Mere digitally signing of Section 148 notice cannot be regarded as issuance of notice

Mere digitally signing of the notice under section 148 of the Income-tax Act, 1961 cannot be regarded as the issuance of notice: Allahabad HC

Introduction

Whether digitally signing of the notice would automatically amount to issuance of notice? Whether digitally signing a notice and issuing it are two different acts? Whether issuance of notice shall take place on the date and time when it is dispatched either electronically or through other mode? Whether merely generating notice on the Departmental Portal and digitally signing it thereafter, would amount to issuance of notice?

The aforesaid questions were framed for determination by the Allahabad High Court in the case of Daujee Abhushan Bhandar Pvt. Ltd. v. Union of India and Others. The Hon’ble High Court has endeavored to answers the questions so framed by analyzing provisions of section 282 and section 282A of the Income Tax Act, 1961 [“the Act, 1961”] read with Rule 127A of the Income Tax Rules, 1962 [“the Rules, 1962”]. Also, the Court has referred to Section 13 of the Information Technology Act, 2000 [“the Act, 2000”] to understand the concept of dispatch of electronic records. The judgment rendered by the Hon’ble High Court is being summarized in the crisp and lucid manner as follows.

Facts of the case

• The assessing authority attempted to initiate re-assessment proceedings under section 147 of the Act, 1961 for the A.Y. 2013-14. For this purpose, a notice under section 148 of the Act, 1961 was digitally signed by the assessing authority on 31^st March 2021.
• It was sent to the assessee through e-mail and the e-mail was undisputedly received by the assessee on his registered e-mail id on 06^th April, 2021.
• The assessee filed objections before the assessing authority. One of the objections raised by the assessee was that the notice is time barred and is thus without jurisdiction as it was issued on 06^th April, 2021 whereas the limitation for issuing notice under section 148 read with the section 149 of the Act, 1961 expired on 31^st March, 2021.
• The objections filed by the assessee was rejected by the assessing authority and held that since the notice was digitally signed on 31^st March, 2021, it shall be deemed to have been issued within the time i.e. on 31^st March, 2021.
• Aggrieved by such rejection, the assessee filed a writ petition and prayed for the quashing of the notice dated 31^st March, 2021 issued under section 148 of the Act, 1961.

Contentions of the assessee

The assessee made following submissions:

• Section 149 of the Act, 1961 provides for the period of limitation for issuance of the notice under section 148 of the Act, 1961. Digitally signing a notice is an act different from the act of issuing the said notice.
• When the notice under section 148 of the Act, 1961 has been issued to the assessee beyond the period of limitation specified under section 149 of the Act, 1961 then such notice is time barred and no re-assessment proceedings can be carried on by the assessing authority under section 147 of the Act, 1961.

Contentions of the Department

The Income-tax Department made following submissions:

• The issue of notice means the date on which the notice is digitally signed by the assessing authority.
• In the given case, the impugned notice under section 148 of the Act, 1961 has been signed by the assessing authority on 31^st March, 2021 i.e. within the period of limitation. Therefore, the impugned notice is wholly valid and the writ petition is not maintainable.

Joint submissions of the assessee and the Department

It was jointly stated by the assessee and the Department that:

• The limitation for issuing notice under section 148 of the Act, 1961 for the A.Y. 2013-14 would have expired on 31^st March, 2020.
• But the limitation was extended by the Taxation and Other Laws (Amendment) Act, 2020 whereby the limitation stood extended up to 31^st March, 2021.
• Thus, the learned counsel for both the assessee and the Department have agreed that the limitation for issuance of notice under section 148 of the Act, 1961 for the A.Y. 2013-14 was available to the assessing authority up to 31^st March, 2021.

Findings of the Court

• The Court referred to section 149 of the Act, 1961. The relevant provision of the section 149 applicable to the facts of the case is reproduced as follows:

“Section 149. Time limit for notice.

(1) No notice under section 148 shall be issued for the relevant assessment year,—

(a)..

(b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year.”

• The Court observed that there is no dispute that the notice must be issued by the assessing authority within the period of limitation as is provided in section 149 of the Act, 1961.
• Further the Court took into consideration section 282 of the Act, 1961 which provides for different modes of service of notice. The relevant provision of the section 282 applicable to the facts of the case is reproduced as follows:

“Section 282. Service of notice generally

(1) The service of a notice or summon or requisition or order or any other communication under this Act (hereafter in this section referred to as ‘communication’) may be made by delivering or transmitting a copy thereof, to the person therein named,-….

(c) in the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000 (21 of 2000) ;”

• The Court also took assistance of section 282A of the Act, 1961 to resolve the issue under consideration that whether digitally signing a notice and issuing it are two different acts or not. The relevant provision of section 282A applicable to the facts of the case is reproduced as follows:

“Section 282A. Authentication of notices and other documents

(1) Where this Act requires a notice or other document to be issued by any Income-tax authority, such notice or other document shall be signed and issued in paper form or communicated in electronic form by that authority in accordance with such procedure as may be prescribed.”

• The Court observed that sub-section (1) of section 282A uses the word “signed and issued in paper form or communicated in electronic form by that authority in accordance with such procedure as may be prescribed.” By construing the sub-section (1) of section 282A, the Court had drawn a conclusion that signing of notice and issuance or communication thereof have been recognized as two different acts.
• The Court referred to sub-rule (1) of Rule 127A of the Rules, 1962 to resolve the issue under consideration that whether issuance of notice shall take place on the date and time when it is dispatched either electronically or through other mode or not. Sub-rule (1) or Rule 127A is reproduced as follows:

“Rule 127A. Authentication of notices and other documents-

(1) Every notice or other document communicated in electronic form by an Income-tax authority under the Act shall be deemed to be authenticated, —

(a) in case of electronic mail or electronic mail message (hereinafter referred to as the e-mail), if the name and office of such income-tax authority—

(i) is printed on the e-mail body, if the notice or other document is in the e-mail body itself; or

(ii) is printed on the attachment to the e-mail, if the notice or other document is in the attachment, and the e-mail is issued from the designated e-mail address of such Income-tax authority;

(b) in case of an electronic record, if the name and office of the Income-tax authority—

(i) is displayed as a part of the electronic record, if the notice or other document is contained as text or remark in the electronic record itself; or

(ii) is printed on the attachment in the electronic record, if the notice or other document is in the attachment, and such electronic record is displayed on the designated website.”

• By interpreting Rule 127A(1) of the Rules, 1962, the Court came to a conclusion that the issuance of notice and other document would take place when the e-mail is issued from the designated e-mail address of the concerned Income-tax authority.
• So, it is concluded that the issuance of notice takes place when the e-mail containing such notice is issued from the designated e-mail address of the concerned Income-tax Authority i.e. when such notice is dispatched electronically. Now the issue arises that at what point of time the dispatch of notice electronically occurs. To give answer to this question the Court referred to sub-section (1) of section 13 of the Act, 2000. Section 13 of the Act, 2000 deals with the time and place of dispatch and receipt of electronic record. The sub-section (1) of section 13 of the Act, 2000 is reproduced as follows:

“Section 13. Time and place of dispatch and receipt of electronic record.

(1) Save as otherwise agreed to between the originator and the addressee, the dispatch of an electronic record occurs when it enters a computer resource outside the control of the originator.”

• By analyzing section 13(1) of the Act, 2000, the Court observed that Section 13(1) provides that dispatch of an electronic record occurs when it enters a computer resource outside the control of the originator. The aforesaid sub-section (1) of section 13 indicates the point of time of issuance of notice. Accordingly, the court formed an opinion that after a notice is digitally signed and when it is entered by the Income-tax authority in computer resource outside his control, i.e., the control of the originator then that point of time would be the time of issuance of notice.
• Final Findings of the Court

By considering the provisions of section 282 and 282A of the Act, 1961 read with Rule 127A of the Rules, 1962 and the provisions of section 13 of the Act, 2000, the Court derived the final findings as follows:

1. Firstly, the notice under section 148 shall be signed by the assessing authority in terms of sub-section (1) of section 282A of the Act, 1961.

2. Then it has to be issued either in paper form or to be communicated in electronic form by delivering or transmitting the copy thereof to the assessee named therein by modes provided in section 282 of the Act, 1961 which includes transmitting in the form of electronic record.

Ratio Decidendi

The questions so framed for determination were answered as follows:

• Whether digitally signing of the notice would automatically amount to issuance of notice or not: It was held that mere digitally signing of the notice cannot be regarded as the issuance of notice.
• Whether digitally signing a notice and issuing it are two different acts or not: While construing the phrase “signed and issued” used in sub-section (1) of section 282A of the Act, 1961 it was held that signing of notice and issuance or communication thereof have been recognized as two different acts.
• What is the date and time of issuance of notice?

Since signing of notice will not amount to issuance of notice then what would be the date and time of issuance of notice? At what point of time it can be said that the notice has been issued?

In respect of the aforesaid substantial question of law, the Court held as follows:

The point of time when a digitally signed notice in the form of electronic record is entered in computer resources outside the control of the originator, i. e., the assessing officer that shall be the date and time of issuance of notice under section 148 read with section 149 of the Act, 1961.

Applying the ratio decidendi so laid down to the facts of the case the Court held that since the impugned notice under section 148 of the Act, 1961 was issued to the assessee through e-mail on 6^th April, 2021 which is beyond the period of limitation ending on 31^st March, 2021, the said impugned notice is time barred and is held to be quashed. The writ petition is allowed.

Author’s Analysis

For the better understanding of the ratio decidendi laid down by the Court in respect of the date and time of issuance of notice, let us understand the technical process of the delivery of e-mail.

• When the Assessing Officer i.e. the originator of the e-mail sends the e-mail containing the notice under section 148, it immediately reaches the e-mail server of the Assessing Officer’s service provider.
• This server will send the mail to the e-mail server of assessee’s service provider.
• The e-mail server of the assessee’s service provider will finally deliver the e-mail to the local system of the assessee.
• The e-mail server of the Assessing Officer’s service provider is outside the control of the Assessing Officer (originator of the e-mail). Therefore, it can be said that the notice under section 148 is said to be issued when the e-mail containing the said notice reaches the e-mail server of the Assessing Officer’s service provider.