Jrd Stock Brokers Pvt. Ltd., New Delhi vs Department Of Income Tax

ITA No. 4399/Del/2010 Asst. Yr: 2002-03 Income-tax Officer, vs. JRD Stock Brokers Pvt. Ltd., Ward 4(2), 4852/24, Ist Floor, Ansari Road New Delhi. Daryaganj, New Delhi-1100 02 (PAN: AABCJ0701D) (Appellant) (Respondent)

ITA No. 4357/Del/2010 Asst. Yr: 2002-03 JRD Stock Brokers Pvt. Ltd., Vs. Income-tax Officer, 4852/24, Ist Floor, Ansari Road Ward 4(2), Daryaganj, New Delhi-1100 02 New Delhi. (PAN: AABCJ0701D) (Appellant) (Respondent)

Revenue by: Shri P. Damkaunjma, Sr. DR Assessee by: Shri R.S. Singhvi, CA

Date of hearing : 29.01.2015 Date of pronouncement: 31.03.2015 ORDER

PER I.C. SUDHIR: JUDICIAL MEMBER

The Learned CIT(Appeals) has given part relief to the assessee, hence, parties are in cross-appeals.

1.1 The assessee has questioned First Appellate Order on the issue of validity of notice issued under sec. 148 of the Income-tax Act, 1961 and the assessment framed in furtherance thereto on the basis that notice under sec. 148 of the Act was not served upon the assessee, the notice was issued after four years from the end of relevant assessment year, hence, it was barred by limitation and that the presumption about undisclosed income was merely on 2

the basis of information from investigation wing ( ground Nos. 1, 2(i) and

(ii). The further issue raised in ground No.3 is about the upholding the estimated commission income @ 7.5% ignoring the assessee's own case for block assessment proceedings.

2. The Revenue on the other hand has questioned First Appellate Order

whereby the Learned CIT(Appeals) has directed the Assessing Officer to

commute the rate of commission at 7.5% of the cash credits appearing in the

undeclared bank account of the assessee ignoring the fact that the addition of

Rs.2,15,42,300 was correctly made by the Assessing Officer under sec. 69 of

the Act being the unexplained cash credits.

3. Since the issue raised in ground No.1 and 2(i) and (ii) of the appeal

preferred by the assessee is legal in nature and going to the root of the matter

hence we preferred to adjudicate it firstly.

4. Heard and considered the arguments advanced by the parties in view

of orders of the authorities below, material available on record and the

decisions relied upon.

5. The facts in brief are that the assessment under sec. 143(3) of the Act

was framed on 29.12.2004 at the total loss of Rs.3,18,160. Subsequently, the 3

case was reopened under sec. 147 on the basis of information from

investigation wing and notice under sec. 148 was issued on 27.3.2009. The

order under sec. 147/143(3) of the Act was framed by making disallowance

to the extent of Rs.2,15,42,300 under sec. 69A of the Act. The assessee has

disputed reassessment proceedings on the ground that notice under sec. 148

was not served and even otherwise the notice under sec. 148 was illegal and

without jurisdiction as the same was barred by limitation and there was no

proper recording of satisfaction. The issue was also raised before the

Learned CIT(Appeals) but the assessee could not succeed there.

6. In support of the grounds involving the issue, the Learned AR

submitted that notice under sec. 148 was issued at the address '4866/24,

Sheel Tara House, Ansari Road, Daryaganj, New Delhi' whereas the correct

address as per the return of income and original assessment order is

"4852/24, First Floor, Ansari Road, Daryaganj, New Delhi". In support in

referred Para Nos. 1 to 3 of the paper book of the assessee filed on

23.02.2011 which are copies of the acknowledgement of return of the

income filed for the assessment year under consideration and original

assessment order dated 29.12.2004 under sec. 143(3) for the year showing

the address of the assessee at" 4852/24, First Floor, Ansari Road, Daryaganj, 4

New Delhi". At page Nos. 4 to 14 of the said paper book have been made

available copies of receipt dated 24.09.2009 for inspection of Ito file; letters

dated 29.9.2009 (with affidavit) filed before the Assessing Officer objecting

service of notice under sec. 148; petition under sec. 144A filed before the

Addl. CIT, his order dated 20.11.2009 passed thereon; reasons recorded

before issue of notice under sec. 148; letters dated 07.12.2009 and

14.12.2009 filed before the Assessing Officer; assessment order dated

23.12.2009 passed under sec. 147/143(3); written submissions before the

Learned CIT(Appeals); First Appellate Order and order of the ITAT for the

block period. These documents have been filed showing the correct address

of the assessee. He referred page Nos. 1 to 10 of the paper book filed on

behalf of the assessee on 16.06.2011 under the certificate that these

documents were made available before the authorities below. These

documents are copies of income-tax returns acknowledgement for the

assessment year 2003-04, 2004-05 and 2005-06 filed with present address

but before the issue of notice under sec. 148; various income-tax notices and

letters issued by ACIT, Central Circle-19, New Delhi for the assessment

year 2002-03 all at the assessee's present address; and notice under sec. 148

dated 27.3.2009 for assessment year 2002-03 issued by the ITO at totally 5

incorrect address. He also placed reliance on several decisions including the

following decisions:

i) CIT vs. Harish J. Punjabi (2008) - 297 ITR 424 (Del.);

ii) CIT vs. Eshaan Pvt. Ltd. (2012) - 344 ITR 541 (Del.);

iii) CIT vs. Silver Streak Trading P. Ltd. (2010) - 326 ITR 418 (Del.);

iv) ACIT vs. Hotel Blue Moon (2010) - 321 ITR 362 (S.C) ; &

v) Chetan Gupta vs. ACIT (2014) - 98 DTR(Delhi)(Trib.) 209.

7. The learned Sr. DR on the other hand tried to justify the First

Appellate Order on the issue.

8. Having gone through the orders of the authorities below, we find that

the Assessing Officer has mentioned that notice under sec. 148 issued on

27.3.2009 was duly served upon the assessee on 30.3.2009. He has

mentioned further that the assessee did not make compliance of the said

notice. Even before the Assessing Officer, the assessee had contended that

notice under sec. 148 issued for the assessment year was not received by the

assessee. The Assessing Officer called for the report from the postal

authority who confirmed the service of the said notice on 30.3.2009. The

assessee contended that the notice dated 27.3.2009 was issued on the

previous address which has been left by the assessee several years ago.

Thus, service of a notice on a wrong address is invalid. It was contended that 6

since the notice was addressed to an incorrect address and never reached the

assessee hence proceedings initiated under sec. 148 for the year be closed.

The Assessing Officer did not agree. He also ignored the letter dated

26.10.2009 filed by the assessee along with affidavit stating that a notice

under sec. 148 issued on wrong address was never served or received by the

assessee.

9. The assessee thereafter filed petition under sec. 144A of the Act

before the Addl. CIT, Range-4, New Delhi on 09.011.2009 with copy to the

ITO, Ward 4(2),New Delhi. The said Additional CIT disposed of the said

petition of the assessee vide order dated 20.11.2009 with the observation as

"the notice under sec. 148 dated 27.3.2009 was served through speed post at

the address at 4866/24, Sheeltara House, Ist Floor, Ansari Road, Daryaganj,

New Delhi. Even though the service of notice is being challenged due to

change in address, it is a fact that the service of notice had taken place". The

Assessing Officer was directed to proceed as per law to complete the

appellate proceedings.

10. The Learned CIT(Appeals) has disposed of the objection regarding

non-service of notice under sec. 148 of the Act with this finding that the

notice was sent and served upon the assessee on 30.3.2009 at the correct 7

address. In para No.3.2 of the First Appellate Order, he has noted further that

it is not in dispute that the notices under sec. 148 and 143(2) of the Income-

tax Act, 1961 have not been received back unserved in the office of the A.O.

within the period of 30 days of issuance. Hence, it could be safely presumed

that it had reached the assessee.

11. Having gone through the copy of the notice under sec. 148 issued on

27.3.2009 for the assessment year 2002-03 under consideration, a copy of

whereof has been made available on record, we find that it is addressed to

the assessee on "4866/24- Sheetla House, Ansari Road, Daryagnaj, New

Delhi". The Addl.CIT, Range-4, New Delhi while disposing of the petition

under sec. 144A filed by the assessee has also affirmed this fact that the

notice under sec.148 dated 27.3.2009 was served through speed post at the

said address of 4866/24, Sheel Tara House, Ist Floor, Ansari Road,

Daryaganj, New Delhi. The correct address of the assessee whereas is

4852/24, First Floor, Ansari Road, Daryaganj, New Delhi as it is evident

from the Income-tax return acknowledgement for the assessment years

2002-03 (under consideration), 2003-04, 2004-05 and 2005-06, copies

whereof has been made available at Page Nos. 1 of the paper book filed on

24.02.2011 and 1 to 3 of the paper book filed on 16.06.2011, which are 8

dated before the issue of notice under sec. 148 and copies of various income-

tax notices and returns issued by the Learned ACIT, Central Circle-19, New

Delhi for the assessment year 2002-03 and other correspondences at the

present address of the assessee made available at page No. 4 to 9 of the

paper book filed on 16.06.2011 and page Nos. 2 to 144 of the paper book

filed on 24.02.2011. Thus it is emerging from record that the notice under

sec. 148 was issued to the assessee on a wrong address, hence, a

presumption of service of notice under order-V Rule 9(5) Proviso of the

Civil Procedure Code, 2002 cannot be taken in case of non-returning of the

notice sent through speed post to the department within 30 days from the

date of posting of the same. In this regard, we find strength from the ratios

laid down in the above cited decisions. In a recent decision of Co-ordinate

Bench of the ITAT at New Delhi in the case of Chetan Gupta vs. ACIT

(supra), it has been held that notice under sec. 148 sent on a wrong address

and served on a person who was neither employee nor authorised agent of

the assessee could not be said to have been validly served. It was held that

service of notice being invalid, mandatory requirement of exemption of

reassessment jurisdiction was absent, hence, consequent reassessment was

liable to be set aside. In the case of CIT vs. Harish J. Punjabi (supra), the

Hon'ble jurisdictional Delhi High Court has been pleased to hold that where 9

the assessee was not served with the notice under sec. 147 and 148 of the

Income-tax Act, 1961, the proceedings for assessment year 1996-97 were

void. Similar view has been expressed by the Hon'ble Delhi High Court in

the case of CIT vs. Eshaan Holding Pvt. Ltd. (supra) wherein the notice

under sec. 148 was not issued on the address given on the return of income

by the assessee. It was held that before issuing notice under sec. 148, it was

expected of the Assessing Officer to have checked up if there was any

change of address, because valid service of a notice of reopening the

assessment is a jurisdictional matter and this is a condition precedents for a

valid reassessment. Respectfully following the ratios laid down in these

decisions, we are of the view that notice under sec. 148 of the Act issued on

27.3.2009 to the assessee on a wrong address was not served upon the

assessee, hence, service of notice being invalid, mandatory requirement of

assumption of reassessment jurisdiction in the present case was absent,

hence, consequential reassessment is liable to be set aside as void ab initio. It

is ordered accordingly. The issue raised in ground Nos. 1 and 2(i) and (ii)

are decided in favour of the assessee. These grounds are thus allowed. 10

12. In view of the above findings holding that the very assessment order

was invalid, the remaining grounds on the merit of addition raised by the

assessee and the Revenue do not stand.

13. In result, appeal preferred by the assessee is allowed and that

preferred by the Revenue is dismissed

Order pronounced in the open court on 31/03/2015.

Sd/- Sd/- ( PRAMOD KUMAR ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 31/03/2015 Mohan Lal Copy forwarded to: 1) Appellant 2) Respondent 3) CIT 4) CIT(Appeals) 5) DR:ITAT ASSISTANT REGISTRAR 11

Date Draft dictated on computer 17.03.2015 Draft placed before author 17.03.2015 Draft proposed & placed before the second member

Draft discussed/approved by Second Member. 27.03.2015 Approved Draft comes to the Sr.PS/PS 31.3.2015 Kept for pronouncement on 31.03.2015 File sent to the Bench Clerk 31.03.2015 Date on which file goes to the AR Date on which file goes to the Head Clerk.

Date of dispatch of Order.