Commissioner of Income Tax vs Sunil Kumar Chhabra

M.M. Kumar, J.—This order shall dispose of IT Appeal Nos. 85 and 287 of 2011 preferred by the Revenue under s. 260A of the IT Act, 1961 (for brevity, ''the Act''), against the orders) dt. 10th Sept., 2010 and 15th June, 2011 respectively, passed by the income tax Appellate Tribunal, Amritsar Bench, Amritsar (for brevity, ''the Tribunal'') because common question of law and facts are involved in these appeals. Facts of these appeals may first be noticed.

ITA No. 85 of 2011

The assessee-respondent during the relevant asst. yr. 2006-07 has been doing the business of Bucks and Quickies (agencies). On 10th Jan., 2007, the assessee-respondent filed his return declaring an income of Rs. 2,48,660, which was processed by the AO under s. 143(1) of the Act. The case was taken up for scrutiny and a notice under s. 143(2) of the Act was issued on 26th Oct., 2007. The AO also issued other statutory notices to the assessee-respondent. In response, the assessee-respondent appeared from time to time and furnished all the information. After completing all the formalities, the AO added an income of Rs. 43,91,913 and accordingly assessed the income of the assessee-respondent as Rs. 46,40,573 as against the returned income of Rs. 2,48,660. vide order dt. 19th Dec, 2008. The AO came to the conclusion that disallowance of rebate and discount paid by the assessee-respondent to the customers was not rebate and discount but commission paid by him to the customers on which no TDS as required under s. 194H of the Act, was deducted and thus, it violated the provisions of s. 40(a)(ia) of the Act (A-1).

The assessee-respondent preferred an appeal before the CIT(A), Jalandhar, against the order dt. 19th Dec, 2008, inter alia, raising the ground that the AO has exceeded the jurisdiction under s. 143(2) of the Act because the notice dt. 26th Oct., 2007, issued under s. 143(2) of the Act, was sent to an address at which the assessee-respondent was not available. Therefore, no presumption of service of notice upon the assessee-respondent, under s. 143(2) of the Act, within the period of limitation of 12 months of the end of the month in which the return was filed, could be drawn. On 13th Nov., 2009, the CIT(A), Jalandhar, allowed the appeal by holding that for assuming jurisdiction to pass an assessment order under s. 143(3) of the Act, service has to be effected by the AO within 12 months of the end of the month in which the return was filed. The CIT(A), Jalandhar, set aside the order dt. 19th Dec, 2008. passed by the AO (A-2).

Feeling aggrieved, the Revenue-appellant filed an appeal before the Tribunal. The Tribunal has found that the notice dt. 26th Oct., 2007 under s. 143(2) of the Act was sent to the assessee-respondent on the address i.e. ''M/s Chhabra Agencies, Attari Bazar, Jalandhar City'', whereas in the return filed by him the address given was ''8, G.T.B. Nagar Extension, Jalandhar''. No evidence has been placed on record showing that the said notice was delivered on the assessee-respondent or his Authorised Representative. It has also come on record that the next notice under s. 143(2) of the Act, dt. 17th June, 2008, was issued on the correct address, which was served personally on the assessee''s counsel. Accordingly, the Tribunal has dismissed the appeal of the Revenue- appellant vide order dt. 10th Sept., 2010 (A-3).

ITA No. 287 of 2011

In this case, the assessee-respondent during the relevant asst. yr. 2005-06 was doing the business of manufacturing and sale/purchase of pipe fitting items. On 31st Oct., 2005, a return of income was filed declaring total income at Rs. 1,24,114. On 27th Sept.. 2006 a survey under s. 133A of the Act was carried out at the business premises of the assessee-respondent and certain incriminating documents were found and impounded. The case was selected for scrutiny as per the instructions of the Central Board of Direct Taxes (CBDT). On 24th Oct., 2006, a notice under s. 143(2) of the Act was issued to the assessee- respondent for hearing on 2nd Nov., 2006. The notice is claimed to have been served on the assessee-respondent on 26th Oct., 2006. No one appeared on behalf of the assessee-respondent on 2nd Nov., 2006. Later on the proceedings were attended by Shri K. Bhagat, chartered accountant along with Shri R.K. Khanna, partner of the assessee- respondent firm. On 28th Dec, 2007, the AO finalised the assessment proceedings determining the total income at Rs. 62,25,279 (A-1).

The assessee-respondent challenged the order dt. 28th Dec, 2007 by filing an appeal before the CIT(A), Jalandhar. Initially the ground of service of notice under s. 143(2) of the Act was not pleaded in the grounds of appeal. However, during the course of the proceedings before the CIT(A), an additional ground was taken that the assessee-respondent was not served the notice under s. 143(2) of the Act within the prescribed period of limitation. On 22nd March, 2010, the CIT(A), Jalandhar, allowed the appeal of the assessee-respondent by holding that there is no evidence of service of notice under s. 143(2) of the Act upon the assessee-respondent within the prescribed period. The CIT(A) has noticed that though there was a mention in the order of the AO about issuance of notice under s. 143(2) on 24th Oct., 2006 but the entry is undated and there is no evidence in the shape of office copy of the said notice on record. It has been further noticed that the assessment record is page numbered and there were no missing pages. The questionnaire allegedly sent along with the notice dt. 24th Oct., 2006, was dt. 9th Nov., 2006 (A-2).

The Revenue-appellant filed further appeal before the Tribunal challenging the order dt. 22nd March, 2010 passed by the CIT(A), Jalandhar. The Tribunal after extracting the relevant paras of the findings recorded by the CIT(A), sustained the order dt. 22nd March, 2010 and dismissed the appeal of the Revenue-appellant vide order dt. 15th June, 2011 (A-3).

Having heard learned counsel for the parties and perusing the paper books we are of the considered view that no substantial question of law arises in these appeals for determination by this Court. The Tribunal has recorded pure findings of facts. In so far as IT Appeal No. 85 of 2011 is concerned, it has come on record that the notice dt. 26th Oct., 2007 under s. 143(2) of the Act was sent on a wrong address. Furthermore, the Revenue-appellant has not brought on record any evidence showing delivery of the said notice on the assessee-respondent or his Authorised Representative. Therefore, under no circumstances it could be presumed that notice has been served on the assessee-respondent within the prescribed period of limitation as per s. 143(2)(ii) of the Act, which requires that the notice has to be served on the assessee after [sic- before) the expiry of twelve months from the end of the financial year in which the return is furnished. Sec. 27 of the General Clauses Act, 1897, explains the meaning of ''service'' by post and reads as under :

Meaning of service by post-Where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression ''serve'' or either of the expressions ''give'' or ''send'' or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by property addressing, prepaying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post." (Emphasis, italicized in print, by us)

From the bare perusal of s. 27 of the General Clauses Act it is clear that service would be deemed to be sufficiently effected if a letter containing the document is properly addressed, prepared (sic-prepaid) and posted by registered post. In the present case the notice in question has not been properly addressed, which is amongst a condition precedent for inferring ''service''.

Similarly, in the other case, the Revenue-appellant has not been able to substantiate from the record of the assessment proceedings that any notice under s. 143(2) of the Act was issued on 24th Oct., 2006. It has been categorically observed by the CIT(A) in his order dt. 22nd March, 2010 that the return was processed under s. 143(1) on 23rd March, 2006 and in the noting of first order sheet no date has been mentioned by the AO. The first notice under s. 143(2) of the Act, which is available on the assessment record, is dt. 9th Nov., 2006. Therefore, we see no legal infirmity in the view taken by the Tribunal as well as the CIT(A), Jalandhar in both the cases. There is no merit in these appeals warranting admission.

The learned counsel for the Revenue-appellant has placed reliance on the Division Bench judgment of this Court rendered in the case of V.R.A. Cotton Mills (P) Ltd. vs. Union of India & Ors. (Civil Writ Petn. No. 18193 of 2011, decided on 27th Sept., 2011) [reported at (2012) 250 CTR (P&H) 188: (2012) 70 DTR (P&H) 439 -Ed.]. The Division Bench in the said case has interpreted the expressions ''serve'' and ''issue'' in the light of the judgments of Hon''ble the Supreme Court rendered in the cases of Banarasi Devi Vs. Income Tax Officer, Calcutta, Collector of Central Excise, Madras Vs. M.M. Rubber and Co., Tamil Nadu, M/s. Indian Drugs and Pharmaceuticals Ltd. Vs. M/s. Indo Swiss Synthetics Gem Manufacturing Co. Ltd. and others, State of Punjab Vs. Khemi Ram, Assistant Commissioner of Income Tax and Another Vs. Hotel Blue Moon, Kunj Behari Vs. Income Tax Officer and Others, , Commissioner of Sales Tax and Others Vs. Subhash and Company, and a Division Bench judgment of this Court rendered in the case of Commissioner of Income Tax Vs. Avi-Oil India P. Ltd., ). In the penultimate para of the judgment rendered in the case of V.R.A. Cotton Mills (P) Ltd. (supra) the Division Bench has observed as under :

......The expression serve means the date of issue of notice. The date of receipt of notice cannot be left to be undetermined dependent upon the will of the addressee. Therefore, to bring certainty and to avoid attempts of the addressee to evade the process of receipt of notice, the purpose of the statute will be better served, if the date of issue of notice is considered as compliance of the requirement of proviso to s. 143(2) of the Act. In fact that is the only conclusion that can be arrived at to the expression ''serve'' appearing in s. 143(2) of the Act.

However, we are of the considered view that the Division Bench judgment in the case of V.R.A. Cotton Mills (P) Ltd. (supra) is totally distinguishable on the facts of the present cases because it has been established that in one case the Revenue-appellant has sent the notice under s. 143(2) of the Act on a wrong address and in the other case the Revenue-appellant has not been able to substantiate by adducing any evidence that any notice under s. 143(2) was issued within the prescribed period of limitation. As a sequel to the above discussion, these appeals fail and the same are accordingly dismissed.