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TMI Blog2012 (6) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s 142(1) on 14.07.2010 calling for certain information for the purposes of making assessment. Nobody appeared on behalf of the assessee. Consequently the assessment was finalized u/s 144 r.w.s. 143(2) on 29.12.2010 at Rs. 2,59,73,862 on the basis of information gathered from banks and other inquiries conducted by the AO. The assessee assailed the assessment order before the learned CIT(A), inter alia, on the question of passing the assessment order without service of notice u/s 143(2) as per the provisions of section 282 of the Income-tax Act, 1961 (hereinafter "Act"). Written submissions were filed before the learned CIT(A) alleging that no notice u/s 143(2) was ever served on the assessee. The learned first appellate authority forwarded such written submissions to the Assessing Officer requiring him to furnish necessary documentary evidence in support of service of notice as per section 143(2). The A.O. submitted remand report dated 23.01.2012 stating that the case was selected for scrutiny through "CASS" and accordingly notice u/s 143(2) was generated through system (AST) on 20.08.2009 giving the address provided by the assessee to the database of the department while applyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of PAN to the assessee. Considering the remand report of the A.O. and the report of the Addl. CIT, the learned CIT(A) observed in para 4 of the impugned order that notice u/s 143(2) dated 20.08.2009 was issued for the first time which was sent by speed post on 31.08.2009 to the assessee at the Kurla address. Since this notice was generated through system and the address at which the said notice was sent was that provided by the assessee himself in the PAN database, the learned CIT(A) termed it as a valid service. He further took note of the fact that notice u/s 142(1) was sent at the address given in the return of income which was also returned by the postal authorities. In his opinion the change of address was never communicated by the assessee to the department and the so called latest address given in the return of income was also found to be not correct as the notice sent u/s 142(1) on that address was also returned by the postal authorities. He noted that the assessee admitted through his affidavit dated 28.03.2011 that his spouse received other notice in November 2010 at their new address - Building No.12, Flat No.222, Kaveri Apartments, Kamdhenu Complex, Hariom Nagar, Mulund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the notice issued under clause (ii) of sub-section (2)' or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment. It can be observed from the opening part of section 143(3)(ii) that the assessment is made pursuant to notice issued by the Assessing Officer u/s 143(2). Now let us have a glance at section 143(2) which provides that : "Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall, - ..... (ii) notwithstanding anything contained in clause (i), if he considers it necessary or expedient to ensure that the assessee has not under-stated the income or has not computed excessive loss or has not under-paid the tax in any manner, serve on the assessee a notice requiring him, on a date to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irement of its service and consequences flowing from its non-service are same irrespective of the fact whether the assessment is finalized u/s 143(3) or 144. 5.2 The immediately next question which arises for our consideration is as to whether such essential requirement of serving notice u/s 143(2) for making the assessment u/s 143(3), is mandatory or directory. If it turns out to be a mandatory requirement, then non-service of such a notice would lead to the assessment order a nullity and in the otherwise case, it will be a procedural lapse making the assessment only irregular and not void. This question came up for consideration before the Special Bench of the Tribunal in Nawal Kishore & Sons Jewellers v. DCIT [(2003) 87 ITD 407 (Lucknow) (SB)] in the context of block assessment. The relevant part of the question before the Special bench, with which we are concerned in the extant case, was - "........whether non-issuance and non-service of notice u/s 143(2) shall have the effect of mitigating the block assessment order, so as to render the assessment orders itself as null and void". The Special Bench answered this question in negative by holding that non-issuance of notice u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar view has been taken by the Hon'ble Delhi High Court in CIT v. Vardhman Estate P. Ltd. [(2006) 287 ITR 368 (Del.)] by holding that the date of dispatch of notice cannot be the deemed date of service of notice. Notice u/s 143(2) having been served on the assessee through speed post after the expiry of the prescribed time limit, the service of notice was not effected in time. The Hon'ble Gujarat High Court has also taken similar view in DCIT v. Mahi Valley Hotels and Resorts [(2006) 287 ITR 360 (Guj.)]. In this case notice u/s 143(2) was issued beyond the statutory period of one year from the end of the month in which the return was filed. The Tribunal held the assessment as void ab initio. When the matter was carried by the Revenue before the Hon'ble High Court, the view taken by the Tribunal was upheld. A survey of the above cases fairly indicates that if there is service of notice u/s 143(2) but beyond the prescribed period, the assessment has to be declared as a nullity. 5.4 Thus it can be easily noticed that the consequences of non-service of notice u/s 143(2) apply with full force to the late or improper service of such notice. In other words, there is no qualitative differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see filed its return giving the Thane address. A copy of order sheet of the Assessing Officer has been placed on pages 21 and 22 of the paper book, from where it can be seen that on the top of it, the name of assessee is typed along with the Kurla address. Then there is a mention of the selection of case for scrutiny assessment. After that, there is a mention of service of notice u/s 142(1) on 04.10.2010. There is again reference to issuance of letter along with notice u/s 142(1) on 02.12.2012, then to notice u/s 271(1)(b) dt. 08.12.2012 etc. There is no reference to any service of notice u/s 143(2). The learned Departmental Representative showed us the assessment record from which it is discernible that notice u/s 143(2) was sent at the Kurla address which was received back and the same notice is placed in the file itself. From the above sequence of events it is crystal clear that there was no service of notice u/s 143(2) on the assessee. In the light of discussion made in para 5.2 of this order above, we find no difficulty in coming to the conclusion that if there is no service of notice u/s 143(2), the assessment has to be declared void ab initio. 6.3 Now we espouse the next su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent intention appears, the service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.' This section, in our considered opinion, does not advance the case of the Revenue in any manner because it inter alia, requires "properly addressing". Unless the latter containing the document, sent by registered post, is properly addressed, it can, by no stretch of imagination, be considered as a proper service of the document contained in the letter. Adverting to the facts of the instant case it is observed that the letter containing notice u/s 143(2) was not properly addressed inasmuch as it was directed at the Kurla address, where from the assessee had shifted its address some years back and had moved on to Thane address by properly giving particulars of the Thane address in the return of income. The notice sent at Kurla address, in the present circumstances, can't be said to be a valid service of notice within the meaning of section 27 of the General Clauses Act for the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co-operated in any inquiry relating to assessment or reassessment, it shall be deemed that any notice under any provisions of this Act, which is required to be served upon him, has been duly served. On a dissection of this provision, we find that it has the following ingredients :- (i) Where the assessee has appeared in any proceeding or co-operated in any inquiry relating to assessment or reassessment. (ii) It shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act. (iii) Such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was not served upon him or not served in time or served in an improper manner. (iv) This section does not apply where the assessee has raised objection about no service or late service or improper service of notice before the completion of such assessment or reassessment. 7.4 A conjoint reading of the above ingredients of section 292BB abundantly brings out that an assessee cannot argue that any notice required to be issued as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2.59 crore. A careful perusal of the assessment order reveals that the assessee did neither appear before the A.O. nor co-operated in any inquiry relating to assessment. The learned Departmental Representative candidly admitted that the assessee did not appear in any proceedings. He, however, hotly argued that the service of notice on the assessee u/s 142(1), should be construed as his co-operation in inquiry relating to assessment. This contention put forth on behalf of the Revenue, in our considered opinion, is sans merits. Co-operation in any inquiry by the assessee can take place only when any information demanded by the A.O. is supplied or any other material is adduced in support of his case. The words "co-operated in any inquiry" are succeeded by the phrase "relating to an assessment or reassessment". Simple receipt of notice u/s 142 cannot be termed as co-operation in any inquiry relating to an assessment. Co-operation will come forth only when certain inquiry is made by the AO and that is properly or improperly replied by the assessee. Further such inquiry must relate to an assessment or reassessment. If an inquiry is made but no reply is given, it cannot be said that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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