When assessee has given his address in the e-return and the AO has also given TDS credit on the same, AO is not right in serving notice u/s 143(2) by affixting the same on some other address

ITAT Delhi

ITA No. 4672/Del/2009

Assessment Year: 2006- 07

ORDER

PER C.L. SETHI, J.M.

The revenue is in appeal against the order dated 03.09.2009 passed by ld. CIT(A) in the matter of assessment made by the Assessing Officer u/s 144 of the Income Tax Act, 1961 for the A.Y. 2006-07.

2. The grounds of appeal raised by the revenue are as under: –

1. “The order of the ld. CIT(Appeals) is erroneous & contrary to facts and law.

3. In the grounds of appeal, the department has taken a stand that the notice issued u/s 143(2) and 115WE(2) of the Act were validly served. The AO completed the assessment u/s 144 of the Act. The AO also passed an order u/s 115WF of the Act. These are two separate orders passed by the Assessing Officer. The ld. CIT(A) passed two separate appellate orders in two separate appeals arising from assessment order passed u/s 144 of the Act and order passed u/s 115WF of the Act respectively. The department should have filed two separate appeals in respect of two separate orders passed by AO u/s 144 of the Act and u/s 115WF of the Act. In the ground of appeal department has taken both these issues together. In the course of hearing of this appeal, this position was pointed out to the ld. Departmental Representative, and after discussion with him it was decided to treat this present appeal only with reference to the assessment order passed u/s 144 of the Act. The department shall be at liberty to file a separate appeal in respect of order passed u/s 115WF of the Act if so advised.

4. We, therefore, proceed to decide as to whether notice issued u/s 143(2) has been validly served upon the assessee within the stipulated time.

5. The assessee filed its return of income on 25.11.2006 showing total income at Rs. 40,66,790/-. The return was processed u/s 143 sub-section (1) of the Act on 21.08.2007. Thereafter, the case was selected for scrutiny. AO issued statutory notice u/s 143(2) dated 11.10.2007 to the assessee at 44-Rajendra Bhawan, Rajendra Place, New Delhi fixing the case for hearing on 24.10.2007. The same notice issued u/s 143(2) was received back undelivered with the remark of the postal authority as “no such office in 44-Rajendra Bhawan, Rajendra Place, New Delhi”. The AO thereafter deputed the Inspector of the office Shri Amar Pal Singh to serve the notice personally but it was reported by Inspector that no such company at that address existed. The AO, therefore, served the notice by affixture. Subsequently, the AO gathered another address of the assessee being at 1-GF, AGCR Enclave, Karkarduma, Delhi and the Inspector was deputed to serve the notice personally at this new address. However, the fresh notice at AGCR Enclave, Karkarduma could not be served as no such company existed at the above address, notice u/s 143(2) was served by affixture at that address also. Since, no one for the assessee appeared before the AO, the AO completed the assessment u/s 144 of the Act vide order dated 19.12.2008.

6. Being aggrieved, the assessee preferred an appeal before the ld. CIT(A).

7. Before the CIT(A), the assessee submitted that assessee was actually operating at 1-GF, AGCR Enclave, Karkarkuma, Delhi upto 15.12.2007 and shifted office to Aditya Mega Mall, SF-4 & SS-11, Central Business District (East), Karkarduma, Delhi. It was further pointed out by the assessee that the assessee had received notice dated 1.10.2007 from DCIT, Circle-6(1), New Delhi regarding some TDS/TCS query in the course of processing the return of income for A.Y. 2006-07 which was complied by the assessee on 28.11.2007. At that time, the assessee was operating from address given in the notice of AO, i.e., at 1-GF, AGCR Enclave, Karkarduma, Delhi. It was further pointed out that in the return of income filed by the assessee for the year under consideration, the address was mentioned at 1-GF, AGCR Enclave, Karkarduma, Delhi. The assessee then pointed out that assessee had already shifted its registered office from 44, Rajendra Bhawan, Rajendra Place, New Delhi long way back in 2001. It was thus, contended that statutory notice u/s 143(2) dated 11.10.2007 issued at 44, Rajendra Bhawan, Rajendra Place, New Delhi was not correct, and service of notice by affixture at that address was not in accordance with the facts of the case and the provisions of law contained in that behalf.

8. Apart from affidavit given by the assessee, the following documents were furnished to support the assessee’ s contention before the ld. CIT(A): –

(i) “Copy of intimation in Form No. 18 to ROC (Change of Regd. Office address).

(ii) Copy of letter from Income Tax Circle 6(1)/2007- 08/139 dated 01.10.2007 received on 9.10.2007, demanded original TDS certificate and copy of covering letter No. MCT/AY/0607/001 submitted on 11.2007.

(iii) Copy of Income Tax Return Acknowledgement dated 25.11.2006.

(iv) Copy of Audit Report, Balance Sheet and Profit/Loss Account.

(v) Copy of Tax Audit Report.

(vi) Copy of 56G Report.

(vii) Copy of last assessment order for A. Y. 2005- 06 processed u/s 143(3) dated 30.03.2007.

(viii) Copy of FIRC received at our Registered Office address.”

9. In the light of submission of the assessee, documents furnished and facts narrated by the AO in the assessment order, the ld. CIT(A) discussed and decided the issue by observing and holding as under: –

4.1 “From the documents filed by the assessee and the perusal of the assessment record it is clear that

a. 44, Rajendra Bhawan, Rajendra Place address was never given in the return filed by the assessee as is clear from the return itself and further proved from the fact that the AO has herself sent a letter to the assessee company at AGCR Enclave address on 1.10.2007 in connection with the claims of TDS/TCS requiring the company to file original certificates for getting credit.

b. The assessment record and assessing officer’s noting dated 13.3 .09 clearly shows that the assessee complied with this on 28.11.2007.

c. The assessee company had shifted it’s operation from AGCR Enclave to Aditya Mega Mall on 15.12.2007.

d. The assessee has been assessed u/s 143(3) for assessment years 2003 -04, 2004-05, 2005-06, so just by digging into the last years record, AO could have known the correct address. The notices issued for the last year, the assessment order, the demand notice all contain the address as 1-GF, AGCR Enclave, Karkarduma.

e. Only if the notice had been sent at the address on the return itself there would have been no issue since up till 15.12.2007, the assessee was operating from there itself.

f. It is surprising to note that the AO is on a look out for the assessee in order to serve a notice for an assessment getting barred by limitation and from the same office a different notice is being sent to the same assessee at the correct address and the assessee is complying with that. It is difficult to comprehend the total disconnect in dealing with an urgent situation.

4.2 The ld. Counsel has brought the following cases of the Honourable Delhi High Court to my notice in support of his contention: –

a. CIT Vs. Dewan Kraft System (P) Ltd. 165 Taxman 139 (Delhi)

b. CIT Vs. Rajesh Kumar Sharma 165 Taxman 488 (Delhi)

c. CIT Vs. Lunar Diamonds Ltd. 146 Taxman 691 (Delhi)

4.3 In the case of CIT Vs. Dewan Kraft System (P) Ltd., the facts are almost similar to the present case. The relevant para is reproduced as under: –

“We have examined the copies of the notices issued by the AO and find that the notice issued at the very last minute. Since the office of the assessee was closed, no efforts were made by the AO to find out the whereabouts of the assessee to serve it but a short cut was taken by the Inspector who resorted to affixation, which was carried out in the absence of any independent witness. It appears to us that the entire exercise of sending the Inspector and resorting to affixation was carried out only to ensure that the case does not become time-barred, knowing fully well that the notices have been issued at the very last minute and could not have been served on the assessee without undertaking some out of the ordinary exercise as has been done in the present case.”

5.0 In the present case, I am of the opinion that in view of the facts above and the categorical stand of the assessee supported by an affidavit that he did not receive any notice, the burden was on the AO to prove that it was dispatched to the correct address. In this case, it was not even doing something out of the ordinary, a mere glance at the address on the return or last years record or a little presence of mind when the assessee responded to a TDS verification notice could have sorted the issued.

A subsequent discussion with the assessee ’s counsel by the AO led to a noting dated 13.3.09 by the AO.

“Shri Anil Khanna, CA & AR along with Shri Sanjay Thakur auditors attended. The issue of change of address was discussed with them.

It has been seen that while specific intimation has been made to ROC, NSDL website and TAN website links, the same was not communicated to the Department separately. However, there was a communication with the company at its AGCR, Karkarduma address in November, 2007 when TDS certificates were called for to which they responded. But by the time, scrutiny proceedings began in June, 2008, the company had shifted out to the above address and its subsequent whereabouts were unknown to the AO. They could not be traced out by the Inspector deputed for the job nor was the same  communicated to the Department. Finally assessment u/s 144 was made.”

5.2 There are whole lot of gaps in this noting, since till the 15.12.2007, all the notices were being sent and affixed at the wrong address. It was only on 26.11.2008 that the Inspector was deputed but by then the assessee had in fact shifted to Aditya Mega Mall duly informing the concerned authorities.

5.3 In view of the above, I hold that since the notice was never served the assessment framed u/s 144 is invalid, thereby allowing the 2^nd ground of appeal.”

12 In this case, the assessee filed its return of income of the assessment year under consideration on 7.12.2006 showing the address at 1-GF, AGCR Elcave, Karkarduma, Delhi – 110092. Prior to this physical return, the assessee filed e-return for the assessment under consideration on 25.11.2006 vide e-acknowledgement no. 90149209. In order to make assessment u/s 143(3) of the Act by the AO, the AO should have issued notice u/s 143(2) before the expiry of 12 months from the end of the month in which the return was furnished. In the present case, the AO should have therefore, served on the assessee the notice u/s 143(2) on or before 3 1^st day of November, 2007, being expiry of 12 months from the end of the month of November, 2006 in which the e-return was filed by the assessee on 25.11.2006. In the present case, AO selected the return for scrutiny to complete the assessment u/s 143(3) of the Act. The AO, therefore, issued a notice u/s 143(2) on 11.10.2007 at 44, Rajendra Bhawan, Rajendra Place, New Delhi. This notice issued u/s 143(2) was not served upon the assessee but returned back undelivered with the postal remark that “no such office in 44, Rajendra Bhawan, Rajendra Place, New Delhi”. The AO therefore, deputed the Inspector and process server to serve the notice by affixture. Affixture of this notice was done by process server in the presence of an Inspector Shri Amal Pal Singh deputed by the AO. In the light of these facts, we have to see as to whether notice issued u/s 143(2) at 44, Rajendra Bhawan, Rajendra Place, New Delhi and, thereafter, service of this notice by affixture at this address was valid. The AO has stated in the assessment order that address of 44, Rajendra Bhawan, Rajendra Place, New Delhi was furnished by the assessee in the return of income. But, on perusal of return of income and the assessment records, we find that assessee has not given this address of 44, Rajendra Bhawan, Rajendra Place, New Delhi in the return of income filed on 25.11.2006 and in the physical return filed on 7.12.2006. The actual address mentioned by the assessee in the return of income is 1-GF, AGCR Enclave, Karkarduma, Delhi. We further find that office of the Deputy Commissioner of Income Tax, Circle 6(1), New Delhi had issued a notice dated 1.10.2007 to the assessee at the address at 1-GF, AGCR Enclave, Karkarduma, Delhi in the matter of processing of Income Tax return for the A.Y. 2006- 07 for the purpose of giving credit of TDS. In this notice, the ACIT, Circle 6(1) has stated that the assessee had filed e-return for A.Y. 2006-07 on 25.11.2006 vide e-acknowledgement no. 90149209, and some of TDS/ TCS, as appearing in schedules 24 & 25 of the said return, were not duly reflected in the departmental data base. The office of Deputy Commissioner wished to correctly processed the return u/s 143(1) after giving due credit for TDS/ TCS and, therefore, DCIT requested the assessee to provide photocopies of TDS/TCS certificates along with the original. It was also mentioned that original shall be returned on the spot after verification and only the photocopies shall be retained for office record. In compliance to this notice dated 1.10.2007, the assessee furnished details of TDS claim along with xerox copies of TDS certificates vide letter dated 24.10.2007 which was received by the office on 28.11.2007. It is thus, clear that address of 1-GF, AGCR Enclave, Karkarduma, Delhi was known to the DCIT, Circle 6(1) and notice for giving credit of TDS was accordingly given at this address. In the light of these facts, it is thus, clear that the last known address to the department was 1-GF, AGCR Enclave, Karkarduma, Delhi – 110092, at the time when the AO had issued notice u/s 143(2) on 11.10.2007. We further, find that the assessment for A.Y. 2005-06 was completed u/s 143(3) vide order dated 30.2.2007. In the body of assessment, the address of assessee is mentioned as 1-GF, AGCR Enclave, Karkarduma, Delhi. The AO also issued notice of demand u/s 156 of the Act for the A.Y. 2005-06 at the same address i.e. 1-GF, AGCR Enclave, Karkarduma, Delhi. We further find that return of income for the A.Y. 2004-05 was also filed showing the address at 1-GF, AGCR Enclave, Karkarduma, Delhi on 1.11.2004. It is further found that assessment for the A.Y. 2003-04 was also completed u/s 143(3) of the Act vide order dated 30.3.2006, where the address of the assessee is mentioned at 1-GF, AGCR Enclave, Karkarduma, New Delhi -110092. These facts of the case discussed above would clearly show that the correct address of the assessee lastly known to the department on 11.10.2007 when notice u/s 143(2) was issued was 1-GF, AGCR Enclave, Karkarduma, Delhi. We, therefore, hold that issue of notice u/s 143(2) at 44, Rajendra Bhawan, Rajendra Place, New Delhi was not valid. This notice u/s 143(2) has not been issued at the correct last known address of the assessee. Therefore, issuing the notice at the said address and serving the notice by affixture at that address cannot said to be valid. In this case, the AO should have sent the notice at the last known address of the assessee available as on 11.10.2007 i.e. 1-GF, AGCR Enclave, Karkarduma, New Delhi, and if the notice sent at this address would have returned back, the service of notice by affixture at this address as per law would not have been any irregularity.

13. In the light of the discussions made above, we therefore, hold that the notice u/s 143(2) issued on 11.10.2007 and then served by affixture at 44, Rajendra Bhawan, Rajendra Place, New Delhi was not valid, and on the basis of that notice, no assessment proceedings could have been validly initiated.

14. In the assessment order, the AO has also claimed that on subsequent inquiry, address of the assessee at 1-GF, AGCR Enclave, Karkarduma, Delhi was gathered, and the Inspector was deputed to serve the notice at the said address. The AO further stated that since no company existed at this address, notice u/s 143(2) was served by affixture there also. Now, we have to see as to whether notice issued at 1-GF, AGCR Enclave, Karkarduma, Delhi by the AO was valid and within time. In the assessment order, the AO has not mentioned the date on which the notice u/s 143(2) was issued at the address of 1-GF, AGCR Enclave, Karkarduma, Delhi. The AO has also not mentioned as to when this notice was served by affixture at this address. We have perused the assessment records, and find that a notice dated 15.09.2008 was issued by the AO to the assessee at the address at 1-GF, AGCR Enclave, Karkarduma, Delhi. This notice sent by speed post has been returned un-served with the remark “left W/a”, dated 19.09.2008”. The Inspector Shri Amal Pal Singh was then deputed to trace out the where about of the assessee company. He visited at the address at 1-GF, AGCR Enclave, Karkarduma, Delhi and found from enquiries made from the nearby residence and inhabitants that this company was functioning from 1-GF, AGCR Enclave long back and had shifted from this place to either at shopping complex, Karkarduma, Delhi or Sainik Enclave, Delhi. The Inspector visited both the places but no one was able to tell the where-about of the said company. The Inspector further stated that the all possible efforts were made but no result was achieved. This report of the Inspector is dated 26.11.2008. The notice issued on 15.09.2008 at 1-GF, AGCR Enclave, Karkarduma, Delhi is beyond the period of 12 months from the end of the month in which the return was filed. Therefore, issue of this notice dated 15.09.2008 is beyond the stipulated time provided u/s 143(2) of the Act. Therefore, this notice does not help the department to uphold the validity of the assessment made by the AO u/s 144 of the Act.

15. Even otherwise, the service of notice by affixture at 44, Rajendra Bhawan, Rajendra Place, Delhi is also not in accordance with the provisions of Order V, Rule 17 of the Code of Civil Procedure, 1908 in as much as the place was not properly identified and the report of service was not authenticative, by any independent person. We have gone through the affixture report submitted by process server stating that he affixed the notice at 44, Rajendra Bhawan, Rajendra Place, Delhi in the presence of Inspector of Income Tax, Shri Amal Pal Singh. On the basis of this report, DCIT declared the service to be valid vide his note dated 31.10.2007. In the service report it has been mentioned that notice has been served by the affixture on 11.10.2007. Since the affixture of notice has not been made in accordance with the aforesaid provisions of Order V, Rule 17 of the Code of Civil Procedure, 1908, the service of notice by affixation cannot held to be valid. In this connection, reliance may be placed upon the decision of Hon’ble High Court of Punjab & Haryana in the case of Commissioner of Income Tax Vs. Naveen Chander (2010) 323 ITR 49 (P&H), where it has been held that when service was sought to be affected by affixation which was required to be done in accordance with the procedure laid down by the order V Rule 20 of CPC but requirements of order V Rule 20 of CPC were not complied with, block assessment proceedings in pursuance to such notice were not valid. In this case it was held as under (Extracted from head note): –

“Held that, the Tribunal had referred to the report, issued by the process server. According to the report of the Inspector/notice server, the notice was affixed on the main door of Shop No. 33. There was no evidence of any local person having been associated with in identifying the place of business of the assessee-respondent and the report was not witnessed by any person at all. It had been found to be flagrant violation of rule 17 of order V of the code which lays down a procedure to serve notice by affixture.

Hence, the Tribunal was justified in holding that having regard to the report of the Inspector/notice server, the requirements of the Code of Civil Procedure had not been fulfilled and the block assessment completed in pursuance to the notice was not valid.”

16. In the light of the reasons given above we, therefore, upheld the order of CIT(A) in holding that assessment framed u/s 144 was invalid as no notice u/s 143(2) was validly served upon the assessee within the statutory time. Thus, the appeal filed by the revenue fails.