Translate
Text Highlighter

Bookmark

PDF

Share

Report a problem
AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Swatanter Kumar
  • Madan B. Lokur, JJ.
Acts
Are you a practicing lawyer?
Enhance your digital presence and reach by creating a Casemine profile.
Upload pleading to use the new AI search
Click here to upload
Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Swatanter Kumar
  • Madan B. Lokur, JJ.
Acts
See more information ...
Smart Summary

Case Summary — Opinion by Madan B. Lokur, J.

Factual and Procedural Background

The appellant challenged an order dated July 22, 2004 of the Income-tax Appellate Tribunal, Delhi Bench (I.T.A. No. 228.Delhi of 1999). The respondent/assessee filed its income-tax return for assessment year 1995-96 on November 29, 1995. A notice under section 143(2) of the Income-tax Act, 1961, was issued on November 29, 1996, apparently by registered post, but—if at all—was received after that date and in any event after November 30, 1996.

The assessee contended that under the proviso to section 143(2) a notice must be served within twelve months from the end of the month in which the return is furnished and therefore before November 30, 1996. Before the Commissioner of Income-tax (Appeals), the assessee filed an affidavit (by J.S. Walia, DGM (Accounts), in-charge of taxation) denying receipt of a registered-post notice, and pointed out that the post office receipt bore only the assessee's name and not its address, suggesting a possibility of incorrect address. The CIT(A) accepted the assessee's contention and held there was no valid service of the notice and that the assessment was invalid.

The Revenue appealed to the Tribunal, which rejected the Revenue's contentions. The Tribunal held that on the basis of the affidavit the assessee discharged its initial burden of proving non-receipt and that the onus then shifted to the Revenue to prove service; the Revenue failed to do so. The present appeal challenges the Tribunal's decision.

Legal Issues Presented

  1. Whether the proviso to section 143(2) of the Income-tax Act requires a notice to be "served" within twelve months and whether the terms "served" and "issued" are interchangeable for the purpose of the proviso.
  2. Whether dispatch of a notice by registered post before the expiry of the prescribed period suffices when the notice is received (served) after the prescribed period—including whether the post office can be treated as agent of the assessee such that posting equals service.
  3. On proof of service, what is the allocation of burden between the assessee and the Revenue when the assessee files an affidavit asserting non-receipt?

Arguments of the Parties

Appellant's Arguments

  • Submitted that the words “served” and “issued” in the proviso to section 143(2) are synonymous; because the notice was issued (posted) before the expiry of the one-year period, the assessment was valid.
  • Relied on Banarsi Debi v. ITO (1964) to support the proposition that issuance within time should suffice.
  • Argued that the post office is the agent of the assessee and that a notice sent by registered post is deemed to be in the hands of the assessee on the date posted; relied on Prima Realty v. Union of India (1997) for agency/tender principles.
  • Also relied upon CIT v. Gyan Prakash Gupta (1987) and Commissioner of Income Tax, Shillong v. Jai Prakash Singh (1996) for the proposition that assessment need not be held null and void for procedural defects of this nature.

Respondent/Assessee's Arguments

  • Contended (by affidavit of a responsible officer) that no notice under section 143(2) was received by registered post.
  • Pointed out the postal receipt did not bear the assessee's address—only its name—so the correct address might not have been on the envelope, raising the possibility that the notice was not sent to the assessee at all.
  • Maintained that, under the proviso to section 143(2), a notice must be served within twelve months and the alleged service beyond that period rendered the proceedings invalid.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Banarsi Debi v. ITO, [1964] 53 ITR 100 (SC); AIR 1964 SC 1742 Considered the effect of an amendment which debarred courts from questioning notices issued after the prescribed time and the meaning of the word “issued” in that context. The court found Banarsi Debi factually inapposite. That case concerned section 34(1)(b) of the 1922 Act and an amendment which saved notices issued after time; the Supreme Court there construed “issued” broadly so as to effectuate the legislative intent. The present court held Banarsi Debi does not support the appellant's position on the facts of this case.
Prima Realty v. Union of India, [1997] 223 ITR 655 (SC) Held that where payment was dispatched by post and the payee had failed to collect or specify mode of payment, dispatch amounted to tender and the post office could be treated as agent for delivery of payment. The court held Prima Realty does not assist the appellant. The principle in Prima Realty arose in the context of tender of payment and the mode of payment; those factual circumstances differ materially from the present notice/service issue.
CIT v. Gyan Prakash Gupta, [1987] 165 ITR 501 (Raj) Cited by appellant for the proposition that assessment should not necessarily be treated as null and void for procedural defects. The court observed it was unnecessary to decide the question raised by reliance on this authority because the Tribunal had not declared the assessment null and void but had set it aside on the ground of late service of notice; therefore the court did not adjudicate this authority's applicability.
Commissioner Of Income Tax, Shillong v. Jai Prakash Singh, [1996] 219 ITR 737 (SC) Cited by appellant on the contention that assessments need not be struck down for procedural irregularities. As with Gyan Prakash Gupta, the court declined to examine this line of authority because it found it unnecessary in view of the Tribunal's specific findings on service and the assessee's affidavit; the point was left open.

Court's Reasoning and Analysis

The court began by identifying the controlling statutory text: the proviso to section 143(2)(ii) which provides that no notice under clause (ii) shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished.

The court examined the appellant's contention that “served” should be read as “issued” and considered the appellant's reliance on Banarsi Debi. It reviewed the facts and legislative history of the authority cited: Banarsi Debi dealt with section 34(1)(b) of the 1922 Act and an amending provision that saved notices “issued” after the prescribed time. The Supreme Court in Banarsi Debi construed “issued” in a broad sense to give effect to the legislative intent to save notices and consequent assessments. The present court concluded that Banarsi Debi's reasoning (and the legislative context in which it arose) is not applicable to the present facts.

The court next considered the appellant's submission that the post office is the assessee's agent so that a notice posted before the prescribed time should be treated as in the hands of the assessee on the date posted. The court examined Prima Realty, which involved dispatch of a cheque and principles of tender and agency in that distinct factual setting, and found Prima Realty inapposite to the present case.

The court emphasized the factual findings below: the CIT(A) accepted the assessee's affidavit denying receipt, noted that the postal receipt lacked the assessee's address (showing only the name), and found it possible that the notice may have been sent to a wrong or incomplete address. The Tribunal had held that once the assessee produced an affidavit of non-receipt, the initial burden of proof of non-receipt was discharged and the onus then shifted to the Revenue to prove valid service within the statutory period. The Revenue failed to discharge that burden.

Given these findings, the court considered it unnecessary to resolve the broader contention that an assessment should not necessarily be voided for service beyond the prescribed period (as raised by reliance on Gyan Prakash Gupta and Jai Prakash Singh). The Tribunal had set aside the assessment on the narrower ground of late service, not by declaring the assessment null and void for other reasons, and the court found no substantial question of law requiring its intervention.

Holding and Implications

Holding: The appeal is DISMISSED.

Implications:

  • The Tribunal's decision—that the assessee's affidavit of non-receipt shifted the burden to the Revenue to prove service of the notice within the statutory twelve-month period and that the Revenue failed to do so—is upheld.
  • The assessment was set aside by the Tribunal on the ground that the notice under section 143(2) had been served beyond the prescribed period; the court did not find any substantial question of law warranting interference with that conclusion.
  • The court did not lay down any new principle or precedent on the broader questions posed by the appellant (for example, on whether “served” should be read as “issued” in the context of section 143(2)), and specifically declined to decide questions rendered unnecessary by the factual findings below.

Disposition: Dismissed.

Show full summary ...

    Commissioner Of Income-Tax v. Lunar Diamonds Ltd.

    Madan B. Lokur, J.:— The appellant is aggrieved by an order dated July 22, 2004 passed by the Income-tax Appellate Tribunal, Delhi Bench (for short “the Tribunal”), in I.T.A No. 228.Delhi of 1999.

    2. The respondent/assessee filed its return of income for the assessment year 1995-96 on November 29, 1995. A notice under section 143(2) of the Income-tax Act, 1961 (the Act), was issued to the assessee on November 29, 1996, apparently by registered post. The notice was received, if at all, after that date and in any case after November 30, 1996. According to the assessee, in terms of section 143(2) of the Act, the notice ought to have been served on it within a period of one year and in any case before November 30, 1996. Since that was not done, the proceedings initiated against the assessee were not in accordance with law.

    3. Before the Assessing Officer, this issue was not directly raised but before the Commissioner of Income-tax (Appeals) (CIT (A)), it was contended by the assessee that it had not received any notice under section 143(2) of the Act by registered post. An affidavit to this effect was filed by one J.S Walia, DGM (Accounts) and in-charge of taxation matters of the assessee. It was also submitted that the alleged notice was not sent by acknowledgment due. It was contended that the receipt issued by the post office did not bear the address of the assessee but only its name. It was, therefore, submitted that there was a possibility that the correct address of the assessee might not have been written on the envelope and, therefore, the question of service of notice on the assessee did not arise. The contention of the assessee was accepted by the Commissioner of Income-tax (Appeals) and it was held that there was no valid service of notice on the assessee and, therefore, the assessment framed was invalid.

    4. The appellant took up the matter in appeal before the Tribunal which rejected the contentions urged by the appellant. It was held that in the face of the affidavit filed on behalf of the assessee, the initial burden on the assessee to prove non-receipt of notice had been discharged and that the onus now lay upon the appellant to prove that the notice under section 143(2) of the Act had in fact been served upon the assessee by registered post. The Tribunal found that the appellant had not been able to prove its case at all and, therefore, there was no merit in the appeal.

    5. The relevant provision with which we are concerned is the proviso to section 143(2)(ii) of the Act and this reads as follows:—

    “143(1)…

    (2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall,—…

    (ii) notwithstanding anything contained in clause (i), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return:

    Provided that no notice under clause (ii) shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished.”

    6. Learned counsel for the appellant contended that the words “served” and “issued” are synonymous and interchangeable. He submitted that the proviso to section 143(2) used the word “served”, but what is meant was “issued”. It was submitted that under these circumstances, since the notice had been issued before the expiry of a period of one year, no error had been committed by the Assessing Officer in framing the assessment order. Reliance in this regard was placed by learned counsel for the appellant on Banarsi Debi v. ITO, [1964] 53 ITR 100 (SC); AIR 1964 SC 1742.

    7. A study of Banarsi Debi, [1964] 53 ITR 100 (SC) shows that the facts of that case are completely inapposite. In that case, under section 34(1)(b) of the Indian Income-tax Act, 1922, a notice was required to be served on an assessee within eight years if the Income-tax Officer had reason to believe that income had escaped assessment. Factually, although a notice had been issued to the assessee therein within a period of eight years, it was served upon him after the eight year period was over. A learned single judge of the Calcutta High Court agreed with the submissions made on behalf of the assessee and quashed the notice.

    8. During the pendency of an appeal before the Division Bench, section 34 of the Indian Income-tax Act was amended by Amending Act No. 1 of 1959. section 4 of the Amending Act debarred the court from questioning the validity of a notice issued under section 34 of the Act on the ground that the time for issue of such notice had expired. The Division Bench, relying upon the amendment to section 34 of the Act, decided against the assessee which led him to approach the Supreme Court.

    9. In the Supreme Court it was contended that section 4 of the Amending Act only saved a notice issued after the prescribed time but it did not apply to a situation where notice is issued within time but served out of time. On behalf of the Revenue, it was contended, in this context that the expression “issued” means “served”.

    10. The Supreme Court went into the legislative history of section 34 of the Indian Income-tax Act and held that the contention of the assessee could not be accepted because it would defeat the very purpose for which the amendment was carried out. While specifically dealing with the use of the word “issued” in section 4 of the Amending Act, the Supreme Court noted that there is no prescription in section 34 of the Indian Income-tax Act of a time-limit for sending a notice. Therefore, it was obvious that the expression “issued” used in section 4 of the Amending Act could not be used in the narrow sense of “sent”. Concluding the discussion on the subject, the Supreme Court noted that the intention of the Legislature was to save the validity of a notice as well as a consequent assessment order from an attack on the ground that the notice was served beyond the prescribed period. That intention would be effectuated if a wider meaning is given to the expression “issued”. Consequently, the Supreme Court held it possible that even though the notice was served beyond the prescribed time, it was saved by section 4 of the Amending Act. It is quite clear from the above that the decision relied upon by learned counsel for the appellant is not applicable to the facts of the present case.

    11. It was then submitted that the post office in which the notice was dispatched is an agent of the assessee and, therefore, when the notice is sent by registered post, it is deemed to be in the hands of the assessee (through its agent, the post office) on the date posted, which was before the expiry of the prescribed period. Reliance in this regard was placed upon Prima Realty v. Union of India, [1997] 223 ITR 655 (SC).

    12. We are of the view that Prima Realty, [1997] 223 ITR 655 (SC) does not at all help learned counsel for the appellant. In Prima Realty, [1997] 223 ITR 655 (SC), some payment was required to be made. The payee did not indicate the mode of payment in spite of a letter received by it to indicate the mode. In fact, the appellant in that case did not even reply to the letter for suggesting the mode of payment. As per the practice, the Central Government sent the cheque by post. The Supreme Court held that it was reasonable for the concerned authority to have waited for the cheque to get personally collected by the payee till the last date and when the payee did not come to collect the cheque, to have dispatched it by post. The Supreme Court held that this amounted to tender of the payment to the payee when the cheque was put in the course of transmission so that it was beyond the control of the sender from the time of its dispatch by post. It was in this context that it was observed that the post office will be the agent of the payee for the purposes of receiving payment.

    13. It was finally submitted by learned counsel for the appellant that it cannot be said that the assessment was null and void because notice was served upon the assessee beyond the prescribed period of one year. Reliance in this regard was placed upon CIT v. Gyan Prakash Gupta, [1987] 165 ITR 501 (Raj) and Commissioner Of Income Tax, Shillong v. Jai Prakash Singh., [1996] 219 ITR 737 (SC).

    14. It is not necessary for us to go into this question at all because the Tribunal set aside the assessment without finding it to be null and void; the assessment order was merely set aside on the ground that the notice under section 143(2) of the Act had been served upon the assessee beyond the period of one year prescribed by the law. We may also point out that there appears to be some doubt whether the notice was at all sent to the assessee because, as observed by the Commissioner of Income-tax (Appeals), the receipt showing that an envelope was sent by registered post merely contained the name of the assessee without its address. Consequently, it is quite possible that the notice may have been sent to the assessee at some wrong or even some incomplete address. However, it is not necessary for us to go into this question at all because the assessee had filed an affidavit stating that it had not received the notice and the Tribunal rightly held that under these circumstances, the burden was upon the appellant to prove that notice was served upon the assessee within the prescribed time. The appellant had failed to prove its case in this regard.

    15. We are of the view that the appeal-does not raise any substantial question of law which requires our decision.

    16. Dismissed.

    Use AI to get other relevant cases.
    Try AI Pro free for 7 days Upgrade to AI Pro

    Comments

    Commissioner Of Income-Tax v. Lunar Diamonds Ltd.
    (Mar 3, 2005)