Ita/531/2007 Of The Commissioner Of Income Tax v. M/S Itc Hotels

IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THR 19 DAY OF AUGUST, 2014. PRESENT THR HON’BLE MR.JUSTICE N. KUMAR AND THR HON’BLE MRS..JUSTICK RATHNAKALA INCOME TAX APPEAL NO.531 OF 2007 BETWEEN: 1.|THE COMMISSIONER OF INCOME-TAX, C.R. BUILDING,QUEENS ROAD,BANGALORE. C.R. BUILDING,QUEENS ROAD,BANGALORE. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX,CIRCLE —- 11(1),CIRCLE —- 11(1), C.R. BUILDING, QUEENS ROAD, BANGALORE. | APPBLLANTS (BY SRI K.V. ARAVIND, ADV.) AND: M/s. ITC HOTELS:A-9, USO ROAD, OQUTAB INSTITUTIONAL AREA,NEW DELHI. .. RESPONDENT (BY SRI RUPESH JAIN, ADV. FORoRI PRASHANTH KUMAR D., ADV.) THIS INCOME TAX APPBAL [IS FILED UNDERSECTION 260-A OF LT. ACT, 1961 ARISING OUT OF. ORDERDATEHD12-02-2007|PASSEDTN|TTA.NO.364/BANG/2005 FOR THE ASSESSMENT YEAR|1995-1996, PRAYING THAT THIS HON'BLE COURT|MAY BE PLKBASED TO: 1.FORMULATE THE SUBSTANTIAL QUESTIONS OFLAW SIATED THEREIN,LAW SIATED THEREIN, Il.ALLOW THR APPEAL AND SET ASIDE THE ORDER|PASSED.BY|THERINCOME-TAXAPPELLATETRIBUNAL, BANGALORE IN ITA NO.364/BANG/200o5DATED 12-02-2007 CONFIRMING THR ORDER OF.THR APPRLLATKH COMMISSIONBR AND CONFIRMTHE.ORDERPASSEDBY|‘THKDEPUTYCOMMISSIONER OF INCOME TAX, CIRCLE-11(1),|BANGALORE, IN THE INTEREST OF JUSTICE ANDEOUITY.PASSED.BY|THERINCOME-TAXAPPELLATETRIBUNAL, BANGALORE IN ITA NO.364/BANG/200o5DATED 12-02-2007 CONFIRMING THR ORDER OF.THR APPRLLATKH COMMISSIONBR AND CONFIRMTHE.ORDERPASSEDBY|‘THKDEPUTYCOMMISSIONER OF INCOME TAX, CIRCLE-11(1),|BANGALORE, IN THE INTEREST OF JUSTICE ANDEOUITY. THIS APPBAL COMING ON FOR FINAL HBARING THIS.DAY,N. KUMAR aaDELIVBRED THR FOLLOWING: JU DBiGMENT This appeal is preferred by the Revenue, challenging|the order passed by the Tribunal which has held that|reopening of the assessment was bad in law as it was not|proceeded by a service of statutory notice contemplatedunder Section 148 (1) of the Income Tax Act, 1961)(hereinafter referred to as ‘the Act).| 2. This appeal was admitted on 14.03.2008 to consider| the following substantial question of law: “Whether the Tribunal twas correct inholding that service of notice under Section 148had not taken place despite there being prooffor having dispatched notice and subsequent noticesunder Section 143 (2) having been served on theassessee and when the assessee’s representativepresent on the day of dispatch had refused toaccept the notice?”| 3. A notice under Section 148 otf the Act was issued on22.01.2001 for reopening the assessment. The assessee filed|his objections and contended that there was no prior|approval of the Commissioner of Income Tax under Section151 of the Act. When the same was noticed, the proceedingswere dropped. After obtaining prior approval of theCommissioner, one more notice was issued on 28.03.2002. |The case of the Revenue is that, the representative of the|assessee was present in the office and declined to receive thesaid notice. Therefore, it was despatched on 28.03.2002,itself. However, there is nothing on record to show that thisnotice was duly served on the assessee. The material on|record shows that the notice was despatched on 28.03.2002,but there is nothing on record to show that it was dulyserved on the assessee. 4. Section 148 (1) of the Act reads as under: “148 (1) Before making the assessment,|reassessment or recomputation under section147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish withinsuch period, as may be specified in the notice, areturn of his income or the income of any otherperson in respect of which he is assessable underthis Act during the previous year corresponding tothe relevant assessment year, in the prescribedform and verified in the prescribed manner andsetting forth such other particulars as may beprescribed; and the provisions of this Act shall, sofaras may be, apply accordingly as if such returnwere a return required to be furnished undersection 1339. [Provided that in a case— 4. Section 148 (1) of the Act reads as under: “148 (1) Before making the assessment,|reassessment or recomputation under section147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish withinsuch period, as may be specified in the notice, areturn of his income or the income of any otherperson in respect of which he is assessable underthis Act during the previous year corresponding tothe relevant assessment year, in the prescribedform and verified in the prescribed manner andsetting forth such other particulars as may beprescribed; and the provisions of this Act shall, sofaras may be, apply accordingly as if such returnwere a return required to be furnished undersection 1339. [Provided that in a case— (a) where a return has been furnishedduring the period commencing on the Ist day ofOctober, 1991 and ending on the 30th day ofseptember, 2005 in response to a notice servedunder this section, and (b) subsequently a notice has been servedunder sub-section (2) of section 143 after theexpiry of twelve months specified in the proviso tosub-section (2) of section 143, as it stoodimmediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) butbefore the expiry of the time limit for making theassessment, re-assessment or recomputation asspecified in sub-section (2) of section 153, everysuch notice referred to in this clause shall bedeemed to be a valid notice: Provided further that in a case—| (a) where a return has been furnishedduring the period commencing on the Ist day ofOctober, 1991 and ending on the 30th day ofseptember, 2005, in response to a notice servedunder this section, and (b) subsequently a notice has been servedunder clause (it) of sub-section (2) of section 143after the expiry of twelve months specified in theproviso to clause (i) of sub-section (2) of section143, but before the expiry of the time limit formaking|the.assessment, reassessmentOrrecomputation as specified in sub-section (2) ofsection 153, every such notice referred to in thisclause shall be deemed to be a valid notice./ [/Explanation.—For the removal of doubts, itis hereby declared that nothing contained in thefirst proviso or the second proviso shall apply toany return which has been furnished on or afterthe Ist day of October, 2005 in response to anotice served under this section./ o. Therefore, it is clear from the aforesaid Section that,beforemakingthe assessmentOT|reassessmentyOT|recomputation under Section 147 of the Act, the Assessing|Officer shall serve notice on the assessee. Therefore, service |of notice under Section 148 (1) of the Act is a condition|precedent before initiating proceedings under Section 147 ofthe Act. In fact, the Apex Court in the case of| S.NarayanappaVs.Commissionerof|IncomeTax|reported in [1967] 63 ITR 219 (SC)1 has held that theproceedings for assessment or reassessment under Section34(1)(a) of the Act which is in|part materiawith Section 147|of the Act, which start with the issue of a notice and it 1s.only after the service of notice, that the assessee whoseincome is sought to be assessed or reassessed becomes a_party to the proceedings. Therefore, if such a service of |notice is not affected, there cannot be any assessment or reassessment proceedings. The Delhi High Court in the caseoT Commissioner of Income Tax Vs. Mani Kakar reportedin [2009] 178 Taxman 315 (Dethi,has held thatproceedings under Section 147 of the Act cannot be initiatedwithout the service of notice as mandated in Section 148 otthe Act. Service of notice 1s a precondition for permitting|asessement under Section 147 of the Act. 6. Therefore, in the instant case, admittedly, when|notice under Section 148 of the Act is not duly served on theassessee, the proceedings under Section 147 of the Act is|one without jurisdiction and the Tribunal has rightly set|aside the order. We find no infirmity or irregularity|committed by the Tribunal. Hence, the substantial questionof law is answered in favour of the assesee and against the| 6. Therefore, in the instant case, admittedly, when|notice under Section 148 of the Act is not duly served on theassessee, the proceedings under Section 147 of the Act is|one without jurisdiction and the Tribunal has rightly set|aside the order. We find no infirmity or irregularity|committed by the Tribunal. 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