2015 (6) TMI 131 - AT - Income Tax

Non-service of notice u/s. 143(2) - Held that - No assessment u/s 143(3) can be said to have validly made where notice u/s 143(2) is not served or where such notice is served beyond the prescribed period or improperly served. The consequences flowing from such non / belated / improper services of notice are that the assessment so made become void ab initio. In the present case AO has not issued any notice u/s 143(2) of the I.T. Act to the assessee. During the entire assessment proceedings, the assessment order in dispute is invalid, void abnitio and against the provisions of the law and the impugned order is not sustainable in the eyes of law and hence, we cancel the same by accepting the appeal filed by the Assessee. - Decided in favour of assesse.

Issues Involved:
1. Validity of the assessment due to alleged non-service of notice under section 143(2) of the Income Tax Act, 1961.
2. Opportunity to rebut the remand report regarding the service of notice.
3. Rejection of application under Rule 46A of the Income Tax Rules.
4. Consideration of the remand report by the Assessing Officer (AO).
5. Specific additions upheld without giving an opportunity of being heard.
6. Invocation of powers under section 250(4) of the Income Tax Act, 1961.
7. General grounds for adding or amending the appeal.

Issue-Wise Detailed Analysis:

1. Validity of the Assessment Due to Alleged Non-Service of Notice under Section 143(2):
The primary issue revolved around whether the notice under section 143(2) was served on the assessee within the prescribed time limit. The assessee argued that the notice was sent to an incorrect address, despite updating the address in the PAN database and filing the return from the new address. The Tribunal found that the AO issued the notice to the old address, despite having knowledge of the new address. The Tribunal concluded that the assessment was invalid as the notice under section 143(2) was not served within the stipulated time, rendering the assessment null and void. This conclusion was supported by various judgments, including ACIT & Anr. Vs. Hotel Blue Moon [2010] 321 ITR 362 (SC) and CIT Vs. Lunar Diamonds Ltd. (2006) 281 ITR 1 (Delhi).

2. Opportunity to Rebut the Remand Report:
The assessee contended that the CIT(A) did not provide an opportunity to rebut the remand report concerning the service of notice. The Tribunal noted that the CIT(A) concluded the hearing without giving the assessee an opportunity to respond to the AO's findings. This procedural lapse was deemed significant, contributing to the decision to invalidate the assessment.

3. Rejection of Application under Rule 46A:
The assessee's application under Rule 46A for admitting additional evidence was rejected by the CIT(A) without assigning any reason, despite the AO recommending acceptance of the additional evidence in the remand report. The Tribunal found this rejection without providing an opportunity of being heard to be improper and against the principles of natural justice.

4. Consideration of the Remand Report by the AO:
The Tribunal observed that the AO's remand report was silent on the issue of service of notice under section 143(2). The CIT(A) sought further comments from the AO, who provided a dispatch receipt as proof of sending the notice. However, the Tribunal found that the notice was sent to the wrong address, and the AO was aware of the correct address, further invalidating the assessment process.

5. Specific Additions Upheld Without Opportunity of Being Heard:
The assessee argued that the CIT(A) upheld certain additions without giving an opportunity of being heard. These included disallowance of bad debts, rejection of claims for loss of goods in transit, business damage, discount expenses, addition under section 68, and rejection of claims for service charges and interest expenses. The Tribunal's decision to invalidate the entire assessment due to non-service of notice under section 143(2) rendered these specific additions moot.

6. Invocation of Powers under Section 250(4):
The assessee contended that the CIT(A) did not invoke the powers under section 250(4) of the Income Tax Act, which could have alleviated the hardship faced by the assessee. The Tribunal did not specifically address this issue in detail, as the invalidation of the assessment due to non-service of notice was sufficient to decide the appeal in favor of the assessee.

7. General Grounds for Adding or Amending the Appeal:
The assessee sought the liberty to add or amend grounds during the appellate proceedings. This general ground was rendered unnecessary as the Tribunal allowed the appeal based on the primary issue of non-service of notice under section 143(2).

Conclusion:
The Tribunal concluded that the assessment was invalid due to the non-service of notice under section 143(2) within the prescribed time limit. The procedural lapses, including the rejection of additional evidence without proper reasoning and failure to provide an opportunity to rebut the remand report, further supported the decision. Consequently, the appeal was allowed, and the assessment order was canceled.

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