2003 (8) TMI 176 - AT - Income Tax

Service Of Notice - Validity of initiation of proceedings u/s 147/148 - Escapement of income - HELD THAT - The procedure of service through affixture has already been discussed above, along with the ratio of various decisions of Supreme Court and various High Courts and after going through the provisions regarding service by affixture, we found that there is no valid service either on the assessee firm or on its partners. Therefore, the assessment completed by the Assessing Officer u/s 144/148 cannot be held as valid assessment. The jurisdiction u/s 148 was not properly assumed, therefore, the assessment cannot be held as valid assessment. As we have already discussed that there was no service of notice under section 148, accordingly there was no jurisdiction to make assessment at the end of Assessing Officer. The finding of CIT (Appeals) that one of the partners had participated in the assessment proceedings, therefore, this was a technical irregularity in issuing notice u/s 148, cannot be sustained because once the proper jurisdiction has not been assumed, then assessment proceedings cannot be held as valid proceedings. Since we have quashed the assessment completed by the Assessing Officer, therefore, we are not inclined to consider the aspect of validity of initiation of proceedings u/s 147/148, that whether the initiation was proper or whether the necessary approval-was validly taken or not. As stated above, the legal ground in regard to service has been allowed by us, therefore, We are not inclined to dispose off the grounds on merits since we have quashed the assessment itself. Therefore, the appeal of the assessee in case of firm is allowed. The appeal of the department in case of the firm M/s.Chandra Agencies has become infructuous, as we have already quashed the assessment order passed by the Assessing Officer. The appeals in case of both the partners are also allowed; as the assessments in these cases were completed on the basis of share of profit distributed in the hands of the partners. The assessment in the case of the firm has already been quashed, therefore, there is no question of assessing the share of profit in the hands of partners. Accordingly the appeals of the partners are also allowed. The appeals of the department in case of two partners have become infructuous because they were completed on the basis of assessment order in case of firm, which has already been quashed here by us above. In the result, the appeals of the assessees are allowed and the appeals of the department are dismissed.

Summary

Issues Involved:
1. Validity of service of notice u/s 148.
2. Validity of initiation of proceedings u/s 147/148.
3. Additions made by the Assessing Officer.
4. Chargeability of interest u/s 139(8), 215/217, and 216.

Summary:

1. Validity of Service of Notice u/s 148:
The primary issue was whether the notice u/s 148 was validly served. The assessee argued that the notice was not served properly as it was affixed at addresses that were not the last known addresses of the firm. The Tribunal examined the procedure for service of notice as per sections 282 and 283 of the Income-tax Act and Order V, Rule 17 of the CPC. It was found that the notices were affixed without independent witnesses and not at the last known address of the firm. The Tribunal concluded that there was no valid service of notice u/s 148, rendering the assessment invalid.

2. Validity of Initiation of Proceedings u/s 147/148:
The assessee contended that the initiation of proceedings was invalid as the necessary approval was taken from the Commissioner of Income-tax instead of the Joint CIT. The Tribunal did not delve into this issue in detail as it had already quashed the assessment on the ground of invalid service of notice u/s 148.

3. Additions Made by the Assessing Officer:
The Assessing Officer had made various additions on account of trading account discrepancies, suppressed sales, advertisement and publicity expenses, sundry creditors, and unsecured loans. The CIT (Appeals) upheld most of these additions but deleted certain cash credits. The Tribunal did not address these additions on merits since the assessment itself was quashed due to invalid service of notice.

4. Chargeability of Interest u/s 139(8), 215/217, and 216:
The CIT (Appeals) had cancelled the chargeability of interest under these sections. The department's appeal against this cancellation became infructuous as the Tribunal quashed the entire assessment.

Conclusion:
The Tribunal allowed the appeals of the assessee, quashing the assessment completed u/s 144/148 due to invalid service of notice u/s 148. Consequently, the appeals of the department were dismissed as infructuous. The assessments in the cases of the partners were also quashed, as they were based on the firm's assessment.