CIT Vs. Jagat Novel Exhibitors Private Limited (Delhi HC)– Main contention of the Assessee was that the notice under Section 147/ 148 of the Act was not issued to the respondent company in the name of the principal officer but was issued to Jagat Novel Exhibitors and without the words “Private Limited” as a suffix. Therefore, the notice was vague as it could not be ascertained whether it was issued to an individual, a firm, an HUF, etc. The notice, therefore, was void ab initio and accordingly the assessment order was a nullity.
On Appeal High Court has relied on SC judgment on the case of Chief Forest Conservator, Government of Andhra Pradesh Vs. Collector (2003) 3 SCC 472 in which Supreme Court examined the question of misdescription or misnomers of parties and the effect thereof as follows:-
“12. It needs to be noted here that a legal entity — a natural person or an artificial person — can sue or be sued in his/its own name in a court of law or a tribunal. It is not merely a procedural there are special provisions in the Constitution and the Code of Civil Procedure as to how the Central Government or the Government of a State may sue or be sued. So also there are special provisions in regard to other juristic persons specifying as to how they can sue or be sued. In giving description of a party it will be useful to remember the distinction between misdescription or misnomer of a party and misjoinder or non-joinder of a party suing or being sued. In the case of misdescription of a party, the court may at any stage of the suit/proceedings permit correction of the cause-title so that the party before the court is correctly described; however, a misdescription of a party will not be fatal to the maintainability of the suit/proceedings. Though Rule 9 of Order 1 CPC mandates that no suit shall be defeated by reason of the misjoinder or non-joinder of parties, it is important to notice that the proviso thereto clarifies that nothing in that Rule shall apply to non-joinder of a necessary party. Therefore, care must be taken to ensure that the necessary party is before the court, be it a plaintiff or a defendant, otherwise, the suit or the proceedings will have to fail. Rule 10 of Order 1 CPC provides remedy when a suit is filed in the name of the wrong plaintiff and empowers the court to strike out any party improperly joined or to implead a necessary party at any stage of the proceedings.”
One of the questions, which arises for consideration, in such cases is whether there was prejudice. The test to be applied is whether the party receiving the notice would be in doubt whether the said notice is meant for him or not. If the recipient of notice was not in doubt that it was meant for him, the misnomer or misdescription is not fatal. Thus failure to mention the words “Principal Officer” on the notices is not fatal. Similarly, we do not think in the facts of the present case and it has not been held by the tribunal or the CIT (Appeals) that there was misnomer or misdescription because the words ‘Private Limited’ were missing in 4 out of 5 notices though the name “Jagat Novel Exhibitors” were clear. It has not resulted in misnomer or misdescription of parties which is fatal and makes the entire proceedings null and void.
HIGH COURT OF DELHI AT NEW DELHI
INCOME TAX APPEAL NOS. 7/2006, 2/2006, 3/2006, 4,2006, 5/2006, 8/2006, 10/2006, 11/2006, 17/2006 & 22/2006
Date of Decision: 8th February, 2012
COMMISSIONER OF INCOME TAX
VERSUS
JAGAT NOVEL EXHIBITORS PRIVATE LIMITED
ORDER
SANJIV KHANNA, J.:
The aforesaid appeals filed by the Revenue under Section 260A of the Income Tax Act, 1961 (Act, for short) relate to the assessment years 1989-90 and 1992-93 to 1995-96. The respondent-assessee is common; Jagat Novel Exhibitors Private Limited.
2. In ITA Nos. 4/2006, 7/2006, 11/2006, 17/2006 and 22/2006, the following substantial question of law was formulated at the time of admission:-
“Whether the ITAT was, in the facts and circumstances of the case, correct in holding that the notice issued to the assessee under Section 148 of the Income Tax Act as also the reassessment framed in pursuance thereto was invalid?”
3. In ITA Nos. 2/2006, 3/2006, 5/2006, 8/2006 and 10/2006, the following two substantial questions of law were formulated at the time of admission:-
“(1) Whether the ITAT was, in the facts and circumstances of the case, correct in holding that the notice issued to the assessee under Section 148 of the Income Tax Act as also the reassessment framed in pursuance thereto was invalid?
(2) In case answer to question No. 1 above is in the affirmative, whether the income originally returned by the assessee could not be brought to tax?”
4. For the sake of convenience, ITA No. 7/2006, which relates to the assessment year 1992-93, is treated as the lead case. However, the relevant facts relating to each assessment year are noticed below.
5. For the assessment year 1989- 90, the respondent filed their return of income on 29th December, 1989 declaring income of Rs .2,29,706/-. For the assessment years 1992- 93 to 1995- 96, no return of income under Section 139(1) was filed by the respondent. For the Assessment Years 1992- 93 to 1995- 96, returns of income were filed on 10th December, 1999 declaring the following incomes:
Assessment Year Disclosed Income
1992- 93 Rs. 3,42,322/-
1993- 94 Rs. 7,75,282/-
1994- 95 Rs. 11,88,712/-
1995- 96 Rs. 4,69,949/-
6. These returns were filed beyond the due date of filing as stipulated in the Act. The respondent had and did not pay taxes due and payable on the income declared in these returns. 7. The respondent also filed declarations under Voluntary Disclosure of Income Scheme, 1997 (VDIS, 1997, for short) for the assessment years 1989-90 and 1992-93 to 1995-96 as per details given below:-
Assessment Year Income disclosed under VDIS
1989- 90 Rs. 3,11,839/-
1992- 93 Rs. 3,42,322/-
1993- 94 Rs. 7,64,586/-
1994- 95 Rs. 11,17,131/-
1995- 96 Rs. 4,28,719/-
8. These declarations, filed before the Commissioner of Income Tax, were not accompanied with proof of payment of tax; – a mandatory pre-condition under the VDIS, 1997. Declarations were, therefore, declared void.
9. In view of the declarations under the VDIS, 1997 and to regularize the returns of income, filed for the first time for the Assessment Years 1992-93 to 1995-96 on 31st December, 1999 but beyond the prescribed time, the Assessing Officer issued notices under Section 147/148 of the Act. These notices were dated 3rd March, 2000 and were sent by registered post.
10. No returns of income were filed pursuant to the said notices.
11. Subsequently, notices under Section 142(1) dated 7th February, 2001 and 12th March, 2001 were issued. On 21st February, 2002, Vijay Narain Seth, Director of the respondent company appeared before the Assessing Officer and submitted that the notices under Section 147/148 were not served. The Assessing Officer rejected the said contention stating that the notices were sent at the local address and the claim of the respondent to the contrary was incorrect. Another notice under Section 142(1) and 143(2) of the Act, with the questionnaire, was issued on 7th March, 2002. The respondent vide letter dated 22nd March, 2002 reiterated his stand that the notices under Section 148 of the Act were not served and stated that the returns filed on 10th December, 1999 and the original return for the assessment year 1989-90 filed on 29th December, 1989 should be treated as returns filed pursuant to the notice under Section 148.
12. It appears that the respondent did not furnish all details as required by the questionnaire. The Assessing Officer passed assessment orders dated 22nd March 2002, assessing the income of the respondent as under:-
Assessment Year 1989- 90
Income declared in the original return Rs.229706/-
Add: Income declared under VDIS, 1997 Rs.311839/-
Taxable Income Rs.541545/-
R/of Rs.541550/-
Assessment Year 1992- 93
Income declared in the original return Rs.342322/-
Add: Income declared under VDIS, 1997 Rs.342322/-
Taxable Income Rs.672369/-
R/of Rs.672370/-
Assessment Year 1993- 94
Income declared in the original return Rs.775282/-
Add: Income declared under VDIS, 1997 Rs.764586/-
Taxable Income Rs.1539868/-
R/of Rs.1539870/-
Assessment Year 1994- 95
Income declared in the original return Rs.1188712/-
Add: Income declared under VDIS, 1997 Rs.1117131/-
Taxable Income Rs.2305843/-
R/of Rs.2305840/-
Assessment Year 1995- 96
Income declared in the original return Rs.469949/-
Add: Income declared under VDIS, 1997 Rs.428719/-
Taxable Income Rs.898668/-
R/of Rs.898670/-
13. The respondent filed appeals. Appeal filed for the assessment year 1992-93 was treated as a lead case by the CIT(Appeals) as the said appeal was disposed of, earlier in point of time. Two principal contentions were raised by the respondent. Firstly, no notice under Section 148 of the Act was served on the respondent and, therefore, the entire proceedings under Section 147/148 of the Act were void. Secondly, the notice under Section 147/148 of the Act was not issued to the respondent company in the name of the principal officer but was issued to Jagat Novel Exhibitors and without the words “Private Limited” as a suffix. Therefore, the notice was vague as it could not be ascertained whether it was issued to an individual, a firm, an HUF, etc. The notice, therefore, was void ab initio and accordingly the assessment order was a nullity.
14. The CIT(Appeals) called for a remand report and a show cause notice was issued to explain why the appeal should not be rejected for non-payment of admitted taxes/advance tax under Section 249(4)(a) of the Act. The CIT(Appeal) allowed the appeal, inter alia, recording as under:-
“5. I have considered the points made by the AO, the comments of the present AO on the written submissions of the appellant and the submissions of the appellant’s counsel. The AO‟s case was that the notice u/s 148 was issued on 03.03.2002 to assessee the additional income declared under the VDIS. The appellant’s case was that-
(a) There was no valid notice u/s 148 of the Act, as admitted by the AO in his comments dt. 5th February 2003 in para 4 (3) at page 8 of his report sent on the written submissions of the appellant that only the word „Private Ltd.‟ has not been mentioned in the notice u/s 148.
(b) There was no „additional income‟ as explained as per the detailed submissions and the reconciliation of the two figures adopted by the AO enclosed as computation to the written submissions.
(c) There was no case of rejection of appeal in view of the provisions of S.249 (4) (a) of the Income Tax, 1961 as there was no tax due as no assessment had been made in time. Moreover, the question involved is of validity of notice u/s 148 and not the case on merits or based on return.
On a consideration of the facts of the case I find that in this case no valid notice u/s 148 of the Act has been issued to the appellant. It is well settled that the issue of a valid notice to the assessee u/s 148 of the Income Tax Act, 1961 within the period specified u/s 149 of the Act, is a condition precedent for the validity of any re- assessment to be made against any re-assessment to be made against an assessee u/s 147. Where the notice issued to an assessee is vague. It would not be possible to rely upon it to sustain an assessment made u/s 147. A vague notice is an invalid notice and in such a case the vagueness cannot be removed by reference to other documents on the record or by issuing a copy of the same notice to the Director as pointed out by the AO. In view of the foregoing, I find no justification to sustain the additions made by the AO subsequent to issuing of invalid notice.
6. The appeal is allowed.”
15. It is noticeable from the reasoning given by the CIT(Appeals) that she has not specifically dealt with contention Nos. (b) and (c) and had only examined contention No. (a) mentioned in the aforesaid order and held that the notice was vague and, therefore, void or invalid.
16. The aforesaid appellate order was followed in other assessment years.
17. After the orders passed by the CIT(Appeals), consequential orders were passed by the Assessing Officer in the income tax computation form. In the computation form, he gave appeal effect and computed the income of the respondent for the years in question as under:-
