A communication takes place when the order is dispatched or “sent out” and is made known or public. Communication in this context can be actual or even constructive - Delhi High Court
This decision draws a distinction between „finding‟ and „direction‟ in the context of Section 153(3)(ii) of the Act, which removes bar of limitation period for making of assessment under Section 143 or 144 or 147 of the Act. Bar of limitation is removed when there is a direction issued by the statutory authority in the nature of an order requiring positive compliance and not by on mere "finding". Petitioner relies on the said decision to urge and submit that „Terms of Reference‟ must be distinguished and cannot be equated with service of the order under Section 142(2A) of the Act. Rajinder Nath and Others (supra) examines and interprets a different provision.
The said findings have no relevance when we examine the question as to the effective date when the order is passed. A communication takes place when the order is dispatched or “sent out” and is made known or public. Communication in this context can be actual or even constructive. Service of the letter dated 30th March, 2013 with the „Terms of Reference‟ would be effective communication in the light of the aforesaid discussion even if it is presumed that the order under Section 142(2A) was not enclosed with the letter. Further, order under Section 142(2A) of the Act was certainly dispatched and sent by speed post vide postal receipt ED86785578IN on 31st March, 2013 at 1819 hours, i.e. within the prescribed period.
Nokia India Private Limited has filed the afore-stated writ petition praying for multifarious reliefs, albeit during the course of arguments primarily one contention was raised and argued; assessment proceedings for the Assessment Year 2009-10 have abated as time barred.
2. The petitioner is a company incorporated under the Companies Act, 1956 and engaged in manufacture and sale of telecommunication handsets.
3. For the Assessment Year 2009-10, the petitioner filed its return on 30th September, 2009, declaring total income of Rs.826.92 crores. The return was selected for scrutiny and notice dated 9th September, 2010 under Section 143(2) of the Income Tax Act,1961 („Act‟, for short) was issued.
4. As per the petitioner, assessment proceedings had remained dormant for nearly twenty eight months till notice dated 17th January, 2013 was issued. Petitioner was required to produce books of accounts for the first time on 28th February, 2013, barely a month before the expiry of time limit for passing the assessment order on 31st March, 2013. Petitioner submits that books of accounts and vouchers were voluminous (described as truck loads), and accordingly, the Assessing Officer had asked the petitioner to furnish books of account in a manner they could be easily examined. On 8th March, 2013, books were submitted in Systems Applications and Products (SAP) format. Trial balance in soft and hard copies was also provided. Petitioner's request to specify ledger accounts required to be produced was rejected by the Assessing Officer with the direction to produce all accounts by 11th March, 2013. Petitioner on 11th March, 2013 had submitted a soft copy of the books of accounts in Excel sheet format, including trial balance and more than 600 pages of general ledger accounts etc. In the proceedings held on 14th March, 2013 numerous queries were raised and answered by the petitioner.
5. On 21st March, 2013, ten days before expiry of time for completing assessment, the Assessing Officer issued notice under Section 142(2A) of the Act to show cause as to why accounts for the Assessment Year 2009-10 should not be audited by a special auditor. Notice was served on the petitioner vide fax on Friday, 22nd March, 2013 at 12.41 p.m. and the petitioner was required to submit its reply/objections by 12.30 p.m. on 25th March, 2013. The petitioner protested, vide submissions on 25th March, 2013, asserting that there was neither a failure to submit details nor incorrect details were furnished. It was highlighted and stressed that adequate time and opportunity had not been given to respond to the show cause notice.
6. The petitioner asserts that at 6 p.m. on 26th March, 2013, opportunity notice was received by fax from the office of the Commissioner of Income Tax, Delhi-V, the second respondent, on the proposal given by the Assessing Officer for initiation of special audit. The petitioner was required to respond by 11.30 a.m. on 28th March, 2013. The petitioner has alleged that only five pages of the draft/proposed order of the Assessing Officer were served on 26th March, 2013. Draft order of twenty two pages was served on 28th March, 2013 at 10 a.m. By letter dated 28th March, 2013, the petitioner informed the second respondent that due to paucity of time it was not possible to submit detailed objections. Request for extension of time by 3 to 5 working days was made. The second respondent had thereupon granted time to the petitioner to submit their response by 11 a.m. on 30 th March, 2013.
7. The petitioner, vide their letter dated 29th March, 2013, had reiterated that due to paucity of time it was not possible to file a detailed reply to the draft order. However, preliminary objections were raised against initiation of special audit proceedings.
8. As per the respondents, notices under Section 142(1)/143(2) were issued. Reference was made to the order sheets dated 21st December, 2012 and 4th January, 2013. Subsequently, after damaging and incriminating material establishing tax evasion had come to light in the survey operations, detailed questionnaire was issued on 17th January, 2013. Despite opportunities, part details and only a few ledger accounts were furnished and full compliance was never made. Soft copy of the books of accounts furnished in SAP format could not be accessed by using an accounting software and had to be converted, and hence cannot be termed as production of books of accounts. Authorized representatives of the petitioner had expressed their inability to explain accounts in entirety and reconcile the details furnished with the accounts. Given the said facts, the Assessing Officer had drawn the proposal for special audit.
9. On the aspect of opportunity, the respondents assert that the petitioner was deliberately marking time, knowing that the last date for passing of the assessment order was 31st March, 2013. Commissioner of Income Tax, Delhi-V, though not mandated as per the provisions of the Act, had issued opportunity notice to the petitioner to attend and explain vide letter dated 26th March, 2013. An attempt to serve the opportunity letter on the authorized representative was made on 26th March, 2013 itself. However service was refused on the ground that this was against the policy of the Chartered Accountant firm. At 11.45 a.m. on 28th March, 2013, authorized representative had appeared and confirmed having received the entire/full copy of the draft order. Earlier on 26th March, 2013, a portion of the draft order was furnished. Opportunity was granted to the petitioner to present their case at 5 p.m. on 28th March, 2013 and again at 11 a.m. on 30th March, 2013 (30th March, 2013 and 31st March, 2013, though Saturday and Sunday, in terms of the directions issued by the Central Board of Direct Taxes, all income tax offices had remained open). On 30th March, 2013, Commissioner of Income Tax, Delhi-V made repeated attempts to contact two representatives of the Chartered Accountant firm appearing for the petitioner, but they did not pick up their phones. Ultimately, partner of the firm was contacted and informed about the attempts made. Commissioner of Income Tax, Delhi-V had also contacted the Advocate representing the petitioner and informed that response was awaited. Thus, adequate and fair opportunity was given, but the petitioner had acted with malevolent intent.
10. The respondents state that Commissioner of Income Tax, Delhi-V after duly applying his mind on 30th March, 2013 had accorded approval to the draft order along with the Terms of Reference for special audit. Approval was dispatched to the office of the Assessing Officer after being recorded in the dispatch register at serial No. 3712 and received in the office of the Assessing Officer vide serial No.2681 in the receipt register. Copy of the dispatch register and receipt register has been enclosed with the counter affidavit. On the same day, i.e., 30th March, 2013, the Assessing Officer passed the order under section 142(2A) of the Act. M/s T.R. Chadha and Company was appointed as the Special Auditor to conduct audit.
11. As per the respondents, the order under Section 142(2A) dated 30th March, 2013 and the Terms of Reference were sent by speed post vide receipt Nos. ED867855480IN, ED867855493IN and ED867855578IN dated 31st March, 2013 between 1815 to 1819 hours to Price Water House Cooper, DLF, Gurgaon; Nokia India, Greater Kailash, Delhi and Nokia India, Gurgaon, respectively. The said order was transmitted twice by fax on 31 st March, 2013. Thirdly, service was affected at the office of the petitioner company at industrial plot No. 243, Udyog Vihar, Phase-I, Dundahera, Gurgaon through Atul Kumar and Sandip Dhanuka, Tax Assistants, who submitted service report dated 31st March, 2013, affirming having been deputed to serve the order under Section 142(2A) of the Act for the Assessment Year 2009-10. As per the said report, two persons, who were present at the reception of the said office, had initially refused to accept the letter, but after talking to the senior officers on phone, they had accepted the letter at 5.45 P.M.
12. The petitioners, however, vehemently deny having received the order under Section 142(2A) of the Act by any of the aforesaid modes on or before 31st March, 2013. It is stated that only 5 pages, i.e. covering letter of two pages and Terms of Reference of three pages, were sent by two fax messages on 30th March, 2013, and not the entire order of 22 pages under Section 142(2A) of the Act. Reliance is placed on two fax message confirmation reports submitted by the respondents, indicating that five pages were transmitted. Similarly, postal receipt Nos. ED867855480IN and ED867855493IN mention the weight of the envelopes as 20 grams and the fee charged as Rs.17/-, which was payable for packets up to 50 grams. Order under Section 142(2A) of 22 pages would have weighed much more and was not enclosed in the said envelopes. Moreover, as the envelopes were handed over to the postal authorities on 31st March, 2013, it should be reasonable to hold that service was affected on or after 1st April, 2013. The Tax Assistants, as per the petitioner, had served a two page letter dated 30th March, 2013 enclosing Terms of Reference at the Gurgaon office of the petitioner at 1738 hours on 31st March, 2013. Order under Section 142(2A) was not served. Terms of Reference and order under Section 142(2A) are distinct and separate and cannot be equated. As per the petitioner, they were served with the order under Section 142(2A) only on 3rd April, 2013.
13. Petitioner's legal assertion is that the order under Section 142(2A) should have been physically and actually served or delivered on or before 31st March, 2013. Reference was made to proviso to Section 142(2C)
In the aforesaid decision, the Supreme Court had examined the question whether an order of suspension passed against a Government servant takes effect when it was made or when it was actually served and received. The question had arisen in the context of Rule 3.26(d) of the Punjab Civil Services Rules, as they then were, which had mandated that the disciplinary enquiry would lapse on retirement of the State employee unless an order of suspension was passed and would have the effect of not permitting the concerned Government servant to retire. In the said case, order of suspension against Khemi Ram was dispatched on 31st July, 1958, but was served after his retirement on 4th August, 1958. The single Judge and Division Bench of the Punjab and Haryana High Court had held that the Government employee had retired from service rendering the enquiry and the ultimate dismissal invalid for the order of suspension was served post 4th August, 1958. In this case, reference was made to decision of the Supreme Court in Bachhittar Singh versus The State of Punjab,  3 Supp. SCR 713 and State of Punjab versus Sodhi Sukhdev Singh,  2 SCR 371 to argue that an uncommunicated order on the file was inconsequential. Reference was also made to Sardar Pratap Singh versus State of Punjab, (1966) ILLJ 458 SC wherein two Judges of the Supreme Court had held that an order of suspension would be effective, the moment it was issued. However, three other Judges in Sardar Pratap Singh (Supra) had not expressed any view on the said aspect. Thus, Khemi Ram (Supra) holds that communication would be effective when it was dispatched, no matter when it was actually received. Once an order was dispatched and goes out of the control of the authority, there was no chance whatsoever of the authority changing its mind or modifying the order. The judgment also observed that the communication could be actual or constructive. The said observations are relevant as the petitioner in the present case does accept having received „Terms of Reference‟ on or before 31st March, 2013. In view of our findings recorded above, we would record that the order itself under Section 142(2A) was dispatched on 31st March, 2013.
33. The order under Section 142(2A) was communicated when it was sent out before 31st March, 2013, as elucidated in Khemi Ram (supra)
34. The aforesaid judgments of the Supreme Court were referred to and examined by a Division Bench of this Court in Qualimax Electronics Private Limited (supra) and it was held as under:-
“32. Of course, the is the danger that to prevent an assessee from seeking a settlement of his case, the adjudicating authority may quickly pass the adjudication order the moment he gets an inkling that the assessee is about to approach the Settlement Commission. There is also the danger that the adjudicating authority may back date an order. Adjudicating authorities are not supposed to behave in this manner and are presumed to function within the boundaries of law but, these things can happen. Would not a literal construction of the provisions then come in aid of such errant officers and run counter to the legitimate hopes of assesses who want to come clean, pay their taxes and have their cases settled by the Settlement Commission? The answer to this would lie in construing the date of adjudication to be the date on which the adjudicating authority loses his locus poenitentia, or opportunity to tear off, destroy or alter the adjudication order. In other words, when the order goes out of his control. And, that happens when the order is signed and the one-way process of sending it to the assessee is put in motion either directly or indirectly through some other agency.
33. Thus, the date of receipt of the order-in-original is not a relevant circumstance. What is of prime importance is the date on which the order-in-original was despatched from the office of the adjudicating authority (in this case, the Commissioner of Central Excise & Customs, Ghaziabad). As we have seen, the order-in-original dated 24.12.2009 had left the office of the said Commissioner on 31.12.2009 and was beyond his reach and control. Consequently, the adjudication becomes effective and complete on that date, i.e, 31.12.2009 That being so, the necessary pre-condition of a case pending adjudication on the date of the settlement application is not satisfied. As such, the Settlement Commission had no jurisdiction to entertain the plea of settlement. Because, it is only a “case” as defined in section 31(c) which could be the subject matter of settlement. Section 31(c) defines “case” to mean any proceeding for the levy, assessment and collection of excise duty, “pending before an adjudicating authority on the date on which an application under sub-section (1) of section 32E is made”. Once, the order leaves the hands of the adjudicating authority in the sense explained above, the „case‟ can no longer be said to be pending before him. Conversely, the proceeding would be regarded as pending before an adjudicating authority till the order does not go out of his control. In the present case, this happened on 31.12.2009 Thus, on 08.01.2010, when the settlement applications were filed by the petitioners, the matter before the adjudicating authority had already been adjudicated.”
In the said case, the petitioners therein had challenged the order passed by the Customs and Central Excise Settlement Commission holding that the settlement applications were not maintainable as the cases had been adjudicated prior to filing of the settlement applications. Order-in-original dated 24th December, 2009 passed by the adjudicating authority was received by the petitioners on 8th January, 2010. The applications for settlement were filed on 8th January, 2010. The ratio of this judgment in Qualimax Electronics Private Limited (supra) again does not support the case of the petitioner.
35. In Qualimax Electronics Private Limited (supra), reference was made to the judgment of the Supreme Court in Collector of Central Excise, Madras versus M.M. Rubber and Company, Tamil Nadu, 1992 Supp (1) SCC 471, which decision had drawn distinction between commencement of limitation period for filing of an appeal against an order, and when an order comes into force or becomes operative. In the former case, period of limitation for filing of an appeal would normally commence when the order passed was received, published and notified. In the latter case, the order becomes operative and effective from the date it was signed and the authority ceases to have any locus poenitentiae to tear off, modify or alter the order.
36. M.M. Rubber and Company (supra) had clarified on two different principles of law relating to limitation. First principle relates to exercise of power or an act, affecting the rights of the parties within period of limitation prescribed. Order or decision of authority comes into force or becomes operative or becomes an effective order or decision on and from the date when it is signed. This happens when the order is made or passed; that is to say when the order is made public or notified in some form or is sent out by the authority so as to have left his hands. Thereafter, the Authority cannot tear or draft a different order. Date of communication of the order to the parties whose rights are affected is not the relevant date for purpose of deciding whether or not the order was passed within the prescribed time.
37. Second principle relates to computation of period of limitation for a party affected by the order or decision, who invokes remedy by way of appeal, revision etc. The rule is that period of limitation for invoking the remedy starts from the date the order is communicated to the party or the date when it is pronounced or published, whereby the party affected has a reasonable opportunity of knowing of the passing of the order or its content.
Communication in the second sense is different from communication in the first sense i.e. the first principle. Communication in the second sense must be satisfied before the decision is said to be conclusive or binding. This principle is not dependent upon provisions of a particular statute but under the general law.
38. Pertinently, in M.M. Rubber and Company (supra) it was observed that knowledge of the party affected by the decision may be either actual or constructive. Knowledge of the party effected by the decision either actual or constructive, is the essential element which must be satisfied. This is a salutary and just principle.
39. We often overlook the aforesaid distinction when we examine the question as to whether an order has been passed within the period of limitation and apply decision with first and second principle interchangeably, which is impermissible and wrong. It is in this context we would also like to refer to the decision of the Supreme Court in Commissioner of Income-tax Vs. Major Tikka Khushawant Singh, (1995) 212 ITR 650 (SC) which referred to the earlier decision in the case of R.K. Upadhyay Vs. Shanabhai P. Patel, (1987) 166 ITR 163 and rejected the plea of the assessee and upheld the contention of the revenue that the date of issue of notice would determine, if it was within the period of limitation and would give jurisdiction to the assessing officer to proceed and not the date on which notice was served. It was observed that issue of notice within the statutory period gives jurisdiction but re-assessment cannot be made till notice was served.
40. In Bacchittar Singh (supra) and other cases it has been held that decision was written out, signed and dated, it would be nothing but a decision which the officer intends to pass and not final. An order on the file till communicated, would not be an order passed or made. Communication of the order would be complete when made public or notified in some form or sent out by the authority so as to have left from his hands as explained in M.M. Rubber and Company (supra).
41. In K. Joseph Jacob versus Agricultural Income Tax Officer and Another,  190 ITR 464 (Ker) dealt with Section 35(2) of the Kerala Agricultural Income Tax Act, 1950, which had stipulated that no order of assessment, etc. shall be made after expiry of five years at the end of the year in which the agricultural income was first assessable. It was observed that communication was made on the date of communication and not on the date when the communication was received. Further, the order or assessment came into force, when it was communicated because the party must be put to notice of that order. First observation relates and states the first principle and the second observation states the second principle. We would have some reservations in accepting the ratio expressed by the single Judge in K. Joseph Jacob (supra) in the light of the decisions of the Supreme Court in Major Tikka Khuswant Singh and R.K. Upadhyay (supra).
42. Government Wood Works versus State of Kerala,  69 STC 62 (Kerala High Court) relates to Kerala General Sales Tax Act, 1963. In the said case, order under Section 35 of the aforesaid Act was made on 3rd September, 1984, but communicated on 28th September, 1984 with an order of remit to the assessing authority, i.e., after period of limitation of four years, which were prescribed. It was observed that mere signing of the order on the file was not enough unless it was in some way pronounced or published or party affected has some means of knowing it. To make an order complete and effective, it should be issued so as to beyond the control of the authority from possible change or modification therein. This, it was observed, should be done within the prescribed period though actual service of the order may be beyond that period. In this case, the Authority/Revenue had failed to produce evidence and material that the order was sent out within the prescribed period. To this extent, therefore, decision of Kerala High Court in Government Wood Works (supra) would not support the petitioners for in the present case order under Section 142(2A) was communicated, i.e. it was “sent out” and dispatched within the prescribed period of limitation.
43. In the aforesaid situation and to meet the argument, that „Terms of Reference‟ were communicated and received by the petitioner alongwith letter dated 30th March, 2013 on 31st March, 2013, reference was made to Rajinder Nath and Others (Supra). This decision draws a distinction between „finding‟ and „direction‟ in the context of Section 153(3)(ii) of the Act, which removes bar of limitation period for making of assessment under Section 143 or 144 or 147 of the Act. Bar of limitation is removed when there is a direction issued by the statutory authority in the nature of an order requiring positive compliance and not by on mere "finding". Petitioner relies on the said decision to urge and submit that „Terms of Reference‟ must be distinguished and cannot be equated with service of the order under Section 142(2A) of the Act. Rajinder Nath and Others (supra) examines and interprets a different provision. The said findings have no relevance when we examine the question as to the effective date when the order is passed. A communication takes place when the order is dispatched or “sent out” and is made known or public. Communication in this context can be actual or even constructive. Service of the letter dated 30th March, 2013 with the „Terms of Reference‟ would be effective communication in the light of the aforesaid discussion even if it is presumed that the order under Section 142(2A) was not enclosed with the letter. Further, order under Section 142(2A) of the Act was certainly dispatched and sent by speed post vide postal receipt ED86785578IN on 31st March, 2013 at 1819 hours, i.e. within the prescribed period.
44. In view of the aforesaid discussion and after examining the entire issue from factual as well as legal position, we have come to the conclusion that the writ petition has no merit. Assessment proceedings have not abated Accordingly, the writ petition is dismissed, with no order as to costs.
Cases Referred to
1. R.K. Upadhyay Vs. Shanabhai P. Patel, (1987) 166 ITR 163
2. Commissioner of Income-tax Vs. Major Tikka Khushawant Singh, (1995) 212 ITR 650 (SC)
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