Facts of the Case

  • The Assessee filed its return of income on October 31, 2001, declaring a loss of Rs. 8,37,355.
  • The Assessing Officer issued a notice under Section 143(2) of the Income Tax Act, 1961 on October 23, 2002, and subsequently on December 18, 2002, fixing hearing dates for October 29, 2002, and December 24, 2002, respectively. The initial notice was sent via speed post on October 25, 2002, to the company's registered address.
  • Due to non-compliance and non-attendance by the Assessee, a further notice under Section 142(1) was issued on January 29, 2003, which also went unheeded.
  • Consequently, the Assessing Officer completed a best judgment assessment under Section 144 of the Act, disallowing advertisement and public expenses amounting to Rs. 8,87,917 due to a lack of supporting evidence.
  • The Commissioner of Income Tax (Appeals) upheld the assessment, noting that the notice was issued within the prescribed limitation period. However, on a subsequent appeal by the Assessee, the Income Tax Appellate Tribunal quashed the assessment and demand, ruling that the notice under Section 143(2) was not served on the Assessee within the statutory period of limitation. The Revenue appealed this decision to the High Court.

Issues Involved

  • Whether the Income Tax Appellate Tribunal was correct in law in quashing the assessment framed by the Assessing Officer on the ground that the notice under Section 143(2) of the Income Tax Act, 1961 was not served upon the Assessee within the prescribed limitation period.

Petitioner’s Arguments

  • The Revenue contended that the statutory notice under Section 143(2) was generated on October 23, 2002, and dispatched via speed post on October 25, 2002, to the official address provided in the return of income.
  • It was argued that because the postal department did not return the dispatched envelope as undelivered or unclaimed, a strong legal presumption arises that the notice was successfully delivered to the addressee in the ordinary course of post.

Respondent’s Arguments

  • The Assessee supported the order of the Income Tax Appellate Tribunal, asserting that the assessment was invalid because no statutory notice under Section 143(2) had been effectively served upon them within the prescribed time limits.
  • It was maintained that service of notice must strictly adhere to the modalities laid down under Section 282 of the Act, and actual service within the deadline was a prerequisite for assuming jurisdiction.

Court Order/ FINDINGS

  • The High Court noted that under Section 282(1) of the Act, a statutory notice may be served either by post or in the manner of a summons issued under the Code of Civil Procedure, 1908.
  • The Court invoked Section 27 of the General Clauses Act, 1897, which provides that service by post is deemed effective by properly addressing, pre-paying, and posting a letter containing the notice. Unless the contrary is proved, service is deemed to take place when the letter would be delivered in the ordinary course of post.
  • The Court observed that the notice was dispatched through speed post from the I.P. Estate Post Office on October 25, 2002, to the correct address of the company. Under normal circumstances, it is presumed to reach the addressee within 2 to 3 days.
  • Since the envelope was never returned undelivered by the postal authorities, and the Assessee failed to provide any evidence or even file a counter-affidavit to deny receipt, the presumption of effective service remained unrebutted.
  • Accordingly, the High Court held that the notice under Section 143(2) was served within the prescribed period. The finding of the Tribunal was set aside, the substantial question of law was decided in favor of the Revenue, and the appeal was allowed.

Important Clarification

While the presumption of service by post under Section 27 of the General Clauses Act is a rebuttest presumption, the burden of proof rests entirely on the Assessee to demonstrate non-receipt. In the absence of an affidavit or concrete evidence to the contrary, the non-return of a properly addressed and dispatched statutory envelope constitutes valid and effective service within the eyes of the law.

Section Involved

  • Section 143(2) of the Income Tax Act, 1961
  • Section 144 of the Income Tax Act, 1961
  • Section 282 of the Income Tax Act, 1961
  • Section 27 of the General Clauses Act, 1897

Link to download the order

https://delhihighcourt.nic.in/app/case_number_pdf/2008:DHC:1094-DB/VBG25032008ITA3472006.pdf

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