2019 (9) TMI 365 - AT - Income Tax

Reopening of assessment u/s 147 - objection regarding no service of notice u/s 148 - assessee has filed an affidavit denying service of notice - information received from the ADIT(Inv.), Unit-2, Agra that there were huge cash deposits in the bank accounts maintained by assessee - HELD THAT - A valid service of a valid notice under section 148 of the Act, is not a mere procedural requirement, but is a condition precedent to the validity of any assessment, reassessment or re-computation to be made under section 147 of the Act and it is so because of the use of words shall serve on the assessee and also the requirement to the effect before making the assessment, reassessment or re-computation under section 147 in the section itself- meaning thereby that if no notice under section 148 is issued or if the notice so issued is shown to be invalid, or the service of notice so issued, is shown to be invalid, AO cannot proceed with the subsequent proceedings for making assessment, reassessment or re-computation under section 147 of the Act. In other words, if the learned Assessing officer, in such circumstances, proceeds with the subsequent proceedings, the same will be illegal and void. Under the aforesaid provisions of section 148 of the Act, unless, the notice is served on the proper person in the manner prescribed under section 282, the service is insufficient and the Assessing officer does not have jurisdiction to re-assess the escaped income - Decided in favour of assessee.

Issues Involved:
1. Validity of re-opening of assessment.
2. Validity of service of notice under section 148 of the Income Tax Act.
3. Jurisdiction of the Assessing Officer.
4. Validity of assessment order in absence of proper service of notice.
5. Legality of additions made in the assessment order.

Detailed Analysis:

1. Validity of Re-opening of Assessment:
The assessee challenged the re-opening of the assessment on the grounds that no notice under section 148 of the Income Tax Act was served upon them, rendering the assessment order void-ab-initio. The Tribunal noted that the objection regarding the non-service of notice under section 148 was raised immediately after receiving the notice under section 142(1).

2. Validity of Service of Notice under Section 148:
The Tribunal examined whether the notice under section 148 was validly served. The assessee contended that no such notice was received. The Tribunal found that the notice was claimed to be served by affixture and speed post. However, the affixture was not done in accordance with the law, as the report did not mention the name and address of the person who identified the house or witnessed the affixture, violating Rule 17, Order V of the Civil Procedure Code. Additionally, no evidence was provided to show that the notice was sent by speed post, such as an acknowledgment from the postal authorities or a tracking report.

3. Jurisdiction of the Assessing Officer:
The assessee argued that the notice issued by the ACIT 2(1)(1), Agra was without jurisdiction, as the jurisdiction over the assessee lay with the ACIT, Circle-I, Agra. The Tribunal found that the jurisdiction had indeed changed prior to the issuance of the notice, as evidenced by the change in address recorded in the Income Tax PAN database and the e-filing portal of the Income Tax Department.

4. Validity of Assessment Order in Absence of Proper Service of Notice:
The Tribunal held that a valid service of notice under section 148 is a condition precedent for a valid assessment. Since the notice was neither properly served by affixture nor by speed post, the subsequent assessment proceedings were deemed illegal and void-ab-initio. The Tribunal emphasized that the service of notice is not a mere procedural requirement but a mandatory condition for the validity of any assessment, reassessment, or recomputation under section 147 of the Act.

5. Legality of Additions Made in the Assessment Order:
Given that the assessment order was held to be void-ab-initio due to the invalid service of notice, the Tribunal did not adjudicate on the grounds related to the legality of the additions made in the assessment order.

Conclusion:
The Tribunal allowed the appeal of the assessee, holding that the assessment order was illegal and void-ab-initio due to the invalid service of notice under section 148. The Tribunal emphasized the importance of proper service of notice as a condition precedent for valid assessment proceedings.

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