Delhi High Court

Dr. K.C. Verma vs Asstt. Cit on 29 May, 2002

Equivalent citations: (2004) 89 TTJ Del 129

ORDER

K.C. Singhal, J.M.

These appeals pertain to assessment years 1992-93 to 1995-96 involving common legal question as to whether the assessments framed under section 144 were bad in law. Since common question is involved, the same' are being disposed of by the common order for the sake of convenience.

2. The brief facts giving rise to these appeals are these. The assessed is a dermatologist, who served as head of the department at Government Medical College, Rohtak, up to 1980 when he left India and returned on 14-11-1991. The returns for the years under consideration were sent by registered post on 2nd Dec., 1997, waiving his right to receive the notices under section 148. However, notices under section 148, dated 23rd March, 1998, were issued and sent to the assessed by registered post. The assessed vide letter dated 24th April, 1998, requested the assessing officer to treat the returns already filed as returns filed in response to notices under section 148. Subsequently, as per assessing officer, notices under section 142(1) were issued on 1st March, 2000, and 23rd Mawh, 2000, fixing the dates of hearing on 8th March, 2000, and 27th March, 2000, respectively, which, according to the assessing officer, remained uncomplied with. Accordingly, the assessments were framed under section 144 vide orders dated 31st March, 2000. These assessments were challenged before the Commissioner (Appeals) before whom it was submitted that none of the alleged notices issued under section 142(1) were served upon the assessed and the assessed came to know about these notices only on receiving the impugned .assessment orders through registered post. According to the assessed, the office record was examined and it was found that record relating to issue and service of the notice under section 142(1) had been forged in the office. In support of this claim, the assessed produced the visitor's register maintained by the Chowkidar of the multi-storeyed residential complex in which assessed owned his flat. According to him, there was no entry in respect of the visit by any notice-server or any inspector from the IT department.

3. After examining the assessment record, the Commissioner (Appeals) found that notice under section 142(1) issued on 1-3-2000, was served through affixture by the notice server in the presence of the inspector. The signature of the notice-server as well as of the inspector were available on the record submitted to the assessing officer. The Commissioner (Appeals) justified the service by affixture by observing that the assessing officer was a fresher directly recruited officer, who was still learning the procedural aspect of the official work and the only reason for such service by affixture was his keen desire to ensure that the notice issued is served on the assessed. It has been further observed by the Commissioner (Appeals) that the second notice under section 142(1) has been served through the notice-server. Accordingly, it was held by him that the service of notices was valid and consequently, the assessments framed under section 144 were in accordance with law. Aggrieved by the same, the assessed is in appeal before the Tribunal on this issue.

4. The learned counsel for the assessed has vehemently assailed the impugned orders by raising two-fold contentions. Firstly, the assessments were without jurisdiction since none of the notices under section 142(1) was served upon the assessed. According to him, there was no reason for not serving the notice in the normal course Le., serving the notice personally or by registered post. Further, he drew our attention to section 282 of Income Tax Act, 1961, for contending that notices under the Act have to be served either by post or if it were a summons issued by a court under the CPC, 1908. He drew our attention to the judgment of the Hon'ble Supreme Court in the case of CIT & Ors. v. Ramendra Nath Ghosh 1974 CTR (SC) 131 : (1971) 82 ITR 888 (SC) to point out that service by affixture could not be made unless the serving officer after using all due and reasonable diligence could not find the defendant and there was no agent empowered to accept the service of the summons on his behalf. Further, the service of affixture was not complete unless the affixture is made in the presence of two persons by whom the house was identified and under whose presence the copy was affi~ed. According to him, if the procedure laid down in r. 17 order 5 of CPC is not followed then service by affixture is illegal in view of the aforesaid Supreme Court judgment. In this connection, he also relied on the decision of Calcutta High Court in the case of Rameshwar Sirkar v. CIT (1973) 88 ITR 374 (Cal) wherein it has been held that mere fact that the assessing officer did not find the assessed at the address, is not sufficient to establish that he could not be found. The assessing officer must show that he made reasonable efforts to find the person on whom the service was to be affected. It is only when such person could not be found after due efforts, the notice by affixture could be effected. In addition, he also relied on the decision of Kerala High Court in the case of A.A. Kochandi & Ors. v. Agrl. Income Tax Officer 1976 CTR (Ker) 72 : (1977) 110 ITR 406 (Ker) and the decision of Gauhati High Court in the case of Smt. Kamala Deid Todi v. CIT (1988~ 78 CTR (Guj) 128 : (1988) 174 ITR 414 (Guj). At this stage, the original record produced by the departmental Representative was seen and it was found that on the notice under section 142(1), the signatures of notice-server and the inspector were there but such notice did not bear the signature of any witness. There was also no report to the effect that any effort was made to find out the assessed. The counsel for the assessed also relied on the fact that there was no entry in respect of visit of notice-server or the IT inspector in the visitor's register maintained by the Chowkidar of the society, where the assessed was living. According to him, this fact shows that report of service by affixture was prepared in the office itself. Since the service of notice under section 142(1) was not proved, the assessments under section 144 were without jurisdiction and, therefore, should be quashed.

5. The second contention of. the learned counsel for the assessed was that no notice of assessment could be served under section 143(2) after the expiry of 12 months from the end of the month in which the return was furnished. Therefore, in the present cases, the notices for assessment under section 143(2) could not be issued after 31st Dec., 1998, as the returns were filed in December, 1997. Even if it be presumed that returns were treated to have been filed on 24-4-1998, when the assessed requested the assessing officer to treat the earlier returns under section 148, the notices under section 143(2) could not be issued after 30-4-1999. According to the learned counsel for the assessed, the notice under section 142(1) can be issued only for making the assessment as it is contemplated for making enquiry before assessment. So, according to him, if the assessing officer had no jurisdiction to proceed to make the assessment under section 143(2) after specified time, then the question of issuing any notice under section 142(1) does not arise and, therefore, on that account also, the notice under section 142 was also time-barred. Consequently, the assessing officer could not proceed to frame the assessment under section 144. In support of the submission, he relied on the decision of the Tribunal in the case of Dr. Vijay Kumar Datla v. Asstt. CIT (1997) 58 ITR 339 (Hyd).

6. On the other hand, the learned departmental Representative has supported the orders of lower authorities and the reasonings given by them. According to him, the notices under section 142(1) were validly issued and served by the notice server in the presence of the IT inspector and such service of notices by affixture was valid in law. According to him, it was not necessary to serve Such notice in the presence of independent witnesses of the locality. It has been further submitted by him that there is no time-limit prescribed for issuing notices under section 142(1) and, therefore, the contention of the learned counsel for the assessed cannot be accepted. Accordingly, it was prayed by him that best judgment assessment under section 144 should be upheld.

7. After considering the rival submissions of the parties and relevant provisions of the statute as well as the material placed, I find merit in the contentions of the learned counsel for the assessed. A bare look at the provisions of section 144 reveals that jurisdiction to assess to the best of judgment can be validly assumed only if any person

(a) fails to make the return required under sub-section (1) of section 139 and has not made a return or a revised return under sub-section (4) or sub-section (5) of that section, or

(b) fails to comply with all the terms of a notice issued under sub-S. (1) of section 142 or fails to comply with a direction issued under sub-section (2A) of that section, or

In the present case, the issue relates to non-comphance. of notice under section 142(1) which provides that for the purpose of making assessment under the Act, the assessing officer may serve on any person who has made a return under section 139 a notice requiring him on a particular date to be therein specified to produce or cause to be produced such accounts and documents as the assessing officer may require. The question of non-comphance of such notice cannot arise unless the notice is duly served upon the assessed. So it can be concluded that valid service of notice is the sine qua non for assumption of valid jurisdiction under section 144.

8. Section 282 provides the manner in which a valid service can be affected. According to this. section, a notice under the Act is to be served either by post or as if it was summons under the CPC, 1908. In the present case, admittedly, notice was never sent by post. So the question arises whether the service was effected in accordance, with. the provisions of CPC. The relevant provisions of the service of summons under the CPC are contained in order V, rr. 12 to 20. Rule 12 provides that service shall be made on the defendant in person wherever it is practicable unless he has an agent empowered to accept the service in which case service, on such agent shall be sufficient. Admittedly, personal service on the assessed was not effected in the present case. The claim of the department is that service of notice under section 142 was effected by affixture. Rule 17 provides service by affixture and the same is being reproduced as under :

"17. Procedure when defendant refused to accept service, or cannot be found:

"Where the defendant or his agent or such other person as aforesaid refused to sign the acknowledgement, or where the serving officer, after using all due and reasonable diligence, cannot find the defendant, who is absent from his residence at the time when service is sought to be effected on him at his residence within a reasonable time, and there is no agent empowered to accept service of the summons on his behalf, nor any other person on whom service can be made, the serving officer shall affix a copy of the summons on the outer door or some other conspicuous part of the house in which the defendant ordinarily resides or carries on business or personally works for gain, and shall then return the original to the court from which it was issued, with a report endorsed thereon or annexed thereto stating that he has so affixed the copy, the circumstances under which he did so, and the name and address of the person (if any) by whom the house was identified and in whose presence the copy was affixed."

Rule 19 provides that where a summons is returned under r. 17, the court shall, if the return under that rule has not been verified by the affidavit of the serving officer, and may, if it has been so verified, examine the serving officer on oath, or cause him to be so examined by another Court, touching his proceedings, and may make such further enquiry in the matter as it thinks fit; and shall either declare that the summons has been duly served or order such service as it thinks fit. At this stage, the attention is also drawn to r. 20 which provides the circumstances under which the substituted service can be effected. For the benefit of this order, the provisions of r. 20 are being reproduced as under :

20. Substituted seiidce-Where the court is satisfied that there is reason to believe that the defendant is keeping out of the way for the purpose of avoiding service, or that for any other reason the summons cannot be served in the ordinary way, the court shall order the summons to be served by affixing a copy thereof in some conspicuous place in the Court-house, and also upon some conspicuous part of the house (if any) in which the defendant is known to have last resided or carried on . business or personally worked for gain, or in such other manner as the court thinks fit."

The perusal of the above provisions shows that before ordering for substituted service, the court must be satisfied that the defendant is keeping out of the way for the purposes of avoiding service or that for any other reason the summons cannot be served in the ordinary way. Further, before affixture the serving officer must use its due and reasonable diligence to find out the defendant and if the circumstances as mentioned in r. 17 exist then only the notice may be served by affixture that too in the presence of witnesses by whom the house was identified and in whose presence the copy was affixed. This view finds support from the judgment of the Apex Court in the case of Ramendra Nath Ghosh (supra). In that case, the service was affected by affixture by the inspector of income-tax but in his report he did not mention the names and addresses of the person who identified the place of business of the assessed nor did he mention in his report or in the affidavit filed by him that he personally knew the place of business of the assessed. The matter travelled up to Supreme Court and it was held finally that the service of notice was not in accordance with law.

9. In the present case, the notice was issued and served on the same day. It is not necessary for me to give any finding as to whether the notice-server or the inspector visited the house of the assessed or not since, in my view, the alleged service of notice was not in accordance with law. Fads of the case do not point out that any effort was made to find out the whereabout of the assessed. There is also no report to the effect that assessed was not available, despite proper effort, at the residence. The original report of the notice-server was seen by me in the course of hearing. There is no report of the notice-server that assessed could not be found in spite of his due diligence. Further, the alleged affixture of the notice was not in the presence of any witness, which is the requirement of law. There is also no material on the record on the basis of which the assessing officer could have reason to believe that defendant was keeping out of the way for the purposes of avoiding service or that for any other reason, summons could not be served in ordinary way. Further, there is no order passed by the assessing officer to the effect that service by affixture was made in terms of r. 20. So it appears that the so-called service was in utter disregard of the provisions of order V, rr. 17, 19 and 20. Accordingly, it is held that there was no valid service of notice issued under section 142(1). Regarding the second notice under section 142(1), there is nothing on the record as to how the notice was served. The assessed has totally denied any service of notice under section 142(1). In view of the above discussion, it is, therefore, held that jurisdiction to assess under section 144 was not validly assumed and consequently, the impugned assessments under section 144 were void ab initio.

10. There is also merit in the alternate contention of the learned counsel for the assessed that issuance of notice under section 142(1) was barred by period of limitation. In order to appreciate the contention of assessed's counsel it would be useful to reproduce the relevant provisions of sections 142 and 143:

"Section 142(1): For the purpose of making an assessment under this Act, the assessing officer may serve on any person who has made a return under section 139 or in whose case the time allowed under sub-section (1) of that section for furnishing the return has expired a notice requiring him, on a date to be therein specified,-

(i) where such person has not made a return within the time Cowed under sub-section (1) of section 139, to furnish a return of his income or the income of any other person in respect of which he is assessable under this Act, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, or

(ii) to produce, or cause to be produced, such accounts or documents as the assessing officer may require.

Sec. 143(2) : Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, the assessing officer shall, if he considers it necessary or expedient to ensure that the assessed has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, serve on the assessed a notice requiring him, on a date to be specified therein, eithei to attend his office or to produce, or cause to be produced there, any evidence on which the assessed may rely in support of the return :

Provided that no notice under this sub-section shall be served on the assessed after the expiry of twelve months from the end of the month in which the return is furnished."

The perusal of section 142 reveals that provisions of this section are to be invoked only for the purpose of making assessment where the return of income has been filed under section 1.39 by the assessed. Such provisions can also be invoked for asking the assessed to file the return where no such return has been filed within the time specified under section 139(1). We are concerned only with the first situation as the returns were admittedly filed by the assessed though under section 148. Before coming to the merits of the contentions of the assessed's counsel, it may be mentioned that section 148 specifically provides that provisions of the Act shall, as far as may be, apply, as if the return under section 148 were return under section 139. Therefore, the procedural provisions of sections 142 and 143 would also apply to such return. Coming to the merits of the assessed's contention, it is seen that marginal note to section 142 states "enquiry before assessment". Sub-section (1) starts with the expression "for the purpose of making assessment under this Act". That means that, the enquiry notice under S. 142(1) can be issued only if the assessing officer either has validly assumed the jurisdiction to make the assessment or can validly assume jurisdiction to assess after making enquiry under section 142(1). Therefore, it may be impliedly inferred that if the power to assess is lost by the expiry of limitation period, the notice under section 142(1) cannot be issued. The jurisdiction to assess can be assumed only within the four corners of provisions of section 143. The provisions of sub-section (2) of this section clearly provides that notice for making assessment can be.issued only within a period of 12 months from the end of the month in which the return is processed. That means after the expiry of such period, the assessing officer has no jurisdiction to make the assessment under section 143(2) or (3) and the only course open to the assessing officer is to accept return under section 143(1). Therefore, in my considered opinion, after the expiry of the period mentioned in subs. (2) of section 143, no notice under section 142(1) can be issued because of the lack of power to assess. This view is fortified by the decision of the Tribunal, Hyderabad Bench, in the case of Dr. Vijaykumar Datla (supra) wherein it has been held that though no time-limit has been explicitly prescribed for issue of notice under section 142(1), such time-limit of issuing notice under section 142(1) is implicit. In the present case, admittedly, the returns were sent through registered post on 2-12-1997, waiving the right to receive notice under section 148. However, notice under section 148 dated 23-3-1998, was served on the assessed but requested the assessing officer vide letter dated 24-4-1998, to treat the returns already filed as returns filed in response to notices under section 148. At the best, it could be said that the returns were filed by the assessed on 24-4-1998 and, therefore, notices under section 143(2) could be issued on or before 30-6-1999. Admittedly, no notice either under section 143(2) or section 142(1) was issued on or before this date. The first notice was issued under section 142(1) on 1-3-2000, which was certainly beyond the date of 30-4-1999 and, therefore, it has to be held that the issue of notices under section 142(1) was barred by the period of limitation. Consequently., the assessments framed in pursuance of such notice was illegal and without jurisdiction. Since the assessed succeeds on these legal grounds, it is not necessary for me to discuss in detail the arguments of the assessed's counsel with reference to the quantum addition.

11. In view of the above discussion, the impugned orders of Commissioner (Appeals) are set aside and the assessments framed under section 144 are hereby quashed.

12. In the result, appeals filed by the assessed are allowed.