Commissioner of Income Tax vs Avi-Oil India P. Ltd.

Augustine George Masih, J.—The abovementioned appeal has been preferred by the Revenue u/s 260A of the Income Tax Act, 1961, against the order dated August 24, 2007, passed by the Income Tax Appellate Tribunal, Delhi Bench "D" New Delhi, in I.T.A. No. 5673/Del/2004 for the assessment year 2001-02. The following substantial questions of law have been raised in the present appeal:

(A) Whether, on the facts and in the circumstances of the case, the Tribunal has erred in law in holding that there was no valid service of notice u/s 143(2) before the due date, though not only notice u/s 143(2) was sent by registered post on October 30, 2002, i.e., before the expiry of limitation on October 31, 2002, and another notice u/s 143(2) was served by affixture on October 31, 2002?

(B) Whether, on the facts and in the circumstances of the case, the Tribunal has erred in law in holding that non-mentioning of time of affixture by the Inspector on the notice issued u/s 143(2) of the Income Tax Act served through affixture made assessment invalid?

(C)Whether there is any failure on the part of the Assessing Officer in trying to serve a notice, firstly, through the notice server, secondly, by the registered post and, thirdly, by affixture when all these methods are in accordance with law laid down in Sub-section (1) of Section 282 of the Income Tax Act, 1961?

(D)Without prejudice to the above whether the Tribunal has erred in not treating the defect, if any, in service of notice u/s 143(2) as a irregularity curable u/s 292B?

The facts relevant for deciding the case in hand are that the assessee filed its return on October 29, 2001. Notice u/s 143(2) of the Income Tax Act was issued on October 29, 2002. The notice server is stated to have visited the factory premises of the assessee on October 31, 2002 and as per the report of the notice server, when he reached the premises of the assessee, the office is stated to have been closed. He approached the Assessing Officer, who directed the notice to be served by affixture. The Assessing Officer ordered that since notice u/s 143(2) dated October 29, 2002, could not be served in the ordinary course as the assessee had deliberately avoided the service of notice, he directed the notice server to serve the notice by affixture at the premises of the assessee. Accordingly, the notice is stated to have been served by affixture. Apart from this, another notice dated October 30, 2002, was also issued and sent by registered post on October 30, 2002, at 4.05 p. m. The notice was served on the assessee on November 1, 2002. The assessee has taken a plea that the proviso to Sub-section (2) of Section 143, requires the notice to be served before the expiry of 12 months from the end of the month in which the return was furnished, since the service of the notice is not within the limitation provided, there is no valid service on him. It is further pleaded that any action taken pursuant to such invalid notice was liable to be set aside and the assessment framed to be annulled.

The facts are not in dispute in this case. The Tribunal, vide its order dated August 24, 2007, has after going through the details of the pleadings, the records and the statements on record given the following findings:

We have considered the relevant facts, arguments advanced and the decisions cited. As regards service of notice dated October 30, 2002, it is not disputed by the Revenue that the same is served only on November 1, 2002, i.e., beyond the limitation prescribed in the proviso to Section 143(2). Thus, it can be held that there was no valid service of notice dated October 30, 2002.

As regards notice dated October 29, 2002, it is seen that for the first time, the notice server tried to serve the same upon the assessee only after the offices were closed on October 31, 2002. It is to be noted that October 29 and 30, 2002, being Tuesday and Wednesday were working days. Similarly, October 31, 2002, being Thursday is also a working day. It is not demonstrated as to whether the notice server approached the premises of the assessee before evening of October 31, 2002. It is also noted that no entry of notice server or even Inspector is recorded in the visitor''s register kept at the gate of premises of the assessee. The Assessing Officer has ordered the service by affixture for the reason that the assessee is deliberately avoiding service of notice. We are unable to accept such contention. When the notice was tried to be served only after the office hours on the last day of the limitation period and in the absence of any earlier attempt having been made by the Revenue authorities to serve the notice, it cannot be said that the assessee is deliberately avoiding service of notice particularly when notice was never effected to have been served. If the Revenue authorities try to serve the notice at the last hour after the close of office hours, the fault lies with the Assessing Officer and not with the assessee. There is not a single instance demonstrated that the assessee has avoided service of notice. This leaves us to believe that the service by affixture is a make belief story and not real sequence of events. In the said affixture some glaring points which can be observed are as under:

(a)No time is mentioned by the notice server in his report when he approached the premises of the assessee to serve the notice. Similarly, no time is mentioned by the Assessing Officer when the notice server went back to him with the report that the notice could not be served.

(b)No time is mentioned by the Inspector in his report where he states that the notice was served by affixture.

(c)There is no mention as to who identified the premises where the notice was affixed and the name and address of the person witnessing such affixture.

(d)There is no entry either of the notice server or Inspector in the visitor''s register maintained by the assessee.

(e) There is no material on the basis of which it can be said that the Assessing Officer has reason to believe that the assessee was keeping out of way for purpose of avoiding service of notice. If the notice was issued on October 29, 2002, for personal delivery, no reasons are mentioned as to why the same could not be served either on October 29, 2002, or on October 30, 2002, or before the close of the office hours on October 31, 2002.

Section 282 of the Income Tax Act provides the manner in which a valid service can be effected. This section states that a notice under the Act is to be served either by post or as if it was summons under the Code of Civil Procedure, 1908.

Order V, Rules 12 to 20 of the Code of Civil Procedure, 1908, provides for the service of summons on the defendant. Rule 12 provides that the service shall be made on the defendant in person whenever it is practicable unless he has an empowered agent to accept the service in which case the service on such agent shall be sufficient.

It is not in dispute that personal service on the assessee was not effected in the present case. Further, it is not disputed that notice dated October 31, 2002, sent by registered post was served on the assessee on November 1, 2002, which is beyond the limitation prescribed. The only claim, therefore, of the Department is that service of notice was effected on the assessee by affixture. Rule 17 deals with the service by affixture and the same is reproduced herein under:

Where the defendant or his agent or such other person as aforesaid refuses to sign the acknowledgment, or where the serving officer, after using all due and reasonable diligence, cannot find the defendant, who is absent from his residence at the time when service is sought to be effected on him at his residence within a reasonable time, and there is no agent empowered to accept service of the summons on his behalf, nor any other person on whom service can be made, the serving officer shall affix a copy of the summons on the outer door or some other conspicuous part of the house in which the defendant ordinarily resides or carries on business or personally works for gain, and shall then return the original to the court from which it was issued, with a report endorsed thereon or annexed thereto stating that he has so affixed the copy, the circumstances under which he did so, and the name and address of the person (if any) by whom the house was identified and in whose presence the copy was affixed.

Rule 20 provides for circumstances under which the substituted service can be effected and reads as under:

Substituted service.--Where the court is satisfied that there is reason to believe that the defendant is keeping out of the way for the purpose of avoiding service, or that for any other reason the summons cannot be served in the ordinary way, the court shall order the summons to be served by affixing a copy thereof in some conspicuous place in the court-house and also upon some conspicuous part of the house (if any) in which the defendant is known to have last resided or carried on business or personally worked for gain, or in such other manner as the court thinks fit.

The above provisions clearly spell out the circumstances under which affixture or substituted service can be ordered. For taking resort to this procedure, the court/competent authority must be satisfied that the defendant is purposely keeping out of the way for avoiding service and or that for any reason, the summons cannot be served in the ordinary way. Before affixture, the serving officer of the summons, must use his due and reasonable diligence to find out the defendant/respondent and if the circumstances as mentioned in Rule 17 exist, then and only then, the notice may be served by affixture and that too in the presence of witnesses by whom the house was identified and in whose presence the copy was affixed. Merely because the noticee in this case has not been found at the given address is not sufficient to establish that he could not be found, when there is nothing to show that reasonable efforts to find the person on whom the service was to be effected have been made.

In the present case, the very first notice is stated to have been served by affixture, which is not valid as it cannot be said that the assessee was avoiding service of notice or there was any other reason existing whereby it can be inferred that the notice cannot be served in an ordinary way.

Section 143(2) of the Income Tax Act reads as under:

(2) Where a return has been made u/s 139, or in response to a notice under Sub-section (1) of Section 142, the Assessing Officer shall, if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return:

Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished.

A perusal of the above, Sub-section (2) of Section 143 reveals that notice u/s 143(2) is not only to be issued but has to be served before the expiry of 12 months from the end of the month in which the return was furnished. In the present case, as held above, no valid notice was served upon the assessee within the prescribed period and was served beyond the period of 12 months, the same is not valid service in the eyes of law. That being so, any action taken pursuant to the said invalid notice is liable to be set aside and the assessment framed is to be annulled.

It has been argued by counsel for the Revenue that even if notice u/s 143(2) was not properly served on the noticee it should have been treated as a defect and such irregularity is curable u/s 292B of the Act. We are afraid that resort cannot be had to this provision to validate the mandatory requirement of service as postulated in Section 143(2) of the Income Tax Act. When there is a specific requirement of service on the noticee the same has to be complied with. Section 292B otherwise also deals with issue of notices and does not deal with service of notices. Therefore, in our considered view, the requirement of Section 143(2) having not been complied with, it cannot be treated as a defect in service of notice, which can be curable u/s 292B of the Income Tax Act.

In the given facts and circumstances of this case, we hold that service on the assessee is not valid service as per Section 143(2) of the Income Tax Act. Therefore, we do not find any illegality in the impugned order dated August 24, 2007, passed by the Income Tax Appellate Tribunal, Delhi Bench "D" New Delhi.

In view of the above, no substantial question of law arises for consideration of this Court.

The appeal is dismissed.