1. This appeal filed by the assesses who is an individual relates to the asst. yr. 2001-02 and arises out of the best judgment order passed under Section 144 of the IT Act on 8th March, 2004. The assessee carries on business in electronic detonators in the name and style of M/s Ram Singh & Co.
3. Ground Nos. 2 and 3 are to the effect that the assessment is to be quashed since it has been framed without serving the mandatory notice under Section 143(2) within the statutory period of 12 months from the end of the month in which the return was filed. The return was filed on 31st Oct., 2001. Notice under Section 143(2), therefore, ought to have been served on the assessee on or before 31st Oct., 2002. A notice was issued on 25th Oct., 2002 and it was served by affixture on 31st Oct., 2002. The assessee challenges the notice on the ground that it has not been properly served and since no other notice was served on him before the aforesaid date, the assessment should be quashed on the basis of the judgments of the Hon'ble Delhi High Court in the cases of CIT v.Lunar Diamonds Ltd. (2005) 197 CTR (Del) 312 : (2006) 281 LTR 1 (Del), CIT v. Vardhman Estates (P) Ltd. and CIT 4. We have considered the facts and the rival submissions in this behalf and we have also perused the assessment record produced before us by the learned senior Departmental Representative. Under Order 5, Rule 20 of CPC which is applicable to service of notice under the IT Act in view of the provisions of Section 282(1) of the Act, there has to be an order of the Court that the notice be served by affixture not only upon the place where the assessee is known to have last resided but also in some conspicuous place in the Court house, which in cases arising under the IT Act should be the IT office. In the present case, there is no order of the Court i.e. the ITO to serve the notice dt.
25th Oct., 2002 on the assessee by affixture. The mere issue of the notice does not automatically lead to the inference that it should be treated as an order to serve the same on the assessee by affixture. As held by the Madras High Court in Kiran Machines v. ITO (2006) 203 CTR (Mad) 574 : (2006) 156 Taxman 463 (Mad), it is the satisfaction of the AO which is very relevant where service by affixture is made and such satisfaction should be spelt out clearly. This is absent in the present case so far as we can see from the record. In CIT v. Savitri Devi Agarwalla (1970) 77 1TR 934 (Assam), the Assam High Court held that there should first be an order by the Court and then service by affixture and the mere fact that after service by affixture the Court was satisfied that service should be effected by affixture would not be proper compliance with Rule 20. In the present case, the last known address of the assessee was 55/28 sector, Faridabad (behind Tile India), as per the reverse of the notice issued on 25th Oct., 2002 (p.
1A of the paper book) but the notice has been served by affixture on tha Kalkaji address of the assessee. This is clear from p. 2 of the paper book which is a copy of the service report where the Inspector who effected the service has stated that the notice server affixed the notice at 59/5, Kalkaji, New Delhi, which is stated in the report to be the last known address of the assessee. This again is a serious irregularity. Lastly, there is no averment in the report of the Inspector or in the assessment order nor is there anything in the assessment record produced before us to show that the copy of the notice was affixed in some conspicuous place in the IT office. The provisions of Rule 20, Order 5 not having been strictly complied with, there is no valid service on the assessee of the notice dt. 25th Oct., 2002 by affixture.
5. The alternative contention is that if Rule 17 of Order 5 of the CPC is held applicable, even then the service is not proper because it is required that due diligence should be exercised by the AO to know the whereabouts of the assessee and only if the assessee cannot be found despite the exercise of reasonable diligence, can the notice be served on the assessee by affixture. According to the reverse of the notice under Section 143(2) (p. 1A of the paper book), the notice server had the knowledge that the assessee was residing in 55/28 Sector, Faridabad; since this address has been noted therein and despite having such knowledge, the notice was served by affixture on the Kalkaji address. This clearly shows that reasonable diligence was not shown by him i.e. the serving officer. When he knew that the assessee had moved to Faridabad from Kalkaji he ought to have proceeded to Faridabad to serve the notice. Thus, the contention based on r. 17 is also to be upheld.6. In addition thereto, Rule 19 of Order 5 requires that where notice is returned under Rule 17, the Court shall, if the return under the rule has not been verified by an affidavit of the serving officer, examine the serving officer on oath touching his proceedings and may make such further enquiry as he deems fit and shall either declare that the notice has been duly served or pass such order as he thinks fit. In the present case, there is no evidence to show that the notice server (Shri Babulal) was required to file an affidavit or that he was examined by the AO on oath. Such procedural irregularities do invalidate the service of the notice as held by the Kerala High Court in M.O. Thomas v. CIT . It is also seen that no reasonable attempts were made by the AO or the serving officer to find the assessee before serving the notice by affixture.
7. In these circumstances, we are of the view that the notice served on the assessee on 31st Oct., 2002 in its Kalkaji address was not validly served as required by Section 282(1) of the IT Act.
8. The learned senior Departmental Representative drew our attention to another notice dt. 25th Oct., 2002 which, according to him, was sent by registered post to the assessee and this notice must have been served on the assessee within a reasonable period and since the assessee was residing close to Delhi, it must be presumed that service would have been effected on him before 31st Oct., 2002. This notice was shown to the learned Representative for the assessee who submitted that there is no acknowledgement and, therefore, there is no evidence of service of the notice. He also relied on the judgment of the Hon'ble Delhi High Court in CIT v. Shanker Lal Ved Prakash, judgment dt. 6th Nov. 2006, in ITA No. 1455 of 2006. We have also seen the copy of the notice and the receipt given by the postal department. It is a fact that the notice is addressed to the assessee at 59/5, Kalkaji, New Delhi. There is no acknowledgment on record. There is no other evidence from which it can be definitely asserted that the notice was served on the assessee at the aforesaid address. The record produced before us does not contain any order-sheet entry on 8th Nov., 2002, the date on which the assessee was required to appear before the AO by the notice issued on 25th Oct., 2002 by registered post. This is one pointer to the fact that the said notice was not served on the assessee.
9. For the aforesaid reasons, we hold that there is no valid service of notice on the assessee under Section 143(2) either by affixture or by post. In this situation, we have no option but to quash the assessment on the basis of the judgments of the Hon'ble Delhi High Court in Lunar Diamonds (supra), Vardhman Estates (P) Ltd. (supra) and Bhan Textiles (supra). We direct accordingly and allow ground Nos. 2 and 3.
10. Ground Nos, 4 to 8 are directed against the additions and disallowances made in the assessment. These grounds are not decided in the view we have taken, namely, that the assessment order is quashed.
11. Ground No. 9 relates to interest under Section 234B and is consequential to our decision in respect of ground Nos. 2 and 3.
In the result, the assessment is cancelled and the appeal is allowed with no order as to costs.