Notice u/s 143(2) not received back unserved by Revenue within 30 days of issuance - Delhi HC holds Notice has been duly served upon assessee
July, 20th 2007
Assessee had filed its return of income on 30th Nov, 1996 declaring an income of Rs.1,710/-. Notice under Sec. 143(2) of the Act was issued on 7th Oct, 1997 and subsequently on 9th Feb, 1998, a notice was served by affixation at the address of the Assessee. Later on several notices were issued but they remained uncomplied. Accordingly the assessment was completed under Sec. 144 of the Act at a total income of Rs.7,98,810/-.
Before the CIT (A), besides challenging the assessment on merits, the Assessee also challenged the validity of assessment on the ground that notice under Sec. 143(2) of the Act was served beyond the statutory period. The CIT (A) observed that though the first notice was issued on 7th Oct, 1997, it has not been shown by the AO whether it was served on the Assessee by 30th Nov, 1997, i.e., the last date by which the notice could have been served. Therefore, the CIT(A) held that there was no presumption in law as to the date of service of notice purported to be sent under registered cover and accordingly, cancelled the assessment made under Sec. 144 of the Act.
Aggrieved, the Revenue filed an appeal before the ITAT. The Tribunal dismissed the appeal holding that in order to raise the presumption with regard to service of the notice, it is incumbent upon the AO to show that the notice was properly addressed, that it was prepaid and that it was sent through registered post, acknowledgement due. All the three ingredients have to be there to raise the presumption, but none of them has been shown by the AO and hence the presumption as to service of notice cannot be raised.
Over to the Hon'ble High Court where the following substantial question of law came up for consideration :-
Whether the Income Tax Appellate Tribunal was correct in law in holding that the notice sent to the Assessee under Section 143(2) of the Income Tax Act, 1961 was not served within the period of limitation
The High Court observed that :
Sec.282 of the Act provides as to how the notice under the Act are to be served. According to it, 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.
As per the material placed on record, notice under Sec. 143(2) of the Act which is dated 7th Oct, 1997 has been sent by the registered post and as per the provisions of the Act it was to be served upon the Assessee on or before the 30th Nov, 1997.
So, the provisions of Sec. 282 of the Act with regard to the service of notice has been dully complied with by the Revenue. Since the notice under Sec. 143(2) of the Act sent by the registered post had not been received back unserved within thirty days of its issuance, so there would be presumption under the law that notice has been duly served upon the Assessee.
In the instant case, since the notice has not been received back unserved within the period of thirty days of its issuance, under these circumstances, it has to be held that the notice has been duly served upon the Assessee.
And the final word :- Accordingly, it was held that the notice under Sec. 143(2) of the Act has been duly served upon the Assessee within the period of limitation. The substantial question of law was answered in the negative, in favour of the Revenue and against the Assessee.
IN THE HIGH COURT OF DELHI AT NEW DELHI ITA No. 610 of 2007
Judgment reserved on: 4th July, 2007
Judgment delivered on: 9th July, 2007
COMMISSSIONER OF INCOME TAX DELHI-I, NEW DELHI ..... Appellant Through: Mr.J.R.Goel, Adv. Vs. ADONIS FINANCE LIMITED 203, DHAKA CHAMBERS 2069/39, NAIWALA, KAROL BAGH, NEW DELHI ..... Respondent
Coram: HON'BLE MR. JUSTICE MADAN B. LOKUR AND HON'BLE MR. JUSTICE V.B. GUPTA
An appeal under Section 260A of the Act can be only in respect of a 'substantial question of law'. The expression 'substantial question of law' has not been defined anywhere in the statute. But it has acquired a definite connotation through various judicial pronouncements. In Sir Chunilal v. Mehta and Sons Ltd. vs. Century Spinning and Mfg. Co. Ltd. [AIR 1962 SC 1314], the Apex Court laid down the following tests to determine whether a substantial question of law is involved. The tests are :(1) whether directly or indirectly it affects substantial rights of the parties, or, (2) the question is of general public importance, or, (3) whether it is an open question in the sense that issue is not settled by pronouncement of the Supreme Court or Privy Council or by the Federal Court, or, (4) the issue is not free from difficulty, and (5) it calls for a discussion for alternative view.
J U D G M E N T
V.B. GUPTA, J.
1.Present appeal under Section 260A of the Income Tax Act, 1961 (for short as 'Act') has been filed by the Revenue against the order dated 17th November, 2006 passed by the Income Tax Appellate Tribunal (for short as 'Tribunal'), New Delhi in ITA No.1700/Del/2003 for the assessment year 1995-96.
2. The Assessee is a public limited company and is carrying on the business in finance, investments and leasing. While completing the assessment under Section 143(3) of the Act, the Assessing Officer noted that the Assessee had raised share capital to Rs.75 lacs by a public issue made on 23rd January, 1995. In the public issue, 7,50,000/- equity shares were offered to the public at the face value of Rs.10 per share. The promoters of the company made a private contribution of Rs.2,25,05,000/-. The Assessee was called upon to prove the genuineness of the share capital. The Assessee adduced evidence in support of his claim. The Assessing Officer came to the conclusion that out of the total share contribution of Rs.3,00,05,000/-, the Assessee could establish the genuineness of only Rs.1,41,69,865/- and in respect of the balance of Rs.1,58,35,135/- the Assessee could not discharge the onus to prove genuineness of the investment and as such he treated the amount as Assessee's income from undisclosed sources.
3. On appeal, the Commissioner of Income Tax (Appeals) sustained the addition of Rs.25,24,000/- out of the addition of Rs.1,58,35,135/- made by the Assessing Officer which consists of following amounts:-
(i) Contribution by 17 persons to whom summons were issued by the A.O. which were returned unserved Rs. 2,30,000/-
(ii) Contribution by 66 persons on whom summons were served but from whom no reply was received
Rs.22,94,000/- ---------------------- Total Rs.25,24,000/- ----------------------
4. Order of the Commissioner of Income Tax (Appeals) was challenged by the Assessee before the Tribunal. The Tribunal vide its impugned order deleted the addition of Rs.25,24,000/-. Hence the present appeal.
5. It has been contended by the learned counsel for the Revenue that as per Section 68 of the Act, onus is on the Assessee to establish the identity of the subscribers of the shares and the alleged investors were not existing at the given address and thus the Assessee has failed to discharge the onus which was upon him and has failed to prove the creditworthiness and genuineness of the transaction.
6. The Tribunal after considering the evidence as well as submissions of the parties, decided the matter in favour of the Assessee and against the Revenue holding that:- We are of the view that so far as the share contribution of Rs.25,24,000/- is concerned, the Assessee has discharged its onus to prove the same under Section 68 of the Act. The complete list containing the folio number, names and addresses of the applicants and the total number of shares applied for is contained in pages 10 to 25 of the paper book. The details of the allotment containing such details as the bank code/serial number, applicants' number and name, the number of shares applied for and allotted, the folio number, the distinct numbers of the shares allotted, the share certificate number, the application amount, the amount adjusted against allotment and the amount refundable or payable etc. All these details regarding the entire 7,50,000 shares have been furnished. Pages 34 to 75 contain the statements received by the Assessee from the banks containing the total summary of the amounts collected on behalf of the Assessee. Page 34 is a letter written by the Delhi Stock Exchange Association Limited on 21.2.1995 to the Assessee approving the scheme of allotment sent to the Assessee. Pages 76 to 142 contain the postal receipts for the dispatch of the share certificate to all the allottees of the shares. There is no finding that any of the shares allotted have been returned to the Assessee. Thus, copious details about the public issue have been furnished by the Assessee at the assessment stage with regard to the entire share contribution including the contribution of Rs.25,24,000/- received from different persons. With specific reference to the 17 cases where the summons issued by the Assessing Officer came back unserved, the Assessee had furnished,vide written submissions filed before the Commissioner of Income Tax (Appeals), certain details which show that 12 of the 17 persons have been found to have changed their addresses and hence could not be traced by the Assessee, as pointed out on behalf of the Assessee. This fact has been highlighted by the Assessee in para 1.4 of the written submissions and though this aspect was referred by the Commissioner of Income Tax (Appeals) to the Assessing Officer for his comments, no comments were received raising an interference that what the Assessee has stated is not disputed. Four persons had refused to receive the summons and the reasons for such refusal are not known but the fact that they refused to take the summons shows that their identity is proved. As regards the single persons remaining, the position is not very clear. Similarly with regard to the 66 persons to whom the summons were served, no one had denied the share contribution. Considering the evidence in is entirety and having regard to the fact that the Assessee had adduced whatever evidence which was in its possession to the income tax authorities and also taking into account the fact that no clinching evidence contra has been brought on record by the income tax authorities with regard to the 83 persons from whom a total share contribution of Rs.25,24,000/- was received, we hold that there is no justification for sustaining the addition.
7. An appeal under Section 260A of the Act can be only in respect of a 'substantial question of law'. The expression 'substantial question of law' has not been defined anywhere in the statute. But it has acquired a definite connotation through various judicial pronouncements. In Sir Chunilal v. Mehta and Sons Ltd. vs. Century Spinning and Mfg. Co. Ltd. [AIR 1962 SC 1314], the Apex Court laid down the following tests to determine whether a substantial question of law is involved. The tests are :(1) whether directly or indirectly it affects substantial rights of the parties, or, (2) the question is of general public importance, or, (3) whether it is an open question in the sense that issue is not settled by pronouncement of the Supreme Court or Privy Council or by the Federal Court, or, (4) the issue is not free from difficulty, and (5) it calls for a discussion for alternative view.
8. Following the above principles, the Kerala High Court in M.Pappu Pillai v. ITO (2000) 243 ITR 726 has held that:- There is no scope for interference by this Court on a finding recorded when such finding could be treated to be a finding of fact. A finding of fact must, therefore, be held to have become final.
9. In the present case, these findings of the Tribunal are purely of fact as to how many applications for shares were made; how many persons have refused to receive the summons; how many persons have been unserved and whether the share holders have changed their addresses or not. The conclusion with regard to these findings made by the Tribunal is essentially factual and as such no substantial question of law is involved in the present case.
10. Under these circumstances, we find no reason to differ with the finding given by the Tribunal which is purely a finding of fact and as such the present appeal is not maintainable and the same is, hereby, dismissed.