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Sumanglam Sewa Awam Educational Samiti G-1, 616/5, Vaishali, Ghaziabad Vs. ACIT Range-2, Ghaziabad
October, 14th 2015
                    IN THE INCOME TAX APPELLATE TRIBUNAL
                        DELHI BENCHES : "G" NEW DELHI


            BEFORE SHRI J.SUDHAKAR REDDY ACCOUNTANT MEMBER
                               AND
             SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER


                            ITA Nos.: 1467,1468/Del/2011
                         Assessment years : - 2003-04, 2004-05

          Sumanglam Sewa Awam Educational Samiti         vs. ACIT
          G-1, 616/5,                                        Range-2,
          Vaishali, Ghaziabad                                Ghaziabad
          (PAN AAETS1949Q)

               (Appellant)                    (Respondent)

                      Appellant by      : Shri Salil Aggarwal, CA,
                                          Shri Shailesh Gupta, CA
                      Respondent by     : Shri Sujit Kumar, Sr. DR

                     Date of Hearing     : 8.9.2015
               Date of pronouncement     :    .10.2015


                                  ORDER

PER BENCH


      ITA No. 1467/Del/2011 arises from the order of learned Commissioner of

Income Tax (Appeals), Ghaziabad dated 17.01.2011 for the Assessment year 2003-

04, wherein the appeal of the appellant was partly allowed on merits. The assessee

has taken as many as 14 grounds in this appeal before us but the main grievance of

the assessee is contained in ground no. 4 which reads as under:


      "That the learned CIT (Appeals) has erred in upholding the impugned
      assessment order passed u/s 147/148 of the Act even when the notice u/s
      148 was never served on the assessee society."
                                                         ITA Nos.1467, 1468/Del/2011
                                                             Sumanglam Sewa Awam
                                                             Educational Samiti
                                                              vs. ACIT
2.    The facts of the case, in brief, are that the return of income was filed on

3.12.2003 and the same was processed u/s 143(1) of the Income Tax Act, 1961 on

26.03.2006 at the returned income. Meanwhile a survey had been conducted on the

premises of the assessee on 17.02.2006 wherein during the course of survey, a

loose paper (marked as Page No 89 of Annexure D-3) was found which showed that

certain payments had been made by one Shri Vijay Gupta and another Shri JK Gulati

to Shri Satish Kumar, Secretary of the assessee society. The amount pertaining to

AY 2003-04 was Rs. 33,15,100/- which according to AO was the undisclosed income

having escaped assessment u/s 147 r.w.s. 148 of the Income Tax Act, 1961. Notice

u/s 148 was issued on 26.03.2007 and was served upon the assessee through

affixture on 16.04.2007. Para 2 on Page 2 of the Assessment Order contains the

information about service of notice through affixture.


3.     The ground of appeal relating issue of service of notice through affixture was

not taken before the Ld. CIT(A) and it is only in this appeal before us that this

ground has been raised for the first time. The assessee has specifically challenged

the issue of non service of notice under section 148 before us, albeit, for the first

time. The Learned DR has strongly objected to the admitting of this additional

ground. However, in view of the decision of the Hon'ble Supreme Court in the case

of National Thermal Power Co. Ltd. Vs. CIT 229 ITR 383 (SC), we are of the opinion

that the assessee is entitled to urge question of law on the basis of facts already

available on record. We also rely on the decision of the Hon'ble Supreme Court in

the case of Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688, wherein it was

held that in the absence of any statutory provision, the appellate authority is vested




                                                                                         2
                                                       ITA Nos.1467, 1468/Del/2011
                                                           Sumanglam Sewa Awam
                                                           Educational Samiti
                                                            vs. ACIT
with all the plenary powers which the subordinate authority may have in the matter.

The Hon'ble Court held that the Tribunal will have the discretion to allow or not

allow a new ground to be raised and further observed that where the Tribunal is

only required to consider a question of law arising from the facts which are on

record in the assessment proceedings then such a question should be allowed to be

raised when it is necessary to consider that question in order to correctly assess the

tax liability of an assessee. We accordingly, allow this additional ground to be

admitted.





4.     The Learned AR for the assessee submitted that a perusal of the notice dated

26.03.2007 allegedly issued under section 148 of the Act (placed at 61 of the paper

book), would reveal that the said notice has not been issued at the correct address,

as the address mentioned on the said notice is not the address of the appellant trust

and further, down below in the said notice, it has been mentioned that the servant

(not of assessee, as the notice was not sent at the address of assessee - appellant)

had refused to receive the said notice. He drew our attention to Order V, Rule 12 of

the Code of Civil Procedure which prescribes that the service has to be effected on

defendant in person or on his agent. The Learned AR further submitted that in the

present case, notice under section 148 of the Act was not served on the assessee

nor the same was refused at all by the assessee. He submitted that when the

officials of the Income-tax Department went to serve the notice under section 148,

the servant (not of assessee, as the notice was not sent at the address of assessee -

appellant) refused to accept the notice. The Learned AR submitted that the servant

here, by no stretch of imagination can be said to be the agent of the assessee and




                                                                                         3
                                                        ITA Nos.1467, 1468/Del/2011
                                                            Sumanglam Sewa Awam
                                                            Educational Samiti
                                                             vs. ACIT
thus, admittedly, no notice was tendered either to the assessee or his agent nor was

the same refused either by the assessee or his agent. The Learned AR further

submitted that the notice allegedly served on 16.04.2007 and that too by affixture is

in complete violation of Order V Rule 17 of CPC, as the conditions precedent to said

affixture of notice were never satisfied by the learned AO. The Learned AR also

submitted that service of notice by affixation can be resorted to only when the

department has discharged its initial onus by showing that authority concerned has

reason to believe that assessee was intentionally hiding himself from authorities for

purpose of avoiding service or that there were other good reasons to come to the

conclusion that summons could not be served in the ordinary way. The Learned AR

submitted that the said process had not been exhausted or carried out by the AO in

the instant case and as such, the service of notice by affixation is bad in law. The

Learned AR placed reliance on the decision of the Hon'ble Delhi High Court in CIT,

Delhi ­ IV vs Hotline International (P) Ltd. 296 ITR 333 in support of his preposition.

He also relied on the judgment rendered by the Hon'ble Delhi High Court in CIT vs

Chandra Agencies (Delhi HC) reported in 202 Taxman 106.


5.   Ld. Counsel for the assessee submitted that the reopening is bad in law as the

reasons recorded were based on a statement, recorded during the course of survey

u/s 133A which is no evidence at all. For this proposition, he relied on the following

case laws:-


     1.   CIT vs. S. Khader Khan Son (2008) 352 ITR 480 (SC)


     2. Commissioner of Income-tax v. S. Khader Khan Son [2008] 300 ITR 157
        (Mad)




                                                                                          4
                                                        ITA Nos.1467, 1468/Del/2011
                                                            Sumanglam Sewa Awam
                                                            Educational Samiti
                                                             vs. ACIT
5.1      He further submitted that the information is not backed by any evidence.


5.2       He raised number of other contentions which we would be dealing, if

necessary, in our findings. Shri Salil Aggarwal also made statements on merit and

raised contentions with which we would deal, if necessary. The Ld. DR Shri Sujit

Kumar on the other hand controverted the statement of the assessee. Ld. DR

submitted that notice was issued to the assessee by speed post and the postal

department tried to serve the notice on several locations but found the premises of

the assessee locked. He pointed out that on none of these days i.e. 3.4.2007,

5.4.2007 and 9.4.2007, the assessee was available at its premises. He submitted

that a person at the house of the assessee refused to receive the notice. He argued

that the servant carries out the instruction of his master and thus it was only at the

residence of the assessee master that the servant refused to take service of the

notice. Because of assessee's conduct with a criminal mind, the department was

forced to serve the notice by affixture. He argued that the service was valid.


5.3.      Both on the issues of reopening as well as on merits, he strongly opposed

the contentions   of the assessee. We would be dealing with the same, if necessary.

Both parties agreed that the issues for the assessment year 2004-05 are identical to

the issues that arise for the assessment year 2003-04 and hence the arguments

would be the same. In rejoinder the Ld. Counsel for the assessee pointed out that

the notice was not sent at the correct address and hence the question of the

assessee avoiding the receiving of notice does not arise. He also submitted that

admittedly no notice has been served to the assessee by speed post. He referred to




                                                                                         5
                                                      ITA Nos.1467, 1468/Del/2011
                                                          Sumanglam Sewa Awam
                                                          Educational Samiti
                                                           vs. ACIT
section 282 and submitted that refusal by servant is of no consequence, as the

notice is to be served on the person mentioned u/s 282.


6.    We have considered the rival submissions and have perused the facts on

record. Undisputedly, notice u/s 148 was issued on 26.03.2007 and was served upon

the assessee through affixture on 16.04.2007. This fact has been recorded by the

AO also on Page 2 of the Assessment Order. There is no other evidence on record to

even suggest that efforts were made earlier to serve the notice on the assessee. The

short question which arises for consideration in this case is as to whether notice

under section 148 of the Act has been duly served upon the assessee prior to the

commencement or completion of the reassessment proceedings or not. The issue at

hand will necessarily have to be examined in light of the relevant provisions of

Income Tax Act, 1961 as well as the Code of Civil Procedure, 1908.


7.    The relevant portion of section 148(1) of the Act, reads as under:

      "148. Issue of notice where income has escaped assessment.-

      (1) Before making the assessment, reassessment or re computation under
      section 147, the Assessing Officer shall serve on the assessee a notice
      requiring him to furnish within such period, as may be specified in the notice,
      a return of his income or the income of any other person in respect of which
      he is assessable under this Act during the previous year corresponding to the
      relevant assessment year, in the prescribed form and verified in the
      prescribed manner and setting forth such other particulars as may be
      prescribed; and the provisions of this Act shall, so far as may be, apply
      accordingly as if such return were a return required to be furnished under
      section 139."

       Section 282 of the Act provides as to how the notice under the Act is to be
      served. The relevant provision of this section reads as under:

      "282. Service of notice generally.-(1) A notice or requisition under this Act
      may be served on the person therein named either by post or as if it were a



                                                                                        6
                                                ITA Nos.1467, 1468/Del/2011
                                                    Sumanglam Sewa Awam
                                                    Educational Samiti
                                                     vs. ACIT
summons issued by a Court under the Code of Civil Procedure, 1908 (5 of
1908)."

Thus any notice under the Income-tax Act has to be served on the person
named therein either by post or as if it were a summon issued by Court under
the Code of Civil Procedure.

Order V, Rule 12 of the Code of Civil Procedure 1908 provides that
wherever it is practicable, service shall be made on defendant in person or on
his agent. The relevant provision reads as under:-

      "Rule 12. Service to be on defendant in person when practicable, or on
      his agent.-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 sufficient. "

Order V, Rule 17 of the Code of Civil Procedure lays down the
procedure when defendant refuses to accept service or cannot be found and
it reads as under:

      "Rule 17. Procedure when defendant refuses to accept service, or
      cannot be found.-Where the defendant or his agent or such other
      person as aforesaid refuses to sign the acknowledgement, 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 and there is no
      likelihood of his being found at the residence within a reasonable
      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 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 address of the person (if any) by whom the
      house was identified and in whose presence the copy was affixed. "

Order V, Rule 19A provides for simultaneous issue of summons for service
by post in addition to personal service. It reads as under:-

      "Rule 19A. Simultaneous issue of summons for service by post in
      addition to personal service.-(l) The Court shall, in addition to, and




                                                                                  7
                                               ITA Nos.1467, 1468/Del/2011
                                                   Sumanglam Sewa Awam
                                                   Educational Samiti
                                                    vs. ACIT
     simultaneously with, the issue of summons for service in the manner
     provided in rules 9 to 19 (both inclusive), also direct the summons to
     be served by registered post, acknowledgement due, addressed to the
     defendant, or his agent empowered to accept the service, at the place
     where the defendant, or his agent, actually and voluntarily resides or
     carries on business or personally works for gain:

     Provided that nothing in this sub-rule shall require the Court to issue a
     summons for service by registered post, where, in the circumstances of
     the case, the Court considers it unnecessary.

     (2) When an acknowledgement purporting to be signed by the
     defendant or his agent is received by the Court or the postal article
     containing the summons is received back by the Court with an
     endorsement purporting to have been made by a postal employee to
     the effect that the defendant or his agent had refused to take delivery
     of the postal article containing the summons, when tendered to him,
     the Court issuing the summons shall declare that the summons had
     been duly served on the defendant:

     Provided that where the summons was properly addressed, prepaid
     and duly sent by registered post, acknowledgement due, the
     declaration referred to in this sub-rule be made notwithstanding the
     fact that the acknowledgement having been lost or mislaid, or for any
     other reason, has not been received by the Court within thirty days
     from the date of the issue of summons. "

Order III Rule 2 of the Code of Civil Procedure defines as to who are
the recognized agents of the parties. It reads as under:-

     "Rule 2. Recognised agents. - The recognised agents of parties by
     whom such appearances, applications and acts may be made or done
     are-

     (a ) persons holding powers-of attorney, authorizing them to make and
     do such appearances, applications and acts on behalf of such parties;

     (b) persons carrying on trade or business for and in the names of
     parties not resident within the local limits of the jurisdiction of the
     court within which limits the appearance, application or act is made or
     done, in matters connected with such trade or business only, where no
     other agent is expressly authorized to make and do such appearances,
     applications and acts. "




                                                                                 8
                                                      ITA Nos.1467, 1468/Del/2011
                                                          Sumanglam Sewa Awam
                                                          Educational Samiti
                                                           vs. ACIT
8.    Thus a bare reading of the provisions of the Income Tax Act, 1961 and the

Code of Civil Procedure reproduced herein above it is seen that as per Order V, Rule

12 of the Code of Civil Procedure, wherever it is practicable the service has to be

effected on defendant in person or on his agent. Admittedly, in the present case,

notice under section 148 of the Act was not tendered to the assessee nor the same

was refused at all by the assessee. It was refused by the servant of another person

who by no stretch of imagination can be said to be the agent of the assessee and

admittedly no notice was tendered either to the assessee or his agent nor was the

same refused either by the assessee or his agent. Under Order V, Rule 17 of the

Code of Civil Procedure, the affixation can be done only when the assessee or his

agent refuses to sign the acknowledgement or could not be found. Here, in the

present case, it is very much apparent from the records that no effort was made by

the Income-tax Department to serve the notice upon the assessee and no effort was

made by the AO to locate the assessee. 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 acknowledgement due but admittedly it was not sent along with

acknowledgement due. The Delhi Bench of the Tribunal in the case of Dr. K.C.

Verma vs ACIT 84 ITD 33 (Delhi) held as follows :-





      "Section 282 provides the manner in which a valid service can be
      affected. According to this section, a notice under the Act is to be
      served either by post or as if it was summon under the Code of Civil
      Procedure, 1908. In the present case, admittedly, notice was never sent
      by post. So the question arises whether the service was effected in
      accordance with the provisions of Civil Procedure Code. The relevant
      provisions of the service of summons under the Code of Civil Procedure
      are contained in Order V Rules 12 to 20. Rule 12 provides that service



                                                                                       9
                                            ITA Nos.1467, 1468/Del/2011
                                                Sumanglam Sewa Awam
                                                Educational Samiti
                                                 vs. ACIT
shall be made on the defendant in person wherever it is practicable
unless he has an agent empowered to accept the service in which case
service on such agent shall be sufficient. Admittedly, personal service
on the assessee was not affected in the present case. The claim of the
department is that service of notice under Section 142 was effected by
affixture. Rule 17 provides service by affixture and the same is being
reproduced as under:

17. Procedure when defendant refused to accept service, or cannot be
found:

Where the defendant or his agent or such other person as aforesaid
refused to sign the acknowledgement, 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 within a reasonable 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 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
address of the person (if any) by whom the house was identified and in
whose presence the copy was affixed.

Rule 19 provides that where a summon is returned under Rule 17, the
Court shall, if the return under that rule has not been verified by the
affidavit of the serving officer and may, if it has been so verified,
examine the serving officer on oath, or cause him to be so examined by
another Court, touching his proceedings and may make such further
enquiry in the matter as it thinks fit; and shall either declare that the
summon has been duly served or order such service as it thinks fit. At
this stage, the attention is also drawn to Rule 20 which provides the
circumstances under which the substituted service can be effected. For
the benefit of this order, the provisions of Rule 20 are being reproduced
as under:




                                                                            10
                                                       ITA Nos.1467, 1468/Del/2011
                                                           Sumanglam Sewa Awam
                                                           Educational Samiti
                                                            vs. ACIT
      20. Substituted service - 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 shall order the
      summons to be served by affixing a copy thereof in some conspicuous
      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 or
      carried on business or personally worked for gain, or in such other
      manner as the Court thinks fit.

      The perusal of the above provisions shows that before ordering for
      substituted service, the Court must be satisfied that the defendant is
      keeping out of the way for the purposes of avoiding service or that for
      any other reason the summons cannot be served in the ordinary way.
      Further, before affixture the serving officer must use its due and
      reasonable diligence to find out the defendant and if the circumstances
      as mentioned in Rule 17 exist then only the notice may be served by
      affixture that too in the presence of witnesses by whom the house was
      identified and in whose presence the copy was affixed."
9.    Accordingly, from the entire material available on record 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 same was neither tendered to the assessee or his agent,

nor the same was refused by either of them.


10.    On the facts of the case and respectfully following the ratio of judgment laid

down by the Hon'ble High Court of Delhi in the case of CIT Delhi ­ IV vs. Hotline

International (P) Ltd (supra) and that of the Delhi Bench of the ITAT in the case of

Dr. K.C. Verma vs ACIT, we hold that since there has been no proper service of

notice on the assessee, the entire reassessment proceedings, resulting in the order

dated 30-12-2008 are bad in law and the order passed u/s 148/143(3) dated




                                                                                         11
                                                                 ITA Nos.1467, 1468/Del/2011
                                                                     Sumanglam Sewa Awam
                                                                     Educational Samiti
                                                                      vs. ACIT
30.12.2008 is quashed. The other grounds of appeal become in fructuous and are

not being adjudicated upon.


11.       In the result, the appeals of the assessee are allowed.



          Order pronounced in the open court on           13th October, 2015.


                      sd/-                                        sd/-
             (SUDHANSHU SRIVASTAVA)                 (J. SUDHAKAR REDDY)
                JUDICIAL MEMBER                     ACCOUNTANT MEMBER

Dated: the 13.10. 2015
`veena'

Copy of the Order forwarded to:

1.    Appellant
2.    Respondent
3.    CIT
4.    CIT(A)
5.    DR
6.    Guard File                              By order
                                                         Dy. Registrar

Sl.                    Description                        Date
No.

 1.   Date of dictation by the Author                11.9.2015

 2.   Draft placed before the Dictating Member       11.9.2015

 3.   Draft placed before the Second Member

 4.   Draft approved by the Second Member

 5.   Date of approved order comes to the Sr. PS

 6.   Date of pronouncement of order

 7.   Date of file sent to the Bench Clerk

 8.   Date on which file goes to the Head Clerk

 9.   Date of dispatch of order




                                                                                               12

 
 
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