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Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Hon'ble Mr. Justice Adarsh Kumar Goel
Acts
  • Section 260A of the Income Tax Act, 1961 (in short "the Act")
  • FINANCE ACT 2008
  • Finance Act, 2008. Clause 42.7
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Hon'ble Mr. Justice Adarsh Kumar Goel
Acts
  • Section 260A of the Income Tax Act, 1961 (in short "the Act")
  • FINANCE ACT 2008
  • Finance Act, 2008. Clause 42.7
See more information ...
Smart Summary

Structured Summary of the Opinion — ITA No. 292 of 2008 (with ITA Nos. 460, 461, 462 of 2008)

Factual and Procedural Background

The Commissioner of Income Tax (revenue) appealed under Section 260A of the Income Tax Act, 1961 against the Income Tax Appellate Tribunal's order dated 6.7.2007 (Amritsar Bench) in relation to assessment/reassessment for the assessment year 1998-99. For brevity, the opinion takes facts from ITA No. 292 of 2008.

The assessee (M/s Panchvati Motors (P) Ltd.) had filed a return on 26.11.1998 declaring nil income after adjusting brought forward losses of Rs. 8,671. The return was processed under Section 143(1)(a) on 30.8.1999 and a refund (including interest under Section 244A) was granted. A notice under Section 148 was issued on 12.3.2003; the assessee filed a return on 23.2.2004, and the reassessment order dated 17.3.2004 assessed total income at Rs. 95,90,410 by making various additions.

The assessee appealed to the Commissioner of Income Tax (Appeals) (CIT(A)). The CIT(A) partly upheld and partly reduced certain additions and deleted others. Both the assessee and revenue appealed to the Tribunal. The Tribunal (6.7.2007) allowed the assessee's appeal and annulled the assessment, holding that service of notice under Section 148 was not valid. The revenue challenged that decision before the High Court.

Three related appeals (ITA Nos. 460, 461 and 462 of 2008) were heard together on the ground that common questions of law were involved; those appeals were disposed of by referring to the detailed order in ITA No. 292 of 2008.

Legal Issues Presented

  1. Whether, in the facts and circumstances of the case, the Tribunal was right in law to hold that the service of notice under Section 148 was invalid and consequently quash the assessment orders on that ground.
  2. Whether an assessment order can be termed invalid merely by reason of any mistake or omission in service of notice when Section 292B of the Income Tax Act, 1961 states that if the proceeding is in substance and effect in conformity with the intent and purpose of the Act, the assessment proceedings cannot be termed invalid merely by reason of any mistake, defect or omission in the notice.

Arguments of the Parties

Appellant (Revenue) — Principal Arguments

  • The notice under Section 148 dated 12.3.2003 was valid and was served by affixation on 23.3.2003 in accordance with Section 282 of the Act.
  • A notice under Section 142(1) was issued and the assessee made an appearance on 10.2.2004; a final hearing was given on 12.3.2004 and reassessment order passed on 17.3.2004.
  • Initially relied on Section 292B as a protective provision against technical objections; alternatively relied on Section 292BB (inserted by Finance Act, 2008 w.e.f. 1.4.2008) which deems notices to have been duly served where the assessee appears or cooperates in proceedings, and precludes objections in subsequent proceedings unless raised before completion of the assessment/reassessment.
  • Contended that Section 292BB is procedural and applies to pending proceedings; the assessee, having not objected before the assessing officer, cannot raise such objection later.
  • Pointed to the assessee's return (column No.12) where the assessee stated the return was filed in response to the Section 148 notice.
  • Relied on the Division Bench judgment in Hind Samachar Limited v. Union of India and others [2011] 330 ITR 266 (P&H) for the proposition that technical defects do not invalidate assessment proceedings where substance conforms with the Act's intent and purpose.

Respondent (Assessee) — Principal Arguments

  • Supported the Tribunal's conclusion that notice under Section 148 was not validly served.
  • Contended that the defect in service was a jurisdictional defect not curable by Section 292B of the Act.
  • Argued that Section 292BB (inserted by Finance Act, 2008) is prospective and not applicable to the facts of the present case (i.e., not applicable retrospectively to validate earlier proceedings).
  • Placed reliance on certain judgments (specific judgments were referenced in the opinion as relied upon by the assessee, but those judgments are not individually listed in the provided text of the opinion).

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Hind Samachar Limited v. Union of India and others [2011] 330 ITR 266 (P&H) Technical defects will not render an assessment order invalid if the return/proceedings are in substance and effect in conformity with the intent and purpose of the Act. The Court relied on this authority to support the proposition that minor or technical irregularities in notice service should not vitiate the assessment where substance conforms to statutory intent; it reinforced the view that the assessee's conduct (filing return in response to notice and not objecting to service) militated against allowing a technical objection to set aside proceedings.
Income Tax Reference No. 15 of 2000 — Commissioner of Income Tax Amritsar vs. Rajbir Singh Karta of Ch. Kesho Dass (HUF), Pathankot (decided 06.12.2010) Section 292B was interpreted to mean that purely technical objections carrying no substance should not invalidate returns, assessments, notices or proceedings where they are in substance and effect in conformity with the intention and purpose of the Act. The Court cited this decision to explain the purpose and scope of Section 292B, namely to prevent venial technical defects from negating the validity of assessment proceedings; the Court used this interpretation to reject the assessee's contention that the service defect invalidated the proceedings.

Court's Reasoning and Analysis

The Court examined the legislative amendment — Section 292BB — which was inserted by the Finance Act, 2008 with effect from 1.4.2008. Section 292BB creates a statutory presumption that where an assessee appears in any proceeding or cooperates in any inquiry relating to an assessment or reassessment, any notice required to be served upon the assessee shall be deemed to have been duly served in time and the assessee is precluded from objecting in subsequent proceedings that the notice was not served, not served in time, or served in an improper manner. The provision contains an explicit proviso preserving the assessee's right to object if the objection was raised before completion of the relevant assessment or reassessment.

The Court noted the Central Board of Direct Taxes' circular explaining that Section 292BB applies to all proceedings pending on 1.4.2008, and treated the provision as procedural and applicable to the present pending proceedings.

Applying the statutory presumption and the earlier interpretative guidance on Section 292B (from the Rajbir Singh reference), the Court observed that the assessee's return itself stated that it was filed in response to the Section 148 notice and that the assessee did not raise any objection to service of the notice before the assessing officer. Because the assessee had appeared/cooperated and had not raised the objection before completion, the statutory bar in Section 292BB (and the protective principle in Section 292B as interpreted) precluded the assessee from relying on the defect in service to vitiate the assessment proceedings.

The Court concluded that the Tribunal erred in holding the service invalid and annulling the assessment merely on the ground of the notice-service defect. The Court further observed that the judgments relied upon by the assessee did not assist because in those cases Section 292BB or Section 292B were either not under consideration or the facts differed materially.

Holding and Implications

Holding: The substantial questions of law were answered in favour of the revenue and against the assessee. In consequence, the appeals by the revenue were allowed and the Tribunal's order annulling the assessment was set aside. The matter was remanded to the Tribunal to decide afresh on merits in accordance with law.

Implications:

  • The Court gave effect to the protective statutory scheme in Sections 292B and 292BB (as inserted by Finance Act, 2008) to prevent purely technical defects in notice-service from invalidating assessment/reassessment proceedings where the assessee has appeared or cooperated and has not raised the objection before completion of the assessment/reassessment.
  • Practically, the Tribunal's annulment of the assessment on the ground of invalid service under Section 148 was reversed; the assessment is to be reconsidered on merits by the Tribunal consistent with this opinion.
  • The Court remanded the matter to the Tribunal for fresh consideration on merits and directed the parties to appear before the Tribunal on 18.7.2011.
  • The opinion does not purport to lay down a novel principle beyond application of the existing statutory provisions (Section 292B and the newly inserted Section 292BB) and cited authorities; the decision resolves the dispute between the parties on the facts and law described rather than announcing a broad new precedent beyond that statutory interpretation.

Additional procedural entries: ITA Nos. 460, 461 and 462 of 2008 were each allowed by brief orders referencing the detailed reasons recorded in ITA No. 292 of 2008.

Show full summary ...

    The Commissioner Of Income Tax v. Ms Panchvati Motors (P) Ltd

    1. This order shall dispose of ITA Nos. 292, 460, 461 and 462 of 2008 as, according to the learned counsel for the parties, the common questions of law are involved therein. For brevity, the facts are being taken from ITA No. 292 of 2008.

    2. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short "the Act") against the order dated 6.7.2007 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as "the Tribunal") in ITA Nos. 638 and 634/ASR/2004, for the assessment year 1998-99, claiming the following substantial questions of law:-

    "(i) Whether in the facts and circumstances of the case the Hon'ble ITAT was right in law to hold that the service of notice u/s 148 was invalid and, therefore, it was not correct in quashing the assessment orders on the said grounds?
    (ii) Whether assessment order can be termed invalid merely by the reason of any mistake or omission in service of notice when section 292b of i.t. act, 1961 states that if the proceeding is in substance and effect in conformity with or according to the intent and purpose of I.T. Act, 1961, the assessment proceedings cannot be termed invalid merely by reason of any mistake, defect or omission in the notice?"

    3. Briefly stated, the facts necessary for adjudication as narrated in the appeal are that the assessee filed return on 26.11.1998 declaring nil income after adjusting brought forward losses of Rs.8671/-. The said return was processed under section 143(1)(a) on 30.8.1999 granting refund of Rs.3,50,280/- including interest under Section 244A of the Act at Rs.50,881/-. Thereafter, notice under Section 148 of the Act was issued to the assessee on 12.3.2003. In response thereto, the assessee filed its return on 23.2.2004 declaring nil income and the assessment was completed vide order dated 17.3.2004 at a total income of Rs.95,90,410/- by making additions under the following heads:-

    4. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [in short "the CIT(A)"]. The CIT (A) vide order dated 13.9.2004 upheld the addition made on account of undisclosed income in the sale of vehicles whereas the additions made under heads "sales of spare parts" and "evasion of sales-tax on bogus RD sales" were reduced to Rs.85,950/- by reducing the GP rate from 15% to 2.7% and excluded the figure of 8.8% being sales tax in the GP rate (23.8%) applied by the Assessing Officer. Further, the CIT(A) deleted the addition of Rs.43,08,570/- made on account of undisclosed income in servicing of vehicles. Being not satisfied, the assessee as well as the revenue filed appeals before the Tribunal. The Tribunal vide order dated 6.7.2007 dismissed the appeal filed by the revenue and allowed the appeal filed by the assessee. The Tribunal recorded that the service of notice under Section 148 of the Act was not valid and, consequently, the assessment order was annulled. Hence, the present appeal by the revenue.

    5. We have heard learned counsel for the parties.

    6. Learned counsel for the revenue submitted that the notice issued under Section 148 of the Act was validly issued on 12.3.2003 and was duly served through affixation on 23.3.2003. The said service was in accordance with the provisions of Section 282 of the Act. It was further submitted that the notice under Section 142(1) of the Act was issued to the assessee and in response thereto an appearance was put by the assessee on 10.2.2004. The reassessment order was passed on 17.3.2004 after affording final hearing on 12.3.2004. Though initially aid was sought from the provision of Section 292B of the Act but in view of insertion of Section 292BB of the Act, learned counsel for the revenue pleaded in the alternative, that the provision of Section 292B of the Act protected the revenue against such technical pleas being raised by the assessee regarding non-service of valid notice under Section 148 of the Act. It was vehemently urged that Finance Act, 2008 had inserted Section 292BB w.e.f. 1.4.2008 which dealt with the notices which were deemed to be valid and the assessee was precluded from taking objection in any of the proceedings or enquiry under this Act that notice was not served upon him or not served in time or was served in improper manner. The assessee having failed to raise any such objection before the assessing officer was not entitled to raise such objection in the appellate proceedings. According to him, the amended provision being procedural applied to all pending proceedings. Learned counsel produced a certified copy of the return which was filed by the assessee and drew the attention to column No.12 thereof, where the assessee itself had written that the return was filed in response to the notice issued under Section 148 of the Act. Learned counsel for the revenue placed reliance on a Division Bench judgment of this Court in Hind Samachar Limited v. Union of India and others [2011] 330 ITR 266 (P&H) to submit that the technical defects would not make the assessment order invalid merely by reason of any mistake, defect or omission, if such return in substance and effect is in conformity with or according to the intent and purpose of the Act.

    7. On the other hand, learned counsel for the assessee supported the order passed by the Tribunal. He submitted that the defect in the service of notice was jurisdictional defect which was not curable in terms of Section 292B of the Act. He placed reliance on the following judgments:-

    8. Rebutting the arguments of the revenue relating to Section 292BB of the Act, learned counsel for the assessee submitted that Section 292BB was prospectively effective from 1.4.2008 and had no applicability to the facts of the present case.

    9. We have given our thoughtful consideration to the respective submissions of learned counsel for the parties and do not find any merit in the submission of learned counsel for the assessee.

    10. Section 292BB of the Act was inserted by Finance Act, 2008, w.e.f. 1.4.2008. It reads thus : -

    "292BB Where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon on him has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was --
    (a) not served upon him; or
    (b) not served upon him in time; or
    (c) served upon him in any improper manner.
    Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment."

    11. A presumption has been raised under the said provision relating to service of notice upon the assessee in respect of assessment or reassessment proceedings. According to this provision, where an assessee appears in any proceedings or cooperates in any enquiry relating to assessment or reassessment proceedings, it shall be presumed that the assessee has been validly served and it shall not be open to the assessee to object that the notice was not served upon him or was not served in time or was served upon him in an improper manner. However, an exception to the aforesaid presumption has been made in a case where such objection has been raised before completion of assessment or reassessment. The provision has been made effective from 01.04.2008 and therefore, shall apply to all pending proceedings. The Central Board of Direct Taxes issued circular No. 1 of 2009 dated 27th March, 2009 (2009) 310 ITR (St.) 42 giving explanatory notes on the provisions relating to direct taxes contained in Finance Act, 2008. Clause 42.7 (at page 86 of the report) is relevant which relates to applicability of this provision and reads thus:

    "42.7 Applicability - This amendment has been made applicable with effect from 1st April, 2008. This means that the provision of new-section 292BB shall apply in all proceedings which are pending on 1st April, 2008."

    12. Further, scope of Section 292B of the Act was considered by this Court in Income Tax Reference No. 15 of 2000 (The Commissioner of Income Tax Amritsar vs. Rajbir Singh Karta of Ch. Kesho Dass (HUF), Pathankot), decided on 06.12.2010, wherein it was observed as under: -

    "The Section was inserted whereby no return of income, assessment, notice, summons or other proceeding shall be rendered invalid merely on account of any mistake, defect or omission where the return, assessment, notice, summons or other proceeding in substance and effect are in conformity with or according to the intention and purpose of the Act. By incorporating this provision, it has been made clear that purely technical objections carrying no substance shall not come in the way of validity of assessment proceedings etc. In other words, minor defects or irregularities in the circumstances aforesaid, would not negate the validity of the proceedings initiated by the assessing officer and the assessee would not be able to raise technical or venial defects in this regard."

    13. It is not disputed that in the return which was filed by the assessee, it was mentioned that the same was filed in response to notice under Section 148 of the Act. No objection regarding valid service of notice under Section 148 of the Act was raised before the assessing officer. Once that is so, the argument of the assessee that there was no valid service of notice under Section 148 of the Act fails. The Tribunal was, thus, in error in concluding otherwise and holding the proceedings to be invalid.

    14. Suffice it to notice, that the plethora of judgments on which learned counsel for the assessee had placed reliance, does not advance the case of the assessee as either in those cases, Section 292BB or Section 292B of the Act was not under consideration or it was on individual fact situation involved therein that the cases had been decided.

    15. In view of the above, the substantial questions of law are answered in favour of the revenue and against the assessee. The appeals are allowed and the matter is remanded to the Tribunal to decide the same afresh on merits in accordance with law.

    16. The parties through their counsel are directed to appear before the Tribunal on 18.7.2011.

    IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 460 of 2008 Date of Decision: 3.5.2011 The Commissioner of Income Tax, Bathinda ....Appellant.

    Versus M/s Panchvati Motors (P) Ltd.

    ...Respondent.

    CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL, ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.

    PRESENT: Ms. Savita Saxena, Standing Counsel, for the appellant.

    Mr. K.L. Goyal, Senior Advocate with Mr. Sandeep Goyal, Advocate for the respondent. AJAY KUMAR MITTAL, J.

    The appeal is allowed.

    For reasons, see the detailed order of even date recorded in ITA No. 292 of 2008 (The Commissioner of Income Tax, Bathinda v. M/s Panchvati Motors (P) Ltd).

    IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 461 of 2008 Date of Decision: 3.5.2011 The Commissioner of Income Tax, Bathinda ....Appellant.

    Versus M/s Panchvati Motors (P) Ltd.

    ...Respondent.

    CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL, ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.

    PRESENT: Ms. Savita Saxena, Standing Counsel, for the appellant.

    Mr. K.L. Goyal, Senior Advocate with Mr. Sandeep Goyal, Advocate for the respondent. AJAY KUMAR MITTAL, J.

    The appeal is allowed.

    For reasons, see the detailed order of even date recorded in ITA No. 292 of 2008 (The Commissioner of Income Tax, Bathinda v. M/s Panchvati Motors (P) Ltd).

    IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 462 of 2008 Date of Decision: 3.5.2011 The Commissioner of Income Tax, Bathinda ....Appellant.

    Versus M/s Panchvati Motors (P) Ltd.

    ...Respondent.

    CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL, ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.

    PRESENT: Ms. Savita Saxena, Standing Counsel, for the appellant.

    Mr. K.L. Goyal, Senior Advocate with Mr. Sandeep Goyal, Advocate for the respondent. AJAY KUMAR MITTAL, J.

    The appeal is allowed.

    For reasons, see the detailed order of even date recorded in ITA No. 292 of 2008 (The Commissioner of Income Tax, Bathinda v. M/s Panchvati Motors (P) Ltd).

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    Comments

    The Commissioner Of Income Tax v. Ms Panchvati Motors (P) Ltd
    (May 3, 2011)