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income-tax Officer Vs. Suraj Prakash - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Jaipur
Decided On
Judge
Reported in(1984)7ITD839(JP.)
Appellantincome-tax Officer
RespondentSuraj Prakash
Excerpt:
.....but that appeal was withdrawn by the assessee before the commissioner (appeals). the assessee also filed appeal against the ex parte order passed under section 144 raising a plea that there was no proper service of the notice issued under section 139(2). the commissioner (appeals) considered this plea and was of the view that the notice under section 139(2) was not properly served on the assessee. notice server appeared personally before the commissioner (appeals) and he informed the commissioner (appeals) that the notice under section 139(2) had been served on the assessee's father, shri babulal. the commissioner (appeals), however, observed that the notice did not bear the signatures of shri babulal. she, therefore, took the view that there was no proper service of the notice issued.....
Judgment:
1. These are the three appeals by the revenue for a single assessment year 1977-78 against the orders passed under Section 271(1)(a), Section 144 and Section 273 of the Income-tax Act, 1961 ('the Act'). We first take up the appeal arising from the order passed under Section 144. The brief facts are that the ITO issued a notice under Section 139(2) of the Act, which was purportedly served on 16-7-1977. No return was filed in response to that notice and also in response to a notice issued under Section 142(1) of the Act, which was served on the assessee on 5-6-1979. The ITO, therefore, completed an assessment under Section 144. The assessee made an application under Section 146 of the Act, which was rejected by the ITO. Then, an appeal was preferred against the order passed on the assessee's application made under Section 146 but that appeal was withdrawn by the assessee before the Commissioner (Appeals). The assessee also filed appeal against the ex parte order passed under Section 144 raising a plea that there was no proper service of the notice issued under Section 139(2). The Commissioner (Appeals) considered this plea and was of the view that the notice under Section 139(2) was not properly served on the assessee. Notice server appeared personally before the Commissioner (Appeals) and he informed the Commissioner (Appeals) that the notice under Section 139(2) had been served on the assessee's father, Shri Babulal. The Commissioner (Appeals), however, observed that the notice did not bear the signatures of Shri Babulal. She, therefore, took the view that there was no proper service of the notice issued under Section 139(2) and, therefore, the entire assessment was invalid. She, therefore, cancelled the assessment order.

2. We have heard Shri Saxena, the learned departmental representative and Shri Ranka, the learned counsel for the assessee. The revenue has raised two grounds in this appeal filed against the order passed under Section 144 and both the grounds converge on the point that in the appeal filed under Section 246(c) of the Act, the assessee cannot take up the issue of the validity of the notice issued under Section 139(2).

The contention of the revenue is that this issue can be raised by the assessee only in the appeal filed against the order passed under Section 146. The revenue, however, seeks to raise an additional ground before us, which runs as follows : The Commissioner (Appeals) erred in holding that the notice issued under Section 139(2) was not properly served on the basis of the statement of the notice server without giving an opportunity to the ITO to cross-examine the notice server.

Shri Ranka has vehemently opposed the additional ground from being admitted. We enquired from Shri Saxena as to why this ground was not raised along with other grounds. He submits that the ITO came to know only from the explanation of the notice server dated 29-9-1982 that he had duly served the notice on Shri Babulal but he was not sure about the signature, which he obtained on the notice. Shri Ranka submits that, the explanation dated 20-9-1982 was already before the ITO when the appeal was filed before the Commissioner (Appeals) on 15-10-1982 and that discovery of explanation dated 20-9-1982 cannot be a new event. Before us Shri Saxena does not say that the ITO could lay his hands on the explanation dated 20-9-1982 of the notice server only after having filed the appeal before the Commissioner (Appeals) on 15-10-1982. On these facts, we do not find any good reason for admitting the additional ground. Even if the additional ground is admitted, we are of the view that the revenue has failed to prove that the notice under Section 139(2) had been duly served on Shri Babulal and that he was a competent person to receive the same. There is no evidence on record to show that Shri Babulal was duly authorised to receive a notice issued under Section 139(2). The revenue presses only one point that Shri Babulal had received notices on behalf of the assessee in the past also. The question is whether Shri Babulal can be assumed to be a competent person to receive notice on behalf of the assessee simply because he received notices in the past also. Shri Ranka relied on a decision of the Hon'ble Allahabad High Court in the case of Addl. CIT v. Prem Kumar Rastogi [1980] 124 ITR 381 in which it has been held that a person who is not an authorised agent of the assessee but who has merely accepted notices in the past on his behalf cannot be deemed or treated to be an authorised agent of the assessee and service on him of the assessment order of the assessee is not valid. Relying on this authority, we hold that Shri Babulal was not even competent to receive notice on behalf of the assessee.

3. Then arises an interesting question from the original grounds of the appeal filed against the order under Section 144. The Commissioner (Appeals) accepted the contention of the assessee that notice under Section 139(2) was not validly served on the assessee and, therefore, the assessment made under Section 144 was bad in law. The contention of the revenue is that the validity of the assessment on this ground could not have been challenged by the assessee in the appeal filed under Section 144 and that the assessee should have taken up and pursued this ground in the appeal filed against the order under Section 146. In short, the revenue's contention is that the assessment order cannot be proved to be invalid in this appeal on the ground that notice under Section 139(2) was not validly served on the assessee. Shri Ranka argues that service of the notice under Section 139(2) cannot be challenged under Section 146 and that can be challenged only in the appeal filed against the order under Section 144. His argument is that under Section 146, the assessee can simply show the mitigating circumstances of the defaults, as mentioned in Clauses (i) and (ii) of Section 146(1). Under Clause (i) of Section 146(1), the assessee is required to show a sufficient cause for not filing the return, as required by Section 139(2) and Clause (ii) of Section 146(1) requires the assessee to explain the default resulting from non-compliance of Sections 142(1) and 143(2) of the Act. For our purposes, Clause (i) of Section 146(1) is material. Order under Section 144 was passed against the assessee for two reasons (i) that the assessee failed to file return in response to the notice under Section 139(2); and (ii) that the assessee failed to comply with the notice issued under Section 142(1). Surely, whether or not notice under Section 142(1) was received-this question can be raised only under Section 146. But the question is whether the assessee can argue non-service of the notice issued under Section 139(2) in the proceedings of Section 146. Shri Ranka submits that Clause (i) of Section 146(1) refers to non-filing of return as required by Section 139(2). So according to him, the default is failure to file return as required by Section 139(2). Shri Ranka urges that Clause (i) of Section 146(1) postulates that notice under Section 139(2) was duly served on the assessee but still he failed to file return, as required by that notice and under this clause the assessee is required to show that he was prevented by sufficient cause from making return as required by Section 139(2). The question whether or not the assessee was required to file return by Section 139(2), does not come within the purview of Section 146, Shri Ranka says. His submission is that this question can be decided only in the appeal filed against the order passed under Section 144. We find force in the submissions of Shri Ranka. If the notice under Section 139(2) is duly served on the assessee and he still fails to file return in response to that, then the assessee can explain under Section 146 that he was prevented by sufficient cause from making the return as required by Section 139(2). But, if the assessee disputes the basic fact that no notice under Section 139(2) was received by him, then the invalidity of the assessment on this ground can be challenged only in the appeal filed against the order passed under Section 144. The Hon'ble Supreme Court in Y. Narayana Chetty v. ITO [1959] 35 ITR 388, considering the analogous provisions of the Indian Income-tax Act, 1922, observed that the notice prescribed by Section 34 of the 1961 Act for the purpose of initiating reassessment proceedings is not a mere procedural requirement: the service of the prescribed notice on the assessee is a condition precedent to the validity of any reassessment made under Section 34. From this authority it clearly appears that service of the notice under Section 139(2) is not a mere procedural requirement but it confers jurisdiction on the ITO to make the assessment and so it is a precedent condition to the validity of the assessment, whether or not the order passed under Section 144 is invalid for want of proper service of the notice under Section 139(2). This question, in our opinion, can be challenged by the assessee only in the appeal filed against the order passed under Section 144 to deny his liability to be assessed by that invalid order under Section 246(c). Our view is fully supported by a decision of the Hon'ble Madras High Court in Jayanthi Talkies Distributors v. CIT [1979] 120 ITR 576. The facts of this authority were-The notice was served by the process-server of the department on the manager of the firm who subsequently also wrote to the ITO asking for time to file the return in pursuance of the said notice. As no return was filed, the ITO completed the assessment under Section 144. The assessee filed an appeal to the AAC contending that there was no valid service of notice as it had not been served on a proper person duly authorised to receive the same. The application to the ITO under Section 146 to set aside the assessment having been rejected, the assessee filed an appeal to the AAC against that order as well. The AAC allowed the appeal filed against the order under Section 146 and, consequently, held that the appeal against the order under Section 144 had become infructuous. The assessee filed an appeal to the Tribunal against the order of the AAC holding that the appeal against the order under Section 144 became infructuous contending that, as the notice under Section 148 of the Act was not validly served on the assessee, the assessment under Section 144 was invalid. The Tribunal dismissed the appeal holding that the notice under Section 148 had been validly served on the manager and, hence, the assessment was valid. On reference, the High Court held that the ITO will have no jurisdiction to make an assessment under Section 147 of the Act unless the notice under Section 148, which can be equated with the notice under Section 139(2) is validly issued to and served on the assessee. The High Court took the view that the notice under Section 148 was not validly served and, therefore, it was held that the reassessment made under Section 147 could not be held to be valid. This authority squarely applies to the instant case. Shri Saxena relied on Gaurishanker Kedia v. CIT [1963] 49 ITR 655 (Bom.). No doubt, this authority fully supports the viewpoint of the revenue. But on the interpretation of Sections 146 and 246(c) and following Y. Narayana Chetty's case (supra) and Jayanthi Talkies Distributors' case (supra), we hold that the Commissioner (Appeals) was right in cancelling the assessment on the ground that there was no proper service of the notice under Section 139(2). Even otherwise when two conflicting views under Gaurishanker Kedia's case (supra) and Jayanthi Talkies Distributors' case (supra) are available, we follow the latter and dismiss the revenue's appeals.

4. The corollary of our finding is that the other appeals of the revenue filed against the orders under Section 271(1)(a) and Section 273 cannot succeed.


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