2016 (5) TMI 1020 - AT - Income Tax

Reopening of assessment - Addition u/s 68 - Non issue of notice - Held that - Whenever a reassessment is sought to be made u/s 147, issuing and serving of a valid notice u/s 148 is a mandatory precondition. The onus lies on the Revenue authorities to prove that the notice was served on the assessee within the stipulated period. It is only if the said notice is served on the assessee that the assessing officer would be justified in taking up proceedings against the assessee. If no notice is issued, or if the notice issued is shown to be invalid, then the proceedings taken up by the assessing officer would be illegal and void. In this case, it is very much apparent that the notice u/s 148 had not been served on the assessee within the stipulated period. The Assessing Officer can assume jurisdiction to complete the assessment only after valid and legal service of the notice in accordance with law. Unless such notice has duly been served, the Assessing Officer cannot be said to have been clothed with the jurisdiction to pass the assessment order. Thus in the present case we hold that in absence of valid service of notice u/s 148 of the Act within the stipulated period, the reassessment proceedings are void ab initio - Decided in favour of assessee

Summary

Issues:
1. Validity of reassessment proceedings based on non-service of statutory notice u/s 148 of the Income Tax Act.
2. Challenge to the addition of ?20 lacs made by the Assessing Officer under section 68 of the Act.

Issue 1: Validity of Reassessment Proceedings
The assessee filed an appeal against an order sustaining an addition of ?20 lacs made by the Assessing Officer under section 68 of the Income Tax Act. The primary contention was the non-service of a statutory notice u/s 148 of the Act. The assessee argued that the notice was sent to an outdated address, rendering it unserved. The Assessing Officer and the Ld. CIT(A) maintained that the notice was issued within time and presumed served as it was sent by speed post and not returned. The Ld. CIT(A) equated "issued" with "served" and held the notice valid. However, the tribunal noted that the correct address of the assessee was known to the department before the notice was issued. Relying on legal precedent, the tribunal emphasized that a valid notice u/s 148 is a mandatory precondition for reassessment. The tribunal concluded that the non-service of the notice rendered the reassessment proceedings void ab initio, following the jurisdictional requirements laid down by the Hon'ble Delhi High Court. Consequently, ground no. 3 was allowed, and other grounds were dismissed as moot due to the decision on the third ground.

Issue 2: Challenge to Addition of ?20 Lacs
The assessee also challenged the addition of ?20 lacs on merits, which was confirmed by the Ld. CIT(A). However, since the tribunal found the reassessment proceedings void ab initio due to the non-service of the statutory notice u/s 148, the challenge to the addition became irrelevant and was not adjudicated upon separately.

In conclusion, the tribunal allowed the appeal in part, ruling in favor of the assessee on the issue of the validity of reassessment proceedings due to the non-service of the statutory notice u/s 148. The tribunal emphasized the mandatory nature of serving a valid notice for reassessment and cited legal precedent to support its decision. As a result, the addition of ?20 lacs made by the Assessing Officer was not separately addressed due to the fundamental flaw in the reassessment process.