The Commissioner Of Income Tax, Jalandhar-Ii, Jalandhar v. Joginder Singh, Nri Through Sh. Jarnail Singh, Poa,Woe Reespondent

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH (1) LTA. No.253 of 2012 (O&M).Decided on:-February 21, 2014. The Commissioner of Income Tax, Jalandhar-Il, Jalandhar. ....... Appellant,VersusJasbir Singh, NRI through Sh. Jarnail Singh, POA,woeRESpOndent, (2) I.T.A. No.254 of 2012 (O&M). The Commissioner of Income Tax, Jalandhar-II, Jalandhar. ....... Appellant, Versus Joginder Singh, NRI through Sh. Jarnail Singh, POA,woe REeSpondent, (3) I.T.A. No.255 of 2012 (O&M). The Commissioner of Income Tax, Jalandhar-Il, Jalandhar. ....... Appellant, Versus Lakhbir Singh, NRI through Sh. Jarnail Singh, POA. woe REeSpondent, (4) I.T.A. No.102 of 2013 (O&M). The Commissioner of Income Tax, Jalandhar-Il, Jalandhar. ....... Appellant, Versus Jasbir Singh, NRI through Sh. Jarnail Singh, POA, woeRESpOndent, (5) I.T.A. No.103 of 2013 (O&M). The Commissioner of Income Tax, Jalandhar-Il, Jalandhar. ....... Appellant, Versus Lakhbir Singh, NRI through Sh. Jarnail Singh, POA. woe REeSpondent, (6) L.T.A. No.104 of 2013 (O&M). The Commissioner of Income Tax, Jalandhar-Il, Jalandhar. ....... Appellant, Versus Joginder Singh, NRI through Sh. Jarnail Singh, POA, woe REeSpondent, CORAM: Hon'ble Mr. Justice Rajive BhallaHon'ble Mr. Justice Dr. Bharat Bhushan Parsoon. 44444 Argued by:- Mr. Vivek Sethi, Advocate for the appellant. Mr. S.K.Mukhi, Advocate for the respondent. Dr. Bharat Bhushan Parsoon, J The first three appeals arise from a common order dated21.5.2012 and the remaining three appeals arise from yet another commonorder dated 23.10.2012 passed by the Income Tax Appellate Tribunal,Amritsar Bench, Amritsar (hereinafter referred to as, the Tribunal) in ITANos.190 to 192/Asr/2010 and ITA Nos.354 to 356/Asr/2012 respectivelypertaining to the assessment year 1999-2000. The first three appeals are qua quantum of income tax, whereasrest of those are against dismissal of the appeals of the revenue in relation tolevy of penalty under Section 271(1)(c) of the Income Tax Act, 1961(hereinafter referred to as the Act). 3Facts and circumstances as also the question of law involved in [.T_-A. No.253 of2012 all these appeals are the same. Hence, these appeals are taken up together foradjudication. 4For convenience and clarity, facts have been taken from ITANo 253 of 2012. 5.Initially, following substantial questions of law had been posedin these appeals for answer:in these appeals for answer: (1)Whether on the facts and in the circumstances ofthe case the Hon'ble ITAT was right in law inholding the service of notice u/s 148/142(1) and143(2) as invalid when the assessee was notavialable in India and the AO has sent the noticesat last known address in India and also validlyaffixed these notices at the last known address ofthe person holding power of attorney.the case the Hon'ble ITAT was right in law inholding the service of notice u/s 148/142(1) and143(2) as invalid when the assessee was notavialable in India and the AO has sent the noticesat last known address in India and also validlyaffixed these notices at the last known address ofthe person holding power of attorney. (II)Whether on the facts and in the circumstances ofthe case the Hon'ble ITAT was right in law inquashing the order of the AO when it wasestablished by the AO and confirmed by theCIT(A) that the assessee was liable to pay capitalgain tax on the compensations received by himfrom PUDA and the decision of the Hon'ble [TAThas benefited the assessee to escape statutoryliability of payment of Income Tax on his taxablemMcome..the case the Hon'ble ITAT was right in law inquashing the order of the AO when it wasestablished by the AO and confirmed by theCIT(A) that the assessee was liable to pay capitalgain tax on the compensations received by himfrom PUDA and the decision of the Hon'ble [TAThas benefited the assessee to escape statutoryliability of payment of Income Tax on his taxablemMcome.. (II)Whether on the facts and in the circumstances ofthe case the Hon'ble ITAT was right in law inquashing the order of the AO when it wasestablished by the AO and confirmed by theCIT(A) that the assessee was liable to pay capitalgain tax on the compensations received by himfrom PUDA and the decision of the Hon'ble [TAThas benefited the assessee to escape statutoryliability of payment of Income Tax on his taxablemMcome..the case the Hon'ble ITAT was right in law inquashing the order of the AO when it wasestablished by the AO and confirmed by theCIT(A) that the assessee was liable to pay capitalgain tax on the compensations received by himfrom PUDA and the decision of the Hon'ble [TAThas benefited the assessee to escape statutoryliability of payment of Income Tax on his taxablemMcome.. 6.|Subsequently, the following additional substantial question oflaw was also framed:law was also framed: Whether Ld. [TAT erred in law in quashing theassessment made by the assessing officer atKapurthala in absence of any direction toassessing officer, Jalandhar to whom according toLd. ITAT the jursidiction lies to frame theassessment as concluded by Id. ITAT itself whilequashing the assessment?assessment made by the assessing officer atKapurthala in absence of any direction toassessing officer, Jalandhar to whom according toLd. ITAT the jursidiction lies to frame theassessment as concluded by Id. ITAT itself whilequashing the assessment? vaAssessee Jasbir Singh had received compensation amounting to [.T_-A. No.253 of2012 Rs.1,04,54,474/- during the assessment year 1999-2000 against compulsoryacquisition of his land situated at village Mansoorwal Dona, DistrictKapurthala. The assessee had not furnished his return of income. Finding itto be a case of income having escaped assessment for the assessment year1999-2000 by reason of failure on the part of the assessee to make a returnunder Section 139 of the Act, after recording reasons and obtainingnecessary approval from the Joint Commissioner of Income Tax (Range-IV),Jalandhar, notice under Section 148 of the Act was served on the assessee on21.3.2006. He did not furnish his return even then. Thereafter, notice undersection 142(1) of the Act was issued on 2.1.2006 along with a questionnaire.The assessee neither attended the office of the named Income Tax authorityin the notice nor filed return nor made compliance of the said notice. S|Even on information made available, the Assessing Officer(hereinafter referred to as the AO) could not get current residential addressof the assessee. The concerned Inspector of the revenue found that it was notpossible to effect service in ordinary manner and consequently, service of thenotice was effected under Section 142(1) of the Act through affixation on thelast known address of the assessee. Since after acquisition of the whole landof village Mansoorwal Dona by PUDA, it had been converted into aresidential colony and as such, notice was affixed on the Dharamshala of thevillage. None appeared on behalf of the assessee. Accordingly, the AOproceeded to frame assessment in terms of Section 144 of the Act i.e.calculating the quantum of long term capital gain for the assessment year1999-2000 at Rs.1,00,09,746/-. As the assessee had concealed this entireincome, penalty notice under Section 271-C of the Act was also issuedSeparately for the concealment of this income on account of long termcapital gains arising from compulsory acquisition of land by PUDA(Annexure A-1). Aggrieved by this order, the assessee filed a petition underSection 264 of the Act on 18.5.2007. Q |Plea of the assessee was that statutory notice had not been Q |Plea of the assessee was that statutory notice had not been served upon him and aftfixture of notice somewhere in village NoorpuDona, District Kapurthala, where the assessee neither was residing nor wasworking for gain and had only agriculture land which had been acquired,was of no legal value. It was pleaded that his address was available withPUDA, Jalandhar and had the AO made some genuine efforts, his addresscould have been obtained trom his bank account or from the office of LandAcquisition Collector, PUDA, Jalandhar and from the Income TaxDepartment itself where the assessee was allegedly assessed for theassessment year 1999-2000. It was elaborated that the assessmentproceedings for the year 1999-2000 had already been finalised by therevenue through his power of attorney Jarnail Singh. 10.Consequently, on 18.2.2008, the Commissioner of Income Tax,Jalandhar-II, Jalandhar (hereinafter referred to as the CIT) accepting versionof the assessee had set aside order of the AO, wherein directions were issuedfor framing assessment afresh after allowing adequate opportunity to theassessee of being heard. Directions were also issued to the AO to ensure thatcontentions of the assessee were judiciously dealt with. Pursuant to thisorder of 18.2.2008 (Annexure A-2), proceedings of assessment were startedafresh. During that proceedings, it was noticed that the assessee had filed thereturn of income for the assessment year 1999-2000 with the Income TaxOfficer, Ward-VI, Jalandhar on 21.8.2000 mentioning the address as c/o ShriJarnail Singh, resident of village Dheena, District Jalandhar Cantt. The AOnoticed that the return filed by the assessee on 21.8.2000 without enclosingthe power of attorney in favour of Jarnail Singh and with incorrect address,was an invalid return. The verification had also been found to be improperand thus return was invalidated on that account as well. ll.It was further noticed that on 24.3.2006 the Income Tax Officer,Ward-VI, Jalandhar had dropped the proceedings under Section 147 of theAct for want of jurisdiction, making a noting that jurisdiction is territorialand would not depend upon address of the power of attorney holder of the [.T_-A. No.253 of2012 assessee. In short, it was felt that merely because power of attorney holder ofthe assessee was a resident of Jalandhar, there would not be jurisdiction ofJalandhar but would remain with the Income Tax Officer, Kapurthala. In thisbackdrop, the Income Tax Officer, Kapurthala-I, Kapurthala had held thatthe jurisdiction over the case of the assessee was rightly vested with it,Making calculations and taking into account quantum of compensationreceived as Rs.1,04,54,474/-, long term capital gain was computed atRs.26,50,340/-. Penalty proceedings under Section 271(1)(c) of the Act werealso initiated separately for concealment of income in terms of order(Annexure A-3) of the Income Tax Officer, Kapurthala-I, Kapurthala. Thisorder was challenged in appeal by the assessee; it was dismissed. 12.Aggrieved with the said order, the assessee went in appealbefore the Tribunal. Vide order dated 21.5.2012 (Annexure A-5), theTribunal accepted version of the assessee by holding that notices shouldhave been served on the agent of the assessee Jarnail Singh, power ofattorney, and notices issued by the Income Tax Officer, Kapurthala-I,Kapurthala under Sections 148 as also 143(2) of the Act were bad in law andthe assessment made thereunder was liable to be quashed. Accepting versionof the assessee, assessments were quashed. 12.Aggrieved with the said order, the assessee went in appealbefore the Tribunal. Vide order dated 21.5.2012 (Annexure A-5), theTribunal accepted version of the assessee by holding that notices shouldhave been served on the agent of the assessee Jarnail Singh, power ofattorney, and notices issued by the Income Tax Officer, Kapurthala-I,Kapurthala under Sections 148 as also 143(2) of the Act were bad in law andthe assessment made thereunder was liable to be quashed. Accepting versionof the assessee, assessments were quashed. 13.Plea of the revenue is that when the Tribunal had acceptedclaim of the assessee that notices issued by the Income Tax Officer,Kapurthala-I, Kapurthala under Section 147 as also under Section 143(2) ofthe Act had neither been served on the assessee nor on his agent JarnailSingh and thus, were of no legal significance, the assessee should not havebeen just let off. It is contended that when liability of the assessee to pay taxon capital gains is undisputed, he should have been brought back within theambit and scope of law to discharge his liability. 14.Counsel for the respondent-assessee, on the other hand, hasurged that once notices issued to him have been proved to be of no legal [.T_-A. No.253 of2012 effect as those were not served on him or on his attorney, entire proceedingslose validity as also legality and no liability could have been fastened onhim. It is claimed that if the proceedings already started by the revenue aredefeated on the legal pedestal, initiation of fresh proceedings is notpermissible in law. 15.Hearing has been provided to counsel for the parties whilegoing through the paper books. 16.There is force in contention of the revenue that once service ofnotice under Section 148, 143(2) and 142(1) of the Act was held to be badobserving that the assessee was no more residing at the last known addressand was accessible only through his attorney Jarnail Singh, it was incumbenton the Tribunal not to quash the whole proceedings as it amounted to leavingthe assessee go sScot-free, though he is liable to pay tax on the capital gainsIt is nowhere denied that compensation for compulsory acquisition of theland was received by the assessee. As such, he cannot deny his liability topay long term capital gain tax. Merely because there was some error inService of notices on the assessee, statutory liability of the assessee to paytax on capital gain was not over. Because of procedural lapses, the assesseeShould not be a gainer and that too by default to escape his liability.Sequelly, order of the Tribunal also lacks merit. 17.Looking from another angle, default made by the revenue incompliance with the procedure in place for service of the assessee ipso-facto, is not a circumstance to let the assessee go scot free from the taxationregime when his liability of payment of capital gain tax is not questioned.When the proceedings had been started by the Income Tax Officer,Kapurthala-I, Kapurthala but the same were found to be defective ontechnical and procedural grounds of service of the assessee, liability ofpayment and capital gains tax which had accrued against the assessee, wouldnot be lost sight of and forgotten, as has been projected by the assessee. 18.It is, thus, ordered that the Income Tax Officer, Kapurthala-I,Kapurthala would start the proceedings afresh after seeking appearance ofthe assessee either in person or through his power of attorney and woulddecide the matter afresh from the stage of issuance of notice to the assessee. 19.Since the land is located at village Mansoorwal Dona, DistrictKapurthala and the proceedings are not required to be conducted at the placeof residence of power of attorney of the assessee and, in fact, the assessmentproceedings are to continue at District Kapurthala where the land acquired issituated, the time spent in conducting the proceedings would be dulyconsidered by the authorities if any question with regard to limitation at anyStage arises. 18.It is, thus, ordered that the Income Tax Officer, Kapurthala-I,Kapurthala would start the proceedings afresh after seeking appearance ofthe assessee either in person or through his power of attorney and woulddecide the matter afresh from the stage of issuance of notice to the assessee. 19.Since the land is located at village Mansoorwal Dona, DistrictKapurthala and the proceedings are not required to be conducted at the placeof residence of power of attorney of the assessee and, in fact, the assessmentproceedings are to continue at District Kapurthala where the land acquired issituated, the time spent in conducting the proceedings would be dulyconsidered by the authorities if any question with regard to limitation at anyStage arises. 2().All the substantial questions of law enumerated in earlierportion of the judgment to the extent already discussed are answered infavour of the revenue. By setting aside the impugned orders, the appeals,consequently, are allowed in favour of the revenue in the terms mentionedabove. _ (Dr. Bharat Bhushan Parsoon)Judge February 21, 2014 ‘Yag Dutt} (Rajive Bhalla)Judge iWhether Reporters of local papers may be allowed to see the judgment? Yes2Whether to be referred to the Reporters or not? Yes3Whether the judgment should be reported in the Digest? Yes2Whether to be referred to the Reporters or not? Yes3Whether the judgment should be reported in the Digest? Yes