2016 (10) TMI 408 - HC - Income Tax

Reopening of assessment - validity of notice - whether or not the notice under Sec. 148 of the Income Tax Act was duly served on the petitioner? - effect of non-service of notice on the proceedings or action taken in pursuance of such notice? - Held that - From the report of the Inspector attached to the office of the IT Act, Ward-9(3), Calcutta, it is evident that the said Inspector attempted to contact the petitioner at its erstwhile address at Biplabi Anukul Chandra Street and not having found the petitioner there, affixed a copy of the notice under Sec. 148 of the IT Act at the said address. This report is dated 31 March, 2014. Although this report mentions that the said address was last known address of the petitioner, such statement is obviously incorrect. As stated above, starting from 2009-10 the Department has sent all correspondences and notices to the petitioner at its Sunny Park address. Further, the Department has disclosed no document to show that Sec. 148 notice was even sought to be served at the petitioner s Sunny Park address nor any such point was urged in the course of making oral submission by Learned Counsel for the respondents. Hence, it appears to be absolutely clear that the notice under Sec. 148 of the IT Act was never served on the petitioner at its Sunny Park address. Hon ble Apex Court in the case of Commissioner of Income Tax-vs.- Thayaballi Mulla Jeevaji Kapasi 1967 (3) TMI 1 - SUPREME Court wherein it was held that the mere fact that the serving officer did not find the party to be served with the notice at his address is not sufficient to establish that he cannot be found. It must be shown not only that the serving officer went to the place at a reasonable time when he would be expected to be present, but also that if he was not found, proper and reasonable attempts were made to find him either at that address or elsewhere. If after such reasonable attempts the position still was that the party is not found, then and then only can it be said that he cannot be found. In the instant case, it does not appear that any attempt was made by the serving officer to find the assessee at any other address. Indeed, we are at a loss to understand why the notice was sought to be served at the erstwhile address of the petitioner when the Department was fully aware of the shifting of the registered office of the petitioner to Sunny Park and had the current Sunny Park address in its records. Thus have to hold that notice under Sec. 148 of the IT Act was not duly served on the petitioner. Any proceeding initiated by the Department pursuant to the notice dated 31 March, 2014 issued under Sec. 148 of the IT Act or any order passed in such proceeding is bad in law and of no effect. Such proceeding and order passed therein, if any, are hereby quashed.- Decided in favour of assessee

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Service of the notice to the correct address.
3. Consequences of non-service of notice.
4. Availability of alternative remedies.

Issue-Wise Detailed Analysis:

1. Validity of the Notice Issued Under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 31 March 2014, issued under Section 148 of the IT Act, which initiated reassessment proceedings for the assessment year 2007-08. The petitioner contended that the notice was not served at its current address, despite the department being aware of the change. The court noted that the notice mentioned both the old and new addresses but was sent only to the old address.

2. Service of the Notice to the Correct Address:
The petitioner argued that the notice was not received because it was sent to the old address. The petitioner had informed the department of its new address through Form No. 18 and Form No. 49A, and the new PAN card was issued to the new address. The court observed that the department had been sending all other correspondences to the new address since 2009, indicating their awareness of the new address. The court found that the notice was never served at the petitioner's new address and that the department did not attempt to serve the notice at the new address or follow the proper procedures for service by affixation.

3. Consequences of Non-Service of Notice:
The court held that due and proper service of notice under Section 148 within the limitation period prescribed under Section 149 is a condition precedent for initiating reassessment proceedings. The court relied on several precedents, including CIT-vs.-Thayaballi Mulla Jeevaji Kapasi and CIT-vs.-Kurban Hussain Ibrahimji Mithiborwala, which established that the jurisdiction to reopen an assessment depends on the issuance of a valid notice. The court concluded that the reassessment proceedings initiated without proper service of notice were void ab initio and a nullity in the eye of law.

4. Availability of Alternative Remedies:
The respondents argued that the petitioner had an alternative remedy by way of statutory appeal under the IT Act, and hence, the writ petition should not be entertained. The court acknowledged that while the existence of an alternative remedy is a rule of practice, it is not a rule of law. The court held that when an action is taken in violation of the principles of natural justice, the writ court would be justified in interfering, notwithstanding the availability of an alternative remedy.

Court's Conclusion:
The court quashed the reassessment proceedings initiated pursuant to the notice dated 31 March 2014, and any orders passed in such proceedings, as they were bad in law and of no effect due to the improper service of the notice. However, the court did not quash the notice itself, allowing the department to proceed afresh with the reassessment, provided they give full opportunity of hearing to the petitioner. The reassessment proceedings, if initiated, should be completed within six months from the date of the judgment.

Disposition:
WP No. 62 of 2015 was disposed of with no order as to costs. The department was directed to act fairly, reasonably, and in compliance with the principles of natural justice in any fresh reassessment proceedings.

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