Madras High Court

Dr.Bharani R.Paluvai vs Income Tax Officer on 30 June, 2021

                                                                          W.P.Nos.10817 & 10818 of 2018

                                   IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                   Dated : 30.06.2021

                                                       CORAM

                                   THE HONOURABLE MR.JUSTICE S.M.SUBRAMANIAM

                                            W.P.Nos.10817 and 10818 of 2018
                                                         and
                                           W.M.P.Nos.12757 and 12758 of 2018


                     Dr.Bharani R.Paluvai                         ...   Petitioner in
                                                                        W.P.No.10817/2018

                     Bridget Bharani                              ...   Petitioner in
                                                                        W.P.No.10818/2018

                                                         - Vs -


                     Income Tax Officer,
                     Non-Corporate Ward-11 (2),
                     Chennai.                                     ... Respondent in both W.Ps.,


                     Common Prayer : Writ Petitions filed under Article 226 of the Constitution of

                     India praying to issue a Writ of Certiorarified Mandamus, calling for the

                     records of the Respondent comprised in its notice dated 31.03.2018 issued to

                     the Petitioner under Section 148 of the Income Tax Act, 1961, along with the



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                                                                            W.P.Nos.10817 & 10818 of 2018

                     Corrigendum dated 31.03.2018 issued thereto, and to quash the same as

                     arbitrary, unjust and illegal, and to consequently forbear the Respondent from

                     in any manner seeking to reassess the Petitioner's income under Section 147 of

                     the Income Tax Act, 1961 with respect to the assessment year 2011-12.



                               For Petitioners         : Mr.Suhrith Parthasarathy

                               For Respondent          : Mrs.Hema Muralikrishnan
                                                         Senior Standing Counsel for Income Tax


                                                 COMMON ORDER


                               The notice issued under Section 148 of the Income Tax Act, 1961, in

                     proceedings dated 31.03.2018, as well as the corrigendum to notice dated

                     31.03.2018, are under challenge in the present writ petitions.



                               2.The petitioner submitted his return of income which was assessed and

                     an order of assessment was passed. However, the respondent issued notice

                     under Section 148 of the Income Tax Act, for reopening of assessment on

                     31.03.2018.       The learned counsel for the petitioner contended that the



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                     impugned notice as well as the corrigendum to notice are challenged on the

                     ground that it was issued beyond the period of limitation, and therefore, the

                     notices have no statutory sanction, thus, are to be set aside.



                               3.To substantiate the said ground, the learned counsel for the petitioner

                     solicited the attention of this Court with reference to the postal cover, wherein,

                     the stamp was franked by the Postal Department on 02.04.2018. It is contended

                     that the last date for reopening of assessment under Section 147 of the Act was

                     31.03.2018, however, the despatch was made on 02.04.2018, and therefore, the

                     impugned notice is liable to be set aside. It is contended that the corrigendum

                     to notice, dated 31.03.2018, was ante-dated as the said corrigendum to notice

                     was despatched on 07.04.2018. If at all, the corrigendum to notice was also

                     despatched on 31.03.2018, it must have been franked along with the original

                     notice on 02.04.2018, and therefore, by putting ante-date, the corrigendum

                     under Section 148 of the Income Tax Act was issued. In the original notice

                     issued under Section 148 of the Act, the Assessing Officer stated that he has

                     reasons to believe that the income of the petitioner chargeable to tax for the

                     Assessment Year 2010-11 has escaped assessment. If that is so, even the period


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                     of limitation expired on 31.03.2017 itself. However, the corrigendum to notice

                     states that it was erroneously mentioned as 2010-11 and the reopening of the

                     assessment is made for the assessment year 2011-12. Thus, the very initiation

                     of proceedings under Section 147 of the Act and issuance of notice under

                     Section 148 of the Act are beyond the period of limitation, and thus, the

                     respondent has no jurisdiction to issue notice, and therefore, they are liable to

                     be set aside.



                               4.The learned counsel for the writ petitioner relied on the judgment of

                     the Gujarat High Court in the case of Kanubhai M Patel Huf Vs. Hiren Bhat

                     or his Successors to Office and 4 others reported in (2010) 3 GLH 639,

                     wherein, the Court allowed the writ petition on the ground that the notice was

                     despatched beyond the period of limitation. The Hon'ble Supreme Court also

                     held that reopening of assessment is to be done within the period of limitation

                     contemplated under the Act. Any such notice issued beyond the period of

                     limitation lacks sanction under the statute and to be construed as non-est in

                     law.




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                               5.The learned Senior Standing Counsel contested the grounds raised by

                     the petitioner by stating that, admittedly, the assessment order was erroneously

                     typed as 2010-11 instead of 2011-12. Thus, the respondent issued corrigendum

                     to notice and corrigendum to notice cannot be construed as a point to reckon

                     the period of limitation. As far as the original notice under Section 148 of the

                     Act, is concerned, it was issued on 31.03.2018 on the last date for reopening of

                     assessment for the Assessment Year 2011-12 and it was despatched on the

                     same day, however, franking was done by the Postal Department on

                     02.04.2018. There was a delay of one day in franking the despatch cover in

                     view of the fact that 01.04.2018 was Sunday and a holiday. Thus, there is no

                     violation of statutory provisions and initiation of proceedings under Section

                     148 of the Act was done within the period of limitation, and thus, the writ

                     petition is liable to be dismissed.



                               6.This Court has elaborately considered the difference between issuance

                     of a notice under Section 148 of the Act and serving of the notice to the

                     assessee concerned. The issuance of notice is one aspect and serving of notice


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                     is another aspect. Section 147/148 stipulates issuance of notice and not serving

                     of notice. Thus, the principles to be adopted in the present case squarely falls

                     within the parameters of the judgment delivered by this Court in W.P.

                     Nos.13425, 13431, 13432 and 11399 of 2018, dated 26.04.2021, which are

                     extracted hereunder:

                                         “15.This Court has to consider the relevant provisions of
                                   the Income Tax Act. Section 147 deals with 'Income Escaping
                                   Assessment' . Once the Assessing Officer 'has reason to believe'
                                   that any income chargeable to tax has escaped assessment for
                                   any assessment, he is competent to institute proceedings under
                                   Section 147 of the Act by complying with the requirements as
                                   contemplated under the provisions of the Act.


                                         16. Section 148 of the Act denotes 'issue of notice where
                                   income has escaped assessment'. Once the Assessing Officer has
                                   reason to believe that any income chargeable to tax has escaped
                                   assessment, then he is empowered to issue notice under Section
                                   148 of the Act and the procedures to be followed under Section
                                   148 are well enumerated in the provision itself.


                                   ...

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19. Section 149 of the Act denotes 'no notice under Section 148 shall be issued for the relevant assessment year if four years have lapsed, which reads as under:-

?149. Time limit for notice:

“(1) No notice under section 148 shall be issued for the relevant assessment year,?

(a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c);

(b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year;

(c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.

Explanation.?In determining income chargeable to tax which has escaped assessment for the purposes of this sub~section, the provisions of Explanation 2 of

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section 147 shall apply as they apply for the purposes of that section.

(2) The provisions of sub~section (1) as to the issue of notice shall be subject to the provisions of section 151.

(3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a non~resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non~resident, the notice shall not be issued after the expiry of a period of six years from the end of the relevant assessment year.

Explanation.?For the removal of doubts, it is hereby clarified that the provisions of sub~sections (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.?”

20. Section 149 of the Act unambiguously stipulates that a notice is to be issued before four years from the end of the relevant assessment year. In certain cases beyond four years and within six years. Therefore, two circumstances are elaborated in the provisions. In certain cases, notices can be issued within

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four years and in certain other cases, notices can be issued beyond four years but within six years.

21. The period of four years and six years as contemplated are enumerated under the provisions of the Act. However, the point to be considered is, whether the issuance of notice dispatched and the delivery of notice to the assessee, which is to be taken into consideration for the purpose of determining the period of limitation.

22. Section 149 of the Act contemplates that no notice under Section 148 shall be issued. Thus, it categorically enumerates the issuance of notice by the Competent Authority to the assessee, within a period of four years and six years, as the case may be. Thus, the language employed indicates ?issuance of notice?.

23. 'Issuance of Notice' means, the order of notice is signed by the Competent Authority. Once the order of notice is signed by the Competent Authority, that is sufficient that the actions are initiated. Thereafter, delivery or receipt of the order is irrelevant as far as the requirements contemplated under the provisions of the Income Tax Act is concerned. Thus, for the purpose of issuance of notice under Section 149 of the Income

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Tax Act, it is sufficient to establish that if such an order/notice is signed by the Authority Competent and if this fact is established, then it is to be construed that the provisions of the Act are complied with.

24. Let us now examine certain circumstances where there is a delay in delivering the goods either by the Process Server or by the Postal Department or on account of sudden declaration of holidays or due to public holidays etc. Various circumstances and situations are possible, which would cause delay in serving the consignment to the addressee. Various circumstances for causing delay in service of the consignment cannot be taken into consideration for the purpose of determining the period of limitation as contemplated under Section 149 of the Income Tax Act.

25. The assessees are taking advantage on account of certain unavoidable circumstances and happenings due to certain omissions on the part of the Postal Department etc. It is possible that commissions and omissions are happening in the Postal Department also. Whether an assessee can take undue advantage from such commissions and omissions of the Postal Department or Process Servers. The answer is 'No'. If such commissions and omissions of another Department is taken into

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consideration for the purpose of quashing the entire proceedings under the Income Tax Act, equally it is possible for some miscreants to create such circumstances, so as to escape from the clutches of law. All these mitigating factors are to be considered by the Courts. Thus, a practical and a pragmatic approach with reference to the legislative intention is to be taken into consideration for the purpose of deciding the point of limitation.

26. Thus if the revenue is able to establish that an administrative decision is taken under Section 147 of the Income Tax Act and a notice under Section 148 is signed and issued by the Authorities Competent before the last date, then it is to be construed that the notice has been issued in compliance with the provisions of Section 149 of the Income Tax Act. Make it more clear that issue of notice is the requirement contemplated under the provisions and the service would be the next step and the same would have been done even after the last date and that will not change the character of issue of notice as completed within the meaning of Section 149 of the Income Tax Act. The case of the petitioner would be strong if the provision contemplates “?service of notice?” to the assessee, and such contemplation is traceable in some other provisions of the Act, for example Section 281 of the Income Tax Act.

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...

28. 'Issue of Notice' by the Competent Authority is contemplated under Section 149 of the Income Tax Act. However, 'Service of Notice' to the assessee has not been contemplated under the said provision. Thus, the 'time limit' prescribed for 'issue of notice' under Section 148 of the Income Tax Act, would not fall under the definition of 'service' under Section 27 of the General Clauses Act, 1897. Thus, Section 27 of the General Clauses Act, 1897 may not have relevance with reference to Sections 147, 148 and 149 of the Income Tax Act, 1961.

29. 'Issue of Notice' and 'Service of Notice' to the assessee cannot be compared at all. What is contemplated under Section 149 of the Income Tax Act is 'issue of notice' and not 'service of notice' to the assessee. The service part is to be complied with subsequently enabling the assessee to defend his case. Undoubtedly, the assessee can defend his case only after service. However, for reckoning the period of limitation 'issue of notice' is sufficient.”

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7.In view of the facts and circumstances, this Court is of the considered

view that, in the present case, the initial notice under Section 148 of the Income

Tax Act was issued on 31.03.2018, which was despatched on the same day and

the cover was franked by the Postal Department on 02.04.2018, in view of the

fact that 01.04.2018 was a Sunday, thus, for all purposes, notice was issued for

reopening of assessment within the period of limitation for the assessment year

2011-12, and therefore, the respondent is to proceed further in accordance with

law by following the procedures contemplated under the Act as well as the

directives issued by the Hon'ble Supreme Court of India in the case of GKN

Driveshaft (India) Ltd.., Vs. Income Tax Officer, 259 ITR 19 (SC), and such

an exercise is directed to be done as expeditiously as possible.