Judgment:
1. The assessee is in appeal before us against the combined order of the learned CIT(A) dt. 26th Nov., 2004 for asst. yrs. 1999-00, 2000-01 and 2001-02. As common issues are involved in all the three appeals, they are being disposed of together by this combined order for the sake of convenience. Besides raising certain issues on merits, the assessee has also challenged the validity of the notices issued under Section 143(2) and Section 148 of the IT Act, 1961 (the Act). We first take up the issue relating to the notice under Section 143(2) of the Act.
2. The assessee-company is a pioneer in publishing scientific, technical, medical books and journals. It has appointed several distributors for selling its books in India and has also opened a liaison office on 1st Feb., 1998, after obtaining approval from the RBI. Notice under Section 148 of the Act was issued to the assessee on 18th Dec., 2002 in response to which the assessee filed its return of income declaring nil income on 14th Feb., 2003. As mentioned by the AO in his order, notices under Sections. 143(2) and 142(1) were issued on various dates and the assessment was completed under Section 143(3) of the Act on 31st March, 2004, at a total income of Rs. 1,19,99,335.
3. Before the CIT(A), the assessee had, by way of additional ground, raised the issue relating to the notice under Section 143(2) by stating that the same was served beyond the statutory period of 12 months. The assessee's case was that since it had filed the return pursuant to notice under Section 148 on 14th Feb., 2003, as per the proviso to Section 143(2) the notice should have been served within 12 months from the end of the month in which the return is furnished. In other words, according to the assessee, the notice under Section 143(2) should have been served on it on or before 28th Feb., 2004. However, the notice was actually issued on 3rd March, 2004 which is beyond the period of 12 months and hence it was barred by limitation. A remand report was called for by the CIT(A) from the AO. The AO reported that notices under Sections. 142(1) along with the questionnaire and 143(2) were issued on 4th Nov., 2003 and they were duly served on the assessee through registered post. The receipt of the registered post was also stated to be on record. In response to this report of the AO, it was stated by the assessee that it had received only the notice under Section 142(1) along with a questionnaire dt. 4th Nov., 2003 but notice under Section 143(2) dt. 4th Nov., 2003, was not received. It was also stated by the assessee that it had carried out an inspection of the assessment records and it was found that on the order-sheet, there was a mention about notice under Section 148 only which was put up on 18th Dec., 2002. There were no noting of the hearing that took place on 18th Dec,, 2003, 29th March, 2004 and 31st March, 2004. The assessee also filed affidavits of S/Shri Rohit Kapoor and Sanjiv Goswami to this effect. The reply of the assessee and the affidavits were forwarded to the AO for his comments. It was stated by the AO that the inspection was not carried out in his presence nor there was any order-sheet entry regarding the date on which the inspection was carried out. It was further stated that a copy of the notice under Section 143(2) dt. 4th Nov., 2003 for each of the assessment years is available on record which were sent by registered post. The CIT(A) considered the reports of the AO and held that since a copy of the notice dt. 4th Nov., 2003 was available on record and since the registered post acknowledgement was also available on record, there was no substance in the additional ground raised by the assessee.
4. The submission of the learned Counsel for the assessee was that the notice issued on 3rd March, 2004 was the only notice received by the assessee under Section 143(2) of the Act. It was pointed out by him that none of the letters that originated from the assessee's side to the AO made any mention about the notice under Section 143(2).
According to him, the onus was on the Department to show as to how the notice was served. Reference was made to Section 106 of the Evidence Act. In this connection, our attention was drawn to the observations of the Hon'ble Madras High Court in the case of Ganga Bai and Anr. v.State of Tamil Nadu . Referring to the remand report of the AO and the observations of the CIT(A), it was submitted that vague expressions like "notices were issued", "it appears" have been used. The argument was that service of notice under Section 143(2) is a jurisdictional precondition for which such vague expressions are not sufficient. It was contended that when the provisos to Section 143(2) specifically used the word "served", the onus was on the Department to show that it was served and inspite of the affidavits having been filed by the assessee-company, the onus remained undischarged. Therefore, the notice under Section 143(2) having been issued beyond the period of 12 months, the assessment made pursuant thereto was invalid.
5. According to the learned Departmental Representative, both the notices along with the questionnaire were issued on 4th Nov., 2003. The office copy on the record of the Department shows that the notice was issued and the postal acknowledgement is also on record. Therefore, there is no reason to believe that the assessee did not receive the notice under Section 143(2). It was further submitted that while providing various details pursuant to the notice under Section 142(1), the assessee did not raise any objection about the non-receipt of notice under Section 143(2). With regard to the order-sheet entries, it was submitted that sometimes certain entries were not recorded therein.
In fact, even the notices which are admitted by the assessee do not find a mention in the order-sheet and it is not mandatory to record each and everything. As regards inspection also, it was submitted, there is no mention in the order-sheet.
6. In his counter reply, it was reiterated by the learned Counsel that the correspondence refers only to Section 142(1) and not 143(2) of the Act. It was submitted that the requirements of both the provisions are quite different. As regards the non-raising of the objection while replying to the notice under Section 142(1), it was submitted that the same was not raised as still there was enough time available for the issue of notice under Section 143(2).
7. We have duly considered the rival contentions and the material on record. The issue we have to resolve is whether the assessee received the notice under Section 143(2) or not. In nutshell, the contention of the Revenue is that the two notices, viz., the one under Section 142(1) and the other under Section 143(2) must have been placed in the same envelope. The copies of both the notices are on record. The acknowledgement having received the envelope is on record. The assessee does not deny the receipt of notice under Section 142(1). Under these circumstances, according to the Revenue, there is no reason for the assessee to say that it has not received the notice under Section 143(2) of the Act. 'The contentions, prima facie, are not untenable.
The original records were produced in the Court before us. We examined the same and found the averments of the Revenue to be true, except that we could not verify whether both the notices were placed in one envelope or not. This is for the reason that this fact, by its very nature, is unverifiable. Therefore, only an, inference can be drawn with regard to this fact. In this connection, there are two factual aspects which need to be taken into consideration. Firstly, prior to the issue of notice dt. 3rd March, 2004 under Section 143(2) of the Act, all the correspondence originating from the assessee refers only to the notice under Section 142(1) of the Act. By way of illustration, we refer to the letter dt. 18th Dec., 2003 (p. 25 of the paper book).
Another letter is dt. 14th Nov., 2003, which was placed before us on the date of the hearing. It can normally be presumed that if both the notices had been received by the assessee, while responding to those notices, the assessee would have given reference of both the notices.
There is no reason whatsoever as to why the assessee should refer only to the notice under Section 142(1) and not to the notice under Section 143(2) of the Act. The second aspect concerns the maintenance of its records by the Revenue. It has been averred by the assessee by way of an affidavit that inspection of the records were carried out by it and the notice under Section 143(2) dt. 4th Nov., 2003 was not found on the record. At p. 645 of the paper book is a request dt. 18th Aug., 2004, from the assessee seeking permission to inspect the records. The said letter bears a dated stamp of the Department. On the letter, there is a hand-written instruction for the assessee to deposit a sum of Rs. 100 which has been signed by Shri. S.S. Rana, an officer of the Department.
A copy of receipt dt. 19th Aug., 2004 evidencing the payment of Rs. 100 is placed on record. We verified from the original records produced before us and found that the original receipt of Rs. 100 is on record.
Below this receipt is a remark by one Nidhi Maheshwari stating "inspected the file on 20th Aug., 2004". The remark bears the signature of Nidhi Maheshwari which is dt. 20th Aug., 2004. We then verified the order-sheet entries in the original record. It was found by us that after the entry dt. 18th Dec., 2002 relating to issue of notice under Section 148, the first entry was dt. 8th March, 2004. There are no entries at all pertaining to the issue of the notice under Section 143(2) of the Act. When this fact was put to the AO by the GIT(A), the response of the AO was that the inspection was not carried out in his presence and that there is no entry in the order-sheet regarding the date on which the inspection was carried out. This not only speaks volumes about the maintenance of the official record of the proceedings by the Department but it also reflects as to how in a tacit manner, the AO is admitting the fact of inspection having been carried out by the assessee. The two factual aspects discussed above compel us to infer that along with the notice dt. 4th Nov., 2003 issued under Section 142(1), notice under Section 143(2) was not placed in the envelope.
Further, the fact that the assessee carried out an inspection of the records and did not find the copies of the notices on record is borne out by a duly sworn affidavit. The Department has not been able to demolish the contents of this affidavit by any cogent evidence.
Therefore, we are compelled to hold that notice under Section 143(2) dt. 4th Nov., 2003 was not served on the assessee. In the course of hearing, it was put to the learned Departmental Representative by the Bench as to whether they would like to make submissions on the issue whether the notice served under Section 142(1) can be regarded as the one served under Section 143(2) of the Act. This proposal was put to the Revenue on the ground that Section 143(2) is meant for giving an opportunity to the assessee of being heard at the time of the hearing.
Since the assessee had availed of the opportunity while responding to the notice under Section 142(1), it was put to the Revenue whether they would like to make any submissions on this aspect. However, they were not inclined to do so and hence no arguments were advanced by either side on this issue.
8. Thus, since the first notice under Section 143(2) which was served on the assessee was dt. 3rd March, 2004 was beyond the time-limit specified in the proviso to Section 143(2) of the Act, the assessment made in pursuance thereof is bad in law. Accordingly, the assessment is held to be invalid and quashed. Since the assessment is being quashed on legal ground, we do not think it necessary to go into the merits of the other grounds raised in the appeal.