2017 (1) TMI 624 - AT - Income Tax

Validity of assessment - non-service of notice u/s. 143(2) within the prescribed time - Held that - AO has not issued any notice u/s 143(2) of the I.T. Act to the assessee. During the entire assessment proceedings the assessment order in dispute is invalid void abnitio and against the provisions of the law and the impugned order is not sustainable in the eyes of law and hence cancel the same by accepting the appeal filed by the Assessee. - Decided in favour of assessee

Issues Involved:
1. Arbitrary and illegal orders by the Assessing Officer (AO).
2. Non-service of notice under Section 143(2) within the prescribed time.
3. Service of notice to an unknown/unrelated person.
4. Ex-parte decision without proper notice.
5. Incorrect determination of sale amount.
6. Arbitrary determination of sale without basis.
7. Additions made by AO being illegal and against natural justice.

Detailed Analysis:

1. Arbitrary and Illegal Orders by AO:
The Assessee contended that the orders passed by the AO were highly arbitrary, illegal, and against the facts of the case. The CIT(A) did not appreciate this contention and upheld the AO's decision.

2. Non-Service of Notice Under Section 143(2) Within Prescribed Time:
The Assessee argued that the AO failed to serve the notice under Section 143(2) within the prescribed time. The Tribunal found that the notice dated 27.6.2007 was served to an unrelated person, and no notice was issued for the hearing on 29.12.2008. The Tribunal referenced the Supreme Court decision in ACIT & Anr. Vs. Hotel Blue Moon, which held that the issuance and service of notice under Section 143(2) is mandatory, and failure to do so renders the assessment order invalid.

3. Service of Notice to an Unknown/Unrelated Person:
The Tribunal noted that the notice dated 27.6.2007 was served to an unknown person, which was a significant procedural lapse. This non-service of notice was a critical point leading to the invalidation of the assessment order.

4. Ex-Parte Decision Without Proper Notice:
The Tribunal observed that the AO decided the case ex-parte on 29.12.2008 without issuing a proper notice for the hearing. This procedural failure was deemed a violation of the principles of natural justice, further invalidating the assessment order.

5. Incorrect Determination of Sale Amount:
The Assessee challenged the AO's determination of the sale amount at ?7,00,000, which was significantly higher than the declared sale of ?4,41,335. The CIT(A) upheld the AO's determination without addressing the Assessee's contention adequately.

6. Arbitrary Determination of Sale Without Basis:
The Tribunal found that the AO arbitrarily determined the sale amount without any reasonable material or basis on record. This arbitrary determination was another ground for challenging the validity of the assessment order.

7. Additions Made by AO Being Illegal and Against Natural Justice:
The Assessee argued that all additions made by the AO were illegal and against the principles of natural justice. The Tribunal agreed, noting the procedural lapses and arbitrary determinations made by the AO.

Conclusion:
The Tribunal concluded that the non-issuance and non-service of the mandatory notice under Section 143(2) rendered the assessment order invalid. The Tribunal referenced multiple judgments, including ACIT & Anr. Vs. Hotel Blue Moon and various High Court decisions, to support its conclusion. The assessment order dated 29.12.2008 was declared invalid, void ab initio, and against the provisions of the law. Consequently, the appeal filed by the Assessee was allowed, and the impugned order was canceled.

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