IN THE PUNJAB & HARYANA HIGH COURT AT CHANDIGARH Date of Decision: 12.12.2011 ITA No.875 of 2010 (Assessment year 1996-97) Commissioner of Income Tax –I, Jalandhar …Appellant Versus Sh. K.G.Singhania …Respondent ITA No.19 of 2011 (Assessment year 2005-06) Commissioner of Income Tax-II, Jalandhar …Appellant Versus Smt. Surinder Pal Kaur …Respondent ITA No.20 of 2011 (Assessment year 2001-02) Commissioner of Income Tax-II, Jalandhar …Appellant Versus Smt. Surinder Pal Kaur …Respondent CORAM: HON’BLE MR. JUSTICE HEMANT GUPTA HON’BLE MR. JUSTICE G.S.SANDHAWALIA Present: Mr. Vivek Sethi, Advocate, for the appellant-Revenue. Mr. Pankaj Jain, Advocate, for the respondent-Assessee. HEMANT GUPTA, J. This order shall dispose of afore-mentioned three appeals pertaining to the assessment years, as mentioned above. However, for the facility of reference, the facts and the questions of law are being taken up from ITA No.875 of 2010 arising out of the order dated 21.05.2009 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (for short ITA No.875 of 2010 ‘the Tribunal’) in ITA No.281 (ASR)/2008. The questions of law read as under: 1. Whether on the facts and circumstances of the case, the Hon’ble ITAT was right in law in not deciding the case on merits and without considering that the assessee had made an incorrect claim of deduction under Section 90-O of the I.T.Act, 1961 and merely dismissing the appeal on technical grounds? 2. Whether on the facts and circumstances of the case, the ITAT was right in law in confirming the order of Ld. CIT (A), who has quashed the assessment proceedings on merely the plea that the service of notice under Section 148 of the Income Tax Act, 1961 by affixture is not a valid service? 3. Whether the service made by registered post and by affixture in the presence of two witnesses at the address of the assessee is not a valid service, especially since the Hon’ble Supreme Court in the case of Commissioner of Income Tax Vs. Daulat Ram Khanna 65 ITR 603 (SC) has concluded that a notice sent by registered post and also affixed at the address of the assessee was a proper substituted service within the time prescribed? The assessee-respondent derives his income from profession and other sources. The original return was filed on 30.10.1996 declaring net income of Rs.4,90,700/-. The case was processed under Section 143(1)(a) of the Income Tax Act, 1961 (for short ‘the Act’) on 30.10.1998. A notice under Section 148 of the Act was issued on 28.03.2003 for the reason that the assessee has claimed excess deduction under Section 80-O of the Act. The said notice was served upon the assessee by affixation at his last known address as well as sent under registered post at his Delhi and Mumbai addresses. The assessee furnished his return in response to the notice under 2 ITA No.875 of 2010 Section 148 of the Act on 30.07.2003 with the remarks ‘as originally returned and assessed’. Thereafter, the assessing officer framed assessment vide order dated 12.11.2003 disallowing excess deduction of Rs.19,05,902/- claimed under Section 80-O of the Act. The assessing officer recorded the following findings: “First of all assessee has raised objection to the service of notice under Section 148. It is made clear that notice under Section 148 was duly served by affixture on 29.03.2003 on the last known address of the assessee at Phagwara in the presence of two witnesses. Copy of which was also sent by post on 31.03.2003. Moreover, issuance of notice under Section 148 within the stipulated period is compulsory and not service although, the service of notice under Section 148 has also been made within the period. Thus, the objection raised by the assessee is not accepted.” In appeal, the Commissioner of Income Tax vide its order dated 31.01.2008 held that in view of non-service of notice under Section 148 of the Act, the reassessment is invalid. It is the said order, which was affirmed by the learned Tribunal in its order dated 21.05.2009. Learned counsel for the appellant relied upon a Division Bench judgment of this Court in CWP No.18193 of 2011 titled “V.R.A. Cotton Mills (P) Ltd. Vs. Union of India and others” decided on 27.09.2011, to contend that it is the date of issue of a notice under Section 148 of the Act, which is relevant and not the actual receipt of the notice by the assessee to return a finding; as to whether the re-assessment proceedings have been initiated within the period of limitation. In the aforesaid case, this Court held to the following effect: “In view of the said judgment, the date of receipt of notice by the addressee is not relevant to determine, as to whether the notice has been issued within the prescribed period of limitation. The expression serve means the date of issue of notice. The date of receipt of notice cannot be left to be undetermined dependent upon the will of the addressee. 3 ITA No.875 of 2010 Therefore, to bring certainly and to avoid attempts of the addressee to evade the process of receipt of notice, the purpose of the statute will be better served, if the date of issue of notice is considered as compliance of the requirement of proviso to Section 143(2) of the Act. In fact that is the only conclusion that can be arrived at to the expression ‘serve” appearing in Section 143(2) of the Act” On the other hand, learned counsel for the respondent relied upon number of judgments of different Courts and also has tried to distinguish the judgments referred and relied upon by the Division Bench of this Court in V.R.A. Cotton Mills (P) Ltd. case (supra). Reliance is also placed upon another Division Bench judgment of this Court in ITA No.7 of 2010 titled “Commissioner of Income Tax-I, Ludhiana Vs.Sh. Naveen Chander” decided on 08.02.2010, wherein the service of notice by affixation was found to be unjustified. At this stage, the questions of law, which require our consideration, are question Nos.2 & 3, as reproduced above. It is not disputed that the notice issued on 28.03.2003 was within the period of limitation. The fact such notice was issued is not in dispute inasmuch as notices under registered post were sent on 31.03.2003 as well i.e. again within the period of limitation. The dispute raised is regarding service by affixation after the period of limitation. The said issue stands concluded by the Division Bench of this Court in V.R.A. Cotton Mills (P) Ltd. case (supra), as referred to above. In another judgment reported as K. Bhaskaran Vs. Sankaran Vaidhyan Balan and another 1999 (7) SCC 510, the Hon’ble Supreme Court considering the provisions of Section 138 of the Negotiable Instruments Act, 1881, wherein the drawer of cheque can be prosecuted on serving of a notice. It was held to the following effect: 4 ITA No.875 of 2010 “19. In Black's Law Dictionary, "giving of notice" is distinguished from "receiving of the notice." (vide page 621) "A person notifies or gives notice to another by taking such steps as may be reasonably required to inform the other in the ordinary course, whether or not such other actually comes to know of it." A person "receives" a notice when it is duly delivered to him or at the place of his business. 20. If a strict interpretation is given that the drawer should have actually received the notice for the period of 15 days to start running no matter that the payee sent the notice in the correct address, a trickster cheque drawer would get the premium to avoid receiving the notice by different strategies and he could escape from the legal consequences of Section 138 of the Act. It must be borne in mind that court should not adopt an interpretation which helps a dishonest evader and clips an honest payee as that would defeat the very legislative measure.” The judgment in Naveen Chander’s case (supra) is not dealing with the issue raised in the present appeals. In the said case, the only issue was service by affixation. It was held that service by affixation was not proper. It was not a case, where the question of limitation arose and considered by the Bench. Therefore, the said judgment is not helpful for the assessee. In view of the above, question Nos.2 & 3 are answered in favour of the appellant-Revenue and against the respondent-assessee. Consequently, all the appeals are allowed. Since, neither the Commissioner nor the learned Tribunal has examined the merits of the assessment proceedings, the matter is remitted back to the Commissioner of Income Tax for fresh decision in accordance with law. (HEMANT GUPTA) JUDGE 12.12.2011 (G.S.SANDHAWALIA) Vimal JUDGE 5