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Deemed Service Of Notice U/s 143(2) On Assessee – Judgment In Case Of Dharam Narain (SC) Needs Reconsideration

In ITO vs. Dharam Narain, the Supreme Court has held that if the assessee is not available to take service of the s. 143(2) notice, service on the authorized representative is sufficient to draw inference of deemed service of notice on the assessee. It was also held that the fact that the authorized representative is disowned by the assessee is irrelevant. CA Dev Kumar Kothari has carefully analyzed the judgement. He argues that the judgement is wrong and requires reconsideration. He has made good his assertion by giving detailed reasons

In a Writ Petition in case of Dharam Narain Versus Income Tax Officer, Etawah – 2012 (12) TMI 1148 – ALLAHABAD HIGH COURT, the High Court has held that there was no service of notice upon assesse, therefore initiation of assessment proceeding was invalid. However, this has been reversed in CIT V Dharam Narian reported as 2018 (2) TMI 1474 – SUPREME COURT OF INDIA.

We find that the High Court followed the following judgments:

Assistant Commissioner of Income Tax & Anr. Versus M/s. Hotel Blue Moon – 2010 (2) TMI 1 – SUPREME COURT OF INDIA

CIT Versus M/s. Sahara India Savings & Investment Corporation Ltd. – 2009 (11) TMI 25 – SUPREME COURT OF INDIA .

In related judgments relied on by High Court the following judgments were referred to and relied on:

in case of Hotel Blue Moon:

1. MAGANLAL Versus JAISWAL INDUSTRIES NEEMACH – 1989 (8) TMI 341 – SUPREME COURT OF INDIA

2. Dr. Partap Singh And Another Versus Director of Enforcement And Others – 1985 (4) TMI 1 – SUPREME Court

And in case of Maganlal :

Commissioner of Income-Tax, Gujarat Versus Vadilal Soda Ice Factory and Sakarlal Balabhai – 1972 (8) TMI 1 – SUPREME Court

1. Commissioner of Income-tax Versus Amarchand N. Shroff – 1962 (10) TMI 51 – SUPREME COURT

2. The Bengal Immunity Company Limited Versus The State of Bihar and Others – 1955 (9) TMI 37 – SUPREME COURT OF INDIA

3. National Sewing Thread Co. Ltd. Versus James Chadwick & Bros. Ltd. (J. & P. Coats Ltd. Assignee) – 1953 (5) TMI 13 – SUPREME COURT

However, we find that in the recent judgment of in case in CIT V Dharam Narian reported as 2018 (2) TMI 1474 – SUPREME COURT OF INDIA any of above precedence have not at all been referred to and discussed by the Supreme Court. There seems no arguments by advocates who appeared for both sides.

No argument found in judgment:

On very careful reading author could not find any words in the judgment about hearing of counsels from any side- not even words like ‘heard counsels of petitioner and / or respondent’, are not found. Only list of advocates, under headings “ For The Petitioner” and “AOR For The Respondent”, have been given. So on reading of the judgment one cannot be sure as to whether any advocate was actually present.

It is true that technically, the Supreme Court can pass order even in few words like, dismissed/ allowed; appeal is allowed / appeal is dismissed; or heard, appeal allowed / heard appeal dismissed etc.

However, now-a-days when even judgements of the Supreme Court have more probability of being dissented by another bench, then reviewed and reconsidered, it is desirable that the order / judgment of the Supreme Court be elaborately speaking, particularly all contentions raised by both sides must be mentioned. This will help in understanding the law declared and also in reconsideration of judgment in case need arise.

An elaborate judgment will also provide more comfort to any person, having some knowledge on the subject, who read the judgment besides to the party who had lost the case.

In case reasons are not given, the party losing the case will have grievance and cannot be satisfied with the judgment and will be left with feeling of justice denied.

About representation of parties:

Heading/ the preamble states:

For The Petitioner : Mr. K. Radhakrishnan, Sr. Adv. Ms. Rekha Pandey, Adv. Mr. Sarad Kumar Singhania, Adv. Ms. Gargi Khanna, Adv. Mrs. Anil Katiyar,

AOR (meaning Advocate on record) For The Respondent : Mr. Imtiaz Ahmed, Adv. Mrs. Naghma Imtiaz, Adv. Mr. Ahmed Zargham, Adv. Ms. Amra Moosavi, Adv. for M/S. Equity Lex Associates, AOR.

From this noting it is not clear, whether any advocate was present or not before the Supreme Court. What is stated appears to be just the list of advocates who are Advocates / Advocates on Record for the Petitioner and Respondent respectively.

In absence of words like ‘heard counsels of both sides’ and in absence of a single argument made by advocates, having been recorded in the judgment, one can have feeling that any advocate did not actually appear before the court or appeared but did not argue the case (or that their lordships did not allow them to argue the case).

No reference of earlier judgments:

For each case a statement of case and past history of similar cases etc. is prepared. In this case, it appears that any such history was not put before their lordships. It is surprising that the counsels of assesse/ respondent could not even insist upon consideration of at least two judgments of the Supreme Court which were followed by the High Court while allowing WP of assessee.

Related aspects – ground realities:

Before discussion of judgment some of relevant issues as per general practice and ground realities are discussed:

a. Authorised Representative (A/R) for scrutiny assessment:

A person can be considered as A/R before any Court or Authority, only when a written authorisation, duly executed in writing and duly stamped, and for particular case, in his favour has been delivered to the concerned authority or court. Unless such written authority is in record of the Court or Officer, any person cannot be considered as A/R.

b. Each year is separate year:

Each year is separate year, and it usual practice that for each year separate authorization is executed and filed. Particularly when case is represented through outsider professional like Advocate, CA or other tax professional. For each year separate authorisation is filed. Even in case the person like tax executive, accountant, FM, Manager who are employed regularly and who hold general power of authority, or is a constituted attorney, a letter from the assessee with copy of power of attorney is submitted confirming that such power of attorney is continuing and the holder of such power is authorised to represent the case for that year or particular appeal or other proceeding.

In case of assessment under direct tax laws, where scrutiny is not a regular feature, the AO insists for written authority for particular year or confirmation from assesse that the GP holder is still an authorised representative. The examination of such authority is an important preliminary step in proceeding. If the AO or any other authority, Tribunal or Court refuses to hear and refuses to grant leave to submit such authority, one should not feel bad. Because this is a preliminary step in initiating hearing.

c. Time of filing of authorisation:

Usually an authorisation, to represent any scrutiny case is filed by assesse after a notice for scrutiny is received by assesse from tax authority. Even if in earlier year authorisation was filed, it is required that for year in hand a separate authorisation is filed. In some circumstances, there can be filing of authorisation beforehand also, but that cannot be final because after a notice is served, it is up to assesse to reconsider and appoint another person as A/R.

It can be said that an authorised representative can only be appointed after proceeding is initiated by properly served notice, as per mandate in the relevant law.

Therefore, in the case before the Supreme Court, it is not clear as to how notice u.s. 143.2 was served upon the Authorised Representative even before service of notice u/s 143.2.

As per usual practice, even if the concerned person was authorised for any other year or any other proceeding, it is not necessary that he was authorised for concerned year also.

Even authorities insist for separate authorisation / vakalatnama to be filed for each year.

As a good practice he should have received notice, and participated in assessment proceeding. He could have preferred appeal if he was aggrieved from assessment order.

From the judgment in case of Dharam Narian: Observations of author
The materials on record indicate that on two occasions the notice sent by registered post could not be served on the respondent – Assesse as he was not available and that it was served on the authorized representative of the respondent – Assessee on 19th October, 2006. As discussed earlier, as per usual practice followed, it is not very likely that any authority to receive notice was given by assesse before he received notice u/s 143.2. It is likely that revenue has produced authority for another year. 
When assessee had denied existence of any A/R, it was important to examine the authority provided and its validity.
In the Rejoinder Affidavit filed by the petitioner it has been denied that Sri Safdar Husain Advocate was the authorized representative duly authorized by the petitioner to receive the notice. There is no contention or argument on this issue as to how Sri Safdar Husain Advocate was authorised or  how was he  not authorised as contended by assessee. This was crucial aspect and there should have been debate on this issue.
Why the assesse had denied, why such denial was considered by the High Court but has not been accepted by the Supreme Court.
As discussed earlier, as per usual practice followed, it is not very likely that an authority to receive notice was given by assesse before he received notice u/s 143.2. A question also arise, whether an authority can be given when there is no case in process?
There is no mention about authority – when it was given by assesse and delivered to the AO? Whether, such authority was in force or not when notice was served on A/R etc.
The question, therefore, that arises in the writ petition was whether in such circumstances the requirement under Section 143(2) of the Income Tax Act, 1961 was met by the Revenue. The High Court answered the question in the negative taking the view that what is required to be satisfied by the Revenue is service of notice and not mere issuance thereof. In fact High Court has considered that the notice was not service on assesse within prescribed limitation. The service on A/R was not service as per law. Furthermore the assesse has denied authority of alleged A/R. This has not been considered by the honourable Supreme court.
It will not be necessary for us to decide the aforesaid question in the present case which is being kept open for decision in an appropriate case. We have taken the aforesaid view as the present case is capable of being resolved on its own peculiar facts. The judgments of the Supreme Court in case of Blue Moon Hotel and Sahara (supra.) were followed by the High Court. That has not at all been mentioned and considered which was necessary as it has been decided that service of notice on assesse is a necessary precondition to assume jurisdiction for making assessment u/s 143.3. The question was settled in case of Hotel Blue Moon, which has not been considered at all, as appears on reading of judgment.
The non-availability of the respondent – Assessee to receive the notice sent by registered post as many as on two occasions and service of notice on 19th October, 2006 on the authorized representative of the respondent Assessee whom the respondent Assessee now disowns, in our considered view, is sufficient to draw an inference of deemed service of notice on the respondent – Assessee and sufficient compliance of the requirement of Section 143(2) of the Income Tax Act, 1961. Whether service of notice on A/R would meet legal requirement? Is an important issue. Why the notice was not served on assesse? is also an important issue.
Why the notice could not be served on premises of assesse is also an important issue.
Whether an inference of deemed service can be drawn? Whether deemed service is proper?
When assesse had a permanent address, and another business address, why notice was not served on assesse on any of such addresses, is an important issue. This was necessary to be  looked into, particularly when assesse had, before the High Court, denied authority of A/R on whom notice has been claimed to be served by revenue.
   

From above discussion it appears that the judgment of the Supreme Court in case of Dharam Narain is not in accordance with earlier judgments. Furthermore, there seems no actual and effective representation by Advocates of any side. Therefore, this is a fit case for review of the judgment.

Assesse should have adopted regular course of assessment and appeal:

It seems that assessee by adopting route of Writ Petition challenging the initiation of assessment proceedings on ground of time barred service of notice had to suffer by adverse judgment of the Supreme Court. By not being available to receive service and without documentarily establishing unavailability.

When notice by Registered post was sent and it was presented at his address, then why he (or in his absence any family member) did not receive notice, appears to raise finger that he deliberately avoided service of notice. But that itself will not be reason to consider deemed service as service as held by the Supreme Court because, revenue could have served notice at his business place or could have made service by affixture of notice on his permanent address.

Why he disown the authority of alleged A/R should have been made clear with reasoning before High Court. If the authority was for any other matter or any other year, then he should have made it clear.

If authority to receive notice was not at all given or given but withdrawn, it should have been made clear at first stage that is in the Writ Petition before the High Court.

In this case when notice was served on A/R within limitation, and served on assesse after limitation, these grounds could be raised during assessment and normal appeal proceedings.

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10 comments on “Deemed Service Of Notice U/s 143(2) On Assessee – Judgment In Case Of Dharam Narain (SC) Needs Reconsideration
  1. Rasik Dagli says:

    I have to add to my post made yesterday.
    S/143(2) provides that Notice U/S 143(2) shall be served to Asseessee. In veiw of clear wording of the Section one can not read…….. Asseessee or his authorised representative……..
    Reading the Section 143(2) it is very clear. Revenue can not serve Notice to an authorised Representative. If Notice is served to AR it will be invalid.

  2. Rasik Dagli says:

    In my view Supreme Court Judgment requires reconsideration. The consequences of Notice u/s 143(2) are so serious that Notice must be served to Asseessee only and not to his Authorized Representative unless Authority Letter expressly provides that Representative is authorized to receive Notice or other communications from ITO. In one case ITO assessed Capital Gain Tax by ignoring all the documents produced to Income Tax Department and also ignoring Indexed Cost of acquisition of Property etc. Assessee sent a representative with one line authority Letter to discuss matter with ITO and submit that he should not ignore well settled principals of Law. At the meeting ITO served Notice U/S.143(2) to the Representative. The representative did not inform or sent Notice or its copy to Asseessee and therefore no reply to Notice was given by Asseesssee. ITO made Assessement for more that Rs. 20,00,000/- (Twenty Lakhs). Asseessee has Filed Appeal in Form No.35 which is pending. So issuing Notice to representative resulted in serious consequences. Assessee is a retired Senior Citizen having no income.
    On the facts of this case I strongly believe that Notice u/s.143(2) should be served to Asseesee only and not to his representative who has not been given Express Authority to receive Notice or other Communication from ITO.

  3. Rasik Dagli says:

    The Supreme Court Judgment requires reconsideration. The consequences of Notice U/S.143(2) are so serious that Service of Notice must be made to Asseessee only. For Example, in a case ITO was not following settled principals of Law regarding Capital Gain even not considering Indexed Cost of acquisition of property. A representative was sent to discuss with ITO about his strange and illegal actions. He was authorised to discuss matter with ITO by a one line authority letter. No authority was given to receive any communication, Notice or Letter from ITO. However, ITO served him Notice U/S.143(2). Representative did not inform Assessee about the Notice by Negligence or forgetfulness and therefore no reply to Notice was given. Actions followed by ITO and he passed Assessment Order of more that Rs.20,00,000/- Assessee filed Appeal in Form No.35 which is pending. On the facts of this case, I am of the strong view that Notice u/s.143(2) must be served to Asseessee only and not to his authorised representative unless Authority Letter expressly provides authority to receive Notice,Letter or other communications from ITO.
    I hope I am clear. Those who agree with my view should come forward and support me.

  4. i agree with author the hon SC summarily cannot handle the issue before it. when even the constituted attorney may be company or the CA every time is asked to produce the authorization if to appear before just AO, when so how just putting notice on door can be deemed as a correct service of notice and be treated as if served, is indeed some ‘per incurium’ kind only for the notice does not function like general CPC 1908 notices, where if we issue the notices to government the public ought to follow sec 80 rule; besides tax notices is not some some public property but it is directly affecting the proprietary rights of the assessee when so post man if he cannot deliver to right person like courier he has to return to the sender back, true he cannot indefinitely wait for the person or just leaving intimation to collect at the post office and he can go back to handle other deliveries.
    issue here is as author said there are so many aspects he high lighted besides the notice might be irrelevant if it is a time barred notice, for it cannot stand without four spuds of give its validity , without valid notice the sec 142 notice obviously need not be responded, for the authority could have misused his authority or any other reason.
    i think like Bombay high court judge correctly wanted to correct his error, in reading the very high court rules, in his order when that order is quoted in several other property issues, the judge rightly posted for hearing once again for his own correction to be carried out by justice Mr.Patel that much care at least we certainly expect from the hon SC.
    Any one can expect that much of care from the SC registry as also from justices, when the taxpayer is affected for any reason

  5. Dheeraj Srivastava says:

    by the judgment the Hob’ble Supreme Court of India has allow some power to the assessing officers as the assessee always tries to escape from the assessment proceedings and the best possible way is to challenge the validity of service of notice u/s 143(2). Some of the CAs/ Advocates are indulge in such practice not to plea the case on merits but to challenge the case on procedural mistakes (either committed by the AO or not). In such circumstances, the AOs are not found them comfortable as in the quality cases in which they give their best and make huge additions on the basis of evidences, the Authorized Representatives plea on procedural mistakes and the judiciary, in most of the cases, allow them relief.
    A good decision by the S.C.

  6. vswami says:

    RIDER: On ‘modern technology’ / indiscriminate addiction to ‘digitization’, for knowing the pros and cons, and what the proverbial Mrs Grundy has to say, suggest to look through (for sampling)>

    https://educationendowmentfoundation.org.uk/public/files/Publications

    https://economictimes.indiatimes.com/jobs/digitisation-will-hit-indian-employees-the-most-manpowergroup-survey/articleshow/56642691.cms

    Also, diligently Google Search for Blogs, etc., on, – as to why uncontrolled adoption of’digitization’, without moderation /incisive research, may do more harm than benefit or be of advantage, in the long run !

    /The_Impact_of_Digital_Technologies_on_Learning_(2012).pdf

    https://educationendowmentfoundation.org.uk/…/The_Impact_of…

    https://www.google.co.in/search…

    < https://economictimes.indiatimes.com/…/article…/56642691.cms

  7. Adv E S Jagadeeshwar says:

    If an assessee did not received the Notice sent by registered post the reasons have to be known. Assessees are appointing the Advocates or CAs on case to case basis but not for all cases. The client is approaching his/her Advocate or CA or Tax Consultant after receiving the Notice as per the Law. If the Assessee did not accept the Notice served to the Authorized Representative then what will happen? Whether A/R is responsible? how? Service of Notice to the assessee shall be clearly known to him. Asking others to receive Notice on behalf of the assessee is also not good. Simply say, offence will be committed by one, punishment will be goes to another. Innocents should not be punished. If punished it is violation of principles of Natural Justice and Fair Trial procedures.

    Professionals are representing the cases on behalf of their clients. If these professionals are dragged into unwanted litigation their valuable time will be spoiled. Their concentration will also be diversed. They can not render justice to their profession also. For example if 50 Assessees have not received Notices and these were served to a Professional what will happen? who will be held responsible? A professional cannot be a witness to his client. For example .. If an Advocate or CA acts as a witness to a client he cannot represent the case before the Hon’ble Court or Authority. He cannot play two roles simultaneously.

    It is better to serve the Notice directly to the Assessee if one system fails, the department has to explore other ways to take “steps.” There is a need to review the procedure being followed regarding Service of Notice to the Assessee.

    • vswami says:

      Any such Notice, even if issued and can be proved with evidence,- intended to afford an opportunity to taxpayer to respond/explain, – will be a futile formality to the core, unless effectively reached/personalty served. if so,the concept of ‘deemed service’ , by any logic or standard,cannot be invoked, or sustained both on any legal or legitimate ground.

      With the idea of resort to electronic communication,lately being pushed forward and vehemently but mindlessly gaining currency/put into practice,could only add to the already obtaining woes, galore, being faced with by taxpayers at large.

      For viewpoints against indiscriminate ‘digitization’/use of so called ‘modern technology’, with no sense of moderation,anyone really concerned may obligingly refer the plethora of material,available in public domain, in the form of inter alia eminent opinions of competent “EXPERTS” !

  8. vswami says:

    INSTANT

    Anyone having concern may wish to go through independently the points made and case law cited. Without the need or urge personally felt for doing so,may simply suggest to look up the Post on FB , sharing views from a different stroke of thoughts-
    @ https://www.facebook.com/swaminathanv3/posts/1594903163919297

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