Mere Appearance of staff of person in Judicial Custody should not be taken as appearance by Assessee himself in absence of Valid Notice: Orissa HC [Read Order]

In a major decision the Orissa High Court observed that mere appearance of staff of person in judicial custody should not be taken as appearance by assessee himself in absence of valid notice

There was a search and seizure proceedings under Section 132 of the Income Tax Act in the case of M/s. Shivom Minerals Ltd and group. On the basis of the seized books of accounts, the case of the Respondent/Assessee, Narayan Kumar Khaitan, was taken up for scrutiny for AY 2010-11.

It is stated that during the course of search, certain incriminating documents were found and, thereafter assessment proceedings under Section 153C read with Section 143(3) of the Income Tax Act for the said AY was completed accepting the income returned.

Subsequently, the case of the Respondent/Assessee was picked up under Section 263 of the Income Tax Act and it was concluded that the original assessment order under Section 153C of the Income Tax was erroneous and prejudicial to the Revenue. In the proceedings under Section 263 of the Income Tax Act, notice was issued for being served upon the Assessee at his last known address.

Uttam Kumar, purportedly a staff of the Assessee appeared and informed the PCIT that the Assessee was in judicial custody. Instead of directing notice to be issued to the Assessee through the Superintendent of Jail.

The PCIT treated the appearance of Uttam Kumar as sufficient service of notice on the Assessee in terms of Section 292BB of the Income Tax Act and proceeded to pass his order under Section 263 of the Income Tax Act revising the assessment proceedings for AY 2011-12. An addition of a huge sum on account of unexplained receipts was thereafter made without hearing the Assessee.

Section 292 BB of the Income Tax Act is a in a taxing statute admits only of strict interpretation. If the legislative intent was that the appearance of an Assessee or his authorized representative was sufficient for the purposes of presuming service notice, then there should be an express provision to that effect. The provision, on the other hand, only talks of appearance by the Assessee and not an authorized representative of the Assessee.

The Bench comprising observed that “PCIT should be conscious that once information was received that a person to whom notice has to be served is in judicial custody, then an appropriate order should be passed requiring service of notice. With the PCIT having failed to do so, it was not open to the Department to contend the mere appearance of a staff of such person in judicial custody before the PCIT should be taken to be the appearance by the Noticee/Assessee himself.”

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