2017 (2) TMI 508 - AT - Income Tax

Reopening of assessment - unexplained investment - procedure followed for affixture of notice not followed - Held that - The address on which the notice was affixed was not the address of assessee, neither in the past nor later. As seen from the written submissions and the copies placed on record of returns filed, the address of assessee was 8-2-686/8/2, Road No. 12, Banjara Hills, Hyderabad. The same address was also stated in the sale deeds placed on record. From where the AO got the address of 195/A, Road No. 13, White House, Jubilee Hills, Hyderabad was not known. How it was the last known address was not answered by the Ld.CIT(A), who examined the record as stated in para 8.2, while confirming on merits. Since the procedure followed for affixture of notice is not proper, assessment completed in pursuance of an invalid note is not valid. Even on merits, it is not clear how the information was received, the basis of the same as assessee was not given any opportunity. Neither the so called statement was furnished nor the cross-examination of the person was provided. Even the Ld.CIT(A) did not examine how the said Manasa Estates came into picture when the document indicates that the monies were received through Janmabhoomi Estates . Since the very basis for addition is not reliable, the addition per se cannot be sustained. - Decided in favour of assessee

Summary

Issues Involved:
Validity of notice u/s. 148, Addition of unexplained investment of ?4,80,000, Service of notice by affixture, Address discrepancy, Merits of the addition based on cash payment for purchase of plots.

Analysis:

1. Validity of notice u/s. 148:
The appeal raised concerns about the validity of the notice u/s. 148 and the subsequent assessment. The appellant argued that the notice was not properly served as it was affixed at an incorrect address. The appellant contended that the notice should have been served at the last known address, which was different from the affixed address. The appellant cited precedents to support their claim and requested the cancellation of the assessment based on the invalid notice.

2. Addition of unexplained investment of ?4,80,000:
The Assessing Officer added ?4,80,000 to the appellant's income as unexplained investment in plots purchased from Manasa Estates. The appellant disputed this addition, providing details of the purchase transactions, including sale deeds and payment evidence. The appellant highlighted that the consideration was paid through a different entity, contradicting the AO's assertion of cash payment. The appellant argued that the AO did not provide substantial evidence for the cash payment claim. The Ld.CIT(A) upheld the addition based on information from the Addl. CIT, Range-6, regarding cash payments beyond documented considerations.

3. Service of notice by affixture and Address discrepancy:
The appellant raised objections regarding the service of notice by affixture, emphasizing that it should only be used as a last resort when normal service is not feasible. The appellant pointed out the inconsistency in the address where the notice was affixed compared to the appellant's known address. The Tribunal noted the discrepancy and ruled that the affixture procedure was improper, following precedents to declare the assessment invalid due to the flawed notice service.

4. Merits of the addition based on cash payment for purchase of plots:
The appellant challenged the addition on the grounds that the AO did not substantiate the claim of cash payments for the plots. The appellant provided detailed evidence of transactions and highlighted discrepancies in the AO's information source. The Tribunal agreed with the appellant, noting the lack of clear evidence for the cash payments and the absence of opportunity for the appellant to respond to the information source. The Tribunal found the basis for the addition unreliable and ruled in favor of the appellant, disallowing the addition.

In conclusion, the Tribunal allowed the appeal, emphasizing the invalidity of the assessment due to the flawed notice service and the lack of substantial evidence supporting the addition of unexplained investment. The judgment highlighted the importance of proper notice procedures and the necessity for reliable evidence in tax assessments.