2018 (4) TMI 1277 - AT - Income Tax

Reopening of assessment - validity of notice issued - service of notice by affixture by the ITI - Held that - It cannot be assumed that the notice was sent by speed post before deputing the ITI. Therefore, we confine ourselves to the claim of the Assessing Officer with regard to service of notice by affixture by the ITI. The report of the ITI clearly shows that the ITI has not made any enquiry with the neighbours or with some responsible person in the locality but claims to have made enquiry with bystanders but their names are also not mentioned. Section 282 of the Income Tax Act, 1961 prescribes the mode of service. In the instant case, apart from not filing an affidavit from the serving officer, there is no mention of the ITI with regard to the person who has identified the house and the person in whose presence the notice was affixed. In otherwords, the ITI, who was deputed by the Assessing Officer, has not followed the procedure prescribed u/s 282 of the Act which in turn refers to the modes contained in Rules 17 to 20 of Order V of CPC. The earliest letter issued by the Assessing Officer is in 2015 which was beyond the time prescribed u/s 148 / 149 of the Act. Therefore, the initiation of proceedings is invalid in law so as to assume jurisdiction under the Income Tax Act. Accordingly, the order passed, consequent to the improper issuance of notice by the Assessing Officer, does not have stand in the eye of law. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice served under Section 148 of the Income Tax Act.
2. Correctness of the computation of capital gains based on SRO registration value.

Issue-Wise Detailed Analysis:

1. Validity of the Notice Served under Section 148:

The primary contention raised by the assessee was the improper service of notice under Section 148 of the Income Tax Act. The assessee argued that the notice was not received by them or anyone on their behalf, and the notice served by affixture was not valid. The assessee's representative highlighted that the General Power of Attorney (GPA) holder had been residing at the address for over 40 years and had been receiving all communications addressed to the assessee.

The Assessing Officer (A.O.) issued a notice under Section 148 on 06.06.2013, which was claimed to be served by affixture due to the absence of an acknowledgement of receipt. The A.O. assumed compliance with the procedure prescribed under law by serving the notice through affixture at a conspicuous place at the given address. The Ld. CIT(A) upheld this procedure, stating that the ITI's report confirmed the affixture due to non-response at the address.

The Tribunal, however, found discrepancies in the procedure followed. The Speed Post Booking Journal indicated that the notice was sent on 09.07.2013, not 07.06.2013, as claimed by the A.O. The ITI's report lacked details of the person who identified the house or the witnesses present during the affixture, which is a requirement under Section 282 of the Income Tax Act and the Code of Civil Procedure (CPC). The Tribunal concluded that the ITI did not follow the due procedure, making the service of notice invalid. Consequently, the initiation of proceedings was deemed invalid, and the assessment order was quashed.

2. Correctness of the Computation of Capital Gains:

The assessee sold a property for ?20 lakhs, while the Stamp Valuation Authorities valued it at ?60,17,000. The A.O. recomputed the capital gains based on the SRO value, determining the total income at ?39,04,780. The assessee contended that the property was 50 years old, built with brick and lime, and sold to the tenant's family who were refusing to vacate, affecting the sale price.

The Ld. CIT(A) dismissed the assessee's arguments, stating that the property was located in a prime commercial area, and even if it was 50 years old, the SRO value could not be considered high. The Tribunal noted that the assessee should be given a proper opportunity to present their case, considering the peculiar circumstances affecting the property's sale price.

However, since the Tribunal quashed the assessment order due to the invalid service of notice, it did not delve into the merits of the addition. The Tribunal emphasized that the assessment order was set aside on the preliminary ground of improper issuance of notice, rendering further examination of the capital gains computation unnecessary.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, setting aside the orders of the A.O. and the Ld. CIT(A) due to the invalid service of notice under Section 148, which was not in compliance with the prescribed legal procedures. The assessment order was quashed, and the appeal was allowed in favor of the assessee.