Ita v. Sh. K.g.singhania

IN THE PUNJAB & HARYANA HIGH COURT AT CHANDIGARH Date of Decision: 12.12.2011 ITA No.875 of 2010(Assessment year 1996-97) Commissioner of Income Tax –I, Jalandhar …Appellant Versus Sh. K.G.Singhania …Respondent ITA No.19 of 2011(Assessment year 2005-06) Commissioner of Income Tax-II, Jalandhar…Appellant Versus Smt. Surinder Pal Kaur…Respondent ITA No.20 of 2011(Assessment year 2001-02) Commissioner of Income Tax-II, Jalandhar…Appellant Versus Smt. Surinder Pal Kaur…Respondent CORAM: HON’BLE MR. JUSTICE HEMANT GUPTAHON’BLE MR. JUSTICE G.S.SANDHAWALIA Present:Mr. Vivek Sethi, Advocate, for the appellant-Revenue.Mr. Pankaj Jain, Advocate, for the respondent-Assessee. HEMANT GUPTA, J. This order shall dispose of afore-mentioned three appealspertaining to the assessment years, as mentioned above. However, for thefacility of reference, the facts and the questions of law are being taken upfrom ITA No.875 of 2010 arising out of the order dated 21.05.2009 passedby the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (for short ‘the Tribunal’) in ITA No.281 (ASR)/2008. The questions of law read asunder: 1.Whether on the facts and circumstances of the case, theHon’ble ITAT was right in law in not deciding the case onmerits and without considering that the assessee had madean incorrect claim of deduction under Section 90-O of theI.T.Act, 1961 and merely dismissing the appeal ontechnical grounds?Hon’ble ITAT was right in law in not deciding the case onmerits and without considering that the assessee had madean incorrect claim of deduction under Section 90-O of theI.T.Act, 1961 and merely dismissing the appeal ontechnical grounds? 2.Whether on the facts and circumstances of the case, theITAT was right in law in confirming the order of Ld. CIT(A), who has quashed the assessment proceedings onmerely the plea that the service of notice under Section 148of the Income Tax Act, 1961 by affixture is not a validservice?ITAT was right in law in confirming the order of Ld. CIT(A), who has quashed the assessment proceedings onmerely the plea that the service of notice under Section 148of the Income Tax Act, 1961 by affixture is not a validservice? 3.Whether the service made by registered post and byaffixture in the presence of two witnesses at the address ofthe assessee is not a valid service, especially since theHon’ble Supreme Court in the case of Commissioner ofIncome Tax Vs. Daulat Ram Khanna 65 ITR 603 (SC) hasconcluded that a notice sent by registered post and alsoaffixed at the address of the assessee was a propersubstituted service within the time prescribed?affixture in the presence of two witnesses at the address ofthe assessee is not a valid service, especially since theHon’ble Supreme Court in the case of Commissioner ofIncome Tax Vs. Daulat Ram Khanna 65 ITR 603 (SC) hasconcluded that a notice sent by registered post and alsoaffixed at the address of the assessee was a propersubstituted service within the time prescribed? The assessee-respondent derives his income from professionand other sources. The original return was filed on 30.10.1996 declaring netincome of Rs.4,90,700/-. The case was processed under Section 143(1)(a)of the Income Tax Act, 1961 (for short ‘the Act’) on 30.10.1998. A noticeunder Section 148 of the Act was issued on 28.03.2003 for the reason thatthe assessee has claimed excess deduction under Section 80-O of the Act.The said notice was served upon the assessee by affixation at his last knownaddress as well as sent under registered post at his Delhi and Mumbaiaddresses. The assessee furnished his return in response to the notice under Section 148 of the Act on 30.07.2003 with the remarks ‘as originallyreturned and assessed’. Thereafter, the assessing officer framed assessmentvide order dated 12.11.2003 disallowing excess deduction of Rs.19,05,902/-claimed under Section 80-O of the Act. The assessing officer recorded thefollowing findings: Section 148 of the Act on 30.07.2003 with the remarks ‘as originallyreturned and assessed’. Thereafter, the assessing officer framed assessmentvide order dated 12.11.2003 disallowing excess deduction of Rs.19,05,902/-claimed under Section 80-O of the Act. The assessing officer recorded thefollowing findings: “First of all assessee has raised objection to the service of notice underSection 148. It is made clear that notice under Section 148 was dulyserved by affixture on 29.03.2003 on the last known address of theassessee at Phagwara in the presence of two witnesses. Copy of whichwas also sent by post on 31.03.2003. Moreover, issuance of notice underSection 148 within the stipulated period is compulsory and not servicealthough, the service of notice under Section 148 has also been madewithin the period. Thus, the objection raised by the assessee is notaccepted.” In appeal, the Commissioner of Income Tax vide its order dated31.01.2008 held that in view of non-service of notice under Section 148 ofthe Act, the reassessment is invalid. It is the said order, which was affirmedby the learned Tribunal in its order dated 21.05.2009. Learned counsel for the appellant relied upon a Division Benchjudgment of this Court in CWP No.18193 of 2011 titled “V.R.A. CottonMills (P) Ltd. Vs. Union of India and others”decided on 27.09.2011, tocontend that it is the date of issue of a notice under Section 148 of the Act,which is relevant and not the actual receipt of the notice by the assessee toreturn a finding; as to whether the re-assessment proceedings have beeninitiated within the period of limitation. In the aforesaid case, this Courtheld to the following effect: “In view of the said judgment, the date of receipt of notice by theaddressee is not relevant to determine, as to whether the notice has beenissued within the prescribed period of limitation. The expression servemeans the date of issue of notice. The date of receipt of notice cannot beleft to be undetermined dependent upon the will of the addressee. Therefore, to bring certainly and to avoid attempts of the addressee toevade the process of receipt of notice, the purpose of the statute will bebetter served, if the date of issue of notice is considered as compliance ofthe requirement of proviso to Section 143(2) of the Act. In fact that is theonly conclusion that can be arrived at to the expression ‘serve” appearingin Section 143(2) of the Act” On the other hand, learned counsel for the respondent reliedupon number of judgments of different Courts and also has tried todistinguish the judgments referred and relied upon by the Division Bench ofthis Court in V.R.A. Cotton Mills (P) Ltd. case (supra). Reliance is alsoplaced upon another Division Bench judgment of this Court in ITA No.7 of2010 titled “Commissioner of Income Tax-I, Ludhiana Vs.Sh. NaveenChander”decided on 08.02.2010, wherein the service of notice byaffixation was found to be unjustified. At this stage, the questions of law, which require ourconsideration, are question Nos.2 & 3, as reproduced above. It is notdisputed that the notice issued on 28.03.2003 was within the period oflimitation. The fact such notice was issued is not in dispute inasmuch asnotices under registered post were sent on 31.03.2003 as well i.e. againwithin the period of limitation. The dispute raised is regarding service byaffixation after the period of limitation. The said issue stands concluded bythe Division Bench of this Court in V.R.A. Cotton Mills (P) Ltd.case(supra), as referred to above. In another judgment reported asK. Bhaskaran Vs. Sankaran Vaidhyan Balan and another 1999 (7) SCC 510, the Hon’ble SupremeCourt considering the provisions of Section 138 of the NegotiableInstruments Act, 1881, wherein the drawer of cheque can be prosecuted onserving of a notice. It was held to the following effect: In another judgment reported asK. Bhaskaran Vs. Sankaran Vaidhyan Balan and another 1999 (7) SCC 510, the Hon’ble SupremeCourt considering the provisions of Section 138 of the NegotiableInstruments Act, 1881, wherein the drawer of cheque can be prosecuted onserving of a notice. It was held to the following effect: “19. In Black's Law Dictionary, "giving of notice" is distinguished from"receiving of the notice." (vide page 621) "A person notifies or givesnotice to another by taking such steps as may be reasonably required toinform the other in the ordinary course, whether or not such other actuallycomes to know of it." A person "receives" a notice when it is dulydelivered to him or at the place of his business. 20. If a strict interpretation is given that the drawer should have actuallyreceived the notice for the period of 15 days to start running no matter thatthe payee sent the notice in the correct address, a trickster cheque drawerwould get the premium to avoid receiving the notice by different strategiesand he could escape from the legal consequences of Section 138 of theAct. It must be borne in mind that court should not adopt an interpretationwhich helps a dishonest evader and clips an honest payee as that woulddefeat the very legislative measure.” ’The judgment inNaveen Chanderscase (supra) is not dealingwith the issue raised in the present appeals. In the said case, the only issuewas service by affixation. It was held that service by affixation was notproper. It was not a case, where the question of limitation arose andconsidered by the Bench. Therefore, the said judgment is not helpful for theassessee. In view of the above, question Nos.2 & 3 are answered infavour of the appellant-Revenue and against the respondent-assessee. Consequently, all the appeals are allowed. Since, neither theCommissioner nor the learned Tribunal has examined the merits of theassessment proceedings, the matter is remitted back to the Commissioner ofIncome Tax for fresh decision in accordance with law. (HEMANT GUPTA)JUDGE (G.S.SANDHAWALIA)JUDGE