Miss Moksh Mahajan, Accountant Member - (1.) THE order of the learned Commissioner of Income-tax (Appeals) for assessment year 1991-92 has been challenged on various grounds as raised.
(2.) In the first ground of appeal the assessee has questioned the jurisdiction of the Asstt. Commissioner of Income-tax. Investigation Circle, Faridabad in initiating the proceedings under section 147/148 of the Act. Shri Anand Prakash, the learned AR who appeared on behalf of the assessee, submitted that the assessee filed its return for assessment year 1991-92 on 31-7-1991. The aforesaid return was processed under section 143(1)(a) of the Act and the intimation was received by the assessee on 1-10-1991. Subsequently the assessee received various notices as under :- 1. Notice under section 143(2) dated 27-8-1993 2. Notice under section 142(1) dated 29-9-1993 Notice under section 142(1) dated 26-10-1993 3. The aforesaid notices were issued by the Assessing Officer, Investigation Circle, Faridabad. The assessee received another notice under section 142(1) of the Act along with letter from the Assessing Officer, Ward-4, Faridabad fixing the date of hearing on 10-2-1995. The adjournment as requested was granted and the assessment was finalised on 16th February, 1995. The assessee was informed that the proceedings under section 147 of the Act where initiated against the assessee on 5-3-1993 and the notice under section 148 of the Act was served on the assessee on 9-3-1993. The proceedings as initiated were stated to be on account of the information received from the Sales-tax authorities who in turn on inspection of the business premises found stock in excess of the value of Rs. 5,68,000. As per arguments advanced the Assessing Officer, Investigation Circle who initiated proceedings under section 147 of the Act had no jurisdiction over the assessee's case with effect from 21-8-1991. The jurisdiction over the assessee's case lay with the Income-tax Officer and not with the ACIT, Investigation Circle, Faridabad. His jurisdiction lay over the cases in which searches were conducted or for the years prior to the assessment years of search. In support attention was drawn to the order of the jurisdiction dated 16th May, 1988. At the time when searches were conducted on the business premises of the assessee on 17-1-1989 the assessee's case was with Income-tax Officer, Ward-4, Faridabad. As a result of searches the jurisdiction over the case was transferred to the Assessing Officer, Investigation Circle, Faridabad. This came to be effective from 17-1-1989. The jurisdiction came to be amended with effect from 21-8-1991. As per the latter order, jurisdiction over the search cases lay with investigation officer only if any action for the assessment year relevant to the period during which search was conducted or for the assessment year prior to the assessment year of search were pending as on 12-7-1993. On 21-8-1991 no assessment proceedings upto assessment year 1989-90 were pending except for invalid reassessment proceedings for assessment year 1988-89. Accordingly, the Assessing Officer, Investigation Circle, Faridabad who had issued the notice had no jurisdiction over the case of the assessee. The case of the assessee was transferred to ITO, Ward-4, Faridabad on 22nd/23rd December, 1994. Accordingly, the issue of notice was void ab initio and as such the assessment on this ground alone could not be upheld. These facts were duly brought to the notice of the Assessing Officer as well before the learned CIT(A). Both the revenue authorities did not discuss the issue at all. The learned CIT(A) after making reference to the submissions gave no decision on the same. This apart, notice issued under section 148 of the Act was not properly served on the assessee. The notice was served on one Shri Rajinder Singh who was not a partner of the firm. The firm was constituted of two partners namely, S/Shri Kanhiya Lal and Davinder Singh. Shri Kanhiya Lal have five sons amongst whom S/Shri Rajinder Singh is the one. As per the report of the Assessing Officer (not confronted to the assessee) all the persons were stated to be living with Shri Kanhiya Lal which was not correct. In fact as would be evident from the statement of Shri Rajinder Singh taken on 17-1-1989 (during the course of searches) Shri Kanhiya Lal and his wife reside in their own house No. 666, Sector 19, Faridabad. Shri Rajinder Singh carried on his independent business from his residential premises which was 1/372, Old Faridabad. Shri Surinder Singh resided with Shri Rajinder Singh in a house. These facts are borne out by the affidavits filed by Shri Rajinder Singh and Shri Kanhiya Lal. It is not known as to how the statement came to be made that all the parties resided together. Shri Rajinder Singh had no authority to receive the notice on behalf of the assessee. The firm was dissolved in 1990-91. The department was duly informed about the dissolution. In the background the service of the notice was not proper. As held by their Lordships of Punjab & Haryana High Court in the case of Kunj Behari v. ITO [1983] 139 ITR 73, the service has to be effected on the person concerned and the same has to be in accordance with order 5 Rules 9 to 20 of Civil Procedure Code. Similar view was taken by their Lordships of Allahabad High Court in the case of Shri Sidh & Co. v. ITAT [1992] 194 ITR 747/64 Taxman 282. In the circumstances, argued the ld. AR on both courts i.e., on account of lack of jurisdiction and non-service of proper notice, the assessment framed is to be quashed. On merit the assessment as framed cannot be upheld because an addition of Rs. 5,68,400 has been made on the basis of order of the Sales-tax authorities without making any independent enquiry. The order of the sales-tax authorities on the other hand stands set aside. In fact against the addition made the Joint Excise & Taxation Commissioner remanded the case to sales-tax authorities for determination of excess stock on 14-7-1992. Against the aforesaid order an appeal was filed before the Sales-tax Tribunal, Haryana. The assessment order under Sales-tax Act and the order of the Joint Excise & Taxation Commissioner, Faridabad confirming the addition were set aside by the Sales-tax Commissioner, Haryana. This is vide order dated 20-3-1995. In the circumstances, the confirmation of an addition of Rs. 5,68,400 was also unwarranted. The learned DR on the other hand, argued that since the order dated 21-8-1991 has not been made available it could not be said that the jurisdiction over the case did not lay with the Assessing Officer, Investigation Circle. No supporting material has also been produced by the learned AR to hold that on the date of issue of notice all the assessments as referred to by the learned AR stood finalised. In the circumstances, the plea of the learned AR could not be accepted. Coming to the service of the notice it was submitted that Shri Rajinder Singh is assessee's son. The notice was served on the address where the business was carried on. As per the report Shri Kanhiya Lal was ill and as such the notice has to be received by his son Shri Rajinder Singh who was found to be there when the notice server visited the premises. It is not a case where the notice server was not aware of the assessee's premises and delivered the same to some third party. Subsequent notices as issued and served were not questioned by the assessee. In the circumstances, to say that the notice was not served on the assessee is not correct. The assessee not only responded to the aforesaid notice inasmuch as it took objection to the jurisdiction of the Assessing Officer. Investigation Circle, Faridabad, he was also aware of the proceedings initiated against him. On merit it was stated that though various opportunities were given to the assessee to represent the case the assessee did not cooperate with the Assessing Officer. No supporting evidence was furnished that the addition of Rs. 5,68,400 was not called for on the basis as communicated to him. In the circumstances, the Assessing Officer had no choice but to make an addition which had to be confirmed by the learned CIT(A).
(3.) WE have considered the rival submissions. WE have also gone through the material to which our specific attention was drawn. Admittedly the firm was dissolved with effect from 1st April, 1991 as per the information lying on records (assessment record requisitioned during the course of hearing). Intimation in record to discontinuance of the business was also given to the Assessing Officer, Investigation Circle, Faridabad vide letter dated 22nd April, 1991. Along with this the deed of dissolution executed on 15th day of April, 1991 between Shri Kanahiya Lal and Shri Davinder Singh was also filed. In the notice issued under section 148 the following address was given :- M/s. Kanhiya Lal Surinder Kumar, Anaaj Mandi, Old Faridabad, Through Kanhiya Lal and Shri Davinder Singh. The aforesaid notice was served on Shri Rajinder Singh. This was dated 9-3-1993. Subsequent notices under section 143(2) and 142(1) of the Act were served on Shri Davinder Singh. It was on 23-12-1994 that the assessment records of the assessee were transferred to the Income-tax Officer, Ward-4, Faridabad and against the column 'pendency' - assessment for assessment years 1989-90 and 1991-92 were shown as pending. On further perusal of the assessment records it is found that the subsequent notices under section 142(1) dated 3-2-1995 and latter dated 2-2-1995 were served on Shri Davinder Singh, in response to which the assessee requested for inspection of records. On the facts as stated above the question arises is whether notice under section 148 of the Act was served on the assessee or not. Sections 282 to 284 of the Act prescribe a procedure for service of notice in given circumstances. While section 282 of the Act relates to service of notice in general, section 283 of the Act relates to service of notice when family is disrupted or firm etc. is dissolved. Section 284 of the Act on the other hand, prescribes procedure of service of notice in the case of discontinued business. These sections viz., 282 and 283 read as under :- Services of notice generally. "282. (1) A notice or requisition under this Act may be served on the person under the Code of Civil Procedure, 1908 (5 of 1908). (2) Any such notice or requisition may be addressed - (a) in the case of a firm or a Hindu undivided family, to any member of the firm or to the manager or any adult member of the family; (b) in the case of a local authority or company, to the principal officer thereof; (c) in the case of any other association or body of individuals, to the principal officer or any member thereof; (d) in the case of any other person (not being an individual), to the person who manages or controls his affairs." Service of notice when family is disrupted of form, etc., is dissolved. "283. (1) After a finding of total partition has been recorded by the [Assessing] Officer under section 171 in respect of any Hindu family, notices under this Act in respect of the income of the Hindu family shall be served on the person who was the last manager of the Hindu family, or, if such person is dead, then on all adults who were members of the Hindu family immediately before the partition. (2) Where a firm or other association of persons is dissolved, notices under this Act in respect of the income of the firm or association may be served on any person who was a partner (not being a minor) or member of the association, as the case may be, immediately before its dissolution." As per above, section 282 of the Act recognises two modes of services of notice-one by post and the other as if it were a summons issued by a court under the Code of Civil Procedure, 1908 (5 of 1908). The expression 'service' generally connotes formal communication to a party to whom notice is sent. Accordingly notice sent by post is to be by registered post so that the communication is given personally to the party to whom notice is sent. As per section 27 of General Clauses Act, 1897 where the notice is properly addressed, prepaying and posted by registered post, the same would be deemed to have been served on the party. As to the second mode of service it is to be as per procedure laid down in respect of the summons issued by a court under the Code of Civil Procedure 1908 (5 of 1908). Reading all the provisions of Order 5, Rules 9, 12 and 20 of the Code of Civil Procedure, 1908 makes it clear that ordinarily the service has to be effected on the person concerned personally. Whereas Rule 9 makes a mention by a summons to be sent by post, as per Rule 12 wherever it is practicable services is to be made on the party in person unless he had an agent empowered to accept service in which case service on such agent would be sufficient. Rule 17 speaks of the procedure when defendant refuses to accept the service or cannot be found. Rule 19 lays down the procedure for examination of serving officer.;