2016 (11) TMI 1620 - AT - Income Tax

Mnatanability of appeal - low tax effect - HELD THAT - On perusal of the Circular No. 21/2015 dated 10.12.2015 and the materials available on record, we could not see whether the impugned case falls under any of the exceptions contemplated in the said Circular. Circular makes it very clear that the revised monetary limits shall apply retrospectively to pending appeals also. We find that the Circular is binding on the tax authorities. This position has been confirmed in the case of Commissioner of Customs vs Indian Oil Corporation Ltd 2004 (2) TMI 66 - SUPREME COURT wherein examined the earlier decisions of the Apex Court with regard to binding nature of the Circulars and laid down that when a Circular issued by the Board remains in operation then the revenue is bound by it and cannot be allowed to plead that it is not valid or that it is contrary to the terms of the statute. Hence we hold that the appeal(s) of the revenue deserve to be dismissed in terms of low tax effect vide Circular No.21 / 2015 dated 10.12.2015 No proper Notice issued u/s. 143(2) served on the assessee - AO claimed to have issued notice u/s. 143(2) for fixing the date of hearing on 23-11-09 and argued that such notice was served on a person by name Sh. M. Sankar who is neither authorized nor concerned person to receive on behalf of assessee - HELD THAT - AO recorded the issuance of notice u/s. 142(1) on 19-7-2010 for fixing the hearing on 02-08-2010 and thereafter, according to assessment order, probably, after 26-08-2010 another notice for initiation of penalty proceedings u/s. 271(1)(b)of the Act was issued. A person claiming to be representing the assessee as partner appeared before the AO for the first time on 10-12-2010 in response to notice issued u/s. 271(1)(b) of the Act and it concluded that the service of notice u/sec 143(2) on 30-09-09 and issuance of notice thereafter u/sec 142(1) of the Act was not in the knowledge of the assessee and as rightly contended by the Ld.AR notice u/sec 143(2) of the Act was not properly served on the assessee. We also find that there is a gap of one year between issuance of notice u/s. 143(2) and appearance of partner representing Assessee before the AO. Therefore, the order sheets of assessment record as filed by the assessee by way of paper book suggests that the assessee was not appeared before the AO in response to notice issued u/s. 143(2) of the Act as it was not in the knowledge of Assessee. Therefore, we hold that the statutory notice issued u/s. 143(2) of the Act was not properly served on the assessee, which is mandatory as per section 143(2) of the Act. The notice as prescribed under sub section (2) of Section 143 of the Act was not properly served on the assessee. Thus, the assessment order dt 30-12-2010 made u/sec 144 of the Act and as confirmed by the CIT-A is held to be invalid and it is quashed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Applicability of CBDT Circular No. 21/2015 regarding low tax effect.
2. Validity of notice issued under Section 143(2) of the Income Tax Act.

Detailed Analysis:

Issue 1: Applicability of CBDT Circular No. 21/2015 regarding low tax effect
The first issue pertains to the appeal filed by the Revenue (ITA No. 181/Kol/2013) for the assessment year 2008-09. The total tax effect on the additions disputed was below the prescribed limit as per CBDT Circular No. 21/2015 dated 10.12.2015. The Circular specifies that appeals should not be filed where the tax effect does not exceed ?10,00,000/- for cases before the Appellate Tribunal. The Tribunal noted that the Circular applies retrospectively to pending appeals and is binding on the tax authorities, as confirmed by the Supreme Court in the case of Commissioner of Customs vs Indian Oil Corporation Ltd (267 ITR 272). Since the tax effect in this case was below the monetary limit, the appeal by the Revenue was dismissed without delving into the merits of the case.

Issue 2: Validity of notice issued under Section 143(2) of the Income Tax Act
The second issue concerns the appeal filed by the Assessee (ITA No. 426/Kol/2013) for the assessment year 2008-09. The primary contention was that the notice issued under Section 143(2) was not properly served on the Assessee. The Assessee argued that the notice was served on an unauthorized person, Shri M. Sankar, who was neither an employee nor a representative of the Assessee. The Tribunal examined the pay register and other documents which confirmed that Shri M. Sankar was not associated with the Assessee. The Tribunal found a gap of one year between the issuance of the notice under Section 143(2) and the appearance of a partner before the AO, indicating that the Assessee was unaware of the notice.

The Tribunal referred to Section 292B of the Income Tax Act, which deems that any notice served improperly is valid if the Assessee has cooperated in the assessment proceedings. However, since the Assessee did not raise the issue of improper service before the completion of the assessment and participated in the proceedings only after a significant delay, the Tribunal held that the statutory notice under Section 143(2) was not properly served.

The Tribunal also considered the decision in DCIT v Mahi Valley Hotels and Resorts (287 ITR 360), where the Gujarat High Court held that a notice issued beyond the statutory period of limitation is invalid. However, the facts of the present case were different as it involved improper service rather than a delay in issuance.

Based on these findings, the Tribunal quashed the assessment order dated 30-12-2010 made under Section 144 of the Act and confirmed by the CIT-A, declaring it invalid.

Conclusion:
1. The appeal by the Revenue (ITA No. 181/Kol/2013) was dismissed due to low tax effect as per CBDT Circular No. 21/2015.
2. The appeal by the Assessee (ITA No. 426/Kol/2013) was allowed, and the assessment order was quashed due to improper service of notice under Section 143(2).