2019 (7) TMI 1950 - AT - Income Tax

Validity of Reopening of assessment u/s 147 - default on non issue of notice on correct/new address - AO had the knowledge of change of address and also had known the correct address, but, for the reasons best known to him, the notices were sent to the old address after the period of limitation - AO has resorted to service of notice by affixture at the old address after notice u/s.148 of the Act was returned unserved on the assessee - HELD THAT - The issuance of notice u/s.148 of the Act is a question of jurisdiction and not a procedural aspect. By issuing a valid notice within the prescribed time limit, only the Assessing Officer gets the jurisdiction to re-open the assessment. In the cases before us, the notices u/s.148 of the Act, though were issued on the last day of the relevant assessment year, were never served on the assessee. Even after the assessee have brought to the notice of Assessing Officer that the notices have not been served on them, no steps have been taken by the Department to rectify the said defect. Therefore,we hold that the notice u/s.148 of the Act is invalid and consequently, the assessments are also invalid. The reliance of the CIT (A) on the provisions of section 292B is also not sustainable, because the defect is not a procedural defect but is a jurisdictional one. In the result, the appeals of both the assessees are allowed.

Summary

Issues:
Validity of notice u/s.148 for reassessment order and its service on the assessee, Capital Gains assessment based on property sale, Jurisdictional defect in notice service, Application of Section 292B, Reopening of assessment due to non-offering of capital gains, Address change and notice service, Legal precedents on notice service validity.

Analysis:

1. Validity of Notice u/s.148 and Reassessment Order:
The case involved appeals against the order of the Commissioner of Income Tax (Appeals) regarding the validity of the notice u/s.148 for reassessment. The assessees contended that the notice was not served on them within the stipulated time, rendering the reassessment order invalid. The Assessing Officer had re-opened the assessment due to non-offering of capital gains on the sale of property. The assessees argued that the notice served by affixture at the old address after being returned unserved was invalid, citing legal precedents emphasizing the importance of proper notice service for reassessment jurisdiction.

2. Capital Gains Assessment and Jurisdictional Defect:
The Assessing Officer invoked Section 50C for assessing Short Term Capital Gains based on the difference between the sale consideration and SRD value of the property. The assessees challenged this assessment, highlighting the jurisdictional defect in the notice service, asserting that the property was sold for the same price as purchased, resulting in no actual gain or loss. The assessees argued that the Assessing Officer's failure to serve the notice at the correct address, despite being aware of the change, rendered the assessment invalid.

3. Application of Section 292B and Legal Precedents:
The assessees contended that the provisions of Section 292B could not cure the jurisdictional defect of non-service of notice u/s.148. They relied on various legal precedents, including judgments from the Supreme Court and High Courts, emphasizing the mandatory nature of proper notice service for initiating reassessment proceedings. The assessees argued that the defect in notice service was not procedural but jurisdictional, leading to the invalidity of the notice and subsequent assessments.

4. Address Change and Notice Service:
The assessees pointed out that they had changed their address, filed returns with the new address, and corresponded with the department at the updated address. Despite this, the notice u/s.148 was sent to the old address after the limitation period, leading to non-service on the assessees. The failure of the department to rectify this defect in notice service was highlighted as a crucial factor in deeming the notice and assessments invalid.

5. Conclusion:
The Appellate Tribunal held that the notice u/s.148 was invalid due to improper service, making the assessments also invalid. Citing legal precedents, the Tribunal emphasized the jurisdictional significance of proper notice service for reassessment proceedings. As a result, the appeals of the assessees were allowed, and the assessments were set aside. The Tribunal deemed further adjudication on the merits unnecessary, given the invalidity of the assessments based on the defective notice service.

This detailed analysis covers the key issues raised in the judgment, focusing on the validity of the notice u/s.148, capital gains assessment, jurisdictional defects, application of legal precedents, and the impact of address change on notice service and assessment validity.