2017 (11) TMI 636 - AT - Income Tax

Jurisdiction of the A.O. for non-service of the notice under section 143(2) within the statutory time limit - modes of service of notice - Held that - When the only notice under section 143(2) dated 06th August, 2012 have been returned to the A.O. unserved in August, 2012 itself, the A.O. could have made some efforts to serve the notice to the assessee upto 30th September, 2012 through other mode of service prescribed under law. However, the A.O. did not make any effort to serve the notice under section 143(2) of the I.T. Act upon the assessee. It clearly show that A.O. never wanted to serve the assessee with jurisdictional notice under section 143(2) of the I.T. Act. It stands proved on record that no notice under section 143(3) have been served upon the assessee within the time prescribed under the law or thereafter. Therefore, the entire assessment order got vitiated due to non-service of the notice under section 143(2) of the I.T. Act. The A.O. therefore, did not get valid jurisdiction to proceed to make scrutiny assessment against the assessee. The assessment order is null and void abinitio - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction of the A.O. for non-service of notice under section 143(2) within the statutory time limit.
2. Levy of penalty under section 271(1)(c) of the I.T. Act, 1961.

Issue 1: Jurisdiction of the A.O. for non-service of notice under section 143(2) within the statutory time limit:

The case involved challenges to the assessment order for Assessment Year 2011-2012 due to non-service of the notice under section 143(2) within the statutory time limit. The assessee contended that the notice dated 6th August, 2012, issued under section 143(2) of the I.T. Act, was returned unserved. The Ld. CIT(A) noted that the notice was received back with the comments "No such person." The A.O. did not issue any other notice under section 143(2) after the unserved notice dated 6th August, 2012. The A.O. failed to make any effort to serve the notice through other modes of service, as required by law. Consequently, it was established that the A.O. lacked valid jurisdiction to proceed with the scrutiny assessment. The assessment order was deemed null and void ab initio, leading to the deletion of all additions made in the assessment order.

Issue 2: Levy of penalty under section 271(1)(c) of the I.T. Act, 1961:

The A.O. had imposed a penalty under section 271(1)(c) based on the additions made in the assessment order, including unexplained cash deposits in the bank account. However, since the assessment order was quashed due to the non-service of the notice under section 143(2), the grounds for levying the penalty were no longer valid. Consequently, the penalty under section 271(1)(c) was set aside, and the appeal of the assessee was allowed.

In conclusion, both appeals by the assessee were allowed. The first issue regarding the jurisdiction of the A.O. was crucial, leading to the quashing of the assessment order and deletion of all additions. Additionally, the penalty under section 271(1)(c) was canceled due to the invalidity of the assessment order.