ITA No. 7 of 2010

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IN THE HIGH COURT OF PUNJAB AND HARYANA AT

CHANDIGARH.

ITA No.7 of 2010

Date of decision 8.2.2010

Commissioner of Income Tax 1, Ludhiana

... Appellant

Versus

Sh. Naveen Chander

... Respondent

CORAM:

HON'BLE MR. JUSTICE M.M. KUMAR

HON'BLE MR. JUSTICE JITENDRA CHAUHAN

Present:

Mr. Vivek Sethi ,Advocate for the appellant

1.To be referred to the Reporter or not ?

2.Whether the judgement should be reported in the Digest ?

M.M.KUMAR, J.

The Revenue has approached this Court by invoking the

provisions of Section 260A of the Income Tax Act,1961 (for brevity 'the

Act') challenging order dated 24.2.2009 passed by the Income Tax

Appellate Tribunal, Chandigarh (for brevity 'the Tribunal') in IT(SS)A

No.28/CHANDI/ 2004 for the block period 1.4.1989 to 24.6.1999. The

Revenue has claimed that following substantive questions of law would

arise for determination of this Court:

“i) Whether on the facts and in law, the Hon'ble Income Tax

Appellate Tribunal was justified in ignoring the fact that vide

order sheet entry dated 19.5.2003, the assessee had duly noted

the fact that notice u/s 158 BD was initially issued by registered

post, which was received back and lateron the same was served

by affixture on 23.7.2001 and service by affixture was not

objected to by the assessee at the time of assessment. The

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Hon'ble ITAT in its order has misquoted the fact that the AO

noted in para 4.1 of his order the objection of assessee

regarding improper service of notice which is not correct;

ii)Whether on the facts and in law, the Hon'ble Income Tax

Appellate Tribunal was justified in holding the service of notice

u/s 158 BD made by affixture (which was not objected to by the

assessee at the time of assessment) as invalid and consequently

holding the assessment proceedings resulting in the order dated

27.6.2003 bad in law; and

iii)Whether on the facts and in law, the Hon'ble Income Tax

Appellate Tribunal was justified in not adjudicating the

grounds raised by the Revenue on merits of the case “?

The basic controversy raised is as to whether the assessee-

respondent was served under Section 158 BD of the Act at his last known

address on 23.7.2001 by way of affixture. The Tribunal considered the

aforesaid issue as a 'fundamental' controversy because it was necessary to

establish that such a notice was served to confer jurisdiction. The Tribunal

placed reliance on the provisions of Order V Rule 17 of the Code of Civil

Procedure, 1908 (for brevity 'the Code') and has concluded on principle that

where notice of service is claimed to have been served by affixation under

Order V Rules 17, 18 and 19 of the Code then it becomes necessary to

examine whether such service has been made in accordance with the

procedure, as it is mandatory. The first requirement is to ensure that the

place is properly identified and secondly the report is authenticated by

independent persons to avoid any attempt by the Process Server to prepare

the report sitting in his office. The Tribunal has referred to the report dated

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23.7.2001 issued by the Process Server. According to the report of the

Inspector/ Notice Server dated 23.7.2001 the notice was affixed on the main

door of Shop No. 33, Anajmandi, Mullanpur. There was no evidence of any

local person having been associated with in identifying the place of business

of the assessee- respondent and the report is not witnessed by any person at

all. It has been found to be flagrant violation of Rule 17 of Order V of the

Code which lays down a procedure to serve notice by affixture. The

conclusion is recorded in paras 13 and 14 of the order which reads thus:

“ 13. So, however, in the report of the Inspector/ Notice

Server, who claimed to have affixed the notice, there is no

evidence of any independent local person having been

associated with the identification of the place of busines