ITO vs. Lal Chand Agarwal (ITAT Agra Third Member)

S. 148 notice “issued” within limitation period is valid even if “service” is later

For AY 1998-99, the AO issued a notice u/s 148 dated 28.3.2005 (within the limitation period of 6 years). However, as this notice was returned un-served, a second notice dated 17.6.2005 (beyond 6 years) which issued & served. The assessee contended that since the AO had issued a second notice, the first one was non-est and as the second notice was issued beyond limitation period, the assessment proceedings were null and void. The CIT (A) upheld the plea. Before the Tribunal, the AM held that there was a difference between “issue” of the notice and its “service” and that the notice dated 28.3.2005 was valid, though not served, and the second notice was invalid and non-est. The JM took a contrary view and held that the first notice was invalid and the second notice having been issued after the limitation period did not give jurisdiction to make the assessment. On a reference to the Third Member, HELD:

The Act makes a clear distinction between “issue of notice” and “service of notice”. S. 149 which prescribes the period of limitation provides that no notice u/s 148 shall be “issued” after the expiry of the limitation period. The “service” of the notice is necessary u/s 148 only to make the order of assessment. Once a notice is “issued” within the period of limitation, the AO has jurisdiction to make the assessment. A notice is considered to have been “issued” if it is placed in the hands of a person authorized to serve it, and with a bona fide intent to have it served. Service of the notice is not a condition precedent to conferment of jurisdiction on the AO but it is a condition precedent to the making of the order of assessment. On facts, as the AO had issued the notice within the period of limitation, he had jurisdiction to reopen the assessment (R.K.Upadhyay vs. Patel 166 ITR 163 (SC) followed)