Wa/1795/2021 Of Parveen Amin Bhathara v. The Income Tax Officer

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR. JUSTICE J.SATHYA NARAYANA PRASAD Smt. Parveen Amin Bhathara No.17, Mylai Periya Thambi StreetChennai – 600 001 The Income Tax OfficerNCW-12 (3),Greams RoadChennai - 600 006 Appeal filed under Clause 15 of The Letters Patent againstthe order dated 26.04.2021 passed by the learned Judge of thiscourt in W.P. No. 11399 of 2018. Prayer in W.P. No. 11399 of 2018:Writ Petition is filed underArticle 226 of the Constitution of India, praying for theissuance of a writ of certiorari, calling for the records on thefile of the respondent in notice under section 148 in PANNO.ADJPB8188J / NCW 12(3) / 11-12 dated 31.03.2018, attachedwith email dated 18.04.2018 and quash the same as illegal andbarred by limitation. R. MAHADEVAN, J. Aggrieved by the order of dismissal dated 26.04.2021 passedby the learned Judge in WP.No.11399 of 2018, the appellant /writ petitioner / assessee has come up with this writ appeal. 2.In the writ petition, the appellant sought to quash thereassessment notice dated 31.03.2018 issued by the respondent onthe ground of limitation. Originally, she filed her return ofincome in Form ITR-V for the assessment year 2011-2012 on 27[th]July 2011. She also submitted her return of income for thesubsequent assessment years and lastly for the assessment year2017-2018, electronically, which were duly acknowledged by therespondent. While so, after a lapse of more than six years fromthe date of submission of return of income for the assessmentyear 2011-2012, the appellant received an e-mail dated18.04.2018 sent by the respondent attaching therewith a noticedated 31.03.2018 issued under section 148 of the Income Tax Act,1961, (in short, “the Act”) in exercise of the powers conferredunder Section 147 of the Act, for re-opening the assessment forthe assessment year 2011-2012. Stating that the notice of therespondent dated 31.03.2018 under section 148 of the Act,received by her through e-mail on 18.04.2018 is time barred asper Section 149 of the Act, the appellant preferred the writpetition bearing No. 11399 of 2018 to quash the same. 3.Opposing the relief sought by the petitioner, therespondent filed a detailed counter affidavit, inter aliastating that the notice under section 148 of the Act for re-opening the assessment was signed on 31.03.2018 and it was givento the process server for despatch to the appellant on her lastknown address at No.17, Mylai Periya Thambi Street, Chennai -600 001, on the same day, but the same was returned unserved bythe process server on 06.04.2018 with an endorsement that “nosuch person is residing in the said address”. Thereafter, onthe basis of the particulars furnished by the appellant in herlast return of income for the assessment year 2017-2018, thenotice dated 31.03.2018 was sent to the appellant's e-mail I.D.on 18.04.2018. Hence, the same is well within the periodprescribed under Section 149 of the Act. The counter affidavitfurther proceeded to state that under section 147 of the Act,the respondent is empowered to assess, re-assess and re-computethe assessment, when there is reason to believe that certainincome of the appellant has escaped from the assessment andthat, the initiation of re-assessment proceedings commenced fromthe moment the notice dated 31.03.2018 was signed by therespondent. Therefore, the notice dated 31.03.2018 issued undersection 148, received by the appellant through her mail on 18.04.2018 is well within the period of limitation. It was alsostated that on receipt of the notice for re-assessment, theappellant ought to have first filed her return of income andthereafter, she can seek remedies available under law. Withoutdoing so, the appellant rushed to this court by filing writpetition under Article 226 of the Constitution of India. 18.04.2018 is well within the period of limitation. It was alsostated that on receipt of the notice for re-assessment, theappellant ought to have first filed her return of income andthereafter, she can seek remedies available under law. Withoutdoing so, the appellant rushed to this court by filing writpetition under Article 226 of the Constitution of India. 4.By order dated 26.04.2021, the learned Judge, onappreciation of the rival contentions, dismissed the writpetition by observing that “it is sufficient if the notice undersection 147 of the Act has been signed and issued by theauthority and therefore, the delay in receiving the documentswould not provide any ground for the appellant to quash theentire proceedings”. The said order of the learned Judge isquestioned by the appellant / writ petitioner / assessee in thiswrit appeal. 5.The learned counsel for the appellant contended that thenotice under section 148 of the Act for reopening the assessmentfor the assessment year 2011-12 beyond four years, was issued bythe respondent through the appellant's registered e-mail only on18.04.2018. As per section 149 of the Act, the time limitprescribed for issuance of notice for reopening the assessmentfor the assessment year 2011-12 is either 4 years i.e. on31.03.2016 or 6 years i.e. on 31.03.2018. Therefore, reopeningthe assessment beyond four years by issuance of notice dated31.03.2018 through e-mail on 18.04.2018 is clearly barred bylimitation under section 149 r/w section 282 of the Act. Thelearned counsel further submitted that it could be evident fromthe Election Commission Identity Card, passport, Aadhar Card andlatest income tax return that the appellant is residing atNo.17, Mylai Periya Thambi Street, Chennai-1 and hence, thenotice sent to the said address of the appellant returnedunserved, was invented for the purpose of validating the noticedated 31.03.2018. Thus, according to the learned counsel, therespondent though signed the notice under section 148 on31.03.2018, he sent the same to the appellant by e-mail only on18.04.2018, which is beyond the period of limitation of sixyears from the end of the assessment year 2011-12. Withoutconsidering the same in a proper perspective, the learned Judgeerred in dismissing the writ petition filed by the appellant.Therefore, the learned counsel prayed to allow this writ appealby quashing the order of the learned Judge dated 26.04.2021 aswell as the notice of the respondent dated 31.03.2018. 6.On the other hand, the learned senior panel counselappearing for the respondent submitted that the notice undersection 148 of the Act was signed and directed to be despatchedon 31.03.2018 and hence, the same is well within the limitationperiod of re-opening the reassessment. The learned counsel 6.On the other hand, the learned senior panel counselappearing for the respondent submitted that the notice undersection 148 of the Act was signed and directed to be despatchedon 31.03.2018 and hence, the same is well within the limitationperiod of re-opening the reassessment. The learned counsel further submitted that the respondent office adopted all thepossible modes of services to serve the notice dated 31.03.2018on the appellant and as a last resort, the same was sent to herthrough e-mail, which was also received by her on 18.04.2018. Insuch circumstances, it cannot be said that the notice dated31.03.2018 was received by the appellant beyond the period oflimitation i.e., on 18.04.2018 and therefore, the entire re-assessment proceedings are vitiated. Having regard to all thesefactors, the learned Judge rightly concluded that the period oflimitation has to be reckoned from the date of signing of thenotice on 31.03.2018 itself, which is in accordance with theprovisions contained under Sections 147 to 149 of the Act; whenthe reassessment was launched against the appellant by issuing anotice duly signed on 31.03.2018, the appellant has to subjectherself to the same; and accordingly, dismissed the writpetition. Ultimately, the learned counsel referred to thedecision of this court in Abab Offshore Ltd v. DeputyCommissioner of Income-tax [(2017) 78 taxmann.com 37 (Madras)]and submitted that the order of the learned Judge requires nointerference at the hands of this court. 7.Heard both sides and perused the materials available onrecord. 8.In the present case, the respondent reopened theassessment of the appellant for the assessment year 2011-12,through notice dated 31.03.2018 under section 148 of the Act.Admittedly, the limitation period of six years for reopening theassessment, came to an end on 31.03.2018. The main plank ofcontention of the learned counsel for the appellant is that thenotice under section 148 of the Act dated 31.03.2018 has beenreceived by the appellant through e-mail only on 18.04.2018i.e., after the expiry of six years from the end of theassessment year under consideration and hence, the same isclearly barred by limitation, whereas the department contendedthat mere signing of notice by the respondent on 31.03.2018amounts to issuance of notice under section 149 of the Act andtherefore, the same is within the limitation period. 9.To appreciate the rival contentions, it is but relevant tolook into the relevant provisions of law viz., section 149 ofthe Act, which reads as under: “Time limit for notice 149(1). No notice under section 148 shall be issuedfor the relevant assessment year - (a)if four years have elapsed from the end ofthe relevant assessment year, unless the case fallsunder clause (b); (b)if four years, but not more than six years,have elapsed from the end of the relevant assessmentyear unless the income chargeable to tax which hasescaped assessment amounts to or is likely to amountto one lakh rupees or more for that year. Explanation – In determining income chargeable to taxwhich has escaped assessment for the purposes of thissub-section, the provisions of Explanation 2 ofsection 147 shall apply as they apply for thepurposes of that section. (2) The provisions of sub-section (1) as to the issueof notice shall be subject to the provisions ofsection 151.” 149(1). No notice under section 148 shall be issuedfor the relevant assessment year - (a)if four years have elapsed from the end ofthe relevant assessment year, unless the case fallsunder clause (b); (b)if four years, but not more than six years,have elapsed from the end of the relevant assessmentyear unless the income chargeable to tax which hasescaped assessment amounts to or is likely to amountto one lakh rupees or more for that year. Explanation – In determining income chargeable to taxwhich has escaped assessment for the purposes of thissub-section, the provisions of Explanation 2 ofsection 147 shall apply as they apply for thepurposes of that section. (2) The provisions of sub-section (1) as to the issueof notice shall be subject to the provisions ofsection 151.” Thus, it is clear from the above provision that the maximum timelimit for issuance of notice under section 148 for reopening theassessment is six years from the end of the relevant assessmentyear. In the instant case, the relevant assessment year is 2011-12; the limitation of six years for initiation of reassessmentproceedings expired on 31.03.2018; and notice under section 148signed by the respondent was dated 31.03.2018. In suchcircumstances, this court is required to examine that suchnotice is in adherence to the compliance of section 149 forreassessment proceedings. 10.While the appellant stated that notice under section 148dated 31.03.2018 was received by her through e-mail only on18.04.2018 and hence, the same is clearly barred by limitation,it is stated on the side of the department that notice undersection 148 was signed by the respondent on 31.03.2018 and thesame was given to the process server to be served on theappellant on the same day, but it was returned on 06.04.2018stating that there was no such person in the given address.After ascertaining her address from the last return of incomefiled by her, the said notice was sent to the appellant'sregistered mail ID, which was also served on 18.04.2018. Thus,according to the respondent, the reassessment proceedingscommenced from the moment, when the notice was signed by therespondent on 31.03.2018 and hence, the same is well within thelimitation. 11.In this context, this court would apply the doctrine of‘substantial compliance’ to the facts and circumstances of thecase. In the decision of the Hon'ble Supreme Court inCommissioner of Central Excise, New Delhi v. Hari Chand ShriGopal and others [(2011) 1 SCC 236], it was held as follows: “Doctrine of substantial compliance and “intendeduse” 32. The doctrine of substantial compliance is ajudicial invention, equitable in nature, designed toavoid hardship in cases where a party does all thatcan reasonably be expected of it, but failed orfaulted on some minor or in consequent aspects whichcannot be described as the “essence” or the“substance” of the requirements. Like the concept of“reasonableness”, the acceptance or otherwise of aplea of substantial compliance depends upon the factsand circumstances of each case and the purpose andobject to be achieved in the context of theprerequisites which are essential to achieve theobject and purpose of the rule or regulation. Such adefence cannot be pleaded if a clear statutoryprerequisite which effectuate the object and thescope of the statute has not been met. Certainly, itmeans that the court would determine whether thestatute has been followed sufficiently so as to carryout the intent for which the statute was enacted andnot a mirror image type of strict compliance.Substantial compliance means “actual compliance inrespect to the substance essential to everyreasonable object of the statute” and the courtshould determine whether the statute has beenfollowed sufficiently so as to carry out the intentof the statute and accomplish the reasonableobjectives for which it was passed. 33. A fiscal statute generally seeks to preserve theneed to comply strictly with regulatory requirementsthat are important, especially when a party seeks thebenefits of an exemption clause that are important.Substantial compliance with an enactment is insisted,where mandatory and direct recruitment requirementsare lumped together, for in such a case, if mandatoryrequirements are complied with, it will be proper tosay that the enactment has been substantiallycomplied with notwithstanding the non-compliance ofdirectory requirements. In cases where substantialcompliance has been found, there has been actualcompliance with the statute, albeit procedurallyfaulty. The doctrine of substantial compliance seeksto preserve the need to comply strictly with theconditions or requirements that are important toinvoke a tax or duty exemption and forgive non-compliance for either unimportant and tangentialrequirements or requirements that are so confusinglyor incorrectly written that an earnest effort atcompliance should be accepted. 34. The test for determining the applicability of thesubstantial compliance doctrine has been the subjectof a myriad of cases and quite often, the criticalquestion to be examined is whether the requirementsrelate to the “substance” or “essence” of the thingto be done but are given with a view to the orderlyconduct of business, they may be fulfilled bysubstantial, if not strict compliance. In other wordsa mere attempt at compliance may not be sufficient,but actual compliance with those factors which areconsidered as essential.” 12.In Kanubhai M. Patel v. Hiren Bhatt and others [(2011)334 ITR 25 (Guj)], it was held by the Gujarat High Court that“date of issuance of notice under Section 148 Income Tax Act hasto be reckoned not from the date when it was issued, but on thedate when it was actually delivered on the assessee”. Therelevant paragraphs of the same are profitably extracted below: "13. On a plain reading of Section 149, it isapparent that under the said provision, the maximumtime limit for issuance of notice under Section 148is six years from the end of the relevant assessmentyear. In the present case, the relevant assessmentyear in each of the petitions is 2003-2004; theimpugned notices are dated 31.03.2010; and the saidnotices were sent for booking to the Speed PostCentre, Ahmedabad, on 07.04.2010. On behalf of thepetitioners, it has been contended that the noticeswhich have been dispatched for service only on07.04.2010, are clearly time barred inasmuch as thedate of dispatch would be the date of issue of thenotices. Whereas, on behalf of the revenue, it hasbeen contended that the notices were actually signedon 31.03.2010, hence, the said date would be thedate of issue and as such, the impugned notices havebeen issued within the time limit prescribed underSection 149 of the Act. 14.In the background of the aforesaid factsand contentions, the core issue that arises forconsideration is as to when can the notice underSection 148 of the Act be said to have been issued.In this context, it would be necessary to examinethe true import of the expression "shall be issued"as employed in section 149 of the Act. 15.The expression 'issue' has been defined inBlack's Law Dictionary to mean "To send forth; to emit; to promulgate; as, an officer issues orders,process issues from court. To put into circulation;as, the treasury issues notes. To send out, to sendout officially; to deliver, for use, orauthoritatively; to go forth as authoritative orbinding. When used with reference to writs,process, and the like, the term is ordinarilyconstrued as importing delivery to the properpersons, or to the proper officer for service etc, 15.1 In P. Ramanathan Aiyer's Law Lexicon theword 'issue' has been defined as follows:- 15.The expression 'issue' has been defined inBlack's Law Dictionary to mean "To send forth; to emit; to promulgate; as, an officer issues orders,process issues from court. To put into circulation;as, the treasury issues notes. To send out, to sendout officially; to deliver, for use, orauthoritatively; to go forth as authoritative orbinding. When used with reference to writs,process, and the like, the term is ordinarilyconstrued as importing delivery to the properpersons, or to the proper officer for service etc, 15.1 In P. Ramanathan Aiyer's Law Lexicon theword 'issue' has been defined as follows:- "Issue. As a noun, the act ofsending or causing to go forth; a moving out ofany enclosed place; egress; the act of passingout; exit, egress or passage out (WorcesterDict.); the ultimate result or end. As a verb, "To issue" means to sendout, to send out officially; to send forth; toput forth; to deliver, for use, orunauthoritatively; to put into circulation; toemit; to go out (Burrill); to go forth as aauthoritative or binding, to proceed or arisefrom; to proceed as from a source (CenturyDict.) Issue or process: Going out of thehands of the clerk, expressed or implied, to bedelivered to the Sheriff for service. A writ ornotice is issued when it is put in proper formand placed in an officer's hand for service, atthe time it becomes a perfected process. Any process may be considered 'issued' if made out and placed in the hands ofa person authorised to serve it, and with abona fide intent to have it served" 16. Thus, the expression to issue inthe context of issuance of notices, writs andprocess, has been attributed the meaning, to sendout; to place in the hands of the proper officer forservice. The expression "shall be issued" as used insection 149 would therefore have to be read in theaforesaid context. In the present case, theimpugned notices have been signed on 31.03.2010,whereas the same were sent to the speed post centrefor booking only on 07.04.2010. Considering thedefinition of the word issue, it is apparent that merely signing the notices on 31.03.2010, cannot beequated with issuance of notice as contemplatedunder Section 149 of the Act. The date of issuewould be the date on which the same were handed overfor service to the proper officer which in the factsof the present case would be the date on which thesaid notices were actually handed over to the postoffice for the purpose of booking for the purpose ofeffecting service on the petitioners. Till the pointof time the envelopes are properly stamped withadequate value of postal stamps, it cannot be statedthat the process of issue is complete. In the factsof the present case, the impugned notices havingbeen sent for booking to the speed post centre onlyon 07.04.2010, the date of issue of the said noticeswould be 07.04.2010 and not 31.03.2010, as contendedon behalf of the revenue. In the circumstances,impugned the notices under Section 148 in relationto assessment year 2003-04, having been issued on07.04.2010, which is clearly beyond the period ofsix years from the end of the relevant assessmentyear, are clearly barred by limitation and as such,cannot be sustained." Thus, it is apparent from the aforesaid decisions that theissuance of notice under section 149 is complete only when thesame is issued in the manner as prescribed under section 282 r/wrule 127 of the Income Tax Rules prescribing the mode of serviceof notice under the Act. The signing of notice would not amountto issuance of notice as contemplated under section 149 of theAct. In other words, the requirement of issuance of notice undersection 149 is not mere signing of the notice under section 148,but is sent to the proper person within the end of the relevantassessment year. Thus, it is apparent from the aforesaid decisions that theissuance of notice under section 149 is complete only when thesame is issued in the manner as prescribed under section 282 r/wrule 127 of the Income Tax Rules prescribing the mode of serviceof notice under the Act. The signing of notice would not amountto issuance of notice as contemplated under section 149 of theAct. In other words, the requirement of issuance of notice undersection 149 is not mere signing of the notice under section 148,but is sent to the proper person within the end of the relevantassessment year. 13.Concededly, the notice dated 31.03.2018 issued by therespondent was served on the appellant through mail, only on18.04.2018. Though the learned senior panel counsel appearingfor the respondent produced the relevant pages of notice serverbook maintained by the department to show that the notice of therespondent dated 31.03.2018 under section 148 is within thelimitation period, but the same only disclosed that the noticedated 31.03.2018 was returned on 06.04.2018. Further, thedecision in Aban Offshore Limited case (supra) relied on theside of the respondent, is of no assistance, wherein, the postalcover showed that the franking was made on 01.04.2015, but the'business post arrangement' between the Income Tax Departmentand the Department of Posts disclosed that the cover wasdespatched on 31.03.2015, i.e., within the period of limitation.Whereas, in this case, there is no document made available to prove that the notice under section 148 dated 31.03.2018 wassent for despatch to the appellant, within the end of therelevant assessment year i.e., 31.03.2018. Thus, it is crystalclear that the notice under section 148 for reopening theassessment was not sent to the appellant, within the timestipulated under section 149 of the Act and hence, the samevitiates the reassessment proceedings initiated under section147 of the Act. 14.In such view of the matter, the order of the learnedJudge dated 26.04.2021 as well as the notice dated 31.03.2018issued by the respondent are liable to be set aside and areaccordingly, set aside. As a sequitur, the writ appeal standsallowed. No costs. Consequently, connected miscellaneouspetition is closed. Sd/- Assistant Registrar(CS IX) //True Copy// Sub Assistant Registrar rsh ToThe Income Tax OfficerNCW-12 (3),Greams RoadChennai - 600 006. +1cc to Mrs. Hema Muralikrishnan, Advocate, S.R.No.40070+1cc to Mr.T.Pramod Kumar Chopda, Advocate, S.R.No.40417 WA No. 1795 of 2021 SKM[co]NSK/13/07/2022