2018 (5) TMI 1722 - AT - Income Tax

Reopening of assessment - Validity of notice u/s 148 to make a reassessment u/s 147 - Jurisdiction of AO - Held that - Assessee is a Korean citizen working with Hyundai Heavy Industries Co. Ltd. - no notice u/s 148 along with reasons for reopening was ever served upon the assessee; that the AO, Mumbai who has issued the notice u/s 148 was not having jurisdiction as only AO, Dehradun was having the jurisdiction as per Notification, even the notice issued by AO, Mumbai was never served upon the assessee - thus entire reopening proceedings and consequent reassessment is void ab initio - Decided in favor of assessee.

Issues Involved:
1. Validity of reassessment proceedings under section 147 read with section 148 of the Income-tax Act, 1961.
2. Jurisdiction of the Assessing Officer (AO) to issue and serve notice under section 148.
3. Compliance with the procedure laid down by the Supreme Court regarding reopening of assessment.
4. Addition of school fee paid by the assessee under section 68 of the Act.

Detailed Analysis:

1. Validity of Reassessment Proceedings:
The appellant challenged the reassessment orders on the grounds that the reassessment proceedings were without jurisdiction due to the non-service of notice under section 148. The Tribunal noted that the Assessing Officer (AO) initiated reassessment based on AIR information regarding the school fees paid by the assessee. However, the notice under section 148 issued by ITO 16(2), Mumbai, was returned unserved with the postal remark "left." The Tribunal held that the notice under section 148 was not validly served within the limitation period, rendering the reassessment proceedings void ab initio.

2. Jurisdiction of the Assessing Officer:
The Tribunal examined the jurisdictional issue and found that the AO in Mumbai had no jurisdiction to issue the notice under section 148. According to Notification No. 9579 dated 05.08.1994, the Deputy CIT, Special Range 1, Dehradun, had jurisdiction over employees of non-resident companies like the assessee. The Tribunal emphasized that the notice issued by the AO in Mumbai was invalid as it was not within his jurisdiction, and no order under section 127 was passed to transfer the case from Mumbai to Dehradun.

3. Compliance with Supreme Court Procedure:
The Tribunal observed that the AO did not follow the procedure laid down by the Supreme Court in GKN Driveshaft's case, which mandates furnishing reasons for reopening to the assessee and addressing objections against non-service of notice under section 148. The AO's failure to comply with this procedure further invalidated the reassessment proceedings.

4. Addition of School Fee Paid by the Assessee:
The AO made additions of ?8,22,213 and ?33,63,559 for AY 2005-06 and 2006-07, respectively, under section 68, on the grounds that the assessee did not provide evidence for the availability of funds to pay the school fees. The Tribunal, however, quashed the reassessment orders on jurisdictional and procedural grounds without delving into the merits of these additions.

Conclusion:
The Tribunal concluded that the reassessment proceedings and the consequent reassessment orders were void ab initio due to the invalid issuance and non-service of notice under section 148 by an AO lacking jurisdiction. The Tribunal quashed the reassessment orders for AY 2005-06 and 2006-07, allowing the appeals filed by the assessee. The Tribunal's decision underscores the importance of adhering to jurisdictional boundaries and procedural requirements in reassessment proceedings.

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