2015 (7) TMI 172 - AT - Income Tax

Reopening of assessment - the assessment orders passed by the AO are illegal and without jurisdiction as no notices u/s.148 of the Act were served on the assessee as submitted by assessee - Held that - In the instant case, even there is no concrete evidence to prove that notices u/s.148 of the Act, were sent by Regd. post on 31.5.2001. Evidence of such notice even does not establish on record that a separate notice for each assessment year under consideration was issued. Considering the above facts, we hold that no notice u/s.148 was served on the assessee. The revenue has miserably failed to prove that notices u/s.148 of the Act were served on the assessee. It is true that the AO derives his jurisdiction to initiate the proceedings u/s.147 of the Act on the basis of service of notice u/s.148 of the Act. For a proceeding u/s.147 of the Act, to be valid, it is mandatory that the service of notice u/s.148 should be effected. In the case of CIT v. Mintu Kalita 2001 (2) TMI 39 - GAUHATI High Court held that service of notice prescribed in section 148 for the purpose of initiating proceeding for reassessment is not a mere procedural requirement but it is a condition precedent to the initiation of proceedings for the assessment u/s.147 of the Act. The mere issuance of notice is not sufficient.Thus we have no other alternative except to annul the reassessment orders made by the AO as well as the impugned order of ld CIT(A) for all the five assessment years under consideration. - Decided in favour of assessee.

Issues Involved:
1. Validity of notice under section 147 read with section 148 of the Income-tax Act.
2. Compliance with the directions of the Income-tax Appellate Tribunal (ITAT).
3. Verification of service of notice.
4. Legality and jurisdiction of reassessment proceedings.
5. Limitation period for reassessment.
6. Opportunity of hearing and principles of natural justice.
7. Merits of additions and disallowances in ex-parte assessment.

Issue-wise Detailed Analysis:

1. Validity of Notice Under Section 147/148:
The primary contention was that the notices under section 147/148 were not validly served on the assessee. The report from the Income Tax Officer (ITO) indicated that notices were issued but did not provide evidence of service. The Tribunal emphasized that service of notice is a condition precedent for reassessment proceedings, citing the Hon'ble Jurisdictional High Court's decision in CIT v. Mintu Kalita, which held that mere issuance of notice is insufficient without proof of service.

2. Compliance with ITAT Directions:
The ITAT had previously remanded the case to the CIT(A) with specific directions to verify the service of notice and examine whether there was another individual with a similar name in the locality. The CIT(A) failed to comply with these directions adequately, as the necessary verifications and inquiries were not conducted properly.

3. Verification of Service of Notice:
The CIT(A) sought verification from the postal authorities, who responded that the case was time-barred and records could not be furnished. Additionally, the assessee provided an affidavit stating the existence of another individual with a similar name. The ITO's report did not conclusively establish the service of notice, leading to the Tribunal's conclusion that there was no concrete evidence of service.

4. Legality and Jurisdiction of Reassessment Proceedings:
The Tribunal reiterated that the AO's jurisdiction to initiate reassessment proceedings is contingent upon the proper service of notice under section 148. Given the lack of evidence for service, the reassessment proceedings were deemed illegal and without jurisdiction.

5. Limitation Period for Reassessment:
The Tribunal addressed the issue of limitation, noting that the notices were issued within the period of limitation. However, the service of notice, which is a condition precedent for reassessment, was not established, rendering the proceedings invalid despite the notices being issued in time.

6. Opportunity of Hearing and Principles of Natural Justice:
The assessee argued that the ex-parte assessment was made without affording a reasonable opportunity of hearing. The Tribunal found that the AO completed the assessments ex-parte due to non-compliance by the assessee, but this was moot since the reassessment proceedings themselves were invalid due to lack of proper notice service.

7. Merits of Additions and Disallowances in Ex-Parte Assessment:
The Tribunal did not delve into the merits of the additions and disallowances made in the ex-parte assessment, as the entire reassessment proceedings were annulled due to the foundational issue of improper notice service.

Conclusion:
The Tribunal annulled the reassessment orders and the impugned order of the CIT(A) for all the assessment years under consideration due to the failure to prove the service of notice under section 148, which is a mandatory requirement for valid reassessment proceedings. The appeals were allowed, and the reassessment orders were declared invalid.

← Previous Next →