Notice not served due to change of Address , Reassessment Valid u/s 148 of Income Tax

JUDGMENT

1. Since these two writ petitions concern common questions, the same are heard and decided together. The short facts involved in WP(C) No. 17509/2016 are as under:-

2. Petitioner is an assessee under the Income Tax Act, 1961 (hereinafter referred to as IT Act). She had filed returns for the assessment year 2008-09 admitting a total income of Rs. 17,74,520/-. She was served with a notice under Section 148 on 13/4/2015 proposing to reopen the assessment for the year 2008-09. She was also served with a notice under Section 142(1) on 1/6/2015. She filed replies as Exts.P3 to P5. However, an order of assessment came to be passed on 22/3/2016 bringing to tax sale of agricultural land which was exempted under the earlier assessment completed under Section 143(1). Petitioner inter alia challenges the aforesaid assessment order mainly on the ground that notice under Section 148 had been issued beyond the period of limitation as provided under the statute.

3. In WP(C) No. 17571/16, the assessee is the husband of the petitioner in WP(C) No. 17509/16. The assessee had filed the returns declaring a total income of Rs. 25,29,970/- and agricultural income of Rs. 30,000/- during the assessment year 2008-09. He was also served with notice under Section 148 on 13/4/2015 proposing to reopen the assessment for the year 2008-09. He was also served with a notice under Section 142(1). He filed replies as Exts.P3 to P5. However an order of assessment came to be passed on 22/3/2016 bringing to tax the sale of agricultural land which was exempted earlier under the assessment completed under Section 143(3). Petitioner raises same contentions as that of the petitioner in WP(C) No. 17509/16.

4. Statement has been filed by the standing counsel on behalf of the respondent in both the cases. Contentions are common and therefore reference is made to the statement filed in WP(C) No. 17509/2016. The first contention is that since the petitioner has an alternate remedy to prefer an appeal against the assessment order, the writ petition is not maintainable. Further, it is contended that the return filed by the petitioners were accepted under Section 143(1) without any modification. Subsequently, the Assistant Commissioner of Income Tax Circle-1, Tirur passed on an information that the assessee Anappadikal Hospitality Private Ltd has purchased certain lands in Ponamallee Taluk from the petitioner for a registered value of Rs. 2.21 crores while the guideline value to be adopted for stamp duty purpose was Rs. 2,57,55,000/-. Certain factors like the situation of the property in an industrialized and urbanised area, the present nature of the property, classification of land as residential for the purpose of fixation of guideline value, the high price realisation for small extent of land etc tempted the assessing officer to form an opinion that the petitioner is not an agriculturist but an industrialist and arrived at a conclusion that the land sold is not agricultural land but a capital asset within the meaning of Section 2(14) of the IT Act, the transfer of which gives rise to capital gains. It is stated that the petitioner had indicated in the return that she had sold agricultural property situated in Nemily Grama Panchayat in Tamil Nadu acquired by her in the year 1998 for a certain consideration. According to the officer, it was not a full and true disclosure within the meaning of first proviso to Section 147 of the IT Act. There is also a difference of Rs. 21 lakhs between the registered value and the guideline value. Therefore, proceeding on the basis that there was escaped assessment, after obtaining prior sanction of the Commissioner of Income Tax, notice under Section 148 was issued on 30/3/2015. Though notices were sent to the available address, the same had been returned and finally it was served on 13/4/2015 at one of the associated business concerns of the petitioner namely M/s. Sree Sakthi Paper mills, Kochi-16.

5. In the statement filed in WP(C) No. 17571/16, it is stated that the registered value of the property sold was Rs. 4.12 crores whereas the guideline value adopted for stamp duty was Rs. 4,45,85,000/-. Other contentions are almost similar.

6. It is further contended that there is a distinction made out between the words ‘issue of notice’ and ‘service of notice’. For the purpose of reopening an assessment, it is enough that a notice is issued and it need not be served as such within the period of limitation. In this case, notice had been issued on 30/3/2015 after having come to know about the escapement of assessment which is well within the period of limitation.

7. Learned counsel for the petitioners having referred to the statutory provisions placed reliance upon the judgment of this Court in Travancore Diagnostics (P.) Ltd. v. Asstt. CIT [2017] 390 ITR 167 (Ker.). On the other hand, learned counsel for the Department placed reliance upon the judgment of the Apex Court in R.K. Upadhyaya v. Shanabhai P. Patel [1987] 166 ITR 163 to prove the difference between ‘issue of notice’ and ‘service of notice’. In the above judgment, it was held that when the Income Tax Officer issued a notice of reassessment under Section 147(b) by registered post on 31/3/1970 and the notice was received by the assessee on 03/04/1970, the notice was not barred by limitation and the Income Tax Officer has jurisdiction to proceed to complete the assessment. In Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500 the Supreme Court considered as to what would be the reason to believe as contemplated under section 147 of the IT Act. It was held that the expression ‘reason to believe’ would mean cause or justification. If the assessing officer has cause or justification to know or suppose that income had escaped assessment, he can be said to have reason to believe that income had escaped assessment. The said expression cannot be read to mean that the assessing officer should have finally ascertained the fact by legal evidence or conclusion. What is required is “reason to believe” but not an established fact of escapement of income. At the stage of issuing of notice, the only question is whether there was relevant material on which a person could have formed the requisite belief. Whether the material would conclusively prove escapement of income is not the concern at that stage.

8. In regard to maintainability of the writ petition, there is no doubt about the proposition that when an alternate remedy is available, the interference of Court is very limited especially in taxing statutes. However, when a question of law is raised especially in regard to limitation, which is clearly borne out by records, nothing prevents this Court from entertaining the said writ petition and deciding the same. Hence, there is no reason to reject the writ petition on the ground of maintainability.

9. The only question to be considered is whether the proceedings now initiated against the petitioners were beyond the period of limitation. In terms of Section 147, if the assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income. As per Section 148, before making assessment, reassessment or recomputation under Section 147, the assessing officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income of the income of any other person in respect of which he is assessable under the Act. Section 149 indicates that no notice under Section 148 shall be issued for the relevant assessment year if 4 years have elapsed from the end of the relevant assessment year, unless the case falls under Clause b. Clause b further indicates that the time should not have elapsed more than six years from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or likely to amount Rs. 1 lakh or more for that year. The contention urged is that the assessment year involved is 2008-09 and the notice ought to have been served within 4 years from the end of the relevant assessment year or six years from the end of the relevant assessment year. According to the petitioners, they have disclosed the facts relating to sale of immovable property during the course of assessment under Section 143(1). Therefore going by the clauses under Sections 148 and 149, notice under section 148 ought to have been served on or before 31/3/2015. The respondent has generated the notice only on 30/3/2015 and served on the petitioner on 13/4/2015.

10. In the impugned order, it is stated that a notice under Section 148 dated 30/3/2015 was generated to the address of the assessee at Ernakulam. However, on query it came to light that the assessee was not regularly staying at the above address and all his letters were being received by unauthorized persons. Hence without loss of further time, notice under Section 148 was sent to the assessee’s another address on 31/3/2015. The said notice was returned unserved. Thereafter, gathering one more address of the assessee, the letter was finally served on 13/4/2015 on the assessee at one of the associated business concern namely Sree Sakthi Paper Mills Ltd, Kochi-16. It is therefore contended that the 13 days delay in service of notice is fully attributable to the assessee. The assessing officer further observed that though under Section 148, the notice is to be served, Section 151 (1) prescribes that notice should be issued within 4/6 years time as the case may be. Further it is contended that subsequent to issue of notice under Section 148, the assessee’s representative had appeared and participated in the reopened assessment proceedings and the issues involved in the assessments were put to them and their explanations were obtained and placed on record. Therefore, placing reliance on section 292B/292BB of the IT Act, it is held that there is a valid notice under Section 140.

11. Learned counsel for the petitioner argued that Section 292B or 292BB has no application to the facts of the case and it is wrongly invoked. Apparently, the aforesaid provisions will not apply. The petitioner had raised an objection regarding maintainability of the reassessment on the ground of limitation by stating that the notice under Section 148 has been issued beyond the period of limitation. Therefore, the only question to be considered is whether any notice had been issued within the period of limitation. Apparently it is not so. Even according to the department, notice was served only on 13/4/2015 beyond the period of limitation. The question is whether there is requirement to serve the notice or whether it would suffice that the notice is issued by the department. The Apex Court in R.K. Upadhyaya (supra) had found out a distinction made between the words “issue of notice” and “service of notice” under the IT Act. It is held that once the notice is issued within the period of limitation, jurisdiction becomes vested in the Income Tax officer to proceed to assess. However, section 148(1) provides for service of notice as a condition precedent to making order of assessment. It is held that “service under the new Act is not a condition precedent to conferment of jurisdiction on the Income Tax officer to deal with the matter. But it is a condition precedent to the making of the order of assessment. It is further held that as Income Tax Officer had issued notice within limitation, the officer can proceed to complete the assessment after complying with the requirement. Apparently in these cases, though a notice was generated on 30/3/2015, it is not stated that they have issued the said notice. According to them, enquiry revealed that the assessee’s address was at Chennai and therefore notice was sent in the said address which was returned without being served. Thereafter gathering one more address of the assessee, the letter was finally served on 13/4/2015. It would therefore be seen that all attempts had been made by the officer to serve the notice on the petitioners by generating the notice on 30/3/2015 and sending the same by registered post on 31/3/2015. Of course, no notice was sent or issued in the address shown in the return. But there is an explanation for the same. Whenever notices are sent, it is being received by unauthorized persons and therefore they have found out the address of the assessee from the registered document and notice was sent by registered post on 31/3/2015. As held by the Apex Court, once the notice is issued, thereafter, assessment can be taken only after service of notice. There is proof to show that notice has been issued and therefore, I am of the view that the authorities have complied with the requirements of the statute in accordance with law.

12. The judgment in Travancore Diagnostics (P.) Ltd. (supra), has no application to the facts of the present case. The only question to be considered in the present lis is regarding the limitation. In so far as I have already found that the notice had been issued within the period of limitation, it would suffice as far as the proceedings are concerned. There is no merit in the contention urged on behalf of the petitioners.

Writ petitions are dismissed. However, nothing prevents the petitioners from preferring appeal before the competent appellate authority, and if the appeals are filed, the period during which the writ petitions were pending before this Court shall stand excluded.