2013 (4) TMI 920 - AT - Income Tax

Summary

Issues Involved:

1. Validity of initiation of re-assessment proceedings u/s 147/148 of the IT Act.
2. Applicability of proviso to section 147 of the IT Act.
3. Issuance of notice u/s 148 within the prescribed time limit as per section 149 of the IT Act.
4. Validity of service of notice u/s 148 of the IT Act.

Summary:

1. Validity of initiation of re-assessment proceedings u/s 147/148 of the IT Act:

The Tribunal examined whether the Assessing Officer (AO) validly initiated re-assessment proceedings u/s 147/148. It was found that the AO relied on vague and unsupported information from the Investigation Wing, Ghaziabad, regarding unexplained gifts. The AO had no new material or evidence to justify the re-assessment as the facts about the gifts were already on record from earlier proceedings. The Tribunal concluded that the reasons for reopening the assessment were vague, incorrect, and unsupported by evidence, making the re-assessment proceedings invalid.

2. Applicability of proviso to section 147 of the IT Act:

The Tribunal considered whether the case fell under the proviso to section 147, which restricts re-assessment after four years unless there was a failure by the assessee to disclose fully and truly all material facts. It was established that the assessee had disclosed all primary facts regarding the gifts in the original return and during the first re-assessment proceedings. Since there was no failure on the part of the assessee to disclose material facts, the re-assessment after four years was deemed invalid and barred by limitation.

3. Issuance of notice u/s 148 within the prescribed time limit as per section 149 of the IT Act:

The Tribunal scrutinized whether the notice u/s 148 was issued within the six-year limit. The AO claimed the notice was issued on 30.03.2007, but there was no corroborative evidence to support this. The Tribunal found that the notice was actually sent on 03.04.2007, beyond the six-year limit, and the purported service by affixture was unreliable and manipulated. Therefore, the notice was not issued within the prescribed time, rendering the re-assessment proceedings invalid.

4. Validity of service of notice u/s 148 of the IT Act:

The Tribunal assessed whether the notice u/s 148 was validly served. It was found that the AO did not attempt to serve the notice at the correct address, despite having the correct address on record from prior proceedings. The service by affixture was deemed unreliable and manipulated. The Tribunal held that there was no valid service of notice u/s 148, and thus, the AO did not acquire jurisdiction to proceed with the re-assessment.

Conclusion:

The Tribunal quashed the re-assessment proceedings on all four points, holding that there was no valid initiation of proceedings u/s 148, no valid issuance of notice within the limitation period, no failure by the assessee to disclose material facts, and no valid service of notice. Consequently, all resultant additions made by the AO were deleted, and the departmental appeals were dismissed.