2023 (2) TMI 655 - HC - Income Tax

Reopening of assessment u/s 147 - no valid service of notice under section 148 - HELD THAT - We agree with the view taken by the Delhi High Court in the case of CIT vs Eshaan Holding (P) Ltd. 2009 (8) TMI 833 - DELHI HIGH COURT upholding the view of the ITAT that if there is no valid service of notice under section 148, the reassessment proceedings are null and void as also the decision of the Punjab and Haryana High Court in the case of CIT vs Avtar Singh 2008 (2) TMI 280 - PUNJAB AND HARYANA HIGH COURT which held that service of notice under section 148 is a condition precedent for making reassessment or re-computation under section 147 of the Act. In our view, before issuing the notice under section 148A (b) it was imperative for the AO to have checked if there was a change of address. A condition precedent for any proceeding including a proceeding u/s. 148A, is a valid service of notice, lest it would be a jurisdictional error. No averment or proof of the service of notice dated 20th March 2022 on the petitioner in respondent s affidavit in reply dated 14th November 2022. The cascading effect of non-service was the petitioner did not get an opportunity to respond to the notice. Consequently, the notice dated 20th March 2022 and the proceedings thereafter are void. Apropos section 151(ii) of the Act the sanction from the PCCIT ought to have been taken when order was sought to be passed beyond the period of three years i.e. beyond 31st March 2022 on 5th April 2022. Consequently, the notice dated 20th March 2022 and order dated 5th April 2022 deserves to be set aside on account of jurisdictional error i.e. for want of service and consequently, for non-compliance with the provisions of the Act. With regard to the reopening notice u/s. 148 dated 13th April 2022, the contention of the petitioner that they received the hand delivery of the notice on 21st April 2022 pursuant to the message received by the petitioner on the registered mobile number on 18th April 2022 is also not controverted by the respondents in their reply. No approval from PCCIT was taken as contemplated u/s 151(ii) as the reopening was caused beyond three years and is therefore vitiated. We also find no averments responding to the ITRV dated 29 April 2022 filed for A.Y. 2018-19 by the petitioner in response to the notice u/s. 148 dated 13 April 2022 nor with regard to the compliance of the stipulations by the respondents u/s. 148. We are accordingly of the view that the impugned order dated 5 April 2022 and the notice dated 13 April 2022 also deserves to be quashed and set aside.

Summary

Issues:
1. Validity of notice dated 20th March 2022 issued under Section 148A(b) of the Income Tax Act for AY 2018-19.
2. Validity of the order dated 5th April 2022 issued under Section 148A(d) of the Act.
3. Reopening notice dated 13th April 2022 issued under Section 148 of the Act for AY 2018-19.

Analysis:

1. The petitioner, a housewife, did not file her income tax return for AY 2018-19 due to income below taxable limits. The notice dated 20th March 2022 was challenged on the grounds of not receiving it at the updated address, leading to a lack of opportunity to respond. The petitioner argued that the order dated 5th April 2022 was passed ex parte and required separate approval from the Principal Chief Commissioner of Income Tax (PCCIT) due to being issued after three years from the end of the relevant AY. The court held that without valid service of notice, the proceedings are void, citing relevant judgments.

2. The respondents contended that the notice dated 20th March 2022 was sent via speed post within the prescribed period. However, the court found that the notice was not served at the correct address despite the petitioner updating it with the income tax authorities. The lack of service deprived the petitioner of the opportunity to respond, rendering the notice and subsequent proceedings void. The court emphasized the importance of valid notice service as a jurisdictional requirement.

3. The reopening notice dated 13th April 2022 was challenged on the basis of not receiving proper approval from the PCCIT as required by law due to being issued beyond the three-year limit. The court found that the petitioner's claim of receiving the notice after a message on the registered mobile number was not contested by the respondents. As there was no approval from the PCCIT for the reopening beyond the stipulated period, the court deemed the notice and subsequent order invalid. The court directed the respondents to proceed with assessment after issuing a valid notice and providing the petitioner with a hearing within a specified timeframe.

In conclusion, the court set aside the impugned orders and notices due to jurisdictional errors, emphasizing the necessity of valid notice service and compliance with statutory provisions. The court granted the respondents the opportunity to conduct a proper assessment after ensuring due process and compliance with the law.