2017 (1) TMI 1244 - AT - Income Tax

Reopening of assessment - non valid notice - Held that - Bare perusal of the notice dated 27.03.2003 allegedly refused by Chowkidar of the assessee company as reported by Inspectors of the Revenue, goes to prove that this is an exercise in futility because neither name of the Chowkidar has been mentioned who has refused to accept the notice nor the factum of refusal by the Chowkidar has been got attested from any of the independent witness. Secondly, Inspectors reported to be deputed for service of notice u/s 148 have decided on their own to get the service of notice affected through affixture without reporting the factum of refusal of the Chowkidar of the assessee to the AO and got the notice affixed on the premises of the assessee on 27.03.2003. Chronology of the events as to issuance of the notice u/ 148 on 26.03.2003 through speed post and then without waiting for the outcome of the service or non-service, as the case may be, issued the notice dated 27.03.2003 to be served by the two Inspectors of the Revenue who reported that the Chowkidar of the assessee has refused to accept the notice and then they have decided on their own to get the service affected on 27.03.2003 through affixture goes to prove that no effort has been made by the Revenue to serve the notice u/s 148 upon the assessee rather paper work has been completed within two days. Revenue is not aware till passing of the assessment orders after a period of one year from the date of alleged service through affixture as to what was the fate of notice sent through speed post. The entire exercise of completing assessment without service of notice upon the assessee has been made in haste. It is humanly not possible to believe that service of notice through registered post can be affected on the same date i.e. 26.03.2003 on which it was issued/posted. Moreover, perusal of the assessment record produced by the Revenue during the course of argument goes to prove that the notice u/s 148 has never been issued at the registered office address of the assessee at Delhi registered with ROC, Delhi and Haryana. So, we are of the considered view that when no valid notice u/s 148 has ever been served upon the assessee either through registered post or through affixture necessary to reopen the assessment, the entire exercise as to opening the assessment is illegal and void, hence not sustainable. - Decided in favour of assessee

Summary

Issues:
1. Jurisdiction of the Assessing Officer over the appellant
2. Estimation of business income on an ad hoc basis
3. Addition of unexplained investments in the purchase of cars
4. Validity of notice u/s 148 for reopening assessment

Analysis:
1. The appellant challenged the jurisdiction of the Assessing Officer, claiming that it should have been in Delhi, not Noida. The appellant argued that being a company with a registered office in Delhi, controlled by directors from Delhi, and filing returns in Delhi, the jurisdiction was incorrect. The Tribunal noted discrepancies in the jurisdiction and found the order illegal and bad in law. The Tribunal allowed the appeal on this ground for both assessment years.

2. The Assessing Officer estimated the business income on an ad hoc basis, leading to discrepancies in the assessment. The appellant contested the estimation, providing details of gold imports and sales. The Tribunal reviewed the facts and circumstances, finding faults in the estimation process. The Tribunal set aside the estimation and directed a reassessment based on accurate information.

3. The Assessing Officer made additions for unexplained investments in car purchases. The appellant failed to provide sources for the investments, leading to discrepancies in the assessment. The Tribunal examined the evidence and found inconsistencies in the additions. The Tribunal allowed the appeal regarding the unexplained investments, directing a reevaluation based on valid evidence.

4. The issue of the validity of the notice u/s 148 for reopening the assessment was crucial. The appellant argued that the notice was not properly served, rendering the assessment illegal. The Tribunal scrutinized the service of notices through speed post and affixture. Finding discrepancies in the service process, the Tribunal concluded that no valid notice was served, leading to the quashing of the assessment orders for both assessment years.