Income Tax Notice served on security guard at factory held validly and properly served under the provisions of Section 282(2) of the Income Tax Act, 1961-High Court
The instant appeal was filed by the Revenue challenging the orders passed by the Income Tax Appellate Tribunal(Tribunal/ITAT) holding that notice u/s 147 / 148 of the Income Tax Act, 1961 (the Act) was not served legally.
ABCAUS Case Law Citation
ABCAUS 2356 (2018) 06 HC
In the instant case, the return of income filed by the respondent-assessee declaring nil income was treated as non est on account of bring filed belatedly beyond statutory time allowed. Consequently, after recording “reasons to believe” in writing, a notice was issued under Section 148 read with Section 147 of the Act, calling upon to file its return for the relevant assessment year.
This notice was sent by registered post and as claimed was also served on the respondent-assessee through Inspector of Income Tax Department at its factory at Industrial Area.
The assessee did not file return in response to the said notice, though the director of the assessee company appeared before the Income Tax Authorities and on his request reasons recorded for issue of notice and a copy of the notice under Section 148 were furnished to hum.
While the proceedings were pending, jurisdiction was transferred from the AO who had issued notice u/s 148 to another AO.
During the course of the assessment proceedings, objection was raised by the assessee questioning the jurisdiction of the Assessing Officer who had issued notice under Section 147/148 of the Act. This contention was rejected.
Later, assessment order was passed under section 144 of the Act to the best of judgment of the AO making additions and invoking Section 68 of the Act.
Commissioner of Income Tax (Appeals) upheld the action of the Assessing Officer.
However, the Tribunal allowed the appeal of the assessee on the ground that notice under Section 148 of the Act issued by the AO was not served as per Section 282 of the Act. The service of notice which was not addressed to the principal officer but to the company itself and affected through Inspector at its factory office at Industrial Area was not on any director or any person authorised by the respondent-assessee to receive the notice but on the Security Guard. The Inspector while effecting service had recorded that the factory was not working and only security guards were present.
The ITAT held that service of the notice on the security guard, who was not authorised to receive notice was invalid and therefore the re-assessment proceedings were entirely void and bad in law. The Tribunal placed reliance on various judgments of the Hon’ble Supreme Court and High Court wherein it was held that when an assessee pleads that he had not been served with notice, it was for the department to place relevant material to substantiate and prove that the assessee was served.
The Hon’ble High Court observed that provisions of Section 282 of the Act dealt with procedure for service of notice and are meant to ensure compliance of principles of natural justice and for ease of service, and not for hairsplitting and fault finding.
It was noted that Sub-section (1) to Section 282 stats that a notice or requisition could be served on the person therein named either by post or as if it were summons issued by a court under the Code of Civil Procedure, 1908. Clauses (a) to (d) of Sub-section (2) to the said Section refer to whom such notice or requisition may be addressed to in different cases such as in case of a firm or Hindu undivided family, a local authority or company, any other association or body of individuals or any other person. In case of a company notice may be addressed to the principal officer. Use of the word “may” in sub-section (2) reflects that this provision is permissive and not mandatory.
Therefore, the Hon’ble High Court opined that it would not be correct to hold as held by the Tribunal that the notice under Section 148 of the Act not being addressed to the principal officer but to the company itself was invalid and completely illegal so as to not confer jurisdiction on the assessing officer.
The Hon’ble High Court observed that notice served on account officer/ temporary employee of a dissolved firm/company gas been held to be a legal notice by various High Courts. All that mattered was whether notice was received on behalf of the assessee and was complied with. When no question about validity of service was raised before the Assessing officer or the first appellate authority but before the Tribunal for the first time, the contention loses force. Belated objection regarding service of notice before the Tribunal was adversely commented upon by the High Court.
The Hon’ble High Court observed that it has been held that when a notice or summons are sent by registered post, the constructions which apply are different from those which apply to service through a process server or an Inspector. Service through registered letters is one of the commonest types/mode of service. Where registered letter duly pre-paid and properly addressed is issued, Courts invoke presumption under Section 27 of the General Clauses Act and Illustration (f) of Section 114 of the Evidence Act. Refusal to accept notice is treated as proper service.
The Calcutta High Court had observed that mere fact that the physical delivery of the notice was made to a person, other than the addressee, who had no authority to receive the letter on the addressee’s behalf, would not be sufficient to prove lack or failure of proper service. Primary question would be whether the assessee had come to know about service at all, or whether the assessee having come to know that some notice had been served, had not made any further enquiry and had not been informed and whether the presumption raised by the Sections had been rebutted according to facts found proved in affirmative or negative.
The Hon’ble High Court observed that when objection with regard to service of notice was not taken before the Assessing Officer but before the appellate authority, the rebuttal should not be easily accepted. Such objection should be raised at the initial stage before the Assessing Officer and not after much delay.
Referring to section 292B, the Hon’ble High Court opined that the section is a broad and wide provision which lays emphasis on substance rather than form and that technicalities should not result in invalidating the proceedings, notice, orders, etc.
The Hon’ble High Court observed that the assessee had taken the plea and contested validity of service of notice on the security guard before the first appellate authority, i.e., Commissioner of Income Tax (Appeals). It was accepted and admitted that no such contention was raised before the Assessing Officer. However, it was observed that the discussion and conclusions/findings recorded by the first appellate authority, un-ambiguously did not reflect and show that ground of invalidity of service in terms of Section 282 of the Act was raised. There was no discussion on the issue; whether the service by registered post or by the Inspector on the security guard would be valid. Legal effect and consequences were not considered. The Hon’ble High Court opined that it supported the submission of the appellant-Revenue that this ground was not taken at the initial stage and when the first appeal was preferred and decided. Moreover, assessee accepted that this contention was not raised before the Assessing Officer.
The Hon’ble High Court allowed the appeal and answered the substantial question of law in favour of the appellant-Revenue and against the respondent-assessee. It was held that the assessment proceedings under Section 147/148 of the Act were not invalid or void for want of proper service of notice.
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