OF RULE 17, HE MUST MAKE DILIGENT SEARCH FOR THE PERSON TO BE SE RVED. HE THEREFORE, MUST TAKE PAIN TO FIND HIM AND ALSO TO MAKE MENTION OF HIS 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 PER THIS RULE. THE CIRCUMSTANCES UNDER WHICH HE DID SO AND THE NAME AND ADDRESS OF THE PERSON BY WHOM THE HOUSE OR PREMISES WERE IDENTIFIED AND IN WHOSE SA NO S . 21 6 & 21 5 /20 1 4 & ITA NOS. 522 1 & 522 2 /14 12 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 OR 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 GENUINENESS OF SUCH SERVICE, THE SERVING OFFICER IS REQUIRED TO STATE HIS FULL ACTION IN THE REPORT AND RELIANCE CAN BE PLACED ON SUCH REPORT ONLY WHEN IT SETS OUT ALL THE CIRCUMSTAN CES WHICH ARE ALSO DULY VERIFIED BY THE WITNESSES IN WHOSE PRESENCE THE AFFIXTURE WAS DONE AND THUS THE AFFIDAVIT OF THE SERVING OFFICER DEPOSING SUCH PROCEDURE ADOPTED BY HIM WOULD ALSO BE ESSENTIAL. IN THE INSTANT CASE, THE WHOLE THING HAD BEEN DONE IN O NE STROKE. IT WAS NOT KNOWN AS TO WHY AND UNDER WHICH CIRCUMSTANCES ANOTHER ENTRY FOR SERVICE OF NOTICE BY AFFIXTURE WAS MADE ON 27 - 7 - 2012 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 THE NOTICE WAS SERVED BY THE AFFIXTURE. IT APPEAR S THAT THE REPORT OF THE INSPECTOR WAS OBTAINED WITHOUT ISSUING ANY PRIOR DIRECTION FOR SUCH PROCESS OR MODE . HOWE VER, THE FACT REMAINED THAT SERVING OFFICER HAD NOT SET OUT REASON FOR PASSING SUBSEQUENT ENTRY NOR FOR ADOPTING THE MODE FOR SERVICE BY AFFIXTURE AND WITHOUT STATING SA NO S . 21 6 & 21 5 /20 1 4 & ITA NOS. 522 1 & 522 2 /14 13 THE REASONS FOR DOING SO, THE ADOPTION OF THE MODE OF SUBSTITUTED SERVICE COULD NOT BE LE GALLY JUSTIFIED. NOTICE WAS SERVED BY AFFIXTURE. THE REASONS FOR SERVICE THROUGH AFFIXTURE HAS NOT BEEN NOTED BY THE AO IN THE NOTESHEET NOR HE HAS ISSUED ANY DIRECTION FOR ISSUING NOTICE THROUGH AFFIXTURES. THE NEXT ENTRY OF NOTE SHEET DATED 28 - 7 - 2012 JUS T INDICATES THAT LETTER WAS FILED BY THE INSPECTOR REGARDING 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 THE DELAY BY SUCH MODE SECOND ENTRY FOR AFFIXATION WAS MADE ON 28 - 7 - 2012 WITHOUT SHOWING JUSTIFICATION FOR THE SAME. THUS, IT IS CLEAR THAT REPORT OF THE INSPECTOR WAS OBTAINED WITHOUT ISSUING ANY PRIOR DIRECTION FOR SUCH PROCESS OR MODE. THUS, THE ADOPTION OF MODE OF SUBSTITUTED SERVICE WAS NOT LEGALLY JUSTIF IED. IT IS ALSO CLEAR FROM THE INSPECTORS REPORT THAT THERE IS NO MENTION OF NAME AND ADDRESS OF THE PERSON WHO HA D IDENTIFIED THE HOUSE OF THE ASSESSE E AND IN WHOSE PRESENCE THE NOTICE U/S. 143(2) WAS AFFIXED. THERE IS NO EVIDENCE OR INDICATION IN THE REP ORT OF INSPECTOR THAT HE HAD PERSONAL KNOWLEDGE OF THE PLACE OF THE BUSINESS 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 ORD ER V RULES 19 AND 20 HAD BEEN ADHERED TO. NEITHER BEFORE TAKING RECOURSE TO SERVICE BY AFFIXTURE, THE ASSESSING OFFICER OR THE CONCERNED OFFICER HAD RECORDED THE FINDING S TO JUSTIFY THE SERVICE BY THIS MODE NO R AFTERWARDS CALLED FOR THE AFFIDAVIT OR CERTIF ICATE OF SERVICE BY AFFIXTURE FROM THE SERVING SA NO S . 21 6 & 21 5 /20 1 4 & ITA NOS. 522 1 & 522 2 /14 14 OFFICER. HE HAD NOT CERTIFIED THAT THE SERVICE HAD BEEN EFFECTED BY ADOPTING THIS COURSE. 15 . IN VIEW OF THE ABOVE, IT IS CLEAR THAT THERE WAS NO VALID SERVICE OF NOTICE U/S.143(2) BY WAY OF AFFIXATION. SINC E IN THE INSTANT CASE, THE DEPARTMENT HAS NOT BEEN ABLE TO DEMONSTRATE THAT NOTICE U/S.143(2) WAS SERVED WITHIN THE STATUTORY TIME LIMIT, THE ASSESSMENT MADE ON THE BASIS OF SUCH INVALID NOTICE C OULD NOT BE TREATED TO BE VALID 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 NOTICE U/S.143(2). A S WE HAVE ALREADY ALLOWED ASSESSEES APPEAL ON LEGAL ISSUE, WE ARE NOT GOING TO DISCUSS THE MERIT S OF THE ADDITION MADE ON ACCOUNT OF DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT. 16 . AS THE FACTS AND CIRCUMSTANCES IN THE CASE OF ANOTHER ASSESSEE - SHRI NILESH BADANI (ITA NO. 5222/MUM/2014) ARE PARI MATERIA , THEREFORE, OUR OBSERVATION MADE IN THE CASE OF SHRI SANJAY BADANI (ITA NO. 5221/MUM/2014) WILL BE APPLIED MUTATIS MUTANDIS TO THE APPEAL FILED BY SHRI NILESH BADANI. 1 7 . SINCE WE HAVE ALLOWED THE ABOVE APPEAL S , THE STAY APPLICATIONS FILED BY THE ASSESSE E S HAVE BECOME INFRUCTUOUS. 1 8 . IN THE RESULT, ITA NO.522 1 /MUM/2014 AND ITA NO.522 2 /MUM/2014 ARE ALLOWED IN TERMS INDICATED HEREINABOVE, WHEREAS THE STAY APPLICATIONS NO.216/MUM/2014 & 215/MUM/2014 ARE HEREBY DISMISSED . SA NO S . 21 6 & 21 5 /20 1 4 & ITA NOS. 522 1 & 522 2 /14 15 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH SEPT . 201 4 . 9 TH SEPT ,2014 SD/ - SD/ - ( ) ( H.L.KARWA ) ( ) ( R.C.SHARMA ) / PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; DATED 09 / 09 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESP ONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//