2018 (6) TMI 1321 - HC - Income Tax

Income escaping assessment - default in issue of notice - Notice deemed to be valid in certain circumstances. 292BB - Held that - In Mayawati s case 2009 (2) TMI 17 - DELHI HIGH COURT in the context of Section 143(2) of the Income Tax Act, held that the word issuance of notice and service of notice , are not synonymous and interchangeable, and accordingly, Delhi High Court held that notice under this section would lose all its legal efficacy, if it had not been actually served on the assessee, within the scheduled and stipulated time. The Delhi High Court held that in this dialectic, a fortiori, since the word, served is conspicuous by its absence in Section 149 and that the legislature has deliberately used the word issue , actual service within the period of four and six years specified in the section, would not be critical. In Commissioner of Income-Tax v. Three Dee Exim 2011 (3) TMI 543 - DELHI HIGH COURT , was is in complete agreement with the reasoning of the Hon ble Division Bench judgment in the aforesaid case of Mayawati (supra) and held that what is contemplated under Section 149 is issuance of notice under Section 148 and not the service thereof on the assessee and further held that the service of notice under Section 148 is only required before the assessment, reassessment or re- computation. - Decided against the assessee

Issues Involved:
1. Validity of Reassessment Proceedings and Service of Notice under Section 148.
2. Dismissal of Grounds on Merits in Respect of Claim under Section 54.
3. Applicability of Section 292BB of the Income Tax Act, 1961.
4. Jurisdiction of Assessing Officer under Section 147.
5. Procedural vs. Substantive Requirements for Reopening Assessment.

Detailed Analysis:

1. Validity of Reassessment Proceedings and Service of Notice under Section 148:
The primary issue was whether the reassessment proceedings were valid despite the alleged non-service of notice under Section 148 on the appellant. The court noted that the notice dated 31.03.2012 was claimed to have been issued and served through affixture after it came back unserved via registered post. The court further examined the procedural requirements under Section 148 and concluded that the issuance of notice is a jurisdictional requirement for reassessment. The court referenced the Supreme Court decision in R.K. Upadhyaya v. Shanabhai P. Patel, which clarified that the jurisdiction for reassessment is conferred upon the issuance of notice, not its service.

2. Dismissal of Grounds on Merits in Respect of Claim under Section 54:
The appellant argued that the Income Tax Appellate Tribunal (ITAT) dismissed grounds related to the claim under Section 54 of the Income Tax Act as "not pressed" without providing an opportunity to present the case on merits. The court observed that the ITAT had indicated that the appellant would be given an opportunity to present the case on merits if the jurisdictional issue was decided against them. However, since the jurisdictional issue was decided in favor of the Revenue, the grounds related to Section 54 were dismissed as not pressed.

3. Applicability of Section 292BB of the Income Tax Act, 1961:
The court examined whether Section 292BB, which deems notice to be valid if the assessee has appeared or cooperated in the proceedings, applied to the impugned assessment. The court noted that Section 292BB, introduced by the Finance Act, 2008, applies to all proceedings pending as of 01.04.2008. The court referenced decisions in CIT v. Panchvati Motors (P.) Ltd. and CIT v. Chetan Gupta, which supported the applicability of Section 292BB to pending proceedings. The court concluded that the appellant, having participated in the proceedings without raising an objection to the service of notice, was precluded from challenging the service of notice under Section 148.

4. Jurisdiction of Assessing Officer under Section 147:
The appellant challenged the jurisdiction of the Assessing Officer (AO) under Section 147, arguing that the AO did not have valid reasons to believe that income had escaped assessment. The court reiterated that the AO had recorded reasons for reopening the assessment based on information received through the Annual Information Report (AIR) and sought approval from the Joint Commissioner of Income Tax. The court held that the AO had valid jurisdiction to reopen the assessment under Section 147.

5. Procedural vs. Substantive Requirements for Reopening Assessment:
The court addressed the appellant's argument that the issue and service of notice under Section 148 are not merely procedural but mandatory requirements for a valid reassessment. The court distinguished between procedural defects and substantive requirements, noting that procedural defects do not render an assessment void but irregular. The court cited the Supreme Court decision in Estate of Late Rangalal Jajodia v. CIT, which held that lack of notice does not amount to the revenue authority having no jurisdiction to assess but renders the assessment defective. The court concluded that non-service or invalid service of notice under Section 148 could be corrected by restoring the matter to the stage where the irregularity occurred.

Conclusion:
The court dismissed the appellant's appeal, upholding the ITAT's decision. The court concluded that the reassessment proceedings were valid, the appellant was precluded from challenging the service of notice under Section 148 due to the applicability of Section 292BB, and the AO had valid jurisdiction to reopen the assessment under Section 147. The court also held that procedural defects in the service of notice do not render the assessment void but irregular, which can be corrected by restoring the matter to the appropriate stage.

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