Requirement u/s 143(2) is of service of notice and not issue of notice. ITAT explains the law on service of notice under Income Tax Act , 1961
ABCAUS Case Law Citation:
ABCAUS 3058 (2019) (07) ITAT
Important Case Laws Cited/relied upon by the parties:
V. R. A. Cotton Mills P. Ltd. VS. UOI & Ors. (2013) 359 ITR 495 (P&H)
Banarasi Devi Vs. ITO (1964) 53 ITR 100 (SC)
CIT Vs. Avi- oil India Pvt. Ltd. (2010) 323 ITR 242 (P&H
Shanabhai P. Patel vs. R. K. Upadhyaya, ITO (1974) 96 ITR 141 (Guj)
K. Upadhyaya, ITO vs. Shanabhai P. Patel (1987) 166 ITR 163 (SC)
CIT Vs. Lunar Diamonds Ltd. (2006) 281 ITR 1 (Del.)
Pr. CIT Vs. Nexus Software Ltd. (2017) 248 taxmann 243 (Guj.)
Pr. CIT Vs. Shri Jawahar Hiranand Bhatia
In the instant appeal, the assessee had challenged the legal tenability of the order passed by the CIT(A). The assessee raised an additional ground that since the Assessing Officer had failed to issue and serve upon the appellant assessee the notice u/s.143(2) of the Income Tax Act, 1961 (the Act) within the prescribed time limit, the impugned assessment order framed was bad in law, without jurisdiction and hence null and void.
However, the Revenue contended that the notice u/s 143(2) of the Act was issued by the Assessing Officer (AO) within due time at the address given in PAN. Though it was admitted that the notice was sent at an address different from that given in the return of income, but Revenue supported the action of the AO in sending notice at the address given by the assessee in the PAN on the strength of Rule 127 of the Income-tax Rules, 1962 (the Rules). It was contended that the said rule had a retrospective application.
The Revenue place reliance on the judgment of the Hon’ble High Court in which it had been held that the date of ‘issue’ of notice be considered as compliance of the requirement of proviso to section 143(2) of the Act, which talks of `service’ of notice within the stipulated period.
The Tribunal observed that the envelope containing notice u/s.143(2) which was issued but returned by the postal authorities with remarks that the addressee was not living at the given address and the further address was not known. It was noted that the notice was sent to the assessee at the address which was different from the one mentioned in the return of income and the AO had also recorded the returned address of the assessee in the assessment order passed.
The Revenue contended that the notice was sent to the address given by the assessee in his PAN details and the system generating notice u/s. 143(2) took up such address from the PAN database. The Revenue relied upon the Rule 127 which provides that notice etc. may be delivered on any of the addresses which, inter alia, include the address available in the PAN database of the addressee under sub-clause (i) of Rule 127(2)(a). Section 27 of the General Clauses Act, 1897 was also quoted to buttress the submission of valid service of notice, once a notice is sent through registered post.
The Tribunal opined that the following was needed to be ascertain –
(i) Whether the notice u/s 143(2) was actually issued ?
(ii) Whether `issue’ of notice is equal to `service’ of notice ?
iii. Whether the notice can be considered as served by post?
(iv) Whether the notice u/s 143(2) can be deemed to have been issued/served?
Whether the notice u/s 143(2) was actually issued ?
The Tribunal opined that that the notice issued and returned by the postal authorities coupled with no further notice issued by the Department had in substance the net effect of non-issuance of notice.
Whether `issue’ of notice is equal to `service’ of notice ?
The Tribunal observed that the Hon’ble Supreme Court ruled that a clear distinction has been made out between the “issue of notice” and “service of notice” under the 1961 Act. Thus, the Tribunal opined that following the law by the highest court of the country, there remained no doubt whatsoever that `issue of notice’ could not be substituted with `service of notice’.
The Tribunal observed that the Hon’ble jurisdictional High Court in the several decisions had held that service of notice u/s. 143(2) within the prescribed time is sine qua non for completion of assessment u/s. 143(3) of the Act.
The Tribunal opined that issuance of notice is different from service of notice and the two words cannot be used interchangeably.
Whether the notice can be considered as served by post?
The Tribunal observed that Section 282 of the Act has caption `Service of notice generally’. Sub-section (1) provides that : `The service of a notice or summon or requisition or order or any other communication under this Act (hereafter in this section referred to as “communication”) may be made by delivering or transmitting a copy thereof, to the person therein named,—(a) by post or by such courier services as may be approved by the Board; or…’.
The Tribunal noted that the term service by post has not been specifically defined in the Act. Thus, meaning of this expression given in the General Clauses Act becomes important.
The Tribunal observed that Section 27 of the General Clauses Act, 1897, deals with the meaning of `service by post’. It states that: `Where any (Central Act) or Regulation made after the commencement of this Act authorizes of requires any document to be served by post, where the expression “serve” or either of the expressions “give” or “send” or any other expression in 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’.
The Tribunal opined that it is manifest from the mandate of section 282 of the Act read with section 27 of the General Clauses Act that these provisions deal with the service of notice and more particularly the service of notice by post. Section 27 provides that service by post shall be deemed to be effected by properly addressing, pre-paying and posting by registered post. It means that when a letter containing the document is properly addressed, pre-paid and posted by a registered post, it will be considered as a valid service. It is not the end of the provision. There is a specific mention of the words `unless the contrary is proved’. It means that the presumption of valid service on properly addressing, pre-paying and positing by registered post is not irrebuttable. It can be rebutted if the contrary is proved.
The Tribunal pointed out that in the instant case, the contrary had been proved inasmuch as the Department had itself accepted that the notice sent by the registered post was returned by the postal authorities. Under such circumstances, there could not be no presumption of valid service of notice in terms of the above provisions.
With respect to the reliance placed by the Revenue on Rule 127, the Tribunal opined that the said rule simply provides different addresses of the assessee at which a notice etc. can be delivered or in other words served. This rule does not dispense with the otherwise legal requirement of serving the notice. Its effect is limited to the extent that if a notice etc. is delivered or served at the address given in the PAN, which may be different from the address given in the return of income, the assessee cannot assail the valid service of such a notice. But the fact of the matter is that the notice etc. must be delivered at the one of addresses given in the rule.
The Tribunal was of the view that simply issuing a notice at the address given in PAN etc., which was not delivered to the assessee, may satisfy the requirement of the initial issue of notice at the correct address but not that of service of such notice until such notice is actually delivered or served.
The Tribunal opined that when no notice u/s 143(2) was delivered or served upon the assessee, rule 127 does not assist the case of the Revenue in any manner. The Tribunal clarified that the question as to whether or not the rule 127 will have retrospective effect was left open as adjudication on this issue was not warranted in the facts of the instant case since the notice was not delivered or served upon the assessee at any address.
Whether the notice u/s 143(2) was deemed to have been issued/served?
The Revenue placed reliance on the provisions of section 292BB to contend that since the assessment proceedings were attended by the assessee he could not now claim that the notice was not issued or served on him.
The Tribunal observed that the said section provides that where an assessee appears in any proceedings and co-operates in an inquiry relating to the assessment etc., it shall be deemed that any notice issued under any provisions of this Act, which is required to be served, has been duly served upon him as per law. When it is so, the assessee shall be prohibited from taking any objection in any proceedings that the notice was not properly served upon him. The proviso to this section states that if an assessee raises an objection before the completion of assessment that the notice was not properly served, then the provision deeming a proper service on attending the assessment proceedings etc., shall not apply.
The Tribunal pointed out that what is relevant to note is that this section dispenses with the requirement of `service’ of notice in the given circumstances and not the `issue’ of notice. If a particular provision requires issue of notice within a stipulated period and no notice is actually issued, even though the requirement of service of notice will stand satisfied with the assessee attending the assessment proceedings, but the Revenue will still have to independently prove that the notice was issued. If issuance of a notice is not established, the adverse consequences will follow.
The Tribunal noted that the assessee did raise objection of the non-service of notice before the AO before the completion of assessment and such an objection had not been disposed of by the AO either in the assessment order or otherwise. Accordingly, proviso to section 292BB got magnetized and the deemed service of notice u/s.143(2), by virtue of the main part of the section 292BB, was erased.
The Tribunal opined that since the requirement of `service’ of notice u/s 143(2) and not its `issue’, is a jurisdictional condition, in the instant case, the AO lacked jurisdiction to make the assessment.
The Tribunal held that the assessment order passed in absence of a valid jurisdiction and quashed the same.