2022 (8) TMI 22 - AT - Income Tax

Revision u/s 263 - non-service of notice on the assessee - assessee was is in judicial custody - non-granting the assessee an opportunity of being heard - HELD THAT - As notice u/s.263 was sent on the address of the assessee and the correct address. The fact remains that at that point of time, the assessee was under judicial custody but one Sri Uttam Kumar, claiming to be an employee of the assessee has responded to the notice. CIT himself categorically held that the said Sri Uttam Kumar does not hold the power of attorney to represent the assessee. Ld Pr. CIT has been communicated by a letter that the assessee is in judicial custody. When an individual is in judicial custody, any notice on such individual can be served on him only through the Superintendent of the Jail, wherein, the individual is lodged. One should keep in mind that once the individual is taken under judicial custody, many of his constitutional rights stands curtailed. Nothing stopped the Pr. CIT from communicating the notice to the individual in jail. Once he was intimated that the assessee is in jail, the Pr. CIT was aware that the assessee is in judicial custody as on 20.3.2019. He had adequate time for serving the notice on the assessee in Jail through Superintendent of the Jail. Instead of this, the Pr. CIT proceeded to issue order u/s.263. He failed to serve notice on the assessee even though he was informed of the judicial custody of the assessee. One must also keep in mind that when the assessee is in judicial custody, his address during the period of judicial custody does not change and it cannot be said that the assessee is absconding. The second condition that the assessee should be given an opportunity of being heard also stood violated insofar as the assessee has not been heard. In the circumstances, order passed u/s.263 got vitiated and is liable to be annulled and we do so. Thus non-service of notice on the assessee, who is in judicial custody and on account of non-granting the assessee an opportunity of being heard, the additional ground filed by the assessee stands allowed and orders passed u/s.263 stand quashed. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of service of notice under Section 263 of the Income Tax Act.
2. Opportunity of being heard for the assessee.
3. Procedural compliance by the Principal Commissioner of Income Tax (Pr. CIT).

Detailed Analysis:

1. Validity of Service of Notice under Section 263 of the Income Tax Act:
The primary issue revolves around whether the notice issued under Section 263 was validly served on the assessee. The Revenue argued that the notice was sent via Speed Post to the address mentioned in the PAN, relying on various judicial precedents to support the validity of such service. These precedents include decisions from the Co-ordinate Bench of the Tribunal, Hon'ble Jharkhand High Court, Hon'ble Delhi High Court, Hon'ble Allahabad High Court, and Hon'ble Supreme Court, which collectively uphold that service by Speed Post is valid if not returned undelivered.

2. Opportunity of Being Heard for the Assessee:
The Tribunal emphasized that Section 263 of the Act requires the Pr. CIT to give the assessee an opportunity of being heard before revising any order. In this case, the assessee was in judicial custody, and the notice was responded to by an individual claiming to be an employee (Sri Uttam Kumar) without a Power of Attorney. The Tribunal noted that once the Pr. CIT was informed of the assessee's judicial custody, he should have served the notice through the Superintendent of the Jail. The failure to do so meant that the assessee was not given a proper opportunity to be heard, thereby violating the principles of natural justice.

3. Procedural Compliance by the Principal Commissioner of Income Tax (Pr. CIT):
The Tribunal scrutinized the procedural compliance by the Pr. CIT, particularly in the context of serving notice to an individual in judicial custody. It was held that the Pr. CIT had adequate time to serve the notice through the proper channel but failed to do so. The Tribunal pointed out that the Pr. CIT's knowledge of the assessee's judicial custody should have prompted a different approach to ensure the notice was properly served. The Tribunal found that the procedural lapses in serving the notice and not granting a proper hearing opportunity invalidated the order under Section 263.

Conclusion:
The Tribunal concluded that the order under Section 263 was vitiated due to non-service of notice on the assessee, who was in judicial custody, and the failure to provide the assessee an opportunity of being heard. Consequently, the order passed under Section 263 was quashed, and the appeals of the assessee were allowed.

Order:
The appeals filed by the assessee were allowed, and the orders passed under Section 263 were quashed. The decision was pronounced in the open court on 15/6/2022.