COMMISSIONER OF INCOME TAX JALANDHAR -II JALANDHAR V. JASBIR SINGH

ITA/253/2012

AI Insights

The case involves multiple appeals by the Commissioner of Income Tax, Jalandhar-II, against various respondents, all NRIs represented by Sh. Jarnail Singh, POA. The appeals were primarily concerned with the validity of notice services under Sections 148, 142(1), and 143(2) of the Income Tax Act, 1961, and the subsequent assessments and penalties related to capital gains tax on compensations received from PUDA for land acquisition. The Tribunal had quashed the assessments due to improper service of notices, leading to the revenue's appeal to the High Court. The High Court found that despite procedural lapses in notice service, the substantive tax liability on capital gains remained, and thus, the assessments should be redone correctly.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 730352 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 21-02-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: S K MUKHI
• Assessee Lawyers: VIVEK SETHI
• Keywords: Assessment; Capital Gain Tax; Compulsory Acquisition; Income Tax; Notice service; Penalty
• Section: 148; 144; 142(1); 143(2); 271(1)(c); 139

Judgement Text

"I.T.A. No.253 of 2012 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH (1) I.T.A. No.253 of 2012 (O&M). Decided on:-February 21, 2014. The Commissioner of Income Tax, Jalandhar-II, Jalandhar. .........Appellant. Versus Jasbir Singh, NRI through Sh. Jarnail Singh, POA. .........Respondent. (2) I.T.A. No.254 of 2012 (O&M). The Commissioner of Income Tax, Jalandhar-II, Jalandhar. .........Appellant. Versus Joginder Singh, NRI through Sh. Jarnail Singh, POA. .........Respondent. (3) I.T.A. No.255 of 2012 (O&M). The Commissioner of Income Tax, Jalandhar-II, Jalandhar. .........Appellant. Versus Lakhbir Singh, NRI through Sh. Jarnail Singh, POA. .........Respondent. (4) I.T.A. No.102 of 2013 (O&M). The Commissioner of Income Tax, Jalandhar-II, Jalandhar. .........Appellant. Versus Jasbir Singh, NRI through Sh. Jarnail Singh, POA. .........Respondent. (5) I.T.A. No.103 of 2013 (O&M). Yag Dutt 2014.03.03 17:50 I attest to the accuracy and integrity of this document I.T.A. No.253 of 2012 -2- The Commissioner of Income Tax, Jalandhar-II, Jalandhar. .........Appellant. Versus Lakhbir Singh, NRI through Sh. Jarnail Singh, POA. .........Respondent. (6) I.T.A. No.104 of 2013 (O&M). The Commissioner of Income Tax, Jalandhar-II, Jalandhar. .........Appellant. Versus Joginder Singh, NRI through Sh. Jarnail Singh, POA. .........Respondent. CORAM: Hon'ble Mr. Justice Rajive Bhalla Hon'ble Mr. Justice Dr. Bharat Bhushan Parsoon. ***** Argued by:- Mr. Vivek Sethi, Advocate for the appellant. Mr. S.K.Mukhi, Advocate for the respondent. Dr. Bharat Bhushan Parsoon, J The first three appeals arise from a common order dated 21.5.2012 and the remaining three appeals arise from yet another common order dated 23.10.2012 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as, the Tribunal) in ITA Nos.190 to 192/Asr/2010 and ITA Nos.354 to 356/Asr/2012 respectively pertaining to the assessment year 1999-2000. 2. The first three appeals are qua quantum of income tax, whereas rest of those are against dismissal of the appeals of the revenue in relation to levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the Act). 3. Facts and circumstances as also the question of law involved in Yag Dutt 2014.03.03 17:50 I attest to the accuracy and integrity of this document I.T.A. No.253 of 2012 -3- all these appeals are the same. Hence, these appeals are taken up together for adjudication. 4. For convenience and clarity, facts have been taken from ITA No.253 of 2012. 5. Initially, following substantial questions of law had been posed in these appeals for answer: (I) Whether on the facts and in the circumstances of the case the Hon'ble ITAT was right in law in holding the service of notice u/s 148/142(1) and 143(2) as invalid when the assessee was not avialable in India and the AO has sent the notices at last known address in India and also validly affixed these notices at the last known address of the person holding power of attorney. (II) Whether on the facts and in the circumstances of the case the Hon'ble ITAT was right in law in quashing the order of the AO when it was established by the AO and confirmed by the CIT(A) that the assessee was liable to pay capital gain tax on the compensations received by him from PUDA and the decision of the Hon'ble ITAT has benefited the assessee to escape statutory liability of payment of Income Tax on his taxable income. 6. Subsequently, the following additional substantial question of law was also framed: Whether Ld. ITAT erred in law in quashing the assessment made by the assessing officer at Kapurthala in absence of any direction to assessing officer, Jalandhar to whom according to Ld. ITAT the jursidiction lies to frame the assessment as concluded by ld. ITAT itself while quashing the assessment? 7. Assessee Jasbir Singh had received compensation amounting to Yag Dutt 2014.03.03 17:50 I attest to the accuracy and integrity of this document I.T.A. No.253 of 2012 -4- Rs.1,04,54,474/- during the assessment year 1999-2000 against compulsory acquisition of his land situated at village Mansoorwal Dona, District Kapurthala. The assessee had not furnished his return of income. Finding it to be a case of income having escaped assessment for the assessment year 1999-2000 by reason of failure on the part of the assessee to make a return under Section 139 of the Act, after recording reasons and obtaining necessary approval from the Joint Commissioner of Income Tax (Range-IV), Jalandhar, notice under Section 148 of the Act was served on the assessee on 21.3.2006. He did not furnish his return even then. Thereafter, notice under Section 142(1) of the Act was issued on 2.1.2006 along with a questionnaire. The assessee neither attended the office of the named Income Tax authority in the notice nor filed return nor made compliance of the said notice. 8. Even on information made available, the Assessing Officer (hereinafter referred to as the AO) could not get current residential address of the assessee. The concerned Inspector of the revenue found that it was not possible to effect service in ordinary manner and consequently, service of the notice was effected under Section 142(1) of the Act through affixation on the last known address of the assessee. Since after acquisition of the whole land of village Mansoorwal Dona by PUDA, it had been converted into a residential colony and as such, notice was affixed on the Dharamshala of the village. None appeared on behalf of the assessee. Accordingly, the AO proceeded to frame assessment in terms of Section 144 of the Act i.e. calculating the quantum of long term capital gain for the assessment year 1999-2000 at Rs.1,00,09,746/-. As the assessee had concealed this entire income, penalty notice under Section 271-C of the Act was also issued separately for the concealment of this income on account of long term capital gains arising from compulsory acquisition of land by PUDA (Annexure A-1). Aggrieved by this order, the assessee filed a petition under Section 264 of the Act on 18.5.2007. 9. Plea of the assessee was that statutory notice had not been Yag Dutt 2014.03.03 17:50 I attest to the accuracy and integrity of this document I.T.A. No.253 of 2012 -5- served upon him and affixture of notice somewhere in village Noorpur Dona, District Kapurthala, where the assessee neither was residing nor was working for gain and had only agriculture land which had been acquired, was of no legal value. It was pleaded that his address was available with PUDA, Jalandhar and had the AO made some genuine efforts, his address could have been obtained from his bank account or from the office of Land Acquisition Collector, PUDA, Jalandhar and from the Income Tax Department itself where the assessee was allegedly assessed for the assessment year 1999-2000. It was elaborated that the assessment proceedings for the year 1999-2000 had already been finalised by the revenue through his power of attorney Jarnail Singh. 10. Consequently, on 18.2.2008, the Commissioner of Income Tax, Jalandhar-II, Jalandhar (hereinafter referred to as the CIT) accepting version of the assessee had set aside order of the AO, wherein directions were issued for framing assessment afresh after allowing adequate opportunity to the assessee of being heard. Directions were also issued to the AO to ensure that contentions of the assessee were judiciously dealt with. Pursuant to this order of 18.2.2008 (Annexure A-2), proceedings of assessment were started afresh. During that proceedings, it was noticed that the assessee had filed the return of income for the assessment year 1999-2000 with the Income Tax Officer, Ward-VI, Jalandhar on 21.8.2000 mentioning the address as c/o Shri Jarnail Singh, resident of village Dheena, District Jalandhar Cantt. The AO noticed that the return filed by the assessee on 21.8.2000 without enclosing the power of attorney in favour of Jarnail Singh and with incorrect address, was an invalid return. The verification had also been found to be improper and thus return was invalidated on that account as well. 11. It was further noticed that on 24.3.2006 the Income Tax Officer, Ward-VI, Jalandhar had dropped the proceedings under Section 147 of the Act for want of jurisdiction, making a noting that jurisdiction is territorial and would not depend upon address of the power of attorney holder of the Yag Dutt 2014.03.03 17:50 I attest to the accuracy and integrity of this document I.T.A. No.253 of 2012 -6- assessee. In short, it was felt that merely because power of attorney holder of the assessee was a resident of Jalandhar, there would not be jurisdiction of Jalandhar but would remain with the Income Tax Officer, Kapurthala. In this backdrop, the Income Tax Officer, Kapurthala-I, Kapurthala had held that the jurisdiction over the case of the assessee was rightly vested with it. Making calculations and taking into account quantum of compensation received as Rs.1,04,54,474/-, long term capital gain was computed at Rs.26,50,340/-. Penalty proceedings under Section 271(1)(c) of the Act were also initiated separately for concealment of income in terms of order (Annexure A-3) of the Income Tax Officer, Kapurthala-I, Kapurthala. This order was challenged in appeal by the assessee; it was dismissed. 12. Aggrieved with the said order, the assessee went in appeal before the Tribunal. Vide order dated 21.5.2012 (Annexure A-5), the Tribunal accepted version of the assessee by holding that notices should have been served on the agent of the assessee Jarnail Singh, power of attorney, and notices issued by the Income Tax Officer, Kapurthala-I, Kapurthala under Sections 148 as also 143(2) of the Act were bad in law and the assessment made thereunder was liable to be quashed. Accepting version of the assessee, assessments were quashed. 13. Plea of the revenue is that when the Tribunal had accepted claim of the assessee that notices issued by the Income Tax Officer, Kapurthala-I, Kapurthala under Section 147 as also under Section 143(2) of the Act had neither been served on the assessee nor on his agent Jarnail Singh and thus, were of no legal significance, the assessee should not have been just let off. It is contended that when liability of the assessee to pay tax on capital gains is undisputed, he should have been brought back within the ambit and scope of law to discharge his liability. 14. Counsel for the respondent-assessee, on the other hand, has urged that once notices issued to him have been proved to be of no legal Yag Dutt 2014.03.03 17:50 I attest to the accuracy and integrity of this document I.T.A. No.253 of 2012 -7- effect as those were not served on him or on his attorney, entire proceedings lose validity as also legality and no liability could have been fastened on him. It is claimed that if the proceedings already started by the revenue are defeated on the legal pedestal, initiation of fresh proceedings is not permissible in law. 15. Hearing has been provided to counsel for the parties while going through the paper books. 16. There is force in contention of the revenue that once service of notice under Section 148, 143(2) and 142(1) of the Act was held to be bad observing that the assessee was no more residing at the last known address and was accessible only through his attorney Jarnail Singh, it was incumbent on the Tribunal not to quash the whole proceedings as it amounted to leaving the assessee go scot-free, though he is liable to pay tax on the capital gains. It is nowhere denied that compensation for compulsory acquisition of the land was received by the assessee. As such, he cannot deny his liability to pay long term capital gain tax. Merely because there was some error in service of notices on the assessee, statutory liability of the assessee to pay tax on capital gain was not over. Because of procedural lapses, the assessee should not be a gainer and that too by default to escape his liability. Sequelly, order of the Tribunal also lacks merit. 17. Looking from another angle, default made by the revenue in compliance with the procedure in place for service of the assessee ipso- facto, is not a circumstance to let the assessee go scot free from the taxation regime when his liability of payment of capital gain tax is not questioned. When the proceedings had been started by the Income Tax Officer, Kapurthala-I, Kapurthala but the same were found to be defective on technical and procedural grounds of service of the assessee, liability of payment and capital gains tax which had accrued against the assessee, would not be lost sight of and forgotten, as has been projected by the assessee. Yag Dutt 2014.03.03 17:50 I attest to the accuracy and integrity of this document I.T.A. No.253 of 2012 -8- 18. It is, thus, ordered that the Income Tax Officer, Kapurthala-I, Kapurthala would start the proceedings afresh after seeking appearance of the assessee either in person or through his power of attorney and would decide the matter afresh from the stage of issuance of notice to the assessee. 19. Since the land is located at village Mansoorwal Dona, District Kapurthala and the proceedings are not required to be conducted at the place of residence of power of attorney of the assessee and, in fact, the assessment proceedings are to continue at District Kapurthala where the land acquired is situated, the time spent in conducting the proceedings would be duly considered by the authorities if any question with regard to limitation at any stage arises. 20. All the substantial questions of law enumerated in earlier portion of the judgment to the extent already discussed are answered in favour of the revenue. By setting aside the impugned orders, the appeals, consequently, are allowed in favour of the revenue in the terms mentioned above. (Dr. Bharat Bhushan Parsoon) Judge (Rajive Bhalla) Judge February 21, 2014 'Yag Dutt' 1. Whether Reporters of local papers may be allowed to see the judgment? Yes 2. Whether to be referred to the Reporters or not? Yes 3. Whether the judgment should be reported in the Digest? Yes Yag Dutt 2014.03.03 17:50 I attest to the accuracy and integrity of this document "