2020 (10) TMI 140 - AT - Income Tax

Validity of the assessment - No notice u/s 143(2) issued - HELD THAT - AO has not issued any notice u/s 143(2) of the Act to the assessee within the time stipulated under the Income Tax Act, 1961 and, therefore, the impugned assessment order is invalid, void ab initio and against the provisions of the law and is not sustainable in the eyes of law. See CHETAN GUPTA 2015 (9) TMI 756 - DELHI HIGH COURT - and M/S HOTLINE INTERNATIONAL PVT. LTD. 2007 (4) TMI 44 - DELHI HIGH COURT - The appeal of assessee is allowed .

Issues Involved:
1. Validity of assessment proceedings due to improper service of notice under Section 143(2).
2. Enhancement of income from House Property.
3. Deduction of expenses from gross rent received.
4. Consideration of previous tribunal decisions.
5. Determination of business activity during the assessment year.
6. Classification of interest income.
7. Set off of brought forward business losses.
8. Timeliness of assessment order.
9. Compliance with CBDT instructions.

Issue-wise Detailed Analysis:

1. Validity of Assessment Proceedings Due to Improper Service of Notice Under Section 143(2):
The primary issue raised by the assessee was the improper service of the notice under Section 143(2) of the Income Tax Act, 1961. The assessee argued that the notice was not served within the prescribed time limit and was sent to an old address despite the Revenue being aware of the new address. The Tribunal found that the notice dated 23.09.2013 was issued to the old address, even though the assessee had informed the AO of the new address via a letter dated 06.06.2008. The Tribunal noted contradictions in the AO's statements regarding the service of the notice and concluded that the notice was void ab initio. Reliance was placed on judgments from the Delhi High Court, including PCIT vs. Atlanta Capital Pvt. Ltd. and CIT vs. Chetan Gupta, which underscored the necessity of proper service of notice for the validity of assessment proceedings.

2. Enhancement of Income from House Property:
The assessee contested the enhancement of income from House Property by ?35,94,903/-. The AO had increased the income based on discrepancies in the rental income figures provided by the assessee. The Tribunal did not delve into this issue in detail as the primary ground of improper service of notice was upheld, rendering the assessment invalid.

3. Deduction of Expenses from Gross Rent Received:
The assessee argued that expenses amounting to ?55,96,453/- incurred to earn the gross rent were not deducted from the gross rent received while computing the income from House Property. The Tribunal did not address this issue separately due to the quashing of the assessment order on the primary ground of improper service of notice.

4. Consideration of Previous Tribunal Decisions:
The assessee cited previous tribunal decisions, including DCIT v/s Texaco Overseas Pvt. Ltd., to support their claim for deducting expenses from the gross rent received. The Tribunal did not specifically address this issue due to the overarching decision to invalidate the assessment proceedings.

5. Determination of Business Activity During the Assessment Year:
The assessee challenged the AO's finding that there was no business activity during the year under consideration. This issue was not separately analyzed by the Tribunal as the assessment order was quashed on procedural grounds.

6. Classification of Interest Income:
The assessee disputed the classification of interest income amounting to ?20,73,047/- under the head 'Income from Other Sources' instead of 'Income from Business'. The Tribunal did not provide a separate ruling on this matter due to the invalidation of the assessment order.

7. Set Off of Brought Forward Business Losses:
The assessee contested the withdrawal of the claim of set off of brought forward business losses amounting to ?20,55,105/-. This issue was rendered moot by the Tribunal's decision to quash the assessment order.

8. Timeliness of Assessment Order:
The assessee argued that the assessment was time-barred as the order was dispatched and served after the statutory deadline. The Tribunal did not specifically address this argument as the primary issue of improper service of notice was sufficient to invalidate the assessment.

9. Compliance with CBDT Instructions:
The assessee claimed that the AO made additions without obtaining the approval of the Principal Commissioner of Income Tax, as required by CBDT instructions. This issue was not separately addressed by the Tribunal due to the quashing of the assessment order on procedural grounds.

Conclusion:
The Tribunal quashed the assessment order due to the improper service of notice under Section 143(2), rendering the other grounds of appeal moot. The appeal was allowed in favor of the assessee, and the assessment order was deemed invalid, void ab initio, and unsustainable in law.

← Previous Next →