2019 (5) TMI 1538 - AT - Income Tax

Condonation of delay - sufficient cause - as per revenue assessee, as a matter of strategy thought it fit to seek rectification a separate matter altogether entailing only a mistake/s apparent from record - HELD THAT - We are inclined to admit the appeal. The reason is two-fold. The explanation, whatever its merits, is bona fide . CIT(A) was appealed both on the legal ground/s, since rejected, as also on merits (of the addition). While, the assessee lost on both, his challenge to the quantification, made separately, was lost sight of by the CIT(A) while deciding the appeal on the merits of the addition. The assessee sought rectification prior to preferring an appeal, which otherwise could be raised during the hearing of the appeal, challenging the quantification of the addition sustained, or in appeal against the section 154 order, i.e., were the assessee to be unsuccessful in obtaining the rectification sought. The charge of mala fides by the Revenue is based on suspicion, perhaps considering that the assessee admits to have adopted, on own violation, a particular course of action. The second reason is that the said course whatever be its merits, is, without doubt, only as per the advice of the assessee s legal counsel. The same should not therefore operate to the detriment of the assessee (refer Concord of India Insurance Co. Ltd. v. Nirmala Devi and Ors . 1979 (4) TMI 29 - SUPREME COURT . The appeal was accordingly admitted, and the hearing in the matter proceeded with. Reopening of assessment u/s 147 - as urged notice u/s. 133(6), 147/148 and notice u/s. 142(1), 143(2) and Assessment Order were never validly served on the assessee - HELD THAT - Referring to the issue of service of notice u/s. 148(1), a question of fact, the same assumes relevance as, in its absence, the matter would necessarily have to travel back to the file of the AO to enable him to provide opportunity to the assessee to join the proceedings and state his case, and frame the assessment accordingly per a speaking order. In this regard, the Revenue, on its part, has also not shown that the address at which the said notice was sent was the assessee s current address at the relevant time, the date of its issue, i.e., as per its record. The same is clearly not either the assessee s business or residential address, nor as that stated in the PAN. The service of notice u/s. 148(1) cannot, accordingly, be regarded as proper. Even as no prejudice survives or is even claimed, the notice u/s. 148(1) remains uncomplied with in consequence. Needless to add, the AO shall also take into account the income as already returned by the assessee. The matter, setting aside the assessment, is restored back to the file of the AO for the purpose. That is, to proceed from the stage of the issue of notice u/s. 148(1), which is undisposed.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Validity of the assessment under sections 144 and 147 of the Income Tax Act, 1961.
3. Non-consideration of the assessee's objection on the quantum of addition.
4. Service of notice under sections 133(6), 147/148, 142(1), and 143(2).

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was delayed by 87 days. The assessee explained the delay was due to awaiting the outcome of a rectification application under section 154 of the Act. The assessee argued that if the rectification was favorably considered, the need for further appeal would be obviated. The Departmental Representative objected, stating the appeal could have been filed independently of the rectification application. The tribunal found the explanation bona fide, noting the assessee’s conduct was not mala fide and was based on legal advice. Thus, the appeal was admitted.

2. Validity of the Assessment:
The assessee contested the assessment on the grounds that the reasons recorded for reopening the case were illegal and that the notices were not validly served. The tribunal noted that the Assessing Officer (AO) inferred the assessee did not file a return for the relevant year due to non-response to a notice under section 133(6). The assessee argued the notice was not received as he had changed his address. However, the tribunal highlighted the assessee's failure to update the address as required under section 139A(5)(d). The tribunal found that the AO had a prima facie reason to believe income had escaped assessment, thus the jurisdiction to assess was validly assumed.

3. Non-Consideration of Objection on Quantum of Addition:
The assessee argued that only ?2.70 lakhs was paid during the year for the shop acquired on an installment basis, and thus the addition should be limited to this amount. The CIT(A) had failed to consider this objection. The tribunal noted that while the assessee's strategy to seek rectification was bona fide, the appeal could have been filed without awaiting the outcome of the rectification application. Nevertheless, the tribunal admitted the appeal and proceeded to hear the matter on merits.

4. Service of Notice:
The assessee contended that the notices under sections 133(6), 147/148, 142(1), and 143(2) were not validly served. The tribunal found that the notices were sent to an address that was neither the current address nor the address as per the PAN. The tribunal concluded that the service of the notice under section 148(1) was not proper. However, it noted that the lack of proper service did not annul the proceedings but rendered them procedurally infirm. The tribunal decided to restore the matter to the AO to proceed from the stage of issuing the notice under section 148(1), ensuring the assessee is given an opportunity to state his case.

Conclusion:
The tribunal allowed the appeal for statistical purposes, setting aside the assessment and restoring the matter to the AO to proceed from the stage of issuing the notice under section 148(1). The AO is to take into account the income already returned by the assessee and provide an opportunity for the assessee to present his case. The tribunal’s decision ensures procedural compliance and fair opportunity for the assessee.