2019 (10) TMI 142 - AT - Income Tax

Validity of reopening of assessment u/s 147 - notice issued u/s 148 is not in accordance with law - no valid service of notice - AR argued that the AO has not served the notice u/s 148 to the assessee for both the assessment years - procedure to serve notice by affixture - HELD THAT - In the instant case, the department could not place any evidence to show that the department has made the efforts to serve the notice in person. There was no evidence of having made the efforts to serve the notice either by post or through notice server. Though there was a report of inspector having served the notice by affixture, there was no panchnama drawn by inspector for service of notice by affixture, specifying the place which is being witnessed by independent witnesses. The notices u/s 148 bear the signature of two witnesses without the details of names and addresses. There was no endorsement on the notices having served the notices by affixture. Without the proper endorsement having served the notice by affixture in the presence of local person identifying place of the assessee, the same cannot be held as valid service. Similarly though the AO has stated to have served the notice u/s 142(1) also by affixture, no evidence was brought on record to show that the notices were served by affixture in the presence of independent witnesses. Perusal of the information shows that there was no independent local person as witness and there is no evidence identifying the place as belonging to the assessee before such affixture. In the instant case, though the letters have stated to have been issued from 2013 onwards and the correct address could not be located, subsequently, it is observed that the assessment order and the demand notices were served on the assessee on the same address which shows that the department has not made proper efforts or the enquiries to locate the assessee. From the above, it is established that the department did not make proper service of the notice as per the procedure laid down in the Code of Civil Procedure. - Decided in favour of assessee.

Summary

Issues:
Validity of notice u/s 148 for A.Y. 2007-08 and 2008-09.

Analysis:
For A.Y. 2007-08, the AO completed assessment u/s 144 r.w.s. 147 due to non-compliance with notice u/s 148. The AO served notice by affixture as the assessee's whereabouts were unknown. The AO determined market value for capital gains tax. The CIT(A) upheld the validity of the notice. The AR argued no valid service of notice u/s 148. The DR argued service by affixture was valid. The ITAT found no evidence of proper service, quashing the proceedings.

For A.Y. 2008-09, similar issues arose. The AO completed assessment u/s 144 r.w.s. 147 due to non-compliance with notice u/s 148. The AO served notice by affixture as the assessee's whereabouts were unknown. The CIT(A) upheld the validity of the notice. The AR argued no valid service of notice u/s 148. The DR argued service by affixture was valid. The ITAT found no evidence of proper service, quashing the proceedings.

The ITAT noted the absence of proper service of notice in both cases. The department failed to prove valid service as per the Code of Civil Procedure. The ITAT emphasized the importance of proper service for initiating proceedings. Without valid service, the assessment proceedings were deemed invalid. The ITAT quashed the proceedings and allowed the appeals of the assessee.

In conclusion, the ITAT found the notice u/s 148 for both A.Y. 2007-08 and 2008-09 to be invalid due to lack of proper service. The failure to comply with procedural requirements led to the quashing of assessment proceedings. The ITAT emphasized the necessity of following proper service procedures as per the law.