2014 (1) TMI 133 - HC - Income Tax

Protective assessment - Validity of mode of service of notice - Held that - The notice issued to assessee returned unserved - A notice was handed over to the departmental representative for service on the assessee - The departmental representative was unable to report whether service was effected on the assessee or not - He placed before the Tribunal a copy of the letter from the concerned assessing officer in which it was reported that the assessments of the A.O.P. was set aside by the appellate authority and fresh assessment has already been made vide order under section 144 of the Act which has become final - The Tribunal, did not go into the merits of the matter and treated the departmental appeal as unadmitted and consigned it to record leaving it open to get the matter revived after giving satisfactory explanation for its failure to get the earlier notice serviced - The Tribunal ought not to have consigned the matter to record and should have taken appropriate steps by exercising powers under section 255(6) read with section 131 of the Act - Substantive assessment of the same income has been made at the hands of the AOP consisting of nine persons which has become final, therefore, protective assessment of the same income made at the hands of the respondent assessee cannot stand - Decided against revenue.

Summary

Issues:
1. Legality of treating Department's appeal as un-admitted by the Income-tax Appellate Tribunal.
2. Validity of the notice served by the Department on the assessee through affixture at the last known address.

Analysis:
1. The appeal pertains to the Assessment Year 1981-82, involving a cooperative society dealing in land transactions. The Income Tax Department conducted a search in 1986, revealing undisclosed premium amounts from land sales. The Assistant Commissioner assessed an income on a protective basis. The Commissioner of Income Tax (Appeals) later deleted the addition, as the amount had been assessed at the hands of another entity. The Revenue appealed to the Income Tax Appellate Tribunal. However, the notice sent to the assessee was returned unserved, and subsequent attempts at service were inconclusive. The Tribunal, without delving into the merits, treated the appeal as unadmitted due to the service issue.

2. The Revenue argued that the Tribunal should have taken steps to ensure service on the assessee, invoking powers under relevant sections of the Income Tax Act. While the Tribunal's order was deemed incorrect, it was noted that the substantive assessment on the same income had been finalized for another entity, rendering the protective assessment on the respondent assessee invalid. Consequently, the orders of the Commissioner of Income Tax (Appeals) and the Tribunal were upheld, as no interference was warranted.

In conclusion, the High Court dismissed the appeal filed under Section 260-A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal. The judgment highlighted the importance of proper service in legal proceedings and upheld the principle that protective assessments cannot stand when substantive assessments have been finalized for other entities.