GLIMPSES OF SUPREME COURT RULINGS

5. Pr. CIT vs. NRA Iron and Steel Pvt. Ltd. (2019) 418 ITR 449 (SC)

Notice – Service of notice – Application for recall of ex parte order – Service of notice on authorised representative – Section 2(35) defines ‘principal officer’ which includes agent of the company and the term ‘agent’ would certainly include a power of attorney holder – No ground for recall of judgment

An application was filed for recall of the judgment for the A.Y. 2009-10 passed by the Supreme Court on the ground that the applicant company was not served with the notice of the SLP at its registered office, nor was a copy of the SLP served on the applicant company.

The applicants submitted that the court notices were sent to the earlier registered office address of the company, i.e., at 310, 3rd Floor, B-Block, International Trade Tower, Nehru Place, New Delhi. However, on 19^th May, 2014, the company had changed its registered office to 211, Somdutt Chambers II, 9, Bhikaji Cama Place, New Delhi 110066.

Thereafter, on 23^rd January, 2019, the registered office was again changed to 1205, Cabin No. 1, 89 Hemkunt Chambers, Nehru Place, New Delhi.

The applicants submitted that they learnt of the judgment dated 5^th March, 2019 passed by the Court from a news clipping published in The Economic Times on 7^th March, 2019. Subsequently, the application for recall was filed on 12^th March, 2019.

The company submitted that on an inspection of the court record it learnt that the affidavit of dasti service filed by the Revenue Department on 19^th December, 2018 showed an acknowledgement receipt by Mr. Sanjeev Narayan, the chartered accountant of the applicant company, on 13^th December, 2018.

The company also placed on record the affidavit of Mr. Sanjeev Narayan wherein he had stated that he was the authorised representative of the company before the Income Tax authorities but was not engaged before the High Court or the Supreme Court. He submitted that he had received service on 13^th December, 2018 from one of the Inspectors of the Income Tax Department, but he bona fide believed that the documents were ‘some Income Tax return documents from Income Tax Department.’ He further submitted that he was suffering from an advanced stage of cataract and had undergone surgery in both eyes, on 4^th January, 2019 and 23^rd January, 2019, respectively.

The Department in its counter affidavit submitted that the dasti notice was duly served on Mr. Narayan at his office address, in his capacity as the authorised representative of the company who was holding a power of attorney of the company for the A.Y. 2009-10. The POA appointed all four partners of the firm, i.e., Mr. Mohan Lal, Advocate, Mr. Ashwani Kumar, Chartered Accountant, Mr. Sanjeev Narayan, Chartered Accountant, and Mr. Surender Kumar, FCA, as their counsel and authorised them to represent the company at all stages of the proceedings. The POA executed by the company in favour of Mr. Sanjeev Narayan was placed on record.

It was further submitted on behalf of the Revenue that even though Mr. Narayan had stated that he underwent the cataract surgery on 4^th January, 2019 and 23^rd January, 2019, this was much after the notice had been served on 13^th December, 2018. Further, Mr. Narayan had appeared before the tax authorities after the date of service on 13^th December, 2018, and prior to his surgery, to represent the company and its sister concerns on the 14^th, 21^st, 28^th and 29^th of December, 2018. In these circumstances, it was pointed out, there was no merit in the contention raised by the company, and hence no ground was made out to recall the judgment passed by the Supreme Court.

During oral hearing on the recall application, a submission was made by the counsel for the company that Mr. Sanjeev Narayan was not the ‘principal officer’ of the company and hence service could not have been effected upon him.

* The Supreme Court noted that section 2(35) defines ‘principal officer’, which includes agent of the company and the term ‘agent’ would certainly include a power of attorney holder {State of Rajasthan vs. Basant Nehata [2005 (12) SCC 77]}.

* It held that Mr. Narayan admittedly being the power of attorney holder of the applicant (M/s. NRA Iron & Steel Pvt. Ltd.) for the A.Y. 2009-10, was the agent of the company and hence notice could be served on him as the agent of the company in this case.

* The Supreme Court observed that the ground taken by Mr. Narayan that even though notice was served on 13^th December, 2018, he assumed that they were ‘some Income Tax return documents’ lacked credibility. It was difficult to accept that the envelope containing the dasti notice from this Court was considered to be ‘some Income Tax return documents’. Also, the deponent had not disclosed as to whether the envelope containing the dasti notice was ever opened. Further, the ground urged that the chartered accountant was suffering from an advanced stage of cataract and hence was constrained from informing his clients, was again not worthy of credence. The dasti notice was served on him at his office on 13^th December, 2018 which was much prior to his surgery which took place on 4^th January, 2019. Furthermore, Mr. Narayan appeared before the Income Tax authorities to represent the company and its sister concerns on various dates prior to his surgery, i.e., on 14^th, 21^st, 28^th and 29^th December, 2018.

The Supreme Court stated that keeping in view the above-mentioned facts and circumstances, it was satisfied that the applicant company was duly served through its authorised representative and was provided sufficient opportunities to appear before the Court and contest the matter. The company chose to let the matter proceed ex parte. The grounds for recall of the judgment were therefore devoid of any merit whatsoever.

The Supreme Court dismissed the application for recall.

6. Pr CIT vs. I-Ven Interactive Limited (2019) 418 ITR 662 (SC)

Assessment – Change of address – Notice – In absence of any application for change in address and/or change in the name of the assessee in the Permanent Account Number database, the assessing officer would be justified in sending the notice at the available address mentioned in the PAN database of the assessee, more particularly when the return has been filed under e-module scheme – Mere mentioning the new address in the return of income is not enough – The change of address in the database of the PAN is a must

The assessee filed return of income for the A.Y. 2006-07 on 28^th November, 2006 declaring total income of Rs. 3,38,71,716. The said return was filed under the e-module scheme and thereafter a hard copy of the same was filed on 5^th December, 2006. The return of income was accompanied with the balance sheet and profit and loss account. The return was processed u/s 143(1) of the Act. A notice u/s 143(2) of the Act was issued to the assessee on 5^th October, 2007. The notice was sent at the assessee’s address available as per the PAN database. A further opportunity was provided to the assessee vide notice u/s 143(2) on 25^th July, 2008. This notice was also issued at the available address as per the PAN database. Thereafter, further notices u/s 142(1) were issued to the assessee on 23^rd January, 2008, 25^th July, 2008 and 5^th October, 2008 along with questionnaires calling for various details and were duly served on the assessee company.

In response to the said notice, the representative of the company appeared on 28^th November, 2008 and 4^th December, 2008. The assessee participated in the proceedings before the AO. However, the assessee challenged the notice under sections 143(2) and 142(1) on the ground that the said notices were not served upon the assessee as the assessee never received those notices and the subsequent notices served and received by the assessee were beyond the period of limitation prescribed under proviso to section 143(2) of the Act.

The AO vide assessment order dated 24^th December, 2008 completed the assessment u/s 143(3) by making disallowance of Rs. 8,91,17,643 u/s 14A, read with Rule 8 of the Rules, and computed the total income at Rs. 5,52,45,930.

Being aggrieved by the assessment order dated 24^th December, 2008, the assessee preferred an appeal before the learned C.I.T. (Appeals). The C.I.T. (Appeals) allowed the appeal vide order dated 23^rd December, 2010 holding, inter alia, that the AO completed the assessment u/s 143(3) without assuming valid jurisdiction u/s 143(2), and therefore the assessment framed u/s 143(3) was invalid. The C.I.T. (Appeals) observed that as the subsequent service of notice u/s 143(2) was beyond the period of limitation prescribed under the proviso to section 143(2) and earlier no notices were served upon the assessee and / or received by the assessee as the same were sent at the old address, and in the meantime the assessee changed its address, therefore the assessment order was bad in law. The Revenue preferred an appeal before the Income Tax Appellate Tribunal which came to be dismissed by the I.T.A.T. vide order dated 19^th January, 2015. The orders passed by the C.I.T. (Appeals) as well as the I.T.A.T. were confirmed by the High Court.

Hence, the Revenue preferred an appeal before the Supreme Court.

The Supreme Court noted at the outset that the notice u/s 143(2) was sent by the AO to the assessee at the address as mentioned in the PAN database on 5^th October, 2007 and the same was within the time limit prescribed in the proviso to section 143(2) of the Act.

It recorded, however, that it was the case of the assessee that the said notice was not served as the assessee had changed its name and address and shifted to a new address prior thereto and therefore the said notice was not served upon the assessee, and by the time when subsequent notices were served, notice u/s 143(2) was barred by the period prescribed in proviso to section 143(2). Therefore, the assessment order was bad in law. It was the case on behalf of the assessee that vide communication dated 6^th December, 2005 the assessee had intimated to the AO about the new address and despite this, the AO sent the notice at the old address.

The Supreme Court observed that the alleged communication dated 6^th December, 2005 was not forthcoming. Neither was it produced before the AO nor before the Supreme Court. In the affidavit, too, filed in compliance with the order dated 21^st August, 2019, the assessee has stated that the alleged communication dated 6^th December, 2005 was not available. Thus, the assessee had failed to prove the alleged communication of that date. The only document available was Form No. 18 filed with the ROC.

The Supreme Court held that the filing of Form-18 with the ROC could not be said to be intimation to the AO with respect to intimation of change in address. According to the Court, it appeared that no application was made by the assessee to change the address in the PAN database and in the PAN database the old address continued. Therefore, in absence of any intimation to the AO with respect to change in address, the AO was justified in issuing the notice at the address available as per the PAN database. Hence, the AO could not be said to have committed any error; in fact, the AO was justified in sending the notice at the address as per the PAN database. If that was so, the notice dated 5^th October, 2007 could be said to be within the period prescribed in proviso to section 143(2) of the Act. Once the notice is issued within the period prescribed as per the said proviso, the same can be said to be sufficient compliance of section 143(2) of the Act. And once the notice is sent within the period prescribed in the proviso to section 143(2), in that case, the actual service of the notice upon the assessee thereafter would be immaterial.

In a given case it may happen that though the notice is sent within the period prescribed, the assessee may avoid actual service of the notice till the period prescribed expired. Even in the case relied upon by the Assessee [Asst. CIT vs. Hotel Blue Moon (2010) 321 ITR 362 (SC)], it was observed that the AO must necessarily issue notice u/s 143(2) within the time prescribed in the proviso to section 143(2) of the Act.

The Supreme Court, therefore, in the facts and circumstances of the case, held that the High Court was not justified in dismissing the appeal and confirming the orders passed by the C.I.T. (Appeals) and the I.T.A.T. setting aside the assessment order solely on the ground that the assessment order was bad in law on the ground that subsequent service of notice upon the assessee u/s 143(2) was beyond the time prescribed in the proviso to section 143(2) of the 1961 Act.

The Supreme Court, in the context of the observations made by the High Court while concurring with the view of the Tribunal that merely by filing of return of income with the new address it shall be enough for the assessee to discharge its legal responsibility for observing proper procedural steps as per the Companies Act and the Income Tax Act is concerned, held that mere mentioning of the new address in the return of income without specifically intimating the AO with respect to change of address and without getting the PAN database changed, is not enough and sufficient.

In the absence of any specific intimation to the AO with respect to change in address and / or change in the name of the assessee, the AO would be justified in sending the notice at the available address mentioned in the PAN database, more particularly when the return has been filed under the e-module scheme. It is required to be noted that notices u/s 143(2) are issued on selection of cases generated under the automated system of the Department which picks up the address of the assessee from the database of the PAN. Therefore, the change of address in the database of PAN is a must; in case of change in the name of the company and / or any change in the registered office or the corporate office, the same has to be intimated to the Registrar of Companies in the prescribed format (Form 18) and after completing the said requirement, the assessee is required to approach the Department with the copy of the said document and the assessee is also required to make an application for change of address in the Departmental database of PAN, which in the present case the assessee had failed to do.

Accordingly, the appeal was allowed by the Supreme Court. The impugned judgment and order passed by the High Court, as well as the orders passed by the C.I.T. (Appeals) and the I.T.A.T., were quashed and set aside. The matter was remanded to the C.I.T. (Appeals) to consider the appeal on merits on other grounds, in accordance with the law.