2016 (11) TMI 1619 - AT - Income Tax

Service of notice by an affixture - mode of service of notice - Curable defect u/s 292BB - validity of assessment - No notice u/s 143(2) issued and served upon the assessee within the stipulated period prescribed in the proviso - wrong assumption of jurisdiction by the AO under section 143(2) - provisions of section 282 of the Act dealing with provisions relating to the service of notice - HELD THAT - There is nothing to suggest that the assessee was intentionally hiding from the authorities for the purpose of avoiding service or there was any other good reason to conclude that the notice could not be served in an ordinary way. The inaction or delay on the part of the Assessing Officer in issuing notice under section 143(2) of the Act cannot be a ground to straightway effect service by affixture. Thus, in the instant case, the ordinary process not having been exhausted or carried out by the Assessing Officer, he was not justified in directly resorting to service of notice by an affixture merely because he had issued the notice at the last minute i.e. on 29//11/2011 so as to avoid the limitation expiring on 30/11/2001. Under these circumstances, we find ample force in the plea of the assessee on the issue of wrong assumption of jurisdiction by the Assessing Officer by issuing the instant notice under section 143(2) of the Act. Plea raised by the Revenue is that the assessee had appeared before the Assessing Officer on 10/12/2001 and that on that basis it is sought to be canvassed that, in any case, assessee was aware of the notice under section 143(2) of the Act having been served on 29/11/2001 - as per assessee it is wrong on the part of the Revenue to contend that assessee attended before the Assessing Officer on 10/12/2001 in response to the notice issued under section 143(2) of the Act dated 29/11/2001. We find the aforesaid plea of the assessee quite potent and is in fact supported by the material on record. The Ld. Representative for the assessee had referred to a communication dated 10/12/2001 addressed to the Assessing Officer, wherein it has been communicated that the notice was received on 10/12/2001 itself, which ostensibly is the notice dated 6/12/2001 addressed to the Director of the company. Therefore, the aforesaid plea of the Revenue is misplaced and is hereby rejected. Curable defect u/s 292BB - section 292BB, in any case, does not come to the rescue of the Revenue in the present case because it has been introduced by Finance Act, 2008 w.e.f. 01/04/2008 and it would not apply in the instant case. Thus the notice under section 143(2) has not been served within the time and the mode prescribed under the Act and as a consequence, the impugned assessment framed under section 143(3) of the Act is void ab-initio. Accordingly, the assessment order dated 10.11.2003 is liable to be quashed. - Decided in favour of assessee

Issues Involved:
1. Validity of the assessment order due to non-service of notice under section 143(2) within the stipulated period.
2. Legality of service of notice by affixture.
3. Applicability of section 292BB of the Income Tax Act, 1961.
4. Participation of the assessee in assessment proceedings as a validation of notice service.

Issue-wise Detailed Analysis:

1. Validity of the assessment order due to non-service of notice under section 143(2) within the stipulated period:
The primary grievance raised by the assessee was that the assessment order was void ab-initio because no notice under section 143(2) of the Income Tax Act, 1961, was issued and served within the stipulated period. The return of income was filed on 30/11/2000, and the notice was required to be served by 30/11/2001. The notice dated 29/11/2001 was served by affixture on the same date. The assessee argued that this service was invalid as it did not comply with the requirements of section 282(1) of the Act, which mandates service either by post or as if it were a summons issued by a Court under the Code of Civil Procedure, 1908.

2. Legality of service of notice by affixture:
The assessee contended that the service by affixture was impermissible as the Assessing Officer did not follow the mandatory requirement of showing that the assessee was avoiding service or that the notice could not be served in the ordinary way. The Tribunal noted that the Assessing Officer's decision to serve the notice by affixture to avoid time lag was not a valid reason. The Tribunal relied on the judgment of the Hon'ble Delhi High Court in CIT v. Hotline International (P.) Ltd., which emphasized that service by affixture is valid only when the assessee or his agent refuses to sign the acknowledgment or could not be found. The Tribunal concluded that the Assessing Officer did not exhaust the ordinary process of service and resorted to affixture at the last minute, which was not justified.

3. Applicability of section 292BB of the Income Tax Act, 1961:
The Revenue argued that the assessee's participation in the assessment proceedings validated the service of notice under section 143(2) in terms of section 292BB of the Act. However, the Tribunal pointed out that section 292BB was introduced by the Finance Act, 2008, effective from 01/04/2008, and thus did not apply to the assessment year in question. The Tribunal also cited the Hon'ble Bombay High Court's decision in CIT v. Salman Khan, which held that section 292BB is prospective and would not apply to assessment years before 2008-09.

4. Participation of the assessee in assessment proceedings as a validation of notice service:
The Revenue claimed that the assessee's appearance before the Assessing Officer on 10/12/2001 indicated awareness of the notice served on 29/11/2001. However, the Tribunal found that the appearance was in response to a different notice issued on 06/12/2001 to the Director of the assessee company. The Tribunal rejected the Revenue's argument and distinguished the facts from the case of CIT v. Vision Inc., where the assessee's participation was directly linked to the disputed notice.

Conclusion:
The Tribunal held that the notice under section 143(2) was not served within the time and mode prescribed under the Act, rendering the assessment order void ab-initio. Consequently, the assessment order dated 10/11/2003 was quashed. All other grounds raised by the assessee relating to the merits of the additions were dismissed as infructuous. The appeal of the assessee was allowed.

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