Appearance Of AR Not Enough For Presuming Service On Assessee Under S. 292BB Of ITA: Orissa High Court

The bench of Chief Justice Dr. S. Muralidhar and Justice M.S. Raman remarked that a person in judicial custody is deprived of many constitutional rights, and thus any officer of the Government, including a Principal Commissioner of Income Tax (PCIT), must pass an appropriate order requiring service of notice on the assessee, who is in judicial custody, through the Superintendent of the concerned jail. The Court added that this is the bare minimum requirement in law.

The Court further ruled that appearance of the authorized representative of the assessee before the Income Tax Authority in any inquiry relating to an assessment or reassessment, is not sufficient for the purpose of presuming service of notice on the assessee under Section 292BB of the Income Tax Act.

Section 292BB of the Income Tax Act provides that where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice which is required to be served upon him under the provisions of the Income Tax Act, has been duly served upon him. Further, such assessee shall be precluded from taking any objection that the notice was not served upon him or that it was served in an improper manner.

The case of the respondent/assessee, Narayan Kumar Khaitan, was taken up under Section 263 of the Income Tax Act, 1961, which confers revisional power on the specified income tax authorities. The revenue department opined that the original assessment order under Section 153C was erroneous and prejudicial to the interests of the Revenue.

In the proceedings initiated under Section 263, a notice was issued upon the assessee at his last known address.

When a staff of the assessee who appeared before the PCIT, informed the PCIT that the assessee was in judicial custody, the PCIT treated the appearance of the said staff as sufficient service of notice on the assessee in terms of Section 292BB of the Income Tax Act. The PCIT, thus, proceeded to pass an order under Section 263, revising the assessment proceedings for the relevant assessment year.

Consequently, a huge sum on account of unexplained receipts was added to the assessee’s income without hearing the assessee.

In an appeal filed before the Income Tax Appellate Tribunal (ITAT), the Tribunal held that the said staff was not an authorized representative of the assessee and that he only appeared to inform the PCIT where the assessee could be located.

The ITAT thus allowed the appeal of the assessee, against which the revenue department filed an appeal before the Orissa High Court.

The revenue department submitted before the High Court that in terms of Section 292BB of the Income Tax Act, the appearance of the staff of the assessee should itself be treated as appearance of the assessee and once the assessee has appeared, he can no longer claim that he was not served with a notice.

Rejecting the arguments made by the revenue department, the High Court reckoned that Section 292BB only talks of the appearance by the assessee and not the appearance of an authorized representative of the assessee.

Perusing the provisions of Section 292BB, the Court remarked, “The above provision 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 High Court further noted that the ITAT, in its order, had concluded that the said staff of the assessee who had appeared before the PCIT, was not an authorized representative of the assessee. He merely appeared to inform the PCIT where the assessee could be located, i.e., the jail, the Court observed.

The bench remarked that despite being informed that the assessee was in judicial custody, the PCIT did not make the effort of having the notice served upon the assessee through the Superintendent of the concerned jail.

While holding that a person in judicial custody is deprived of many constitutional rights which he could otherwise exercise, the Court said, “Any officer of the Government including a 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 on such person through the Superintendent of the concerned jail. This is the bare minimum requirement in law.”

Since the PCIT failed to serve notice on the assessee through the Superintendent of the concerned jail, the bench ruled that the department cannot contend that the mere appearance of a staff of the assessee before the PCIT must be taken as the appearance by the noticee/assessee himself.

The High Court thus dismissed the appeal.

Case Title: PCIT (Central) versus Narayan Kumar Khaitan

Dated: 14.02.2023

Counsel for the Petitioner: Mr. Radheyshyam Chimanka, Senior Standing Counsel Along with Mr. A. Kedia, Junior Standing Counsel

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