2019 (4) TMI 2020 - AT - Income Tax

Validity of Reopening of assessment u/s 147 - notice u/s 148 was not issued at the correct address of the assessee and the same could not be said to have been issued within the outer time limit provided u/s 149 of the Act which was 31/03/2015, being the expiry of 6 years from the end of relevant AY i.e. 2008-09 - HELD THAT - Upon combined reading of Section 149 Section 148, we find that notice could not be issued to the assessee beyond a period of 6 years from the end of relevant AY which, in the present case, expired on 31/03/2015. Section 148 mandates revenue to serve upon assessee the requisite notice before proceeding to make any assessment / reassessment or re-computation. Upon careful perusal of chronology of events as enumerated in the preceding paragraphs, we find that there was no service of notice u/s 148 by the revenue on assessee in the present case and the primary condition to invoke reassessment jurisdiction, against the assessee, remained unfulfilled. The non-service of notice, in our opinion, was not merely a curable procedural defect but primary requirement under law, without fulfilment of which the revenue could not be empowered to trigger re-assessment proceedings against the assessee. Thus we hold that in the absence of service of notice u/s 148, reassessment jurisdiction as acquired by Ld. AO could not be sustained in law which left us with no option but to quash the reassessment proceedings. - Decided in favour of assessee.

Summary

Issues Involved:

1. Legality of reopening assessment under Section 147 read with Section 148 of the Income Tax Act, 1961.
2. Validity of service of notice under Section 148.
3. Addition of unexplained income under Section 68.
4. Deletion of addition made on account of share capital and share premium.
5. Jurisdictional requirement of service of notice under Section 148.

Detailed Analysis:

1. Legality of Reopening Assessment under Section 147 read with Section 148:

The assessee contested the reopening of the assessment by invoking Section 147 read with Section 148 on the grounds that it was illegal, ultra vires, and contrary to the provisions of the Act. The assessee argued that the notice issued under Section 148 was not validly served, and the reopening was based on general statements recorded from third parties that were later retracted. The CIT(A) confirmed the reopening, but the Tribunal found that the notice was not served at the correct address, making the reassessment proceedings invalid.

2. Validity of Service of Notice under Section 148:

The Tribunal noted that the notice issued on 10/03/2015 was returned undelivered by postal authorities with remarks of "incomplete address/not known." The notice was later affixed at the same incomplete address, and no independent witnesses substantiated the affixture. The Tribunal held that the service of notice was a jurisdictional requirement, and non-service of notice invalidated the reassessment proceedings. The Tribunal relied on judicial pronouncements, including CIT Vs. Chetan Gupta, which emphasized that service of notice under Section 148 is a jurisdictional pre-condition for reassessment.

3. Addition of Unexplained Income under Section 68:

The revenue contested the deletion of the sum brought to tax by the AO as unexplained income under Section 68 in respect of money credited as share capital, including share premium. The AO had made the addition based on the findings of a survey and statements from directors admitting that only accommodation entries were provided. However, the CIT(A) and the Tribunal found that the assessee had provided sufficient documentary evidence to establish the identity, creditworthiness, and genuineness of the transactions.

4. Deletion of Addition Made on Account of Share Capital and Share Premium:

The CIT(A) deleted the addition of share premium based on CBDT Instruction No. 2/2015 and the decision of the Bombay High Court in Vodafone India Services Pvt. Ltd. The Tribunal upheld this decision, noting that the transactions were on capital account and could not be taxed under Section 68. The Tribunal also referred to decisions in CIT Vs. Gagandeep Infrastructure Pvt. Ltd. and CIT Vs. Green Infra Ltd., which supported the non-taxability of share premium under Section 68.

5. Jurisdictional Requirement of Service of Notice under Section 148:

The Tribunal emphasized that the issuance and service of notice under Section 148 are jurisdictional requirements that must be mandatorily complied with. The Tribunal found that the revenue failed to serve the notice properly, and the reassessment proceedings were invalid. The Tribunal held that the non-service of notice was not a curable procedural defect but a primary requirement under law.

Conclusion:

The Tribunal quashed the reassessment proceedings due to the invalid service of notice under Section 148, allowing the assessee's appeal. Consequently, the revenue's appeal on merits was dismissed as infructuous. The same conclusions applied to the cross-appeals of M/s Stroll Properties Pvt. Ltd. and M/s Sitilite Properties Pvt. Ltd., resulting in their appeals being allowed and the revenue's appeals being dismissed.