2022 (7) TMI 1405 - AT - Income Tax

Validity of assessment - no proper service of notice u/s 143(2) - Addition on-money payment on purchase of a flat - HELD THAT - Assessment record does not contain any proof regarding service of notice under section 143(2) to the assessee. There should not be any dispute that the AO would get jurisdiction over the return of income filed by the assessee only upon service of notice u/s 143(2) meaning thereby, the AO could not scrutinize the return of income without issuing notice u/s 143(2) in accordance with law. We find support for this legal proposition from the decision rendered by Hon'ble Supreme Court in the case of ACIT Vs. Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT Accordingly, in the present case, the impugned assessment order framed by the AO is liable to be quashed for want of jurisdiction - set aside the order passed by learned CIT(A) as well as AO. We give liberty to the Revenue to seek recall of this order in accordance with law, if it is found subsequently that there was proper service of notice u/s 143(2) of the Act. Appeal filed by the assessee is treated as allowed.

Summary

Issues:
1. Delay in filing the appeal
2. Alleged on-money payment on purchase of a flat
3. Non-service of notice under section 143(2) of the Act

Analysis:
1. Delay in filing the appeal:
The appeal was filed challenging the order related to the assessment year 2007-08, but it was barred by a 94-day limitation. The assessee explained that the delay was due to injuries sustained in a bike accident, resulting in fractures in the neck, hand, and spine. The Tribunal, considering the circumstances, condoned the delay and admitted the appeal for hearing.

2. Alleged on-money payment on purchase of a flat:
The dispute centered around the addition of Rs. 3,49,600 as an alleged on-money payment on the purchase of a flat. The learned CIT(A) had confirmed this addition. However, the Tribunal, after hearing the parties, found that the assessment order lacked jurisdiction due to the non-service of notice under section 143(2) of the Act. Citing the legal proposition from the Supreme Court's decision in ACIT Vs. Hotel Blue Moon (321 ITR 362), the Tribunal concluded that without proper service of notice, the Assessing Officer could not scrutinize the return of income. Consequently, the Tribunal set aside the orders passed by the CIT(A) and the Assessing Officer.

3. Non-service of notice under section 143(2) of the Act:
The legal issue of non-service of notice under section 143(2) of the Act was pivotal in this judgment. The Tribunal emphasized that the Assessing Officer's jurisdiction over the assessee's income tax return is established only upon the proper service of the notice under section 143(2) of the Act. As the assessment record lacked proof of such notice, the Tribunal quashed the assessment order and subsequent decisions. The Tribunal granted the Revenue the option to seek a recall of the order if proper service of notice is established later.

In conclusion, the appeal filed by the assessee was treated as allowed, primarily due to the jurisdictional issue arising from the non-service of the notice under section 143(2) of the Act. The Tribunal's decision to quash the lower authorities' orders on this legal issue rendered other matters raised in the appeal unnecessary for adjudication.