2016 (8) TMI 1179 - AT - Income Tax

Reopening of assessment - unsigned notice - reasons recorded are subsequent to the date of notice - Held that - The unsigned notice is not a curable irregularity but is a nullity. The reasons were recorded on 13-07-2006 which makes it a clear case of recording of reasons after the issue of notice. It is beyond comprehension as to how the theory of ejusdem generis comes to the rescue of the Revenue. Literal meaning of ejusdem generis is of the same kind or nature as per Wharton s Law Lexicon Sixteenth Edition. This term is chiefly used in cases where general words have a meaning attributed to them less comprehensive than they would otherwise bear, by reason of particular words preceding them. The recording of reason by mentioning it as being recorded on 20-06-2006 but signing it on 13-07-2006 can by no stretch of imagination be treated as reason recorded on 20-06-2006 by placing reliance upon the rule of ejusdem generis and for that matter on any other rule. Thus he assessee s objection on account of invalid reopening succeeds in this case inasmuch as the notice of reopening is an unsigned document and the reasons recorded are subsequent to the so called date of notice. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of unsigned notice under Section 148.
2. Recording of reasons to believe before issuing notice under Section 148.
3. Validity of the Assessment Order passed under Sections 143(3)/147 without disposing of objections.
4. Estimation of gross receipts and net profit.
5. Treatment of return of income filed in the wrong jurisdiction.
6. Overall validity of the CIT(A)'s order.

Issue-wise Detailed Analysis:

1. Validity of Unsigned Notice under Section 148:
The assessee contended that the notice under Section 148 was invalid as it was unsigned. The CIT(A) upheld the validity of the notice, referencing Section 292BB of the I.T. Act, which precludes an assessee from objecting to any notice on the grounds of improper service if they have participated in the proceedings. However, the ITAT found that Section 292BB does not cure the fundamental defect of an unsigned notice. The Tribunal emphasized that an unsigned document cannot be considered a valid notice under Section 148, citing precedents such as B.K. Gooyee vs. CIT and Umashankar Mishra vs. CIT.

2. Recording of Reasons to Believe Before Issuing Notice under Section 148:
The assessee argued that the reasons to believe were recorded after the issuance of the notice. The CIT(A) inferred from the order sheet that the reasons were recorded on 20-06-2006, despite being signed on 13-07-2006. The Tribunal found this reasoning flawed, noting that the certified copy indicated the reasons were indeed recorded on 13-07-2006, after the notice date. The Tribunal rejected the CIT(A)'s reliance on the principle of ejusdem generis to justify the timing discrepancy, concluding that the reopening was invalid due to the improper sequence of recording reasons.

3. Validity of the Assessment Order Passed under Sections 143(3)/147 Without Disposing of Objections:
The assessee claimed that the Assessment Order was invalid as the objections to the reasons for reopening were not disposed of. The CIT(A) observed that discussions with the Authorized Representative constituted sufficient compliance with the Supreme Court's directives in GKN Driveshaft (India) Ltd. The Tribunal did not directly address this issue, as the invalidity of the notice and the improper recording of reasons rendered the reopening itself void.

4. Estimation of Gross Receipts and Net Profit:
The AO estimated the gross receipts based on patient registers and extrapolated the data to the entire financial year, arriving at ?11,42,100. The net profit was determined after disallowing certain expenses as personal. The CIT(A) upheld these additions, but the Tribunal did not engage in the merits of these estimations due to the invalidity of the reopening.

5. Treatment of Return of Income Filed in the Wrong Jurisdiction:
The AO treated the return filed in the wrong jurisdiction as non-est, initiating proceedings under Section 147. The CIT(A) supported this view, referencing the case of K. Adi Narayana Murti. The Tribunal did not delve into this issue, given the fundamental invalidity of the reopening process.

6. Overall Validity of the CIT(A)'s Order:
The Tribunal found the CIT(A)'s order flawed due to the reliance on an unsigned notice and improperly recorded reasons. Consequently, the Tribunal set aside the CIT(A)'s order and quashed the reassessment proceedings.

Conclusion:
The ITAT quashed the reopening proceedings due to the unsigned notice under Section 148 and the improper recording of reasons, rendering the assessment order invalid. The Tribunal did not address the merits of the case, as the jurisdictional defects were sufficient to decide the appeal in favor of the assessee. The appeal was allowed, and the reassessment order was set aside.