2017 (5) TMI 1210 - AT - Income Tax

Revision u/s 263 - opportunity of being heard has not been satisfied as no notice was served on assessee - denial of natural justice - Held that - The first condition of opportunity of being heard has not been satisfied as no notice was served on assessee leave alone giving sufficient opportunity. Coming to the issue of non-service of notice it is to be noted that the Ld.CIT did not serve any notice on assessee. As explained by the Ld.CIT-DR the notice was sent through service by process server to the AO who reported that assessee was not living in the given address and his whereabouts are not available and the address which was given was demolished. In these circumstances without taking recourse to any other mode of service of notice CIT concluded that the proceedings are to be completed as they were time barring. As can be seen from para 6 the notice dt. 14-03-2011 was issued but not served but an order was passed on 28-03-2014. At any rate reckoned from the date of issuing the notice even the mandatory two weeks time was also not provided by the CIT. Ld.CIT could have sent the notice by post to make evidence on record that a proper notice was at-least issued if not served on assessee. No notice was sent by post. Having come to know that assessee was not living in the given address no attempt was made to locate assessee as was subsequently found out in the course of recovery proceedings. In the present case neither there was any issuance of a show cause notice by way of post nor was there any service by affixture. There is no substituted service also as admitted in this case. Apart from not giving an opportunity to assessee Ld.CIT also did not verify the record properly. The proceedings u/s. 153C were initiated as the department has seized certain documents in search of M/s. MBS Jewellers Pvt. Ltd. Obviously AO could not have completed the assessment without examining these documents as the very basis for issuing of notices u/s. 153C for the impugned year was the said sale deed copies. Moreover AO issued a show cause notice as discussed in the arguments of Ld. Counsel and assessee had given a detailed reply. It was further submitted that assessee has given GPA to one Shri Koteswara Rao and subsequently cancelled the same within two years. The said GPA copies were enclosed to letter by assessee in the course of assessment proceedings itself. The copies of sale documents obviously pertain to the period after GPA was cancelled. Therefore as presumed by assessee and may be in the eye of law they are not valid documents. Not only that assessee has also clearly stated that he has not sold any property and the statement of affairs do indicate that the impugned property is in assessee s possession. Thus if the CIT has examined the record correctly he would not have come to a conclusion that there is no verification of the issue. Opportunity of being heard is little more than serving a notice on assessee. It is not an empty formality. Without giving a proper opportunity to assessee revision proceedings u/s. 263 cannot be finalized as the provisions of Section 263 mandates that the CIT may pass such orders after giving an opportunity of being heard. Since the mandatory requirement of opportunity of being heard has not been provided to assessee the order passed by CIT is void ab-initio. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the order under Section 263 of the Income Tax Act.
2. Proper service of notice to the assessee.
3. Verification of unexplained investments by the Assessing Officer (AO).
4. Opportunity of being heard for the assessee.

Detailed Analysis:

1. Validity of the Order under Section 263:
The appeal challenges the ex-parte order passed by the Commissioner of Income Tax (CIT) under Section 263 of the Income Tax Act. The CIT set aside the assessment order for AY 2006-07, alleging non-examination of certain information in the seized material. The Tribunal noted that the CIT's order was passed without serving a proper notice to the assessee and without giving the assessee an opportunity to be heard, which is a mandatory requirement under Section 263.

2. Proper Service of Notice to the Assessee:
The CIT attempted to serve the notice to the assessee through the AO, but the notice could not be served as the assessee's whereabouts were unknown, and the last known address was demolished. The Tribunal emphasized that the CIT did not take alternative measures for service, such as sending the notice by post or using substituted service methods like publication in a local newspaper. The Tribunal highlighted that the service of notice is crucial and must comply with the procedures outlined in the Income Tax Act and the Civil Procedure Code.

3. Verification of Unexplained Investments by the AO:
The CIT alleged that the AO did not verify the unexplained investments related to land transactions. However, the Tribunal found that the AO had indeed examined the transactions during the assessment proceedings. The assessee had provided detailed explanations and documents, including the cancellation of the General Power of Attorney (GPA) given to Shri G. Koteshwara Rao, which invalidated the subsequent sale deeds executed by him. The Tribunal concluded that the AO had verified the issue, and the CIT's claim of non-verification was unfounded.

4. Opportunity of Being Heard for the Assessee:
The Tribunal underscored the importance of giving the assessee an opportunity to be heard before passing an order under Section 263. The CIT's failure to serve a proper notice and provide an opportunity for the assessee to present their case rendered the order void ab-initio. The Tribunal cited several legal precedents emphasizing the necessity of adhering to the principles of natural justice and providing a fair hearing to the assessee.

Conclusion:
The Tribunal quashed the CIT's order under Section 263, stating that the mandatory requirements of serving a proper notice and giving the assessee an opportunity to be heard were not fulfilled. The Tribunal also noted that the AO had verified the transactions in question, and the CIT's conclusions were not based on a proper examination of the record. The appeal of the assessee was allowed, and the order was pronounced in the open court on 23rd May 2017.