Vildirect: IncomeTax-caselaws-2004-VIL-266-ITAT-DEL

2004-VIL-266-ITAT-DEL

Equivalent Citation: ITD 092, 415, TTJ 093, 224, [2005] 274 ITR (A. T.) 61 (ITAT [Del])

Income Tax Appellate Tribunal DELHI

Date: 09.11.2004

HIND BOOK HOUSE.

INCOME-TAX OFFICER.

BENCH

Member(s) : R. V. EASWAR., P. M. JAGTAP.

JUDGMENT

Per P.M. Jagtap, Accountant Member. - This appeal by the assessee is directed against the order of learned CIT (A)-XXV, New Delhi dated 25-11-1999 and the preliminary issue which arises for our consideration out of the same is whether the notice claimed to have been issued by the Assessing Officer under section 143(2) was validly and properly served on the assessee within the specified time limit in compliance with the statutory requirement or not.

2. The relevant facts of the case, which are not in dispute, are that the assessee firm is engaged in the business of dealing in books and journals published from abroad. It filed its return of income for the year under consideration declaring a loss of Rs. 10,200 on31-10-1997. The case of the assessee was selected for scrutiny and in the absence of sufficient compliance on the part of the assessee to the notices issued by him during the course of assessment proceedings, the Assessing Officer proceeded to complete the assessment under section 143(3)/144 assessing the total income of the assessee at Rs. 20,00,000 as against the returned loss of Rs. 10,200. Aggrieved by the same, the assessee firm preferred an appeal before the learned CIT(A) challenging, inter alia, the validity of the order passed by the Assessing Officer under section 143(3) on the ground that no notice under section 143(2) was served on it within the time limit specified in the proviso to the said sub-section. Examination of assessment record by the learned CIT(A), however, revealed that the first notice issued under section 143(2) was served at the address given by the assessee in its return and the same was also signed by the recipient as 'A. Singh'. It was, however, submitted on behalf of the assessee firm that the said signature appearing on the office copy of notice under section 143(2) docs not belong either to any of its partners or authorized representative. It was also submitted that there is no person employed with the assessee firm who could have signed as Mr. A. Singh. It was, therefore, alleged that the said notice apparently has been served on a fictitious person not related to the assessee. An affidavit of the partner of the assessee firm was also filed before the learned CIT(A) in support of the same. A copy of the said affidavit along with the written submission filed by the assessee was forwarded by the learned CIT(A) to the Assessing Officer who, vide his letter dated8-11-1999, confirmed of having served the said notice under section 143(2) to the assessee on10-7-1998through the Process Server who was stated to have obtained the acknowledgement. It was also stated by the Assessing Officer in the said letter that the assessee has been carrying on its business at the same premises for several years and, therefore, there was no possibility of notice being served at any other premises instead of the premises of the assessee situated at 82, Janpath,New Delhi. It was further submitted by the Assessing Officer that there is no fixed procedure to be followed for the service of notice and the notice having been served at the premises of the assessee and the same having been acknowledged as such, there was no reason for the Process Server to disbelieve that the person receiving the said notice is authorized to receive the same. It was also pointed out by the Assessing Officer that the assessee firm has never given any instructions to the Department to the effect that only the specified persons have been authorized to receive any communication from the Department. The stand of the Assessing Officer, therefore, was that the notice issued under section 143(2) had been validly served on the assessee in compliance with the relevant statutory requirements. The learned CIT(A) was convinced by the submissions made by the Assessing Officer in his remand report and relying on the same, he rejected the contention of the assessee firm that notice under section 143(2) was not properly served on it within the time limit specified in proviso to section 143(2).

3. We have heard the arguments of both the sides and also perused relevant material on record. At the outset, we may observe that the submissions made by the Assessing Officer in his remand report submitted before the learned CIT(A) to the effect that there is no fixed procedure to be followed for service of the notice, is totally incorrect. The procedure for service of notice is provided specifically in section 282 of the Income-tax Act, 1961 which reads as under: -

"282. (1) A notice or requisition under this Act may be served on the person therein named either by post or as if it were a summons issued by a court under the Code of Civil Procedure, 1908 (5 of 1908).

(2) Any such notice or requisition may be addressed-

(a) in the case of a firm or a Hindu undivided family, to any member of the firm, or to the manager or any adult member of the family;

(b) in the case of a local authority or company, to the principal officer thereof;

(d) in the case of any other person (not being an individual), to the person who manages or controls his affairs."

4. As is evident from the aforesaid provisions, a notice may be addressed in the case of a firm to any of its partners in addition to the firm itself in whose name the said notice is issued. As per the provisions contained in sub-section (1) of section 282, such notice has to be served either by post or as if it were a summons issued by a Court under the Code of Civil Procedure, 1908. Order V of Code of Civil Procedure, 1908 contains the provisions relating to issue and service of summons. Rules 12,13,15,16 & 18 of Order V, which are relevant in the present context, are reproduced below: -

"12. Service to be on defendant in person when practicable, or on his agent-Wherever it is practicable, service shall be made on the defendant in person, unless he has an agent empowered to accept service, in which case service on such agent shall be sufficient.

13. Service on agent by whom defendant carries on business-(1) In a suit relating to any business or work against a person who does not reside within the local limits of the jurisdiction of the Court from which the summons is issued, service on any manager or agent, who, at the time of service, personally carries on such business or work for such person within such limits, shall be deemed good service.

15. Where service may be on an adult member of defendant's family- Where in any suit the defendant is absent from his residence at the time when the service of summons is sought to be effected on him at his residence and there is no likelihood of his being found at the residence within a reasonable time and he has no agent empowered to accept service of the summons on his behalf service may be made on any adult member of the family, whether male or female, who is residing with him.

16. Person served to sign the acknowledgement-Where the service officer serves or tenders a copy of the summons to the defendant personally, or to an agent or to other person on his behalf, he shall require the signature of the person to whom the copy is so delivered or tendered to an acknowledgement of service endorsed on the original summons.

18. Endorsement of time and manner of service-The serving officer-shall, in all cases in which the summons has been served under Rule 16, endorse or annex, or cause to be endorsed or annexed, on or to the original summons, a return stating the time when and the manner in which the summons was served and the name and address of the person (if any) identifying the person served and witnessing the delivery or tender of the summons."

5. A conjoint reading of section 282 of the Income-tax Act, 1961 and the relevant provisions of Civil Procedure Code reproduced above shows that notices under the Income-tax Act are required to be served on the assessee in accordance with the provisions of section 282 and the same may be served personally upon the person named therein or upon his agent duly authorized. As per Rule 12 of Order V of CPC, a service has to be made, wherever it is practicable, on the person named therein unless he has an agent empowered to accept service in which case service on such agent is sufficient. In terms of Rule 13(1), a notice against a person who does not reside within the jurisdiction of the concerned agent, service on any Manager or agent who, at the time of service, personally carries on such business or work for such person within such limits shall be deemed to be good service. In terms of Rule 14, when service cannot be made on the person named therein, the same may be made, in the absence of an agent empowered to accept the service of summons, on any agent of such person in charge of the property of the defendant. As per Rule 15, where the defendant is absent from his residence when the service is sought to be effected and there is no likelihood of his return within a reasonable time and there is no agent empowered to accept service of the summons on his behalf, service may be made on any adult member of the family, whether male or female, who is residing with him. Service of notice on a person who is employed by the assessee, however, is not valid unless such person is authorized specifically to receive notices etc. on behalf of the assessee and the fact that such person accepted the service of notices and assessee acted on such notice in the past does not enable the Department to treat such person as an authorized agent of the assessee as held by Hon'ble Madras High Court in the case Jayanthi Talkies Distributors v. CIT [1979] 120 ITR 576 and by Hon'ble Allahabad High Court in the case of Addl. CIT v. Prem Kumar Rastogi [1980] 124 ITR 381. Nevertheless, where the facts show that notices served on an employee of the assessee ultimately reached the assessee and the assessee has responded to such notice without raising any objection regarding the service of notice, then the assessee may be deemed to have waived the irregularity in the service of notice as held by Hon'ble Bombay High Court in the case of K.C. Tiwari & Sons v. CIT [1962] 46 ITR 236, Hon'ble Gujarat High Court in the case of CIT v. Bhanji Kanji's Shop [1968] 68 ITR 416 and Hon'ble Calcutta High Court in the case of CWT v. Mrs. Illa Pal Choudhury [1971] 82 ITR 936. In the case of B. Johar Forest Works v. CIT [1977] 107 ITR 409, the Hon'ble J & K High Court has held that service of notice otherwise than by post on an employee is invalid being not in accordance with the provisions despite the fact that the notice, in fact, had in some way or other reached the assessee. Where the assessee admits the receipt of the notice and proceeds to act in response to such notice without any objection, he should be deemed to have waived the irregularity in the service of notice. However, the counsel or a lawyer cannot waive the rights of his clients without referring the matter to him and without the later's acknowledgement and any such waiver if made will not bind the assessee.

6. As far as service of notice in case of firm is concerned, such notice in terms of clause (a) of sub-section (2) of section 282 of the I.T. Act may be addressed to any member of the firm. However, this enabling provision does not detract from the general proposition that, just like any other assessee, a firm may be addressed in its own name. Hence, the notice issued in the name of the firm and served on one of its partners is quite valid and proper. Section 282(2)(a) merely prescribes a permissive mode of service and is not intended to be either mandatory or exhaustive. Consequently, the circumstance that the notice is not addressed to a partner will not invalidate the same if in fact it is served on the partner and accepted by him on behalf of the firm. A notice served on one of the partners of the firm is a sufficient notice to satisfy the requirements of law. However, notice issued to a firm cannot be validly served through Process Server on its employees who are not authorized to receive such notices as held by Hon'ble J & K High Court in the case of B. Johar Forest Works and Hon'ble Madras High Court in the case of Jayanthi Talkies Distributors. Similarly, service of notice relating to a firm on a person not connected nor concerned in any manner with the firm would be no service at all as held by Hon'ble Allahabad High Court in the case of Shri Sidh & Co. v. ITAT [1992] 194 ITR 747.

7. Where the notice is not served by post, it has to be established by the Revenue that the service has been effected as if the notice is a summons issued by the Court under CPC. Rule 16 of Order V of CPC provides that when the serving officer delivers or tenders a copy of the summons to the defendant personally or to an agent or other person on his behalf, he shall require the signature of the person, to whom the copy is so delivered and rendered, to an acknowledgement of service endorsed on the original summons. Rule 18 of the said order further provides that the serving officer shall in all cases in which the summons has been served under Rule 16, endorse or annex or cause to be annexed or endorsed on or to the original summons returned stating the time and the manner in which the summons had been served and the name and address of the person, if any, identifying the persons serving and witnessing the delivery or tender of the summons. These provisions clearly point out that the evidence admissible to prove proper service of notice is a report by the person who is said to have effected the service. Where at any stage there is determination by the ITO of the fact whether there is proper service of notice and no report is available on record from any person, who has the personal knowledge of the service of such notice, its service cannot be said to have been proved by admissible evidence as held by Hon'ble Bombay High Court (Nagpur Bench) in the case of Hardeodas Jagannath v. ITO 30 ITR 695 (sic). In the case of R.L. Narang v. CIT [1982] 136 ITR 108, Hon'ble Delhi High Court has held that where a notice is served through a Process Server and there is neither the service report nor evidence to point out the identity of the person on whom the service is effected, it cannot be said that there is a proper service of notice. In the case of CIT v. Thayaballi Mulla Jeevaji Kapasi [1967] 66 ITR 147, Hon'ble Supreme Court has held that the onus is on the Revenue to establish that the service was made either on the assessee himself or on somebody duly authorized by him to receive such notice. Although section 114 of the Indian Evidence Act raises a presumption that all the official acts are regularly performed, such presumption only relates to the proper performance of an act where that act is proved to have been done. Obvious as it is, such presumption does not relate to the doing of the very act whose performance itself is in question as held by Hon'ble Bombay High Court in the case of Rasiklal Amritlal Doshi v. A. Nundy, Addl ITO [1961] 42 ITR 35. Hence, the said presumption made available by the Indian Evidence Act cannot by itself constitute the basis for proving the service of notice.

8. In the present case, the notice purportedly served on the assessee firm was neither served on any of its partners or its agent duly authorized to receive the said notice. As is evident from the record, the same was served on one Mr. A. Singh who was neither the agent of the assessee firm duly authorized to receive the said notice on its behalf nor even its employee. The said person to whom the notice in question was claimed to be served and who had even acknowledged receipt of the same, was neither identified by the notice server nor delivering or tendering of the said notice to him was witnessed as required by Rule 18 of Order V of CPC. Before the learned CIT(A) as well as before us, the plea raised on behalf of the assessee firm has been that the said notice was not received by it as claimed by the Revenue and it was, therefore, incumbent upon the Department to place on record the relevant material to establish that the service was made either on the assessee firm itself or any of its partners or on somebody else duly authorized by it to receive such notice. The Revenue, however, has failed to discharge this onus that lay on it. Having regard to all these facts of the case and keeping in view the specific provisions of section 282 of the I.T. Act read with relevant provisions of CPC as discussed hereinabove as well as the legal position emanating from the aforesaid judicial pronouncements, we are of the view that there was no valid service of notice on the assessee under section 143(2) within the time specified in the proviso to the said section and in the absence of compliance of the said statutory requirement, the assessment completed in pursuance of the said notice was ab initio invalid. The same is, therefore, quashed allowing the appeal of the assessee.

9. In the result, the appeal of the assessee is allowed.

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