2012 (6) TMI 16 - AT - Income Tax

Valid service of notice u/s 143(2) sine qua non for making assessment u/s 143(3)/144 - best judgement assessment - notice u/s 143(2) send to assessee at the address(given by assessee while applying for PAN) other than that given in the return of income for the year under consideration and earlier AYs which was eventually returned by the postal authorities - Held that - Sending of notice on the address other than that given in the return of income which was eventually returned by the postal authorities does not amount to either service or deemed service of such notice. Further notwithstanding the fact that change of address was not intimated by the assessee as per the provisions of section 139A(5) the legal consequences for non-service of notice u/s 143(2) on the address provided in the return itself cannot be brushed aside. It is duty of AO to find out correct address. Effect of Section 292BB - Held that - Assessment order reveals that the assessee did neither appear before the A.O. nor co-operated in any inquiry relating to assessment. Mere receipt of notice u/s 142 calling for information but not furnishing information in response to the notice cannot be said to have co-operated in any inquiry in relation to an assessment or reassessment . Hence provisions of Section 292BB are not attracted and it is held that there is no valid service of notice u/s 143(2) rendering assessment order passed void ab initio - Decided in favor of assessee.

Issues Involved:
1. Validity of assessment under section 144 due to service of notice under section 143(2).
2. Effect of non-service of notice under section 143(2).
3. Whether there was valid service of the notice in the present circumstances.
4. Effect of section 292BB.

Issue-wise Detailed Analysis:

I. Validity of Assessment under Section 144 Due to Service of Notice Under Section 143(2):

The assessee contested that the assessment under section 144 was invalid due to improper service of notice under section 143(2). The Commissioner of Income-tax (Appeals) [CIT(A)] upheld the assessment, stating that the notice was generated and sent to the address provided by the assessee in the PAN database. The notice was returned by postal authorities, and subsequent notices were also returned unserved. Despite this, the CIT(A) concluded that the notice was validly served as per the address in the PAN database, and the assessee did not inform the department of any address change.

II. Effect of Non-Service of Notice Under Section 143(2):

The Tribunal analyzed the consequences of non-service or improper service of notice under section 143(2). It emphasized that service of notice under section 143(2) is mandatory for making an assessment under section 143(3) or 144. Non-service or improper service of such notice renders the assessment void ab initio. The Tribunal referred to various judicial precedents, including the Supreme Court's decision in ACIT v. Hotel Blue Moon, which held that omission to issue notice under section 143(2) is not a procedural irregularity but a jurisdictional defect.

III. Whether There Was Valid Service of the Notice in the Present Circumstances:

The Tribunal found that the notice under section 143(2) was sent to the Kurla address, which was outdated, and not to the Thane address provided in the return of income. The notice was returned unserved. The Tribunal concluded that there was no valid service of notice under section 143(2) on the assessee. The Tribunal rejected the Revenue's argument that the notice should be deemed served based on the PAN database address, highlighting that the return of income provided a different address, and the Assessing Officer should have verified the correct address.

IV. Effect of Section 292BB:

Section 292BB, inserted by the Finance Act, 2008, deems notice to be validly served if the assessee has appeared in any proceeding or cooperated in any inquiry related to assessment or reassessment. However, the Tribunal noted that the assessee neither appeared nor cooperated in any inquiry. The Tribunal held that mere receipt of notice under section 142(1) does not constitute cooperation. Since the assessee did not cooperate or appear, the provisions of section 292BB were not applicable, and the assessment was void due to non-service of notice under section 143(2).

Conclusion:

The Tribunal concluded that the assessment order was void ab initio due to the lack of valid service of notice under section 143(2). Consequently, the assessment was set aside, and the appeal was allowed in favor of the assessee. Other grounds challenging the additions were dismissed as infructuous.

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