2005 (12) TMI 230 - AT - Income Tax

Block Assessment - Search And Seizure - absence of proper service of notice u/s 158BC - barred by limitation - HELD THAT - In our opinion this is the settled law that the affidavit of the assessee cannot be rejected without cross-examination of the person who has given the affidavit in view of the decision of the Hon'ble apex Court in the case of Mehta Parikh Co. vs. CIT 1956 (5) TMI 4 - SUPREME COURT . The affidavit is the best piece of evidence and CIT(A) in our opinion was not correct in law in rejecting the affidavit without bringing any evidence to the contrary. The CIT(A) was duty-bound to give opportunity to the assessee to cross-examine the Inspector and witnesses for bringing the truth as we feel it was necessary on the facts of the case to render substantial justice and to ascertain the fact whether the notice has been served on the assessee through the notice-server or by affixture. Learned DR could not bring any evidence or proof that the notice has been sent to the assessee through registered post AD nor any evidence has been produced that the AO has given finding that sending of the notice through registered post is not necessary. Even no such finding has been recorded on the order sheet. From the first page of the order and from the impression of the ink/writing it appears as if the entry dt. 15th Feb., 1999 to 31st March, 1999 has been made at one go. Therefore, we find force in the submission of the learned AR that no notice has been served on the assessee prior to 31st March, 1999 and it was only notice issued on 30th March, 1999 the copy of which is available at p. 6 has been served on the assessee for the first time on 31st March, 1999 and since the assessment was getting time-barred, the AO has tried to bring the evidence on record that the notice has been served on the assessee prior to 31st March, 1999. Genuinenity of the photocopy of the notice available at p. 6 of the paper book has not been denied by the ld DR in the open Court. Thus, we are of the view that the notice has not been served on the assessee in this case in accordance with s. 282 of the IT Act earlier to 31st March, 1999. In the absence of service of notice, the assessment order passed on 31st March, 1999 is a nullity and cannot be sustained in the eyes of law. We, therefore, set aside the order of the CIT(A) on this issue and annul the order passed by the AO. We have already held that the order passed by the AO is barred by limitation. We cannot direct the AO to make a fresh assessment because that would tantamount to extending the limitation for which we are not competent. Our aforesaid view is duly supported by the decision of the Hon'ble Supreme Court in the case of Hope Textiles Ltd. vs. Union of India 1993 (10) TMI 2 - SUPREME COURT . In the result, the appeal filed by the assessee on this issue is allowed.

Summary

Issues Involved:
1. Validity of the assessment.
2. Jurisdiction and proper service of notice under Section 158BC.
3. Assessment barred by limitation.
4. Compliance with provisions of Section 282(1) and Rule 19, Order 5 of CPC.

Detailed Analysis:

1. Validity of the Assessment:
The assessee challenged the validity of the assessment on the grounds that it was framed without jurisdiction and barred by limitation. The assessment was based on the requisition under Section 132A and the subsequent notices issued under Section 158BC and 142(1). The Tribunal found that the assessment order was passed without proper service of notice, rendering it invalid.

2. Jurisdiction and Proper Service of Notice under Section 158BC:
The assessee argued that the notice under Section 158BC was not properly served. The notice-server reported that the assessee refused to receive the notice, and later, an Inspector served the notice by affixture. The Tribunal noted that the service of notice by affixture did not comply with the provisions of Section 282(1) and Rule 19, Order 5 of CPC. The Inspector's report lacked details such as the names and addresses of witnesses, and no attempt was made to serve the notice at the assessee's residence. The Tribunal emphasized that the service of notice must be done in accordance with the law, and the affidavit submitted by the assessee stating that no notice was served was not countered by the Department.

3. Assessment Barred by Limitation:
The Tribunal found that the assessment was barred by limitation. The notice under Section 158BC was issued on 30th March 1999, asking the assessee to file a return within 45 days. The assessment order was passed on 31st March 1999, but the order was not served until 24th November 1999. The Tribunal held that the assessment order must be communicated to the assessee within the limitation period, and the delay in service rendered the assessment invalid. The Tribunal cited several case laws to support the view that an assessment order must be put into motion for service before the expiry of the limitation period.

4. Compliance with Provisions of Section 282(1) and Rule 19, Order 5 of CPC:
The Tribunal examined the compliance with the provisions of Section 282(1) and Rule 19, Order 5 of CPC. It was found that the notice was not served by registered post, and no finding was recorded by the AO that sending the notice by registered post was unnecessary. The Tribunal highlighted that proper service of notice is crucial, and the affidavit submitted by the assessee stating that no notice was served was not rebutted by the Department. The Tribunal concluded that the notice was not served in accordance with the law, and the assessment order was a nullity.

Conclusion:
The Tribunal annulled the assessment order, holding that it was barred by limitation and not served in accordance with the law. The appeal filed by the assessee was allowed, and the Tribunal emphasized that it could not direct the AO to make a fresh assessment as it would extend the limitation period, which is beyond its competence.