Commissioner of Income Tax, Delhi vs Soni Associates (P) Ltd.

ITA No. 149 of 2003 is an appeal by the Revenue under Section 260A of the Income Tax Act, 1961 (''Act'') directed against the order dated 28th November 2002 passed by the Income Tax Appellate Tribunal (''ITAT'') in ITA No. 2820/Del/95 for the Assessment Year (''AY'') 1991-92.

On 6th January 2004, this Court framed the following question of law:

"Whether the ITAT is right in holding that notice dated 30th December 1992 under Section 143(2) of the Income Tax Act, 1961 addressed to M/s. Soni Associates (P) Ltd. at the address mentioned in the return was not served upon the Assessee as same was received at the said address by Ms. Asha Mehra wife of one of the Directors of the Assessee company?"

As far as ITA No. 114 of 2002 is concerned, it is an appeal by the Revenue directed against the order dated 31st December 2001 passed by the ITAT in ITA No. 2065/Del/94 for AY 1990-91. In the said appeal the question of law framed by this Court by the order dated 6th January 2004 reads as under:

"Whether the ITAT was right in taking into consideration additional evidence in the form of affidavit filed by a Principal Officer of the Assessee and whether this would not be contrary to law and particularly to Rule 29 of the Appellate Tribunal Rules, 1963?"

The facts are that the Assessee filed its return of income for AY 1990-91 on 17th December 1990. The case was picked up for scrutiny and notice under Section 143(2) of the Act was issued on 26th June 1991. In terms of the said provision, as it then existed, the notice was to be served on the Assessee on or before 30th June 1991. The case of the Assessee was that the notice was not served before 30th June 1991. Since there was no evidence regarding service of the notice, the ITAT required the Revenue to produce the requisite certificate from the postal authority. However, the Department''s Representative filed a letter dated 10th December 2001 stating that the postal authorities had communicated by a letter dated 6th December 2001 that the enquiry made by the Revenue was time barred and could not be taken up at that stage. The ITAT came to the conclusion that even if it was accepted that the date of dispatch of the notice was 27th June 1991, it could not have been served before 28th June 1991 which was the returnable date indicated in the notice. The ITAT also referred to the affidavit of the Principal Officer of the Assessee stating that no such notice had been served upon it. Since the presumption of service of notice was rebuttable and an affidavit had been filed by the Assessee, the ITAT accepted the Assessee''s contention that there was no service of notice under Section 143(2) of the Act. Therefore the assessment under Section 143(3) was held to be bad in law.

As far as ITA No. 149 of 2003 is concerned, the plea of the Revenue was that the notice dated 30th December 1992 (in relation to the return filed for AY 1991-92 on 30th December 1991) was served upon Smt. Asha Mehra, wife of Shri R.K. Mehra, one of the Directors of the Assessee, on 30th December 1992. The notice was not addressed to Smt. Asha Mehra. She was neither a Director of the company nor its authorised agent and, therefore, could not have received notices on its behalf.

The ITAT, after referring to the provisions of Section 282(1) of the Act read with Order V Rule 12 of the Civil Procedure Code, 1908 (''CPC'') concluded that the service of notice on Smt. Asha Mehra could not be treated as a service on the Assessee.

The Court finds that the question of law as far as ITA No. 149 of 2003 is concerned, stands covered against the Revenue by the decision of the Supreme Court in Assistant Commissioner of Income Tax and Another Vs. Hotel Blue Moon, where the Supreme Court has categorically held that the service of the notice under Section 143(2) of the Act upon the person to whom it is addressed is a mandatory requirement. For the purposes of Section 282(1) of the Act, it is seen that unless the person upon whom the notice was served is "an agent empowered to accept service", in terms of Order V Rule 12 CPC, such service of notice cannot be treated to be valid. In the present case, admittedly, Smt. Asha Mehra was not an agent of the Assessee duly empowered to receive notice on its behalf.

Mr. Rohit Madan, learned Senior Standing counsel for the Revenue referred to Section 292BB of the Act to urge that an objection to the service of notice as not being in accordance with the provisions of the Act could not be entertained where an Assessee has appeared in proceedings or cooperated. However, it is seen in terms of the proviso to Section 292BB of the Act, the said provision would not apply where the Assessee has raised the objection before the completion of the assessment. In any event Section 292BB of the Act has been introduced retrospectively from 1st April 2000. In that view of the matter, the question is answered in favour of the Assessee and against the Revenue.

As far as ITA No. 14 of 2002 is concerned, the decision of the ITAT has purely turned on facts. The notice was admittedly not served on the Principal Officer of the Assessee prior to 30th June 1991. The reliance by the ITAT on an affidavit filed by the Principal Officer to rebut the statutory presumption under Section 27 of the General Clauses Act cannot be said to be perverse. Consequently, the question is answered in favour of the Assessee and against the Revenue.

For the aforementioned reasons, both appeals are dismissed but in the circumstances with no order as to costs.