2013 (10) TMI 652 - HC - Income Tax

Questions Framed Substantial Question of Law OR Not service of notice u/s 158BD - change in the address of assessee - Held that - The report leaves no ambiguity that the Assessing Officer was aware that the respondent is not residing at his last known address but surprisingly persisted in ordering service by affixation, at this address - it would be appropriate to clarify that if the revenue is aware that an assessee is not residing at his last known address, an Assessing Officer, would be required to search for the assessee s new address and if still not available, serve the assessee in accordance with procedure for substituted service and publication etc. prescribed by the Code of Civil Procedure - In the absence of any error of jurisdiction of law in the impugned orders, we express our inability to entertain the appeal on the questions of law as set out in the memorandum of appeal but proceed to consider whether questions of law framed by counsel for the revenue in court should be answered. Defect in service of Notice - Whether defect in service would entail setting aside of the show cause notice along with assessment order and in such a situation the CIT(A) or the I.T.A.T should have directed the Assessing Officer to proceed from the stage of service Held that - Setting aside of an assessment order would not entail setting aside of the show cause notice - The order passed by the Assessing Officer was held to be illegal for want of valid service - The show cause notice, however, has not been held to be invalid and, therefore, subsists - In this view of the matter, while affirming orders passed by the CIT(A) or the I.T.A.T, with respect to illegality of the Assessment order for want of valid service, the matter is remitted to the Assessing Officer to adjudicate the show cause notice afresh from the stage prior to initiation of ex-parte proceedings.

Summary

Issues:
Challenge to assessment order due to defective service and subsequent reversal of order by authorities.

Analysis:
1. The revenue challenged an order passed by the Income Tax Appellate Tribunal, Chandigarh, affirming the Commissioner of Income Tax (A)'s order. The issue arose from the respondent selling his house and shifting without informing the department of his new address, leading to a dispute regarding service of notices. The appellant contended that service at the last known address was valid due to lack of alternative address information. The key questions raised were whether a defect in service invalidates the show cause notice along with the assessment order and whether the authorities should direct the Assessing Officer to proceed from the stage of service in such situations.

2. The respondents argued that the findings of fact by the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal did not warrant interference. They highlighted that the Assessing Officer was aware of the respondent's change of address but continued to serve notices at the old address, leading to the ex-parte assessment order being set aside. The respondents emphasized that the Income Tax Officer should consider all relevant decisions on the subject if directed to proceed afresh.

3. The High Court examined the substantial questions of law framed by the revenue, which primarily focused on the adequacy of service and due diligence exercised in locating the assessee. The Court noted that the Assessing Officer's awareness of the change in the assessee's address required diligent efforts to serve notices correctly. The Court emphasized that if an assessment order is deemed illegal due to defective service, the show cause notice remains valid, necessitating the restoration of the matter to the Assessing Officer for fresh adjudication from the stage of service.

4. Ultimately, the Court held that the questions raised by the revenue were not merely factual but involved significant legal implications. It was determined that setting aside an assessment order for defective service did not nullify the show cause notice, requiring the authorities to direct the Assessing Officer to proceed afresh from the stage of service. The Court stressed the importance of adhering to legal procedures and ensuring proper service of notices to maintain the integrity of the assessment process. Consequently, the matter was remitted to the Assessing Officer for reevaluation based on the correct service procedures and relevant legal considerations, effectively disposing of the appeal.