1. These cross appeals of the assessee and the revenue arise out of the order of the CIT (A), Panchkula, passed on 30.09.2005 in Appeal No.Res/64/GGN/04-05, pertaining to assessment year 1996-97. On perusal of the order of the learned CIT (A), it is found that the assessee had filed return of income declaring total income of Rs. 3,43,460/- on 30.11.1996. The return was processed under section 143(1)(a) of the Income Tax Act, 1961 [in short "the Act"] on 30.05.1997, determining the total income at Rs. 8,20,814/-. Thereafter, assessment was framed under Section 144 of the Act on 18.03.1999 determining the total income at Rs. 2,14,89,110/-. The appeal against this order was decided by the CIT (A) on 17.09.1999. However, the Tribunal, vide order No.4551/Del/1999 dated 31.03.2003 restored the appeal to the file of the CIT (A). Consequently, the CIT (A) passed an order on 30.09.2005 and the appeals before us emanate from this order.
2. Ground No. 6 of the appeal of the assessee is preliminary in nature.
It is mentioned that the learned CIT (A) erred on facts and in law in not quashing the order even though the notice under Section 143(2) of the Act was not served upon the assessee or its authorized representative within the statutorily prescribed time. It is mentioned that such an omission constituted jurisdictional default and not merely procedural irregularity. Therefore, he erred in holding that the omission to issue notice as aforesaid could not be the ground for holding the assessment to be null and void.
3. In this connection, it is mentioned by the learned CIT (A) that one of the contentions of the assessee was that since the return of income was filed on 30.11.1996, the notice under Section 143(2) should have been served upon the assessee on or before 30.11.1997. No notice was served till this date. Therefore; the order of assessment was null and void. It is further mentioned that remand report was obtained from the A.O., who pointed out that a notice under Section 143(2) of the Act was issued on 11/13.11.1997 vide Dispatch No. 2640. Therefore, it was contended that it was not acceptable that the notice could not be served on or before 30.11.1997. The learned CIT (A) considered the rival submissions. He also perused the assessment records. It was pointed out that a notice under Section 143(2) of the Act dated 11/13.11.1997 and a questionnaire were sent to the assessee vide Dispatch No. 2640 by the Additional Commissioner of Income Tax, Special Range, Faridabad. Thus, the notice; was issued within time and, therefore, there was no merit in the contention of the assessee in this behalf. Without prejudice to the aforesaid finding, it was mentioned that the provisions of Section 143(2) of the Act were not mandatory but only obligatory in nature and, therefore, non-compliance of the same would not render the consequential assessment as null and void. It was further mentioned that even if the provisions are taken as mandatory in nature, the further test would be whether, the provisions were substantially complied with and its non-compliance caused any prejudice to the assessee? Thus, if the assessee participated in the proceedings, then, it could be said that non-issuance of notice under Section 143(2) of the Act did not cause any prejudice to the assessee. It was also mentioned that the impugned provisions are procedural in nature.
Therefore, non-compliance of the same cannot lead to the inference that the assessment order was null and void. It was also mentioned that the provisions were statutory recognition of the principle of audi alterm partem i.e. before drawing any adverse inference against a person; he should be given a reasonable opportunity of being heard. Since, the assessee had been given sufficient opportunities of being heard, the principle was complied with in substance. Therefore, Ground No. 2 of the appeal before him in this behalf was dismissed.
4. Before us, the learned Counsel for the assessee stated that of the case laws relied upon by the learned CIT (A) in the matter were decided under old law i.e. before the introduction of Proviso to Section 143(2)(ii). Proviso enacts that no notice under this sub-section shall be served on the assessee after the expiry of 12 months from the end of the month in which the return is furnished. Coming to the factual aspect, our attention was drawn towards the remand report of the A.O.dated 25.01.2005 submitted to the learned CIT (A). It is mentioned therein that a notice under Section 143(2) of the Act was issued on 11/13.11.1997 and, therefore, it was not acceptable that the notice was as not served on or before 30.11.1997. It is further mentioned that on careful examination of the records, it is found that a notice under Section 143(2) of the Act was issued on 19.02.1999 at the address Plot No. 8, HSIDC, Industrial Area, Gurgaon, which has not been returned back. The case of the learned Counsel of the assessee was that no proof by way of acknowledge card or otherwise is available on the record to show that the first notice date 11/13.11.1997 was served on the assessee. Notice dated 19.02.1999 was forwarded at a wrong address as the address of the assessee was Plot No. 2, HSIDC, Gurgaon. Thus, it is clear that the provision contained in Section 143(2)(ii) of the Act was not complied with.
5. Coming to the legal issues, a reference was made to the meaning of "Service by Post" under the General Clauses Act, 1897. It is provided that where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression "serve" or either of the expression "give" or "send" or any other expression is 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 effected at the time at which the letter would be delivered in the ordinary course of post. Thus, for effecting service, what is to be shown is that the notice was properly addressed, prepaid and posted by a registered post. The records do not show the mode of service as nothing beyond the office copy of the notice and the questionnaire are on record. Further, our attention was drawn to Rule 19-A of Order V of the CPC. It is provided that where a summons is returned under Rule 17, the Court shall, if the return under that rule has not been verified by the affidavit of the serving officer, and may, if it has been so verified, examine the serving officer on oath, or cause him to be so examined by another Court, touching his proceedings, and may make such further enquiry in the matter as it thinks fit; and shall either declare that the summons has been duly served or order such service as it thinks fit. On the basis of this provision, it was argued that in case the service was affected through any serving officer, there is nothing on record to show that he was examined on oath and it was declared that notice had been served.
6. Reliance was placed on the decision of the Hon'ble Delhi High Court in the case of R.L. Narang v. CIT , in which it was pointed out that Income Tax Act is a Central Act and Section 282 provides for service by post. As such, the provisions of Section 27 of the General Clauses Act, 1897, are applicable. Therefore, for raising the presumption that a notice has been served, it should be sent by registered post. If the notice is served through a process server and there is neither a service report nor any evidence to show the identity of the person on whom the service was affected, there was no proper service. In the light of this decision, it was pointed out that there is no evidence that the notice was sent to the assessee by registered post. There is also no evidence in the form of report of process server or the identity of the person on whom the service was affected. Thus, it was argued that the impugned notice dated 11/13.11.1997 was not served on the assessee. Further, reliance was placed on the decision of the Hon'ble Orissa High Court in the case of ITO v. Manmohan Lal and Ors. , in which it was pointed out that Section 282 of the Income Tax Act, 1961, contemplates that a notice may be served on the person named therein either by post or as if it was a summons issued under the Code of Civil Procedure, 1908. Respondent No. 1 and 2 were named in the notices as concerned persons, to whom notices were sent at their addresses by post. It was necessary that the notices were sent by registered post with AD. In so far as Respondent No. 3 was concerned, notices sent by Registered Post with AD should have been delivered either to the Manager or the Principal Officer of the firm.
The postal acknowledgement slip does not disclose that the notices were delivered at the address or the Manger or the Principal Officer. If the notices were delivered to someone else, it cannot be said that the notices were duly delivered and served upon them. In that case, no presumption can be drawn. No attempt was made by the Petitioner to ! prove by adducing evidence either oral or documentary, that the persons who received the notices were authorize agents of the opposite parties.
Therefore, the finding of the Subordinate Judge that there was no service of notices cannot be displaced by invoking revisional jurisdiction of the Court under Section 115 of the Code. Reliance was also placed on the decision of Hon'ble Delhi High Court in the case of CIT v. Vardhman Estate Pvt. Ltd. . In that case, notice was required to be served on or before 31.10.2002. The notice was served by Speed Post on 1.11.2002. The A.O. did not produce any document before the Tribunal regarding the service of the notice through the process server. The Tribunal passed the order holding that since the notice was served after 31.10.2002, the assessment was not valid. The Hon'ble Court, inter-alia, pointed out that revenue sought to place reliance on the service through the process server for which documents were not produced before the Tribunal. Therefore, it was held that the Tribunal was not in error in rejecting the rectification application moved by the revenue and holding that the assessment was bad in law. It was also held that no substantial question of law arose from the facts of the case.
7. Coming to the introduction of Section 292BB, w.e.f. 01.04.2008, in the Act, it was argued that the assessee had not participated in the assessment proceedings, which was clear from the fact that the assessment was framed under Section 144 of the Act. This provision came into effect from 01.04.2008 and, therefore, was not applicable to the proceedings for assessment year 1996-97. In this connection, reliance was placed on the decision of Hon'ble Supreme Court in the case of Virtual Soft Systems Ltd. v. CIT , dealing with the interpretation of the phrase, "tax sought to be evaded" used in Section 271(1)(c), Explanation 4. It was held that unless expressly stated or clearly implied, the amendment in the fiscal statute cannot be taken to be retrospective in nature. Further, reliance was placed on the decision of the Hon'ble Delhi High Court in the case of Sham Gopal Charitable Trust v. Director of Income Tax (Exemption) , dealing with the service of notice under Section 272(A)(2) of the Act regarding delay in filing the return. The assessee denied the service of notice. There was no finding given by the learned CIT (A) or the Tribunal that the notice in question was actually served on the assessee. Therefore, it was held that the assessee was not served with these notices and consequently was deprived of the opportunity of being heard before the levy of the penalty, which by itself was sufficient to set-aside the order of the penalty.
8. In reply, the learned DR pointed out that the first notice of hearing under Section 143(2) was to put in transmission on 11/13.11.1997, much before 30.11.1997. The A.O. heard the assessee and the matter has also been heard twice by the CIT (A). Therefore, it can be inferred that the provisions contained in section 143(2) of the Act have not been substantially complied with. He also produced the case record to show that the office copies of the notice and questionnaire, which were on record and a Dispatch No. 2640 was also mentioned on the notice. Subsequent notices were issued in the same manner. If the subsequent notices were served, there is no reason to come to the conclusion that the notice dated 11/13.11.1997 was not served upon the assessee before 30.11.1997. He also filed a letter dated 12.06.2008, enclosing a letter dated 11.06.2008 from the Assistant Commissioner of Income Tax, Gurgaon Circle, Gurgaon, addressed to the Sr. DR, ITAT, New Delhi, to the effect that the first notice under Section 143(2) of the Act for assessment year 1995-96 was issued to the assessee on 04.11.1996 and the same was in time. Photo copy of the notice was also enclosed. It is seen from the letter and the copy of the notice that they pertain to assessment year 1995-96, while we are dealing with the case for assessment year 1996-97.
9. We have considered the facts of. the case and rival submissions. The facts of the case are that purportedly a notice under section 143(2) of the Act dated 11/13.11.1997 was issued to the assessee vide Dispatch No. 2640. The learned DR was specifically asked to produce the record maintained by the A.O. to show the mode and manner in which the notice was issued or served on the assessee. The same was not done. However, a letter dated 12.6.08 was filed which is not in relation to assessment year 1996-97 but in assessment year 1995-96. This shows that either no record exists with the A.O. to show the mode and manner in which the notice for this year was issued or served to the assessee or sufficient attention was not paid to the pointed query of the Tribunal in this behalf. The only material of record are the copies of the notice and the questionnaire, bearing Dispatch No. 2640. There is no evidence on record whether the notice was served through the process server or through Registered Post AD. The notice does not bear any signature of the authorized person of the assessee company. In such a circumstance, it can be inferred that there is no evidence before us that the notice was served through process server as held in the case of Vardhman Estate Pvt. Ltd. (supra). There is no evidence on record that the notice was handed over to the Postal Authorities in an envelop properly addressed and pre-paid by way of Registered Post At). Consequently, it is held that the notice has also not been served on the basis of presumption of the General Clauses Act, 1897. Thus, there is no evidence on record to show that the notice was served on the assessee before 30.11.1998. It is also clear that the AO and the learned DR routinely filed the letter dated 11.06.08 and 12.6.08 respectively, as they do not pertain to the assessment year under question. In these circumstances, it is held that the impugned notice has not been served on the assessee.
10. Coming to the provisions contained in Section 292BB, it is pointed out that the same came into force w.e.f. 01.04.2008. If it is considered to be a procedural section, its provision will apply where the hearing was conducted on or after 01.04.2008, in which the assessee participated. If it is considered to be a substantive provision, it will apply to the proceedings of the assessment year 2008-09 and subsequent years and not to any earlier year. Therefore, this provision does not advance the case of the revenue.
11. The decision in the case of Vardhman Estate Pvt. Ltd. (supra) also supports view that failure to serve the notice within the time would lead to the inference that the assessment was not valid. In other words non-service of the notice within the statutorily prescribed time limit is not merely a procedural matter, the effect of which is washed off by the participation of the assessee in the proceedings or by the fact that subsequently sufficient opportunity of being heard was granted to the assessee. We may add that this part of the order will not be applicable after coming into force of the provisions contained in Section 292BB. Thus, it is held that the assessment was not valid.
12. Since, we have decided the primary ground in favour of the assessee, leading to the cancellation of the assessment, it is not necessary for us to decide other grounds regarding merits of the addition. Thus, income determined finally under Section 143(1)(a) of the Act has to be taken as the total income of the assessee for fastening the tax liability on it. It also follows that the appeal of the revenue does not survive.
13. In the result, the appeal of the assessee is allowed on preliminary ground and the appeal of the revenue is dismissed.