2011 (8) TMI 1151 - AT - Income Tax

Reopening of assessment - invalid notice - Held that - The fact that notice was not served on the correct person and the fact that notice by post was not sent to the correct address also remaining unrebutted on record. Fatuous argument advanced by the Sr. DR that at the address as per return the only likely occupants would be cows and buffaloes as such is of help to the department as it merely addresses the fact that no attempt was made to serve notice to the address available on the return. Similarly the argument that notice would have been received despite a wrong address in a small place like Bulandshahar also does not inspire any confidence and it definitely cannot be said to be a rebuttal of the consistent unrebutted stand of the assessee that the notice was never served upon the assessee. In regard to notice on some Minakshi Agarwal again in the face of consistent stand of the assessee right from the stage of AO that he has not received the notice and she was not the authorized person of the assessee a rebuttal by the department on record is not available.

Issues Involved:
1. Validity of Proceedings under Section 147
2. Basis for Formation of Belief that Income has Escaped Assessment
3. Binding Nature of Decisions from Non-Jurisdictional Benches
4. Service of Notice under Section 148

Detailed Analysis:

1. Validity of Proceedings under Section 147:
The Department contended that the CIT(A) erred in holding that the initiation of proceedings under Section 147 was invalid. The assessee argued that the Assessing Officer (AO) did not exercise an independent mind and acted merely on information received from another AO, which was termed as "borrowed satisfaction." The CIT(A) quashed the proceedings, stating that the AO acted mechanically and without application of mind. The Tribunal upheld the CIT(A)'s decision, agreeing that the AO proceeded on borrowed satisfaction and did not independently verify the information received.

2. Basis for Formation of Belief that Income has Escaped Assessment:
The Department argued that information about the bogus nature of a gift from the donor's ITO was a valid basis for the AO's belief that income had escaped assessment. The assessee countered that the AO did not verify the correctness of the information and acted mechanically. The Tribunal noted that the AO recorded reasons verbatim from the information received without cross-checking the facts, such as the names of donor trusts and the amounts involved. The Tribunal found that the AO's belief was not independently formed and upheld the CIT(A)'s decision to quash the proceedings.

3. Binding Nature of Decisions from Non-Jurisdictional Benches:
The Department questioned whether the CIT(A) was bound by decisions from other CIT(A)s or non-jurisdictional benches of the ITAT. The CIT(A) relied on various judgments, including those from the Agra Bench of the ITAT, which had quashed reassessment proceedings in similar cases. The Tribunal supported the CIT(A)'s reliance on these judgments, emphasizing the principle of judicial discipline that requires following the decisions of higher appellate authorities.

4. Service of Notice under Section 148:
The assessee claimed that the notice under Section 148 was never served. The AO contended that the notice was served by notice server and speed post, but the addresses were incorrect. The Tribunal noted that the Department did not provide evidence to show proper service of notice. The Tribunal found that the notice was not served on the correct address or person, which rendered the assessment order void ab initio.

Conclusion:
The Tribunal dismissed the Department's appeal, upholding the CIT(A)'s decision to quash the reassessment proceedings. It concluded that the AO acted on borrowed satisfaction without independent verification and that the notice under Section 148 was not properly served. The Tribunal emphasized the need for the AO to independently form a belief based on verified information and to ensure proper service of notice to uphold the validity of reassessment proceedings.

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