2016 (3) TMI 278 - AT - Income Tax

Non service of notice u/s 143(2) - Held that - Apparently, the notice was sent on the wrong address as the assessee has categorically given his address in the relevant return of income for the Assessment Year 2006-07, which was subjected to scrutiny, the issuance of notice in a mechanical manner does not mean that service of notice on the assessee has been effected. Presumption can only be raised against the assessee for service of notice u/s 143(2) when the notice was sent on the correct address. The revenue is also silent if the alleged notice sent through registered cover was received back undelivered or has never been received back within the stipulated period to raise the presumption against the assessee. The entire record of the Assessing Officer is silent and as such, the Assessing Officer cannot be allowed to raise the presumption for service of notice on assessee. So, we are of the considered view that service of notice u/s 143(2) is essential and assessment made without service of such a notice is invalid. So, when the assessee has categorically proved that the change of address has already been intimated to the Revenue by incorporating the same in the relevant return of income for the Assessment Year 2006-07, the assessment order due to non service of notice u/s 143(2), is not sustainable. Assessment order passed in this case by the Assessing Officer without getting service of notice on the assessee on his new address duly intimated to the revenue is not sustainable in the eyes of law. Hence, we hereby set aside the impugned order passed by Ld. CIT(A). - Decided in favour of assessee

Summary

Issues:
1. Proper service of notice u/s 143(2) of the Act
2. Disallowance of expenses and bad debts claimed by the assessee

Analysis:

Issue 1: Proper service of notice u/s 143(2) of the Act
The appellant challenged the assessment order on the grounds of non-service of notice u/s 143(2) of the Act. The Assessing Officer claimed to have sent the notice to the address provided by the assessee in Form 49A, but the appellant contended that the notice was not received. The Tribunal noted that the notice was sent to a different address than the one provided by the assessee in the return of income for the relevant assessment year. The Tribunal held that service of notice u/s 143(2) is essential, and assessment without proper service of notice is invalid. Since the appellant had informed the revenue of the change in address, the assessment order was deemed unsustainable due to the lack of proper notice service.

Issue 2: Disallowance of expenses and bad debts claimed by the assessee
The Assessing Officer disallowed certain expenses claimed by the assessee, including telephone expenses, business promotion expenses, and vehicle usage expenses. Additionally, the assessee claimed bad debts of a significant amount, which was not supported by sufficient evidence regarding the financial position of the debtor. The Tribunal observed that the Assessing Officer's disallowances were based on lump sum amounts claimed in the P&L accounts without detailed explanations or evidence. However, the Tribunal did not delve into the merits of these disallowances due to the primary issue of improper notice service. Consequently, the Tribunal set aside the impugned order passed by the Ld. CIT(A) and allowed the appeal of the assessee.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the importance of proper notice service for assessment validity and setting aside the assessment order due to the lack of such service. The disallowances made by the Assessing Officer were not specifically addressed on merits, as the primary issue of notice service rendered the assessment unsustainable in the eyes of the law.