2025 (1) TMI 172 - AT - Income Tax

Validity of reopening of assessment in the absence of proper service of notice u/s 148 - HELD THAT - No notice u/s. 148 was ever served on the assessee. The AO without service of mandatory notice u/s. 148 of the Act, proceeded to complete the assessment. The proceedings u/s. 147 of the Act without mandatory notice u/s. 148 of the Act are bad and liable to be quashed. As in the case of CIT vs. Laxman Das Khandelwal, 2019 (8) TMI 660 - SUPREME COURT has held that provisions of section 292BB of the Act does not save complete absence of notice u/s. 148 of the Act. In the instance case since there was no service of notice u/s. 148 of the Act nor the assessee was provided the reasons for issuance of notice u/s. 148 of the Act, the assessment order passed in the instant case is held to be without jurisdiction. Appeal of the assessee is allowed.

2019 (8) TMI 660 - SC

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the notice under section 148 of the Income Tax Act, 1961 was properly served on the assessee.
Whether the assessment order passed under sections 144/147 of the Act is valid in the absence of proper service of notice under section 148.
Whether the assessment proceedings are null and void due to lack of jurisdiction as a result of improper service of notice.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Proper Service of Notice under Section 148

Relevant Legal Framework and Precedents: Section 148 of the Income Tax Act requires the issuance of a notice to the assessee before proceeding with reassessment under section 147. The Supreme Court in CIT vs. Laxman Das Khandelwal has clarified that section 292BB does not cure the complete absence of notice under section 148.
Court's Interpretation and Reasoning: The court found that the notice under section 148 was never served on the assessee. The notice was incorrectly addressed to an individual named Ravinder in a different village, and the service report confirmed that the notice was returned unserved.
Key Evidence and Findings: The service report from the Inspector indicated the absence of any individual named Ravinder who could be identified as the assessee. The notice was returned unserved, and the case was subsequently transferred to the correct jurisdiction without issuing a new notice under section 148.
Application of Law to Facts: The court applied the legal requirement of proper service of notice under section 148 and found that the absence of such service rendered the proceedings invalid.
Treatment of Competing Arguments: The respondent argued that the assessee failed to disclose capital gains and did not respond to notices. However, the court focused on the procedural lapse concerning the notice under section 148.
Conclusions: The court concluded that the assessment proceedings were null and void due to the absence of proper service of notice under section 148, leading to a lack of jurisdiction.

Issue 2: Validity of Assessment Order under Sections 144/147

Relevant Legal Framework and Precedents: Sections 144 and 147 of the Act pertain to best judgment assessment and reassessment, respectively. The validity of such assessments hinges on the proper initiation of proceedings through a valid notice under section 148.
Court's Interpretation and Reasoning: The court reasoned that without a valid notice under section 148, the reassessment proceedings under section 147 could not be sustained.
Key Evidence and Findings: The absence of a validly served notice under section 148 was a critical factor leading to the court's decision to quash the assessment order.
Application of Law to Facts: The court applied the principle that reassessment proceedings initiated without proper notice are without jurisdiction and thus invalid.
Treatment of Competing Arguments: The respondent's defense of the assessment order was outweighed by the procedural defect identified by the court.
Conclusions: The court held the assessment order to be without jurisdiction and therefore set it aside.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The proceedings u/s. 147 of the Act without mandatory notice u/s. 148 of the Act are bad and liable to be quashed."
Core Principles Established: The necessity of serving a valid notice under section 148 as a jurisdictional prerequisite for reassessment proceedings under section 147.
Final Determinations on Each Issue: The court determined that the assessment order was invalid due to the lack of proper service of notice under section 148, leading to the quashing of the assessment proceedings.

In conclusion, the court emphasized the importance of adhering to procedural requirements in tax assessments, particularly the proper service of notices, as a foundational element of jurisdiction. The appeal was allowed, and the impugned assessment order was set aside.

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