Iapl/413/2011 Of Suresh Kumar Sheetlani v. Income Tax Officer-1 3

-Court No. 35 Reserved on 09.08.2018 Delivered on 14.08.2018 Case :- INCOME TAX APPEAL No. - 413 of 2011Appellant :- Suresh Kumar SheetlaniRespondent :- Income Tax Officer-1 (3)Counsel for Appellant :- Swapnil KumarCounsel for Respondent :- C.S.C., Income Tax,Manish Goyal Hon'ble Bharati Sapru,J.Hon'ble Dinesh Kumar Singh,J. [Per: Dinesh Kumar Singh,J.) 1.This appeal under Section 260-A of the IncomeTax Act, 1961 (hereinafter referred to as “the Act') hasbeen filed by the assessee against the order dated 17[th]June, 2011 passed by the Income Tax AppellateTribunal, Agra Bench, Agra (hereinafter referred to asthe “Tribunal”) in ITA No.467/Agra/2009, AssessmentYear (hereinafter referred to as “A.Y.”) 1999-2000. 2.While admitting the appeal on 25[th] November,2011, the following two questions of law wereformulated:- "(A) Whether the Income Tax AppellateTribunal has erred in law and on the factsof the case in holding that the service ofnotice dated 28.3.2006 issued under Section148 of the Act, on the last known address,which the department had collected from the bank, whereas the last known address wasavailable in the return filed by the petitioner,can be treated to be valid service? (B) Whether the proceedings in pursuanceto the notice under Section 148 can beinitiated without affecting service, which inaccordance with Section 282 of the IncomeTax Act, even if it is presumed can be madeon an address, which is collected by thedepartment from the bank, whereas knownaddress was available with the departmenton Saral Form-5 of the petitioner?" 3.The Assessing Officer (hereinafter referred to as“A.O.”) issued notice dated 28[th] March, 2006 underSection 148 of the Act to the assessee at the addressi.e. 109, North Idgah Colony, Agra available on theassessee's Bank Account No.10309 in Canara Bank(SSI Branch), Sanjay Place, Agra. 4.The said notice was issued after recordingreasons that the assessee had obtained or credited anamount of Rs.5,28,183.00 and Rs.5,79,424.00 fromM/s Essar Pee Advertising, Delhi who were providingentries to the beneficiaries by showing that thetransactions made by them in purchase and sale ofshares of certain companies and gifts from certainpersons, which in fact never took place. The assesseewas alleged to be one of the beneficiaries, figuring in the list supplied by the Investigation Wing, Agra.Since the transactions of share trading were found tobe bogus and, therefore, entire amount claimed to havebeen received by the assessee by bank draft wasassessee's income from undisclosed sources. Theassessee had escaped assessment within the meaningof Section 147 of the Act. A.O. also found that onemore amount of Rs.5,15,300.30 was deposited and heissued show cause notice to the assessee under Section143(3) read with Section 142(1) of the Act dated 23[rd]November, 2006 requiring the assessee to explain andprove this amount also as the said amount alsoappeared to be of the same nature. 5.The A.O also issued notice under Section 142(1)of the Act dated 8[th] November, 2006 to the assessee. Inresponse to the notice, the authorized representative ofthe assessee appeared and filed reply, challengingservice of notice under Section 148 of he Act and alsorequested for supply of the reasons recorded. Thereasons were supplied to the authorized representativeon 28[th] November, 2006. 6.The A.O. completed the assessment by makingaddition of Rs.16,22,907.00 plus 1% commission andexpenses, totaling to Rs.17,91,720.00 on account of amount of fictitious sale of shares, which had been held to be bogus and unexplained income of theassessee from undisclosed sources vide assessmentorder dated 5[th] December, 2006 under Sections 144and 147 of the Act. 5.The A.O also issued notice under Section 142(1)of the Act dated 8[th] November, 2006 to the assessee. Inresponse to the notice, the authorized representative ofthe assessee appeared and filed reply, challengingservice of notice under Section 148 of he Act and alsorequested for supply of the reasons recorded. Thereasons were supplied to the authorized representativeon 28[th] November, 2006. 6.The A.O. completed the assessment by makingaddition of Rs.16,22,907.00 plus 1% commission andexpenses, totaling to Rs.17,91,720.00 on account of amount of fictitious sale of shares, which had been held to be bogus and unexplained income of theassessee from undisclosed sources vide assessmentorder dated 5[th] December, 2006 under Sections 144and 147 of the Act. 7.Aggrieved by the said order, the assessee hadfiled an appeal before the first appellate authority. Thefirst appellant authority vide order dated 9[th]September, 2009 cancelled the said assessment order,declaring the same as invalid on the ground that thenotice under Section 148 of the Act was never servedupon the assessee. 8.The C.I.T.(A) held that notice under Section 148of the Act was issued by I.T.O.-1(1), Agra on 28[th]March, 2006 to the assessee at 109, North IdgahColony, Agra. The A.C.I.T., Circle-1, Agra transferredthe case records to I.T.O.-1(1), Agra on 8[th] May, 2006.Subsequently, the case was assigned to ITO-1(3),Agra, who issued a requisition under Section 133(6) ofthe Act on 12[th] November, 2006 to M/s Essar PeeAdvertising Company calling for various informationin respect of the share transactions. The A.O. alsoissued a requisition under Section 133 (6) of the Acton 9[th] November, 2006 to the Manager, Canara Bank (SSI Branch), Sanjay Place, Agra calling for the bankstatement of the assessee for the period 1[st] April, 1998to 31[st] March, 1999. 9. The A.O. issued a notice under Section 142(1) ofthe Act on 8[th] November, 2006. Thereafter, the A.O.issued a show-cause-notice dated 23[rd] November, 2006under Section 143(3) read with Section 142(1) of theAct proposing therein to add the following deposits inthe Bank Account No.10309, Canara Bank (SSIBranch), Sanjay Place Agra as the assessee'sundisclosed income: 06.06.1998Rs. 5,28,183.2010.06.1998Rs. 5,15,300.3029.06.1998Rs. 5,79,424.00 10. The A.O. also proposed to estimate the assessee's income at Rs.4,00,000.00 in addition to the abovedeposits in absence of furnishing return of income. Inresponse thereto, the authorized representative of theassessee filed a letter dated 28[th] November, 2006furnishing therewith a copy of the acknowledgment ofthe return filed in ward 2(2), Agra on 16[th] November,2000 declaring therein income of Rs.1,52,580.00. Theassessee also requested that reasons recorded for issueof notice under Section 148 and details, copies of acknowledgment of notice under Section 148 said tohave been served on the assessee should be provided. 11. The A.O. completed the assessment under Section 144 read with Section 147 of the Act on 5[th]December, 2006, observing that the assessee hadfailed to prove the genuineness of purchase and sale ofshares and, accordingly, added the deposits in the bankaccount, detailed herein-above, as the assessee'sunexplained income from undisclosed sources. 12. The assessee preferred an appeal and contendedthat notice under Section 148 of the Act issued by theA.C.I.T., Circle -1, Agra as also the I.T.O.-1(1), Agrawas never served on him and the addition made underSection 68 of the Act were not tenable since theassessee did not maintain regular books of account andfiled his return of income under Section 44AF of theAct being a retail trader of shoe soles. 11. The A.O. completed the assessment under Section 144 read with Section 147 of the Act on 5[th]December, 2006, observing that the assessee hadfailed to prove the genuineness of purchase and sale ofshares and, accordingly, added the deposits in the bankaccount, detailed herein-above, as the assessee'sunexplained income from undisclosed sources. 12. The assessee preferred an appeal and contendedthat notice under Section 148 of the Act issued by theA.C.I.T., Circle -1, Agra as also the I.T.O.-1(1), Agrawas never served on him and the addition made underSection 68 of the Act were not tenable since theassessee did not maintain regular books of account andfiled his return of income under Section 44AF of theAct being a retail trader of shoe soles. 13. On behalf of the Department, it was contendedthat notice under Section 148 was duly sent by speedpost which was not returned back by the postalauthority with the remarks “not found or not served orrefused”. The notice was served on the correctaddress. Therefore, the plea of non-service of noticecould not be accepted in absence of change in address having been informed to the postal authority. A letterdated 4[th] October, 2007 was addressed to the A.O.giving directions under Section 250(4) of the Act asunder:- “With reference to the above you arehereby directed as under:- 1.To depute your Inspector to ascertainthe identity of the present owner andoccupant of 109, North Idgah Colony, Agrafrom whom the said premises was purchasedby him, the date of purchase, the date oftaking possession with documentaryevidence. The relationship of the ownerand/or occupant with Shri Suresh KumarSitlani. 2.Furnish mode of service of assessmentorder, deemed notice, penalty notice etc. onSuresh Kumar Sitlani with evidence as peryour record. A report on the above lines should besubmitted to this office by 11.10.2007. Thecase records are returned herewith to be re-sent along with the requisite report.” 14. The assessee took the specific plea that he had filed his return of income for the year underconsideration i. e. 1999-2000 on the changed addressi.e. 2, Rishi Marg, Shahganj, Agra. In support thereof,the assessee filed a photocopy of the return filed inSaral form on 31[st] March, 2000 before Ward 2(2),Agra. He further said that no change of the address was made in the bank account as no correspondencewas required to be made with the bank as the assesseewas holding a Saving Account. 15. In compliance of the directions under Section250(4) of the Act, vide letter dated 4[th] October, 2007the A.O. furnished a report dated 27[th] May, 2009which is reproduced herein-above:- “1. The present owner/occupant of thepremises at 109, North Idgah Colony areShri Sanjay Batra & Shri Vijay Batra, bothbrothers. 2.As directed the inspector was deputedto make enquiries from the present ownersbut they refused to cooperate him statingthat they are not relative of Shri SureshKumar Sheetlani from whose father ShriNanak Ram they have purchased theproperty. A summon issued on 15.10.2007to Shri Sanjay Batra was also not compliedand as far as I remember counsel of ShriSanjay Batra, Shri Narendra Singh hadappeared without any vakalatnama ordocuments are informed that Shri SanjayBatra has told him that he is beingharassed. No copy of sale deed/copy ofagreement etc. was supplied from which thedate of sale/purchase may be ascertained. 3.The file related to the present case wasreceived in this office on 08.11.2006 fromITO-1(1) as case was assigned u/s.120(1)amongst other time barring cases videorders dated 07.11.2006 of the then Id.Jt. CIT, Range-1, Agra and the case was timebarring in the next month itself. Assessmentwas completed on 05.12.2006 u/s.144. 3.The file related to the present case wasreceived in this office on 08.11.2006 fromITO-1(1) as case was assigned u/s.120(1)amongst other time barring cases videorders dated 07.11.2006 of the then Id.Jt. CIT, Range-1, Agra and the case was timebarring in the next month itself. Assessmentwas completed on 05.12.2006 u/s.144. 4.Records shows that notice u/s.142(1)dated 08.11.2006 along with questionnairewas sent on the address 109, North IdgahColony, Agra and notice severer vide hisreport dated 11.11.2006 reported that on theaddress one Shri Batra is living and ShriSuresh Kumar Sheetalani bad shiftedsomewhere else 2 years ago. On 15.11.2006inspector reported that Shri Suresh KumarSheetalani did not reside at 109, NorthIdgah Colony and on 20.11.2006 when hecame to know that Shri Suresh Kumar isresiding at 2, Rishi Marg, he reported andserved the notice on 20.11.2006. A copy ofintimation u/s. 14391) for A.Y.1999-2000 dt.16.11.2000 of the ITO-2(2) available/supplied shows the address of the assesseeas 2, Rishi Marg, Shahganj, Agra. 5.The service of the assessment order,notice of demand and penalty notice etc.was made through speed post on06.12.2006. As regards the request of assessee by thephotocopy dated 22.10.2007 for the supplyof the copies vide para 3, as the file wasreceived from ITO-1(1), Agra as statedabove, the ITO-1(1) and Dy. CIT, Circle-1,Agra is being requested to makecompliance.” 16. On the basis of the aforesaid report, the CIT (A)held that notice under Section 148 of the Act was not served upon the assessee. The notice sent underSection 148 of the Act was sent at the wrong addressand, therefore, the service of notice could not bedeemed to have been effected on the assessee. Theservice of notice under Section 148(A) is sine qua nonand in absence thereof, the assessment proceedingsconcluded under Section 147 of the Act were renderedinvalid. The CIT (A) allowed the appeal and quashedthe assessment order. 17. The Department being aggrieved by the order of the CIT (A) preferred appeal before the Tribunal. 18. The Tribunal vide impugned judgment and order has held that notice dated 28[th] March, 2006 underSection 148 was issued to the assessee on the addressavailable with the Canara Bank (SSI Branch), SanjayPlace, Agra by speed post, which was not receivedback served or unserved from the assessee's side. TheTribunal held that the notice dated 28[th] March, 2006hadbeen sent to the assessee on the address availablewith the Department through speed post and the noticeunder Section 148 issued to the assessee by speed posthad not been received by the Department unserved, itwould be deemed to be valid service and, therefore,the Tribunal set-aside the order passed by the CIT(A) and directed the CIT (A) to adjudicate the case onmerit, after hearing the parties. 19. It is important to mention here that CIT(A), after considering the report submitted by the A.O. inresponse to the directions under Section 250(4) of theAct, had held that the assessee was not residing at 109,North Idgah Colony, Agra and he had left the addresstwo years back. The assessee had filed his return at hisnew address i.e. 2, Rishi Marg, Shahganj, Agra. TheDepartment had with it the new address of theassessee, but the notice was sent at old address on theground that it was the address available with the Bankin respect of bank account of the assessee. TheTribunal has not dealt with the report of the A.O.submitted in response to the directions under Section250(4) of the Act. 20. Considering the aforesaid aspect of the matter,when the Department had correct address of theassessee, sending notice at incorrect address and thenpresumption drawn of service of notice is whollyerroneous. We find that the presumption drawn by theTribunal on the ground that since notice was notreceived back unserved, it would be deemed to beservice of notice, cannot be sustained. 20. Considering the aforesaid aspect of the matter,when the Department had correct address of theassessee, sending notice at incorrect address and thenpresumption drawn of service of notice is whollyerroneous. We find that the presumption drawn by theTribunal on the ground that since notice was notreceived back unserved, it would be deemed to beservice of notice, cannot be sustained. 21. We, therefore, set-aside the impugned judgmentand order passed by the Tribunal and allow the appeal. 22. The questions of law are answered in favour ofthe assessee and against the revenue. Order Date :- 14[th] August, 2018MVS Chauhan/-