Income Tax Notice by Speed Post held not served properly as it returned back and was not sent by registered post to qualify u/s 27 of General Clauses Act as per judgment of Supreme Court – ITAT
ABCAUS Case Law Citation:
1026 (2016) 09 ITAT
Main Ground of appeal:
The main ground of appeal raised by the assessee in this case was that notice under section 143(2) of the Income Tax Act, 1961 which was sent by speed post was not properly served upon the assessee, as the assessee was abroad at the time of alleged service of notice.
Brief Facts of the Case:
The income tax return of the assessee was selected for scrutiny under CASS and a notice u/s 143(2) was sent to the assessee fixing the case for hearing. However the said notice returned back with the remark of the postman that the addressee had left India. As the notices was returned back, no one appeared before the AO and eventually the assessment was made under section 144.
On appeal, CIT(A) also upheld the assessment made u/s 144.
Judgments relied by the CIT(A)
The CIT(A) had heavily place reliance on several judgments of the Supreme Court.
In the case of Madan & Co vs Wazir Jaivir Chand under Jammu & Kashmir Houses & Shops Rent Control Act, 1966 , the Apex Court had held that a notice had to be served through post. Their Lordships held that all that a landlord could do to comply with this provision was to post a prepaid registered letter (acknowledgment due or otherwise) containing the tenant’s correct address. Once he did that and the letter was delivered to the post office, he had no control over it. It was then presumed to have been delivered to the addressee under s. 27 of the General Clauses Act. It was opined that that to interpret the provision as requiring that the letter must have been actually delivered to the addressee, would be virtually rendering it a dead letter. It was held that if a registered letter addressed to a person at his residential address did not get served in the normal course and was returned, it could only be attributed to the addressee’s own conduct. They held that of the addressee was compelled to be away for some time, all that he had to do was to leave necessary instructions with the postal authorities.
Further, in the case of K. Bhaskaran vs. Sankaran Yaidhyan Balan related to service of notice u/s 138 of the Negotiable Instruments Act, where the notice sent by the complainant through registered post was returned by the postal authorities with the remarks “unclaimed” and the defendant pleaded that he was not aware of the notice and, therefore, could not be held to be guilty of not complying with the notice to make the payment within 15 days of the amount in respect of the bounced cheque. The Apex Court have held in this decision that the situation would amount to refusal of the registered article and that the service of notice was deemed to have been made on the defendant.
Contentions of the assessee:
The assessee submitted that admittedly the notice was not served upon him, which was apparent since the envelop containing notice was returned back with the remarks by the Postal Authorities “Addressee Left India”. That the assessee had not authorized anybody (including maid servant) to receive notice on his behalf. It was submitted that CIT(A) had held that since the assessee was issued notice under section 143(2) of the Act, by registered post and therefore, it was a deemed service of notice and while holding such finding, the CIT(A) had relied upon a number of judgments. However, it was submitted that the judgments relied upon by the CIT(A) were not applicable to the facts and circumstances of the present case, as admittedly the notice was not issued by Registered Post, as it was sent through Speed Post.
The assessee relied on the judgment of the Supreme Court in the case of ACIT vs. Hotel Blue Moon the assessment completed without service of notice u/s 143(2) was not a valid assessment.
Observations made by the Tribunal:
It was observed by the Tribunal that the notice u/s 143(2) was sent by speed post and not by Registered Post whereas the CIT(A) had held that notice was sent by Registered Post and had relied upon number of case laws for the proposition that in a case where Registered notice is sent, there is a deemed service of notice.
According to the CIT(A), the “registered article” was duly tendered at the house of the appellant, the postman had stated that a maid servant was available at the house in this period when the notice was sought to be served. The postman had also stated that he used to serve all the articles including registered articles to the appellant’s servant only. It indicated that the servant of the appellant was authorised to receive registered articles on his behalf.
The CIT had referred to section 282 of the Income Tax Act which deals with service of notice. CIT(A) held that under sub-section (1) the AO could serve a notice either by post or in the manner provided under the Code of Civil Procedure 1908.
To define the meaning of the term ‘service by post’ CIT(A) had referred to section 27 of the General Clauses Act, 1897 as under:
“27. 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 properly addressing, pre- paying 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.”
Further, the CIT(A) had held that if the notice u/s 143(2) sent by registered post to the correct address is returned back by the postal authorities because the addressee was not available at his address and there was no agent authorised by the assessee to receive the registered notice on behalf of the addressee, accepting the assessee’s contention would imply that no valid proceedings u/s 143(2) can be initiated in such a case even though the notice was sent by a method prescribed under law.
According to CIT(A) It would lead to a situation where even though the notice was properly issued by the AO in time by registered post and the registered article also reached the assessee’s address within the limitation period of service of notice on the assessee, the proceedings would be held to be invalid because the notice was not handed over to the appellant or to his authorised agent.
The ITAT noted that CIT(A) heavily placed reliance on the case law(s), where the notice was sent through Registered Post, whereas the fact remains that the notice was not sent through Registered Post. Therefore, the case laws relied upon by the ld. CIT(A) were not applicable to the facts and circumstances of the case.
The ITAT observed that the Supreme Court in the case of Hotel Blue Moon had held that service of notice under section 143(2) of the Act, is a mandatory requirement and without service of such notice, the assessment is not a valid assessment.
Further, the Tribunal noted that following the decision of the Supreme Court, the Allahabad High Court in the case of CIT, Lucknow vs. Salarpur Cold Storage (Pvt.) Ltd. had clearly held that assumption of jurisdiction without issuing of notice u/s 143(2) cannot be cured even by taking recourse to deeming fiction u/s 292BB of the Act.
The ITAT cancelled the assessment made u/s 144.