2020 (4) TMI 847 - AT - Income Tax

Validity of reopening of assessment - no proof for service of notice u/s. 148 - HELD THAT - Referring to narration given by the AO as to issuance of service of notice u/s 148 shows that it does not contain facts if the notice were ever served upon the assessee, it just contains the fact that notices u/s 148 were issued on 05.06.2009. Further examine assessment record viz. order sheet prepared by the AO and dispatch register, no doubt copy of notices dated 05.06.2009 for AYs 2006-07 2007-08 is reportedly issued on 05.06.2009 vide dispatch register but the record is altogether silent if the said notices were served upon the assessee or received back served/unserved nor copy of acknowledgement from the postal authority acknowledging the receipt of notice is there on the file. It is settled principle of law that when the assessee has specifically challenged service of notice u/s 148 as well as u/s 142 (1) since the stage of assessment it is the duty of the Revenue to prove the service of notice. When we examine the order sheet entries for AYs 2006-07 2007-08 prepared in due course of official duty by the AO, except for the fact that notices were issued on 05.06.2009, there is not a whisper even if the said notices were served upon the assessee. Merely producing the carbon copy of notice and dispatch register entry does not prove service of notice on the assessee. Service of notice u/s 148 dated 05.06.2009 for AYs 2006- 07 2007-08 and service of notice dated 24.09.2009 u/s 142 (1) in AY 2008-09 is not proved to have been effected upon the assessee in accordance with provisions contained under section 282 (1) of the Act read with order under Rule XII and Order III Rule 6 of CPC, 1908 which is a jurisdictional pre-condition to finalize the reassessment and as such, Revenue has failed to prove the proper service of notice u/s 148 - Decided against revenue.

Summary

Issues Involved:
1. Service of Notice under Section 148
2. Validity of Assessment Proceedings under Section 147
3. Imposition of Penalty under Section 271(1)(c)

Issue-wise Detailed Analysis:

1. Service of Notice under Section 148:
The primary issue was whether the notices dated 05.06.2009 issued by the Assessing Officer (AO) for the assessment years (AYs) 2006-07, 2007-08, and 2008-09 were served upon the assessee. The Tribunal examined the assessment records, including the order sheet and dispatch register, and found no evidence of actual service of the notices on the assessee. The records did not contain any acknowledgment from the postal authority or any indication that the notices were received by the assessee. The Tribunal emphasized that the onus to prove the service of notice lies with the Revenue, as per the Supreme Court's ruling in V.N. Bharat vs. D.D.A. & Anr. The Tribunal concluded that the Revenue failed to prove the service of notices under Sections 148 and 142(1) on the assessee.

2. Validity of Assessment Proceedings under Section 147:
Given the failure to prove the service of notices, the Tribunal addressed the effect of non-service on the assessment proceedings. It reiterated that the service of notice under Section 148 is a jurisdictional precondition for reopening assessments under Section 147. Citing the Delhi High Court's decision in CIT vs. Chetan Gupta, the Tribunal held that the non-service of notice invalidates the reassessment proceedings. Consequently, the assessments framed by the AO under Section 254/144 for the AYs 2006-07, 2007-08, and 2008-09 were deemed void ab initio and were ordered to be quashed.

3. Imposition of Penalty under Section 271(1)(c):
The AO had imposed penalties under Section 271(1)(c) for the AYs 2006-07, 2007-08, and 2008-09, based on the assessments which were now quashed. The Tribunal, referencing the Supreme Court's decision in KC Builders & Anr. vs. ACIT, stated that when the very basis of the assessment is void, the penalties levied on such assessments cannot stand. Therefore, the penalties imposed by the AO and sustained by the Commissioner of Income Tax (Appeals) were ordered to be deleted.

Conclusion:
The Tribunal allowed the appeals filed by the assessee for the AYs 2006-07, 2007-08, and 2008-09, quashing the assessments and deleting the penalties. The judgment underscored the importance of proper service of notice as a jurisdictional requirement for valid reassessment proceedings and the consequent penalties.