2017 (1) TMI 1195 - AT - Income Tax

Validity of assessment u/s 143(3) - notice of hearing was served upon minor daughter - Held that - There is merit in the submissions of the ld. AR of the assessee, as the proposition canvassed by the ld. AR for the assessee are supported by facts narrated by him. As per Section 15 of the Code of Civil Procedure, the notice should be served at least on any adult member of the family and if the notice is served upon a minor child it would be presumed that it has not been served on the assessee at all. The assessee has also explained before us the definition of the child and adult and the same we have noted in the above para. The assessee also filed the affidavit before the CIT(A) stating that he was neither aware about the notice u/s.143(2) nor any statutory notice u/s.143(2) has been served on him. Therefore, considering the factual position we are of the view that the order passed by ld. CIT(A) is a reasoned order and does not require any interference. Therefore, we confirm the order passed by ld. CIT(A). - Decided against revenue

Issues:
1. Validity of assessment proceedings due to alleged lack of valid service of notice under section 143(2) of the Income Tax Act.
2. Additions made by the Assessing Officer in the assessment order.
3. Appeal by the Revenue challenging the order of the Commissioner of Income Tax (Appeals).

Issue 1: Validity of Assessment Proceedings
The appeal filed by the assessee challenged the assessment order for the Assessment Year 2007-2008 on the grounds of lack of valid service of notice under section 143(2) of the Income Tax Act. The appellant argued that notice was not validly served as per the procedure laid down under Rule 12-15 of Order V of the Civil Procedure Code, 1908. The appellant further contended that the notice served upon the minor daughter was not valid and that the assessment proceedings were invalid. The Commissioner of Income Tax (Appeals) considered the arguments and evidence presented. The Commissioner noted that the appellant denied receiving the notice and highlighted discrepancies in the service of notices. Ultimately, the Commissioner held that lack of opportunity rendered the assessment ab initio invalid, and the assessment was annulled based on the facts presented.

Issue 2: Additions Made by the Assessing Officer
Regarding the additions made by the Assessing Officer in the assessment order, the Commissioner of Income Tax (Appeals) analyzed each addition separately. The first addition related to an unsecured loan given to an individual, which was deemed frivolous and liable to be deleted as it was not a credit entry. The second addition pertained to sundry creditors shown in the balance sheet, which the Assessing Officer treated as bogus and spurious without sufficient evidence or efforts to ascertain the real state of affairs. The Commissioner held that without proper evidence, the addition of sundry creditors was not justified and should be deleted. The third addition was a disallowance of telephone expenses for personal use, which the Commissioner found unjustified without proper application of mind or supporting material. The Commissioner concluded that the additions made by the Assessing Officer did not stand the test of law and annulled the assessment based on these grounds.

Issue 3: Appeal by the Revenue
The Revenue filed an appeal challenging the order of the Commissioner of Income Tax (Appeals) on various grounds. The Revenue contended that the assessment order was made as per law and should not have been annulled. The Revenue also argued that sufficient opportunities were given to the assessee and that the additions made by the Assessing Officer were valid. However, the Departmental Representative for the Revenue failed to convince the tribunal, and the tribunal upheld the order of the Commissioner of Income Tax (Appeals) based on the arguments presented by the assessee's representative. The tribunal agreed that there was a lack of valid service of notice under section 143(2) and confirmed the annulment of the assessment.

In conclusion, the tribunal dismissed the appeal filed by the Revenue and upheld the order of the Commissioner of Income Tax (Appeals) annulling the assessment for the Assessment Year 2007-2008. The tribunal found merit in the arguments presented by the assessee regarding the lack of valid service of notice and the unjustified additions made by the Assessing Officer, leading to the confirmation of the annulment of the assessment.

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