1. The assessee has filed this appeal against the order of the CIT (A), New Delhi, passed in Appeal No. 61/03-04, dated 24.1.2005, on as many as seven grounds.
2. The Ground Nos. 3 and 4 relate to disallowance of an amount of Rs. 21,22,091/- in view of provisions of Section 40(a)(iii) of Income Tax Act, 1961 and Ground No. 5 relates to confirmation of disallowance of.
Rs. 6,81,840/- and Rs. 10,00,000/- by the CIT (A) holding the same in the nature of Head Office Expenditure as envisaged under Section 44C of the Act.
3. However, at the out set of the appellate proceedings, the learned AR for the assessee submitted that the appeal may not be disposed off on merits as raised in Ground Nos. 3 and 4 but the assessee's appeal may be only disposed off on legal issue as involved in Ground Nos. 1 and 2 of the appeal of the assessee regarding the non-service of notice under Section 143(2) of the Act within a period of limitation and so assessment framed by the Assessing Officer under Section 143(3) being invalid is required to be quashed. In view of this submission of the assessee, now, we shall dispose off Ground Nos. 1 and 2 involving this legal issue and the same are stated as under and as such we are not deciding the Ground Nos. 3 and 4 of the assessee on merits as submitted by the assessee: (1) That the ld. Commissioner of Income Tax (Appeals) (CIT(A)] has erred in law and on facts in upholding the validity of notice Under Section 143(2) issued on 31.10.2002 i.e. being the last day for service thereof on the assessee.
(2) That the ld. CIT (A) has erred in law and on facts in holding that the notice Under Section 143(2) issued on 31.10.2002 is deemed to have been served on that day itself, merely relying upon the judgment given by the Supreme Court of India in the case of Prima Realty v. Union of India and Ors. 223 ITR 655, which is distinguishable on facts and in law.
4. Briefly stated, the facts relating to this issue are that in this case the assessment was completed on a total income of Rs. 6,78,17,980/- as against declared income of Rs. 58,53,990/-.
5. Regarding the legal issues involved in Ground Nos. 1 and 2 of the appeal of the assessee, the undisputed facts are that a return of income was filed by the assessee on 22.10.2001 and, therefore, as per relevant provision of the Act notice under Section 143(2) of the Act was required to be served upon the assessee on or before 31.10.2002, whereas in the case of the assessee, as per Para 1 of the assessment order, the notice under Section 143(2) was issued by the Assessing Officer by a way of foreign air registered letter C6365 on 31.10.2002 and thereafter notices were issued by the Assessing Officer under Section 143(2) and 142(1) on 13.02.2003 alongwith notice under Section 142(1). As per Para 2 of the assessment order in response to the notices the assessee took an objection to the issue of notice under Section 143(2) of the Act stating that the notice dispatched dated 31.10.2002 has not been received by the assessee. Since, the notices have not been served upon the assessee by 31.10.2002 the assessment proceedings for the concerned assessment year have become time barred on 01.11.2002 and the subsequent notices issued in respect of the assessment are not valid in law.
6. On appeal, the learned CIT (A) by placing reliance on the decision of the Apex Court in the case of Prima Realities v. Union of India 223 ITR 655, held that in the instant case, the Post Office has acted as an agent of the assessee and, therefore, the date of service within the provisions of Section 143(2) of the Act will be treated as 31.10.2002 because the Apex Court in its decision (supra) have clearly held that the Post Office is an agent of the assessee and, therefore, the date i.e. 31.10.2002 when the Assessing Officer had sent the notice by Registered A/D Post will be treated as date of service on the assessee.
In this case, the Apex Court has further observed that it must be assumed that unless the cheque was collected personally by the payer it would be sent by post thereby constituting the Post Office as the agent for the purpose of serving the payment. By making such observations, the CIT (A) treated this notice to have been served upon the assessee on 31.10.2002 and so the same was within a statutory period as provided under proviso to Section 143(2) of the Act.
7. The learned AR for the assessee contended before us that in the case of the assessee the notice under Section 143(2) of the Act was not served upon the assessee within the time limit prescribed in the proviso to Section 143(2) of the Act i.e. on or before 31.10.2002, hence, the assessment order passed under Section 143(2) is required to be quashed because as per provisions of Section 143(2), the notice should be served on the assessee and mere issue of notice within the statutory period is not proper compliance of the provisions of Section 143(2) of the Act.
8. Further, responding to the decision of the Apex Court in the case of Prima Realities (supra), the Apex Court, referred to by the learned CIT (A) in his order, the learned AR for assessee submitted that in that case their Lordships were dealing with the payment made by cheque.
Moreover, the ratio of this case is that whether the addressee has shown his desire either expressly or impliedly to send a cheque by post the property in the cheque passes to him as soon as it's posted.
Therefore, the Post Office acts as an agent of the person to whom the cheque is sent and so the facts of that case are clearly distinguishable with the facts of the case of the assessee.
9. However, in support of his contention, he has relied upon the decision of the ITAT Delhi Bench "C" in the case of M/s Whirlpool India Holdings Ltd. v. DDIT rendered in I.T.A. No. 330/Del/2004 for the assessment year 2000-01, CIT (A) v. Vardhman Estate (P) Ltd. , CIT v. Bhan Textiles (P) Ltd. and 10. Whereas on the other hand, the ld. DR for the Revenue placing reliance on the reasoning given in the order of CIT (A) as well as on the decision of the Apex Court in the case of Prima Reality (Supra) submitted that since the notice Under Section 143(2) of the Act was issued against the assessee by registered post on 31.10.2002 itself, it is deemed to have been served upon the assessee on that very date i.e.
31.10.2002 and so the notice was served upon the assessee within the statutory period as required under proviso to Section 143(2) of the Act.
11. We have considered the rival submissions of both the parties, perused the record and carefully gone through the orders of the tax authorities below as well as the relevant case law on the issue under consideration before us.
12. In order to dispose off the legal issue involved in grounds of appeal of the assessee, we are required to decide the following points: First, whether the Assessing Officer is able to establish the service of the notice Under Section 143(2) within 12 months from the end of the month in which the return has been filed by the assessee as provided under proviso to Section 143(2) of the Act.
Second, in case the Assessing Officer has failed to establish the service of such notice within the statutory period as provided under proviso to Section 143(2) whether the assessment framed and the demand raised thereunder is required to be quashed.
13. We may also mention here that as per provisions of Section 143(2) a statutory notice under Section 143(2) of the Act is required to be served on the assessee within 12 months from the end of the month in which the return has been filed and it is not only required to be issued within 12 months from the end of the month in which the return has been filed. It means that the onus to prove the service of the notice on the assessee within the statutory period is upon the Assessing Officer and not upon the assessee. In the instant case the Assessing Officer has failed to discharge the onus of proving the service of the notice upon the assessee under Section 143(2) of the Act within the statutory period of limitation i.e. on or before 31.10.2002 (in the instant case of the assessee) because in the instant case the notice was only issued by the Assessing Officer on 31.10.2002 but neither the same has been received back by the Assessing Officer nor the department is able to prove the service of the notice upon the assessee on 31.10.2002, therefore, the notice under Section 143(2) of the Act is not proved to have been served upon the assessee on or before 31.10.2002 by the Department and, hence, any service of notice thereafter on a subsequent date is barred by a period of limitation as provided under proviso to Section 143(2) of the Act. In our above view, we find support from the following case law: 14. In the decision of the ITAT Delhi Bench "C" in the case of Whirlpool India Holdings Ltd. v. DDIT rendered in I.T.A. No.330/Del/2004 for the assessment year 2000-01, wherein the Tribunal held as under: 15. As we have already considered various case laws by which it is held that the date of issue of notice has not been taken into consideration but the date on which the notice is served has to be taken into consideration and if it is found that the same was served after the expiry of the prescribed time limit then every proceeding thereafter has to be held as null and void as they were without assumption of proper jurisdiction. As stated above, in the present ca3c, the notice was served on 3.12.2001, which was after the expiry of time limit of 12 months; therefore, we hold that the Assessing Officer did not have proper jurisdiction to complete the assessment on the assessee. Accordingly, we quash the assessment order passed by the Assessing Officer in the case of the assessee.
16. We have already allowed the legal ground of the assessee, therefore, we do not deem fit to decide the other grounds of the assessee as we have quashed the assessment by holding that the same was without jurisdiction.
15. It is also important to mention that the Tribunal in the case (supra) has also considered the decision of Apex Court in the case of Prima Realities (supra). The Tribunal has also placed reliance on the decision of jurisdictional High Court of Delhi in the case of CIT v.Lunar Diamonds Ltd. 281 ITR 1 (Del) wherein their Lordships have also discussed the decision of Apex Court delivered in the case of Prima Realities (supra) and while distinguishing the same held as under: Tribunal having held that the Revenue has failed to prove that the notice under Section 143(2) was served upon the assessee within the prescribed time, and set aside the assessment on that ground, no substantial question of law arises.CIT (A) v. Vardhman Estate (P) Ltd. , wherein their Lordships held that: Date of dispatch of notice cannot be deemed to be the date of service; notice under Section 143(2) having been served on the assessee through speed post after the expiry of prescribed time-limit and there being no relevant document before the Tribunal to show that the same was served within the prescribed time through the process service, the service of notice was not effected in time.CIT v. Bhan Textiles (P) Ltd. . In this case their Lordships held as under: Notice under Section 143(2) must be served on the assessee within the prescribed time-limit; service of notice after the prescribed time-limit would not relate back to the date of issue of notice.
In CIT v. Kalyani Selected Kargallia Colliery 148 ITR 468 (Patna) held that: there was no presumption in law as to the date of service of a notice purported to be sent under registered cover.
18. In Meghji Kanji Patel v. Kundanmal Chamanlal Mehtani , the Court observed that: Where an ex-parte decree is passed when the writ of summons has been sent to a defendant by registered post and the cover containing the summons has been returned with the postal endorsement "refused" it is undoubtedly for the defendant to satisfy the court that the letter was not tendered to him. But the defendant can only do so by making a statement on oath. This must usually remain uncontroverted, unless the postman who tendered the letter to him is summoned and makes a statement that he tendered the cover containing the summons to the defendant and after cross-examination, his evidence is believed. If the plaintiff does not summon the postman, the statement on oath of the defendant remains uncontroverted and in such a case there is sufficient ground for setting aside the ex-parte decree.
19. In the case of Commissioner of Income Tax v. P.V. Kumar , their Lordships of Delhi High Court have observed in Para-2 of their order as under: 2. Before this Court also, the respondent is not served. It appears that the Tribunal rendered the decision in the absence of the assessee without effective service. The notice which was sent has been received with the postal remark 'left' This indicates that the assessee was not served with the notice. A matter can be decided in the absence of a party, provided, the party has been served and, thereafter, the party does not remain present before the court or the Tribunal. But when the notice notifying the date of hearing has not been served on the assessee, there is no question of deciding the matter ex-parte. The Tribunal ought to have waited for proper service and after the proper service on the party, it ought to have decided the matter.In Fatechand Agarwal v. Commissioner of Wealth-Tax 97 ITR 701 (Orissa) at Page 702 held: In Hajarilal Kishorilal v. CIT 64 ITR 563 (MP), their Lordships observed that: to prove the date of service of notice, the acknowledgement card was the best proof of service which must be produced by the revenue.
In the case of Venkat Naicken Trust and Another v. Income Tax Officer and Anr. , their Lordships of Madras High Court have held that when the assessee pleads that the assessee has not been properly served with any notice, it is for the Department to place the relevant material to substantiate their plea that the assessee was served with proper notices.In World Wide Exports (P.) Ltd. v. Income-tax Officer , the Tribunal observed that: It was also pointed out by the department that the fault was with the assessee as it had not intimated the change of its address. The CIT (A) had also observed that the assessee conceded that he did not intimate the change of address. This observation did not appear to be correct, firstly because the assessee had taken this stand that the registered notice which was sent on old address was received at that very address and secondly even if the assessee did not intimate the change of address, then also the obligation regarding the service of notice under Section 143(2) was very much thereupon the revenue.
it is well settled that a notice Under Section 143(2) has to be served upon the assessee and mere issuance of notice within a period of 12 months is not sufficient.
22. Delhi Bench of ITAT in the case of Jain Marbles v. Inspecting Assistant Commissioner in para 15 held: It is well settled law that it is the duty of the Revenue to establish service of a notice on which reliance is sought to be placed.
23. Thus, on the basis of our discussions, we have come to a conclusion that the revenue has failed in establishing the service of the notice under Section 143(2) upon the assessee within period of limitation of 12 months i.e. on or before 31.10.2002 [in the instant case of the assessee] as required under the proviso to Section 143(2) of the Act, so, the first point is decided in favour of the assessee and against the revenue.
24. Now coming to the second point we find that in case the revenue has failed to establish the service of the notice upon the assessee under Section 143(2) within the statutory period of limitation provided under the proviso to Section 143(2) then the assessment proceedings completed by the Assessing Officer in violation of statutory provision of Section 143(2) are liable to be cancelled/quashed. In our above view we find support from the decision of Special Bench of the Tribunal in the case of Raj Kumar Chawla v. Income-tax Officer wherein the Tribunal held as under: Though the appellants were not able to state the exact date of service of notice but the admitted fact was that the notice under Section 143(2) in respect of the appellants had been served after the expiry of period of 12 month as provided under proviso to Section 143(2). Since the assessing authority had failed to serve the notices within the statutory period provided under Section 143(2), the assessing officer had lost its jurisdiction to make assessment under Section 143(3) read with, Section 147.
25. Similarly, in the case of M/s Whirlpool India Holdings Ltd., New Delhi v. Dy. DIT, International Taxation, Circle-II, New Delhi reported in (2005) 26 IT Rep 214 (ITAT Del) (NOC) the Tribunal held - "that after amendment of 143(2) the notice was required to be served within 12 months from the end of the month of the filing of the return and no only issued. The Tribunal quashed the assessment as well as the demand raised along with the levy of interest."World Wide Exports (P) Ltd. v. Income-tax Officer (supra), the tribunal also held that: As the department had not been able to demonstrate that the notice under Section 143(2) was served upon the assessee within 12 months from the date of furnishing of the return, the assessment made on the basis of such invalid notice could not be treated to be a valid assessment and hence such assessment order was to be treated as null and void ab initio and was liable to be quashed and annulled.
27. Similarly in the case of CIT v. Lunar Diamonds Ltd. Delhi High Court, their Lordships have upheld the order of the Tribunal annulling the assessment framed pursuant to the notice issued under Section 143(2) and served upon the assessee beyond the period of limitation of 12 months.
28. Hence, respectfully following the decisions (supra) it is held that as the notice tinder Section 143(2) has not been served upon the assessee within a statutory period of limitation as provided under Section 143(2) of the Act so the instant assessment framed by the Assessing Officer is invalid and the same is hereby cancelled/quashed and the demand raised there under also stands cancelled/quashed. The Ground Nos. 1 and 2 of the appeal of the assessee stand allowed. Since, the assessment framed under Section 143(3) of the Act has itself been cancelled/quashed by us on the legal issue, we do not consider it necessary to adjudicate upon the other grounds of appeal taken by the assessee on merits.
29. In the result, the appeal filed by the assessee is allowed in terms of the order.