2015 (10) TMI 1272 - AT - Income Tax

Reopening of assessment - mode of service of notice - Held that - By affixture notice was served on the given address of the assessee on 26/09/2008. Even the assessee himself admitted that he had received notice dated 30/09/2008 on 09/10/2008, which is within 12 months from the date of return filed i.e. 31/10/2007. The Hon ble Punjab & Haryana High Court in the case of Amarjit Singh Tut (2013 (2) TMI 173 - Punjab and Haryana High Court) has held that statute of limitation is a procedural statute and is applicable to pending proceedings. Objection to the territorial jurisdiction has to be raised at the earliest and it otherwise deemed to have been waived.The Hon ble Court further held that for A.Y. 2007-08 even notice issued and served within one year from the end of the date of return is valid notice U/s 143(2)(ii) of the Act. In another case, the Hon ble Punjab & Haryana High Court in the case of CIT Vs. Jasbir Singh NRI through Shri Jarnail Singh, POA 2014 (3) TMI 221 - PUNJAB & HARYANA HIGH COURT has held that notice issue on the last known address is valid service. It is further held that it was incumbent on the Tribunal not to quash the whole proceedings as it amounted to leaving the assessee go scot free, though he is liable to pay tax on the capital gains. The assessee received compensation on compulsory acquisition of land, therefore, he cannot deny his liability to pay long term capital gain tax. Merely because there was some error in service of notices on the assessee, statutory liability of the assessee to pay tax on capital gain was not over. Because of procedural lapse, the assessee should not be a gainer and that too by default to escape his liability. The case law cited by the learned DR i.e. V.R.A. Cotton Mills P. Ltd. Vs. Union of India (2011 (9) TMI 611 - PUNJAB AND HARYANA HIGH COURT) is squarely application on the assessee s case wherein it has been held that prescribed time limit for notice, the expression serve and issue are interchangeable, as has been noticed in Section 27 of the General Clauses Act, 1897 and also in a judgment of the Hon ble Supreme Court in the case of Banarsi Devi Vs. ITO (1964 (3) TMI 11 - SUPREME Court), therefore, the moment, notice is signed and put in the course of transmission by the department, the notice is due to be served. It has been held that notice, which was served by the affixture on the last day of limitation is valid. The appellant had not filed any FIR against the claim that somebody had filed his return as claimed before the learned CIT(A), therefore, we set aside the order of the learned CIT(A) and directed to frame the order as per law after providing reasonable opportunity of being heard to both the parties. - Decided in favour of revenue.

Summary

Issues Involved:
1. Validity of the notice issued under section 143(2) by the ITO, Ward-3(2), Chandigarh.
2. Validity of the assessment order despite the notice being served through affixture.
3. Jurisdiction and procedural lapses in the issuance of the notice.

Detailed Analysis:

Issue 1: Validity of the notice issued under section 143(2) by the ITO, Ward-3(2), Chandigarh
The Revenue contended that the notice under section 143(2) was issued on 25/09/2008 and served through affixture on 26/09/2008. The Assessing Officer (AO) argued that the notice was validly issued and served within the prescribed time limit. The assessee, however, claimed that the notice was served after the expiry of the six-month period from the end of the financial year in which the return was furnished, making it invalid. The CIT(A) found that the assessee's jurisdiction was with ITO, Ward 1(2), Kota, not Chandigarh, and thus quashed the notice as invalid.

Issue 2: Validity of the assessment order despite the notice being served through affixture
The AO issued multiple notices, including one on 26/09/2008 served by affixture at the Chandigarh address and another on 30/09/2008 sent to the Kota address. The assessee argued that the notice was received on 09/10/2008, beyond the statutory limit. The CIT(A) verified that the assessee's return for A.Y. 2007-08 was filed with the address of Kota, and the first valid notice was dated 30/09/2008, served on 09/10/2008, making it barred by limitation. The CIT(A) declared the assessment order ab-initio void.

Issue 3: Jurisdiction and procedural lapses in the issuance of the notice
The CIT(A) concluded that the jurisdiction to assess the assessee lay with ITO, Ward 1(2), Kota, and not Chandigarh. The return filed at Chandigarh appeared to have been filed by someone else. The AO's notices were thus not correctly issued. The CIT(A) advised corrective action to book the guilty party. The Revenue argued that the notice served by affixture on 26/09/2008 and the subsequent notice dated 30/09/2008 were within the statutory period, making them valid. The Punjab & Haryana High Court's judgments in V.R.A. Cotton Mills P. Ltd. and Amarjit Singh Tut supported the validity of notices issued within the prescribed period, even if received later.

Conclusion:
The Tribunal, after considering the rival contentions, held that the notice served by affixture on 26/09/2008 and the notice received on 09/10/2008 were within the 12-month period from the date of return filing (31/10/2007), thus valid under the law. The Tribunal cited relevant case law supporting the validity of notices issued within the prescribed period. The Tribunal set aside the CIT(A)'s order, directing the AO to frame the order as per law after providing reasonable opportunity of being heard to both parties. The appeal of the Revenue was allowed.