Delay In Dispatch Of Assessment Order Renders It Void

From the facts discussed above as well the case laws, it is obvious that this Bench allowed repeated opportunities to the revenue for producing evidences so that the fact regarding date of framing of assessment order could be verified. However, the Department could not produce any evidence which prove that the assessment order was ready as on 31.12.2008. Thus, we have no option but to accept the contention of assessee that the assessment order was not passed on 31.12.2008. No doubt the provisions of section 153 requires that assessment order shall not be passed after the expiry of two years from the end of the assessment year in which the income was first assessable. This is applicable to this case. There is no requirement that service must be effected before the expiry date but there must be evidences to show that assessment order was indeed passed before the limitation. In the present case before us no such evidence has been adduced by revenue that the order was indeed passed on or before 31.12.2008. Even though the assessee has taken up this issue in appeal and revenue has repeatedly been asked to produce evidences to that effect. There is no evidence produced before this Bench to show that the assessment order and demand notice was dispatched by registered post as on the date of assessment order of 31.12.2008. Rather, evidences are against the revenue that the assessment order and demand notice were dispatched only on 12.02.2009 and the same was served on assessee on 16.02.2009 i.e. beyond 47 days of limitation. There can be postal delay of a week’s time or a fortnight’s time at the maximum and it cannot be 47 days’ delay. Hence, we are of the view that in order to make the assessment order complete and effective, it should be issued so as to be beyond the control of the authority concerned for any possible change or modification and this should be done within the limitation period though actual service of the assessment order may be beyond that period. When an assessment order has been purported to have been passed within the prescribed period of limitation but the same is served on the assessee after unreasonable delay without being an explanation coming forward for such delay, in the absence of any explanation whatsoever it can safely be presumed that the order was not made on the date on which it purports to have  been made and on the basis of such presumption it can be held that the order was passed after the expiry of limitation. In such circumstances, taking into consideration all the facts, we hold that the assessment order was barred by limitation. Hence, we allow this jurisdictional issue in favour of assessee.

ITAT “A” BENCH: KOLKATA

I.T.A No. 240/Kol/2010
I.T.A No. 985/Kol/2010
Assessment Year: 2006-07
Shri Subrata Roy
Vs.
Income-tax Officer, Wd-29(1), Kolkata
Date of pronouncement :  19.11.2012

ORDER

Per Mahavir Singh, JM   

These cross appeals by assessee and revenue are arising out of order of CIT(A)-XVI, Kolkata in Appeal No. 357/CIT(A)-XVI/29(1)/08-09 dated 13.11.2009. Assessment was framed by ITO, Wd-29(1), Kol u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2006-07 vide his order dated 3 1.12.2008.

2. First we take up ITA No.240/K/2010 (assessee’s appeal). The first issue, in this appeal of assessee, is against the order of CIT(A) as regards to assessment being barred by limitation as the assessment order was served on assessee after 47 days of expiry of limitation period. For this, assessee has raised following ground nos. 2 and 3:

“2. For that the 1d. CIT(A) erred in holding that the assessment was not barred by limitation when the assessment order as served on the appellant after 47 days of the limitation period and there was nothing to show that the assessment left the control of the AO before expiry of the limitation period.

3. For that the 1d. CIT(A) erred in relying on the so called report of the Notice Server when the assessee never refused to accept any notice of the department, even otherwise  there was no evidence to show as to why the assessment was held up by the AO without dispatch for 47 days.”

3. Briefly stated facts are that the relevant assessment year is 2006-07 and assessee filed his return of income on 31.07.2006. Thereafter, notices u/s. 143(2) and 142(1) of the Act were duly issued and served on the assessee and assessment was framed u/s. 143(3) of the Act vide order dated 3 1.12.2008. Certain additions were made and assessee challenged the additions in appeal before CIT(A). Before CIT(A), assessee took first issue as regards to assessment being barred by limitation as assessment order and demand notice were served 47 days after expiry of limitation period and there is no evidence that the assessment was completed before the end of limitation period. During the course of appellate proceedings before CIT(A), assessee claimed that the assessment order along with demand notice was dispatched by the AO on 12.02.2009 but assessment order is dated 3 1.12.2008. According to assessee, assessment order and demand notice were served on assessee on 16.02.2009. The CIT(A) treated the assessment as made within limitation period by giving following finding in para 6:

“6. I have considered the submissions of the appellant and perused the assessment order. I have also gone through the assessment records. On perusal of assessment records and the order sheets attached to the assessment record, it is seen that the assessment was completed on 31.12.2008 and it was signed on the same date alongwith the demand notice and notice u/s. 274 read with section 271 of the I. T. Act. The assessment order and the notice of demand were handed over to the Departmental Notice Server for service of the same on the appellant. However, it is reported by the notice server that the assessment order and the demand notice were refused to accept by the appellant. Later on, the order and the demand notice were sent by registered Post. It is also observed from the assessment records that the last date of hearing was on 15.12.2008 and hence there is no reason to doubt that the assessment was not completed within the limitation period Thus, from the assessment records, it is apparent that the assessment was completed within the limitation period i.e. on 31.12.2008. Moreover, section 153 of the I. T. Act states that no order of assessment shall be made u/s. 143 or section 144 at any time after expiry of (a) two years from the end of the assessment year in which the income was first assessable; or     Thus, the Act also speaks about the completion of assessment and not the service of assessment order. In the case of K. U. Srinivasa Rao vs. Commissioner of Wealth-Tax, Andhra Pradesh, Visakhapatnam, 152 ITR 128(AP) the Hon ’ble High Court has held as under:

“The word to be noticed is “made”. It must be remembered that an order of assessment is not an administrative order, but a quasi-judicial order. It is true that an order of assessment may not have been made in the presence of the assessee and that it requires to be communicated, but still, its character as a quasi-judicial order must be kept in mind while interpreting the word “made”. The Act merely requires that an order of assessment shall be made within the prescribed period. It does not further require that it should be communicated within the period prescribed.”

The jurisdictional High Court in the case of India Ferro Alloy Industry Pvt. Ltd. vs. CIT, 202 ITR 671(Cal) on the issue involved has held as under:

“what is required for completion of the assessment is the determination of the tax liability and issue of demand notice but certainly not the service of the same on the assessee.

Similar view was taken by the Apex Court in Commissioner of Income Tax, West Bengal III vs. Balkrishna Malhotra — (1971) 81 ITR 759 (SC), and also in —

(1)      Rm P. R. Viswanathan Chettiar vs. Commissioner of Income Tax, Madras, 25 ITR 79 (MAD),

(2)      Ramanand Agarwalla vs. Commissioner of Income Tax, North Eastern Region, Shiliong, 151 ITR 216 (Gauhati),

(3)      Badri Prasad Bajoria vs. CIT (1967) 64 ITR 362 (Cal),

(4)      Kodidasu Appalaswamy And Suryanarayana vs. Commissioner of Income Tax, AP (1962) 46 ITR 735 (AP),

(5) Esthuri Aswathiah Vs. Commissioner of Income Tax, Mysore, (1963) 50 ITR 764 (Mysore). In view of above, it is held that the assessment was completed within the limitation period as provided under the Act and not barred by limitation. The ground no.2 is dismissed.”

Aggrieved, assessee is in appeal before the Tribunal.

4. Before us, Ld. counsel for the assessee Shri S. M. Surana argued that the assessment is barred by limitation as assessment order and demand notice dated 3 1.12.2008 were served after 47 days i.e. expiry of the limitation period as prescribed under proviso to section 153(1) of the Act i.e. served on 16.02.2009. When a query was put to Ld. counsel for the assessee that what is the proof of service of the assessment order and demand notice as on 16.02.2009, he stated that the assessment order was dispatched through registered post and it seems from the envelop dispatching Assessment order, that it was dispatched by AO on 12^th February, 2009, which ultimately received by the assessee on 16.02.2009. According to Ld. counsel, assessment order and demand notice served after 47 days of limitation period is clearly barred by limitation and for this, he relied on certain case laws. According to Ld. Counsel, last date for completion of assessment in the present case was 31.12.2008 and assessment order was served on assessee on 16.02.2009. He fairly conceded that no doubt the assessment order and demand notice both are dated 3 1.12.2008 but it does not mean that the assessment was completed within the limitation period and for this, it is for the AO to show that the assessment was completed within the limitation period. When a query was put to Ld. counsel for the assessee that how AO can prove that the assessment was completed within the limitation as the assessment order clearly depicts the date within limitation i.e. 3 1.12.2008. He replied that it is for the AO to show that the assessment order and demand notice left AO’s control within the limitation period i.e. before  31.12.2008 and that will prove that the assessment was completed as on 3 1.12.2008. He stated that according to assessee, the assessment order and demand notice were received on 16.02.2009 by Registered Post and envelope containing this assessment order and demand notice was dispatched on 12th February, 2009. In such circumstances, Ld. counsel stated that let the AO or the DR demonstrate that the assessment order and demand notice were dispatched as on 31.12.2008. In such circumstances, he stated that the assessment framed by AO is clearly barred by limitation and CIT(A) has wrongly upheld the same.

5. On the other hand, Ld. Sr. DR Shri Amitabha Roy referred to para 6 of CIT(A)’s order and stated that, first of all, assessment order and demand notice were handed over to Departmental Notice Server for service of the same on the assessee but as reported by the Notice Server, the assessee refused to accept the assessment order and demand notice and later on assessment order and demand notice were sent by Registered Post. Further, Ld. Sr. DR relied on the time limit for completion of assessment as prescribed u/s. 153(1) of the Act and stated that as per this provision, only assessment order is to be made and it is no where mentioned that it needs to be served. He argued that the period of limitation is for completion of assessment only and not for communication of assessment order to the assessee. According to Ld. Sr. DR, the limitation period prescribed in section 153 of the Act is the period within which AO has to complete one stage of the proceedings i.e., the assessment of the income and the determination of tax payable but it is not necessary that terms of the order of assessment should also be communicated to the assessee within that period. According to Ld. Sr. DR, what is required for completion of assessment is the determination of the tax liability and issue of demand notice but certainly not the service of the same on the assessee. In view of these arguments Ld. Sr. DR stated that the assessment order is within the limitation period and is a valid assessment order. For this, he also cited certain case laws.

6. We have heard rival submissions and gone through the facts and circumstances of the case. We find from the assessment order that the date noted for framing of assessment order is 3 1.12.2008 but this is disputed by the assessee. Even before us it was argued by Ld. Sr. DR Shri Amitabha Roy that the assessment order and demand notice were sent by Registered Post on 12th February, 2009, which was ultimately received by assessee on 16.02.2009 because first the assessment order and demand notice was handed over to Departmental Notice Server and assessee refused to accept the assessment order. In such circumstances, Revenue’s contention is that the assessment order and demand notice were sent by Registered Post only on 12^th  February, 2009, which was ultimately received by assessee on 16.02.2009. But, for this argument, the Ld. Sr. DR could not adduce any evidence that the assessment order and demand notice at the first instance, were handed over to the Departmental Notice Server and there is no proof of any refusal on the part of the assessee. Even otherwise, it is an admitted fact that the assessment order and demand notice were received by assessee after 47 days, which is beyond the prescribed date of limitation for passing of assessment order u/s. 143(3) of the Act. The assessment was getting time barred as on 3 1.12.2008 and demand notice and assessment order were served on 16.02.2009. Before us the facts undisputed are that the assessment order is dated 3 1.12.2008 and it is also not disputed by revenue that the assessment order was dispatched by the AO on 12^th February, 2009, as appears from the envelop of dispatch of the assessment order and demand notice. Once this is a fact that the assessment order was dispatched on 12^th February, 2009 and the same was received on 16^th February, 2009, no doubt there is no requirement of service of assessment order u/s. 153 of the Act but service of assessment order after expiry of the period of limitation raises a presumption against passing of the order within the limitation period. Where an assessment order has been purported to have been passed within the prescribed period of limitation but the same is served on the assessee after a long delay, without there being an explanation coming forward for such delay, in the absence of any explanation, whatsoever, it can be presumed that the order was not made on the date on which it is purported to have been made. Here, in the present case before us, the revenue has not furnished any explanation and has not produced any documentary evidence despite repeated directions on 27.10.2011 and 09.07.20 12 that let the assessment records and dispatch records be produced for verification. Rather revenue has not objected or has not contested the fact that the assessment order was dispatched on 12.02.2009 and same was received on 16.02.2009. In the above given facts, now we have to consider the case law cited by Ld. counsel for the assessee as well as by Ld. SR DR.

7. First case law referred by Sh. S.M. Surana of Hon’ble Gujarat High Court in the case of KanuBhai M. Patel(HUF) V Hiren Bhatt(2011)334ITR25(Guj)wherein the concept of date issue of notice, which means when it will leave the control of the authority concerned. Hon’ble Gujarat High Court discussed the expression ‘issue’ as defined in Black’s Law Dictionary to mean “To send forth; to promulgate; as, an officer issues orders, process issues from a court. To put into circulation; as, the treasury issues notes. To send out, to send out officially; to deliver, for use, or authoritatively; to go forth as authoritative or binding. When issued with  reference to writs, process, and the like, the term is ordinarily construed as importing delivery to the proper person, or to the proper officer for service etc.” Further, the word ‘issue’ has been defined in P. Ramanath Aiyer’s Law Lexicon as follows:

“Issue. As a noun, the act of sending or causing to go forth; a moving out of any enclosed place; egress; the act of passing out; exist; egress or passage out (Worcester Dict.); the ultimate result or end As a verb, To issue means to send out, to send out officially; to send forth; to put forth; to deliver, for use, or authoritatively: to put into circulation; to emit; to go out (Burrill); to go forth as a authoritative or binding, to proceed or arise from; to proceed as from a source (Century Dict.)

Issue of process. Going out of the hand of a clerk, expressed or implied, to be delivered to the Sheriff for service. A writ or notice is issued when it is put in proper form and placed in an officer’s hands for service, at the time it becomes a perfected process

Any process may be considered issued if made out and placed in the hands of a person authorised to serve it, and with a bona fide intent to have it served”

Hon’ble High Court considering the definition of the word ‘Issue” held that it is apparent that merely signing the notices on the last day of limitation cannot be equated with issuance of notice as contemplated u/s. 149 of the Act. The date of issue would be the date on which the same was handed over for service to the proper officer. Hon’ble High Court in such circumstances held that when last day of limitation for issuance of notice is 31.03.2010 and the same was sent for booking to the Speed Post centre on 07.04.2010, the date of issue of said notice is 07.04.2010 and not the date of signature of the officer as on 31.03.2010 and held the issuance of notice as barred by limitation.

8. The next decision cited by Ld. Counsel of Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Rai Bahadur Kishore Chand And Sons in ITA No. 522 of 2007 dated 13.03.2008 has held as under:

“5. We find no force in the contention raised by the Learned counsel for the revenue. The basic question to be decided in this case is “Whether the impugned assessment order was passed within the statutory period of limitation upto 31.3.2004 or not?” The Tribunal after perusing the evidence on record and taking into account the non-production of assessment record before the Bench has given a finding of fact that the impugned assessment order for the assessment year 2001-02 was passed after the statutory time limit. The Tribunal has noted the fact that the revenue was given more than 5 opportunities to produce record of the Department to challenge the specific grounds of appeal taken by the assessee to the effect that assessment order dated 2 6.3.2004 was not served upon him within the statutory  period of limitation and as such the same is liable to be quashed being passed after the statutory time limit and ultimately, the Departmental Representative stated before the Tribunal that the matter may be decided in the light of the facts on record of the case. While dismissing the appeal of the revenue, the Tribunal has given a categoric finding that no evidence has been adduced by the Department to show that the impugned order dated 26.3.2004 passed by the assessing officer was indeed passed before the statutory time limit.”

9. Further, reliance was placed on the decision in the case of CAGIT Vs. Kappumalai Estate (1998) 234 ITR 187 (Ker) and also Government Wood Works Vs. State of Kerala (1988) 69 STC 62 (Ker) and on the basis of these two decisions Ld. Counsel contended that in order to make the assessment order complete and effective it should be issued so as to be beyond the control of the authority concerned for any possible change or modification. This should be done within the prescribed period though the actual service of the order may be beyond that period. The contention of Ld. Counsel was that service of assessment order after the expiry of the period of limitation raises a presumption against passing of the order within limitation. Ld. Counsel for the assessee also relied on the decision of Hon’ble High Court of Andhra Pradesh in the case of Cf. K. Mohd. Osman Saheb & Co. Vs. State of Andhra Pradesh (1971) 27 STC 303 (AP). He also relied on the decision of Hon’ble Supreme Court in the case of State of Andhra Pradesh Vs. M. Ramakishitah & Co. (1994) 93 STC 406 (SC).

10. However, Ld. Sr. DR relied on the decision of ITO Vs. Shri Lal Chand Agarwal of this Tribunal in ITA No.169/Agr/2007 dated 30.08.2011 of Agra Bench and also the decision of Elkom Enterprises Pvt. Ltd. Vs. ITO in ITA No.1081/Kol/2009 dated 30.04.2010. Ld. Sr. DR also relied on the decision of Hon’ble P&H High Court in the case of V.R.A. Cotton Mills (P) Ltd. Vs. Union of India & Ors. In CWP No.18193 of 2011 dated 27.09.2011. We find that in the case of Lal Chand Agarwal (supra) the issue was the issuance of notice u/s. 148 of the Act and there were two notices of different dates and which notice is valid. Further, in the case of V.R.A. Cotton Mills (P) Ltd. (supra) the issue was regarding issuance of notice u/s. 143(2) of the Act vis-à-vis the date of filing of return of income. However, the issue in Elkom Enterprises Pvt. Ltd. (supra) was exactly the similar but the facts found are that the assessment order was passed on or before 31.12.2007 even though the same was served 04.03.2008. Tribunal in this case came to the conclusion on the basis of evidences that the entry made in dispatch register at Sl. No. 94 is not at all an entry which looks like an inserted entry and this register establishes that the assessment order was made on 27.12.2007. In the case of Elkom Enterprises Pvt. Ltd. (supra) Tribunal came to the conclusion that the assessment order was  passed on 27.12.2007, much before the expiry of limitation period i.e. 3 1.12.2007, on the basis of documents and evidences. But in the present case before us, it is a fact that despite repeated opportunities to the revenue they could not prove by any documentary evidence that the assessment was framed on 31.12.2008 i.e. the date of assessment order. It is a fact that the assessment order and demand notice was handed over to Postal Authorities on 12.02.2009 and the same was received by assessee on 16.02.2009.

11. From the facts discussed above as well the case laws, it is obvious that this Bench allowed repeated opportunities to the revenue for producing evidences so that the fact regarding date of framing of assessment order could be verified. However, the Department could not produce any evidence which prove that the assessment order was ready as on 31.12.2008. Thus, we have no option but to accept the contention of assessee that the assessment order was not passed on 31.12.2008. No doubt the provisions of section 153 requires that assessment order shall not be passed after the expiry of two years from the end of the assessment year in which the income was first assessable. This is applicable to this case. There is no requirement that service must be effected before the expiry date but there must be evidences to show that assessment order was indeed passed before the limitation. In the present case before us no such evidence has been adduced by revenue that the order was indeed passed on or before 31.12.2008. Even though the assessee has taken up this issue in appeal and revenue has repeatedly been asked to produce evidences to that effect. There is no evidence produced before this Bench to show that the assessment order and demand notice was dispatched by registered post as on the date of assessment order of 31.12.2008. Rather, evidences are against the revenue that the assessment order and demand notice were dispatched only on 12.02.2009 and the same was served on assessee on 16.02.2009 i.e. beyond 47 days of limitation. There can be postal delay of a week’s time or a fortnight’s time at the maximum and it cannot be 47 days’ delay. Hence, we are of the view that in order to make the assessment order complete and effective, it should be issued so as to be beyond the control of the authority concerned for any possible change or modification and this should be done within the limitation period though actual service of the assessment order may be beyond that period. When an assessment order has been purported to have been passed within the prescribed period of limitation but the same is served on the assessee after unreasonable delay without being an explanation coming forward for such delay, in the absence of any explanation whatsoever it can safely be presumed that the order was not made on the date on which it purports to have  been made and on the basis of such presumption it can be held that the order was passed after the expiry of limitation. In such circumstances, taking into consideration all the facts, we hold that the assessment order was barred by limitation. Hence, we allow this jurisdictional issue in favour of assessee.

12. In the result, appeal of assessee is allowed.

13. Order pronounced in the open court on 19^th Nov., 2012

Dated: 19th November, 2012