2013 (11) TMI 179 - AT - Income Tax

Notice u/s 153A to be invalid Notice issued not in accordance with section 282 of the Income Tax Act Held that - As held by Commissioner(A), no search and seizure action u/s.132(1) was carried out in the premises of appellant and hence notice u/s.153A was issued not in accordance with the provisions of law - The Assessing Officer has not followed the provisions of Section 282 of the Act - He should have served the notice on the appellant company or on the official liquidator by post or as if it were summons issued by a Court under the Code of Civil Procedure, 1908 - Such notice should have been addressed by him to the official liquidator or to the person who manages or controls company s affairs. The Assessing Officer has not done his job in accordance with the Section 282 of the Act. In fact, he not sent any of the notices by post or through a process server. He has adopted only the mode of substituted service by way of affixture - Assessing Officer has also not followed order V, Rule 17 of the Code of Civil Procedure, 1908, which mandates that the substituted service by affixture to be adopted only if the person refuses to sign the acknowledgement, or the serving officer after using all due and reasonable diligence, cannot find the defendant who is absent from his residence etc - Since the revenue has not challenged the order of the Commissioner of Income Tax(Appeals) for the Assessment Year 2007-08; therefore, the appeal filed by the assessee has become infructuous when the notice issued u/s 153A and u/s 142(1) has been held as against the provisions of law and consequently assessment on the basis of the said invalid notices, would not survive Decided in favor of Assessee.

Summary

Issues Involved:
1. Validity of notice under Section 153A and Section 142(1).
2. Addition under Section 41(1) of the Income Tax Act.
3. Reliance on loose papers found from a third party.
4. Assessment under Section 153C versus Section 153A.
5. Admission of additional evidence by CIT(A) without satisfying Rule-46A(1).
6. Deletion of disallowances and additions by CIT(A) without proper examination.

Issue-wise Detailed Analysis:

1. Validity of Notice under Section 153A and Section 142(1):
The assessee contended that the notices under Section 153A and Section 142(1) were not properly served, thereby challenging the additions made. The Commissioner of Income Tax (Appeals) [CIT(A)] held that the Assessing Officer (AO) did not follow the procedure under Section 282 of the Income Tax Act read with Rule 17 of Order V of the Code of Civil Procedure, 1908. The AO's exclusive mode of service by affixation was deemed improper as there was no evidence of attempts to serve notices by post or process server. The Tribunal found that the AO had actually sent notices via registered post and to the official liquidator, contrary to CIT(A)'s findings. Consequently, the Tribunal set aside the issue to CIT(A) for fresh adjudication after considering the relevant facts and records.

2. Addition under Section 41(1) of the Income Tax Act:
The assessee challenged the addition of Rs. 13,07,303/- (for AY 2006-07) and Rs. 28,43,033/- (for AY 2007-08) under Section 41(1). The Tribunal did not provide a conclusive decision on this issue but set aside the matter to CIT(A) for fresh consideration along with the examination of additional evidence by the AO.

3. Reliance on Loose Papers Found from a Third Party:
The assessee argued that the loose papers found from a third party did not mention the appellant company's name and thus should not be relied upon. CIT(A) had initially accepted this argument, but the Tribunal noted that the additional evidence had not been properly examined by the AO. The Tribunal set aside this issue to CIT(A) for fresh adjudication after proper examination of the additional evidence.

4. Assessment under Section 153C versus Section 153A:
The assessee claimed that the assessment should have been made under Section 153C instead of Section 153A. The Tribunal did not specifically address this issue but implied that the procedural correctness of the notices and subsequent assessments needed reevaluation by CIT(A).

5. Admission of Additional Evidence by CIT(A) Without Satisfying Rule-46A(1):
The revenue contended that CIT(A) admitted additional evidence without ensuring compliance with Rule-46A(1), which requires rigorous tests to be satisfied. The Tribunal observed that the AO had objected to the admission of additional evidence without examination. Therefore, the Tribunal set aside this issue to CIT(A) for fresh consideration after obtaining a proper remand report from the AO.

6. Deletion of Disallowances and Additions by CIT(A) Without Proper Examination:
The revenue challenged CIT(A)'s deletion of various disallowances and additions (advertisement expenses, miscellaneous expenses, cash credits, unexplained sundry creditors) without discussing the merits of the additional evidence. The Tribunal noted that the additional evidence had not been examined by the AO. Consequently, the Tribunal set aside these issues to CIT(A) for fresh adjudication after inviting a proper remand report from the AO.

Conclusion:
For Assessment Year 2006-07, the Tribunal allowed the appeals for statistical purposes, setting aside various issues to CIT(A) for fresh adjudication. For Assessment Year 2007-08, the Tribunal dismissed the assessee's appeal as infructuous since the revenue did not challenge CIT(A)'s finding on the invalidity of notices under Section 153A and Section 142(1).