2022 (4) TMI 531 - AT - Income Tax

Reopening of assessment u/s 147 - Mode and manner of service of notice as contemplated in Sec. 282(1)(b) - validity of the service by affixture of the Notice u/s.148 - HELD THAT - Notice server having failed to effect the service of the Notice u/s. 148, dated 11.03.2015, had returned the same with a report, viz. viz. Shrimaan Ji, is kothi mein is naam ka kohi nahin hai (that no one by the said name is available at this address), which thus clearly did cast an obligation upon the A.O. to have made necessary verifications as regards the whereabouts of the assessee, which we are afraid he had most arbitrarily dispensed with, and instead, by way of an idle formality got the same served by way of affixture at the aforesaid wrong address - if the A.O. would have done the bare minimum that was expected of him, i.e., consulted/referred to the assessment record of the assessee, i.e., his returns of income, PAN data, Form No. 26AS etc., then, the correct present address of the assessee could have easily been gathered by him. As the A.O. had failed to exercise his diligence as regards verifying the address of the assessee, and had in fact most arbitrarily dispensing with the said statutory obligation got the Notice u/s. 148, dated 11.03.2015 affixed at an address, i.e., 1-B, New Guru Teg Bahadur Nagar, Jalandhar, at which the assessee well to his knowledge (as intimated by the notice server vide his report) was not residing, therefore, the validity of such a service cannot be subscribed on our part. At this stage, we may observe, that the manner in which the A.O. had ordered for the service of the Notice u/s.148, dated 11.03.2015 by way of affixture at the aforesaid address, i.e., without using all due and reasonable diligence for verifying the whereabouts of the assessee is absolutely not in conformity with the mode and manner of service of notice as contemplated in Sec. 282(1)(b) r.w. Order V - Rule 17 of the Code of Civil Procedure, 1908 (V of 1908). We, thus, in terms of our aforesaid observations are of the considered view that the service of the Notice u/s. 148, dated 11.03.2015 cannot be held to have been carried out as per the mandate of law. As in the case before us the Notice u/s. 148, dated 11.03.2015 had been served on the assessee's counsel for the first time in the month of February, 2016, i.e., much beyond the prescribed period of 6 years from the end of the relevant assessment year which had expired on 31.03.2015, therefore, respectfully following case of Harjeet Surajprakash Girotra . 2019 (7) TMI 941 - BOMBAY HIGH COURT we are of the considered view, that the A.O. had invalidly assumed jurisdiction for reopening the concluded assessment of the assessee company and passed the reassessment order u/s. 148 r.w.s. 143(3), dated 30.03.2016. At the same time, we may herein observe, that our aforesaid view is subject to our observations recorded herein below. Thus order passed u/s. 148 r.w.s. 143(3) shall stand vacated for want of valid assumption of jurisdiction by him for passing the impugned order.

Issues Involved:
1. Service of notice under section 148.
2. Disposal of objections raised by the assessee.
3. Validity of jurisdiction without notice under section 143(2).
4. Justification of the addition of ?22,00,000.

Detailed Analysis:

1. Service of Notice under Section 148:
The assessee challenged the validity of the notice issued under section 148, arguing that it was served at an incorrect address. The notice was issued to an address where the assessee no longer resided, and the notice server reported that no one by the assessee's name was available at that address. Despite this, the Assessing Officer (A.O.) directed service by affixture at the same incorrect address. The Tribunal observed that the A.O. failed to exercise due diligence in verifying the correct address from the assessee's returns or PAN database. It was held that the service of notice by affixture at the wrong address was not valid as per the mandate of law. The Tribunal also referenced the judgment of the Bombay High Court in Harjeet Surajprakash Girotra, which emphasized that service of notice is necessary for a valid reassessment.

2. Disposal of Objections Raised by the Assessee:
The assessee argued that the A.O. did not dispose of the objections raised against the reasons recorded for reopening the assessment. The Tribunal noted that the A.O. did not issue a speaking order to address these objections. This failure to address the objections was a procedural lapse on the part of the A.O.

3. Validity of Jurisdiction Without Notice under Section 143(2):
The assessee contended that the A.O. did not issue a notice under section 143(2) after the assessee filed a return in response to the notice under section 148. The Tribunal observed that the issuance of a notice under section 143(2) is mandatory for assuming valid jurisdiction. The absence of such a notice rendered the reassessment proceedings invalid.

4. Justification of the Addition of ?22,00,000:
The assessee challenged the addition of ?22,00,000 made by the A.O. as unexplained investment in shares. The assessee claimed that the investment was sourced from a joint bank account with his mother, which included loan proceeds and credits belonging to his mother. However, the A.O. rejected this claim, citing a lack of evidence to establish the nexus between the withdrawals and the investment. The Tribunal did not delve into the merits of this addition, as the primary issue of the validity of the notice under section 148 was sufficient to decide the appeal.

Conclusion:
The Tribunal concluded that the A.O. had invalidly assumed jurisdiction for reopening the assessment due to the improper service of the notice under section 148. The matter was remanded to the A.O. for a limited purpose: to verify whether the assessee had raised objections regarding the service of the notice during the assessment proceedings. If such objections were raised, the reassessment order would be vacated. The appeal was allowed for statistical purposes.

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