2008 (1) TMI 473 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the service of notice u/s 148 of the IT Act, 1961.
2. Jurisdiction of the AO to pass the assessment order u/s 144/148/147 of the IT Act, 1961.

Summary:

1. Validity of the service of notice u/s 148 of the IT Act, 1961:
The Revenue contended that the CIT(A) erred in annulling the assessment order by relying on the decision of the Allahabad High Court in the case of Addl. CIT vs. Prem Kumar Rastogi, as the notice u/s 148 was issued after taking prior approval of the Addl. CIT and properly served at the residence of the partner of the assessee firm. The AO observed discrepancies in the income reported by the assessee and issued a notice u/s 148 on 21st Jan., 2002, which was allegedly served on 24th Jan., 2002. The assessee argued that the notice was not served on any partner or authorized person, citing the Supreme Court decision in R.K. Upadhyaya vs. Shanabhai P. Patel, which mandates that service of notice is a condition precedent to pass a valid assessment order. The CIT(A) found that the notice was not served on the partners or authorized representatives, and the person who received the notice was not identified, thus invalidating the service of notice u/s 148.

2. Jurisdiction of the AO to pass the assessment order u/s 144/148/147 of the IT Act, 1961:
The CIT(A) concluded that the AO did not acquire legal or valid jurisdiction to pass the assessment order due to improper service of notice. The Tribunal upheld this view, emphasizing that valid service of notice is a condition precedent to the validity of reassessment. The Tribunal noted that the ITI's report did not identify the person who received the notice, and the service was not in accordance with the provisions of s. 282 of the IT Act, 1961. The Tribunal referenced several judicial precedents, including the Supreme Court's decision in R.K. Upadhyaya vs. Shanabhai P. Patel and the Allahabad High Court's decision in Addl. CIT vs. Prem Kumar Rastogi, to support the conclusion that the assessment order was illegal and without jurisdiction due to improper service of notice.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to annul the assessment order due to improper service of notice u/s 148, which resulted in the AO lacking jurisdiction to pass the assessment order u/s 144/148/147 of the IT Act, 1961.