ORDER
Shri Pradeep Parikh, A.M.
1. The department is in appeal before us against the order of the learned CIT(Appeals) dated 6-1-1992 in respect of assessment year 1984-85. The only issue for our consideration in this appeal is as to whether the notice under section 148 of the Income-tax Act, 1961 (‘the Act’) was within the prescribed period of limitation or otherwise keeping in view the decision of the Supreme Court in the case of R. K. Upadhyaya v. Shanabhai P. Patel [1987] 166 ITR 163/33 Taxman 229.
2. The assessee is an individual carrying on construction business. In the original assessment the income was determined by applying a net profit rate on net receipts, that is, after deducting the cost of material supplied by the contractee. From the figure so arrived at, a further amount of Rs. 36,600 was deducted, being excess cost of cement. This assessment was completed under section 143(3) on 15-5-1985. Subsequently however, the Assessing Officer was of the opinion that the sum of Rs. 36,600 should have been deducted from the total receipts and not from the net profit arrived at by applying the net profit rate. Accordingly, notice under section 148 was issued and served on the assessee. The reassessment was completed on 31-1-1991 after giving due opportunity of being heard to the assessee.
3. The assessee challenged the very jurisdiction of the Assessing Officer to issue notice under section 148 on grounds of limitation. As per the findings of the CIT(Appeals) the time available for issue of notice was up to 31-3-1989, whereas the same was served on the assessee somewhere in November 1989. According to him the notice was beyond the time-limit permissible under section 149(1)(a)(i) and hence cancelled the reassessment as void ab initio. The department being aggrieved by this order, is in appeal before us, and in the ground itself it has pressed into service the decision of the Apex Court in R. K. Upadhyaya’s case (supra).
4. The learned D.R., relying on the abovementioned decision submitted that the notice was issued on 12-10-1988. That was also the day on which the Assessing Officer recorded his reasons. Accordingly, the contentions of the learned D.R. was that the day the Assessing Officer recorded his reasons to issue the notice, the latter was issued. Therefore, in his opinion, it was in consonance with the decision in R. K. Upadhyaya’s case (supra). As per the said decision what was material was that the notice should have been issued within the period of limitation and service of notice was only a condition precedent for making the assessment. The learned D.R. also relied on the decisions in New Bank of India Ltd. v. ITO [1982] 136 ITR 679/18 Taxman 180 (Delhi), Iqbal Singh Atwal v. CIT [1984] 147 ITR 599/[1983] 13 taxman 267 (Cal.), Tiwari Kanhaiya Lal v. CIT[1985] 154 ITR 109/[1984] 19 Taxman 497 (Raj.) and CIT v. Lallubhai Jogibhai [1995] 211 ITR 769/79 Taxman 419 (Bom.).
5. Shri N. C. Dhadda, the learned counsel for the assessee, stressed on the interpretation of the term ‘Issued’. According to him the term “issue” contemplates that the process of serving the same should set in motion. Merely writing down the particulars and preparing the same does not mean that it is issued. If such an interpretation is given then the assessing authority may make the notice within the period of limitation but keep it on the file for an indefinite period of time before setting it in motion. This, according to him, would defeat the very purpose of prescribing the period of limitation. In the assessee’s case, it was submitted, the notice was served about 13 months after the issue, and there was no evidence to the effect that the process of setting the notice in motion was initiated within the period of limitation. Thus, it was urged that the notice was bad in law and hence the order of the CIT(Appeals) be upheld.
6. In reply, the learned D.R. submitted that the moment Assessing Officer records his reasons to issue the notice and makes out the notice, the process of setting it in motion is presumed.
7. We have considered the rival submissions. Since the plank of the department’s case has been the decision of the Supreme Court in R. K. Upadhyaya’s case (supra), it would be advantageous to consider the facts of that case on which the Apex Court laid down the principle that service is not a condition precedent to conferment of jurisdiction on the Assessing Officer : it is a condition precedent only to the making of the order of assessment.
8. In the said case the period of limitation was expiring on 31-3-1970. The notice was issued by registered post on 31-3-1970 itself and was served on the assessee on 3-4-1970. On these facts, the Supreme Court observed as follows :
“The requirement of issue of notice is satisfied when a notice is actually issued. In this case, admittedly, the notice was issued within the prescribed period of limitation as March 31, 1970, was the last day of that period. Service under the new Act is not a condition precedent to conferment of jurisdiction on the Income-tax Officer to deal with the matter but it is a condition precedent to the making of the order of assessment.”
9. In the case of New Bank of India Ltd. (supra) the notice was issued on the last day when the period of limitation was getting over. The fact as to exactly on which date it was served, is not available. However, in the present case the notice was dated 12-10-1988, but was it actually issued before 31-3-1989, is a moot point.
10. In the case of Iqbal Singh Atwal (supra), the question of limitation for issue of notice under section 148 was not before the Calcutta High Court and hence the said decision is not helpful to us to decide this appeal. On the same ground the decision in Tiwari Kanhaiyalal’s case (supra) of the jurisdictional High Court is also not helpful.
11. In CIT v. Kishore Chand [1989] 180 ITR 355/46 Taxman 324 (Punj. & Har.), the limitation period was expiring on 31-3-1969. Notice under section 148 was issued on 28-3-1969 and was served on 1-4-1969. On these facts, the Punjab & Haryana High Court held the notice to be valid.
12. In the case of CIT v. Rameshwer Prasad & Co. [1991] 188 ITR 291/55 Taxman 29, the question before the Allahabad High Court was whether the case of the assessee could be transferred to another Income-tax Officer between the date of issue of notice and service of notice. In this context the High Court held that once a notice is issued under section 148, the case is commenced and transfer of such a case is permissible under section 127. In our opinion, this decision is not directly helpful in the present appeal as it does not pertain to transfer of jurisdiction.
13. In CIT v. Smt. Beefathumma [1991] 188 ITR 649 (Ker.), notice under section 148 was issued on 7-3-1979. It was served by registered post on 8-3-1979 and served on the assessee on 21-4-1979. On these facts the Kerala High Court held the notice to be a valid notice.
14. In Lallubhai Jogibhai’s case (supra), the notice was issued on 29-3-1975 but was served on the assessee on 7-4-1975. On these facts the Bombay High Court observed that the requirement of issue of notice is satisfied when a notice is actually issued and accordingly held the same to be valid.
15. In CIT v. Major Tikka Khushwant Singh [1995] 212 ITR 650/80 Taxman 88 (SC), in a writ petition filed by the assessee, the Punjab & Haryana High Court directed the AAC to decide the assessee’s appeal in accordance with law and in doing so to also ascertain when the notice under section 148 had been despatched by registered post. The department filed a Special Leave Petition before the Supreme Court. The Supreme Court refused to interfere with the order of the High Court. Thus, according to the High Court, the date of despatch of notice was an important factor to decide the date of issue of notice.
16. In CIT v. Sheo Kumari Debi [1986] 157 ITR 13 (Pat.) (FB), the notice was signed on 30-3-1970 and was issued by registered post on 31-3-1970. Admittedly, it was served in first week of April, 1970. In this case, the Full Bench of the Patna High Court dealt at length explaining the meaning of the words “issue” and “Service”. The Court also discussed at length the difference between the provisions in the Income-tax Act, 1922 and the provisions in the Income-tax Act, 1961. According to the Court, the issue of notice within the time period was made mandatory under the present Act, and not service of notice, so that a recalcitrant assessee may not avoid the same and render the efforts of the revenue to assess escaped income futile. In this context the Court accepted the argument on behalf of the revenue that the Department would not have the least motivation to withhold or delay service after the officer first duly recorded a reasoned order for the issuance of a notice for reopening the assessment under section 148.
17. It is exactly the opposite we find in the present case, what the Patna High Court did not anticipate. In the case before us, the reasons were recorded on 12-10-1988. The notice was also made out on the same day. However, there is nothing on record to show that the same was issued by 31-3-1989. All the judicial authorities discussed above unequivocally point out that the notice should actually be set in motion for being served on the assessee. Simply preparing the notice but keeping it on file past the limitation period does not tantamount to issuing the same. The Patna High Court also, quoting from Chamber’s Twentieth Century Dictionary, observed that the relevant meaning of the word “issue” are : act of sending out; to put forth; to put into circulation; to publish; to give out for use. Thus keeping the notice on file after preparing it, does not fit into any of these meanings to be described as “issued”. After issuing it as described above, it is immaterial when it is served. It may be served even after three years, but the essence is that it should set into motion for being served. And, the onus to show that it was so issued, lies on the department, who in the case before us, has failed to do.so.
18. In this context, it would be unfair not to deal with the contention of the learned D.R. mentioned in para 6 above, that once the notice is made out, the process of setting it into motion is presumed. In this connection, the Patna High Court also referred to section 114 of the Evidence Act which provides that there is a presumption that all official acts are regularly performed. There cannot be any quarrel with the observations of the Hon’bie High Court. However, the presumption is certainly rebuttable. And that is why in Major Tikka Khushwant Singh’s case (supra) in para 15, the Hon’ble High Court directed the A.A.C. to ascertain when the notice under section 148 had been despatched. In the present case, the glaring facts themselves demolish the presumption. The notice was made out on 12-10-1988, more than five months before the period of limitation was to expire, but was served on the assessee on 9-11-1989, i.e., about thirteen months after it was prepared. The department’s case is not that the notice was sent out on or about 12-10-1988 or at any time before 31-3-1989. We have perused the original records of the department and do not find any material to show that the notice was despatched before 31-3-1989. Under these circumstances, normal presumption would be that the notice must have been set into motion for being served only a few days before 9-11-1989, i.e., the day on which it was served.
19. The Andhra Pradesh High Court in CIT v. Smt. Kailasa Devi & Smt. Rukmini Bai [1976] 105 ITR 479, while holding the words “issued” and “served” to be synonymous, had expressed apprehension about the fall in official standard. The Patna High Court, while referring to section 114 of the Evidence Act, did not lay emphasis on this aspect. However, the Hon’ble High Court did except some fall. The present case, perhaps, may be one – that of negligence on the part of the Assessing Officer to issue the notice before limitation despite preparing the same well in advance.
20. Finally, a word about the significant change made in the present Act from that in the earlier Act. Under the 1922 Act, service before the limitation was a precondition. Under the present Act, only issue before the limitation was made mandatory. This significant change according to the Patna High Court, was to blunt the efforts of recalcitrant assessee wishing to avoid the service of notice in the present case, there is no such allegation against the assessee, nor any material to indicate so.
21. In the ultimate analysis, just as “issue” and “service” are held not to be synonymous by most of the courts, including the Apex Court under the Income-tax Act, 1961, in our opinion, the words “preparation” and “issue” are also not synonymous. In the facts of the present case, the notice was prepared but not issued, and the presumption under the Evidence Act about official acts having been performed regularly stands demolished. We, therefore, hold the notice under section 148 to be bad in law. The order of the CIT(Appeals) does not call for our interference.
22. In the result, the appeal of the department is dismissed.