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TMI Blog2015 (2) TMI 776X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the period of limitation and, consequently, was an invalid notice. The Assessing Officer assumes jurisdiction under Section 148 of the Act only upon issuance of a valid notice. Since the notice dated 17.06.2005 was an invalid notice, the assessment order cannot be sustained. Reliance by the Tribunal that the notice dated 17.6.2005 was in fact a notice dated 28.3.2005, which was a curable defect under Section 292B is totally misplaced. Section 292B has no application in the instant case. The notice dated 17.6.2005 could not be treated as a notice dated 28.3.2005 or a notice in continuation of the notice dated 28.3.2005. Thus assessment order passed by the Assessing Officer under Sections 147 and 148 of the Act are quashed. - Decided in favour of the assessee. - Income Tax Appeal No.479 of 2012 - - - Dated:- 18-2-2015 - Hon'ble Tarun Agarwala And Hon'ble Dr. Satish Chandra,JJ. ORDER (Per: Tarun Agarwala, J.) For the assessment year 1998-99, the appellant filed his return of income declaring an income of ₹ 2,46,100/-. It transpires that the assessing authority received information from the Additional DIT (Investigation), Agra that one M/s Ashok Gupta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were carried out by the assessing authority after assuming jurisdiction on the basis of the second notice dated 17.06.2005. The Commissioner of Income Tax (Appeals) held that the notice dated 17.06.2005 was barred by limitation and was invalid. Aggrieved by the order of the appellate authority, the department preferred a second appeal before the Income Tax Tribunal. There was a difference of opinion between the members of the Tribunal. The Judicial Member concurred with the view of the Commissioner of Income Tax (Appeals) and quashed the assessment proceedings while the Accountant Member disagreed with the appellate order and upheld the assessment proceedings. On account of the difference of opinion, the matter was referred to a third member. The third member concurred with the view of the Accountant Member and quashed the appellate order and allowed the appeal of the department holding that a valid notice was issued on 28.03.2005, on the basis of which reassessment proceedings were validly conducted. The assessee, being aggrieved by the order of the Tribunal, has filed the present appeal under Section 260A of the Act of 1961 framing the following substantial questions of law:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is assessment, for that assessment year: Explanation 1.--Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.--For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :-- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but-- (i) income chargeable to tax has been underassessed ; or (ii) such income has been assessed at too low a rate ; or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees twenty-five thousand or more for that year; (iii) if seven years, but not more than ten years, have elapsed from the end of the relevant assessment year, unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees fifty thousand or more for that year; Explanation.--In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151. (3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of two years from the end of the relevant assessment year. Sanction for issue of notice. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocedural one. The initiation of re-assessment proceeding commences on a notice issued under Section 148 of the Act. The service of notice contemplated under Section 148 of the Act is merely a condition precedent for making a valid assessment. In R.K.Upadhyaya Vs. Shanabhai P. Patel, 166 ITR 163, the controversy was that a notice under Section 148 was issued on 31.03.1970 i.e. the last date of limitation, which notice was served on the assessee on 03.04.1970, after the expiry of limitation. The High Court held that since the notice was served after the expiry of the period, the assessment order was invalid and had accordingly quashed the notice for reassessment issued under Section 147 of the Income Tax Act,1961. The Supreme Court held that the scheme of 1961 Act in so far as the notice for re-assessment was concerned was quite different than that contained under Section 34 of the Income Tax Act, 1922. The Supreme Court held that a clear distinction has been made between issue of notice and service of notice under the Act. The Supreme Court held that once a notice is issued within the period of limitation, the Income Tax Officer gets the jurisdiction to proceed to reassess an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the distinction and under a wrong basis felt bound by the judgment in 53 ITR 100. As the Income-tax Officer had issued notice within limitation, the appeal is allowed and the order of the High Court is vacated. The Income-tax Officer shall now proceed to complete the assessment after complying with the requirements of law. Since there has been no appearance on behalf of the respondents, we make no orders for costs. The controversy in the instant appeal is, whether a valid notice has been issued by the Assessing Officer, which has been issued within the period of limitation and which notice has been served upon the assessee. In order to proceed further, it would be best to recapitulate the facts in hand. The record indicates that a notice under Section 148 of the Act was originally issued by the Assessing Officer on 24.03.2005 which was returned unserved by the process server with the report dated 26.03.2005 intimating that the assessee has gone out for medical treatment. The same notice was again given to the notice server, which again came back unserved with the report dated 31.03.2005 that the assessee had gone out for the medical treatment. Subsequently, the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equently, no reassessment could be made by the Assessing Officer under Section 148 of the Act on the basis of the notice dated 28.03.2005. Another notice dated 17.06.2005 was issued by the Assessing Officer under Section 148 of the Act, which was served upon the assessee on 29.06.2005 and, on the basis of this notice, reassessment order was passed under Section 143(3) read with Section 147 of the Act. In our opinion the issuance of a fresh notice dated 17.06.2005 was an invalid notice as it was issued after the period of limitation contemplated under Section 149 of the Act. The Assessing Officer could not assume jurisdiction and make a reassessment on the basis of an invalid notice. The service of this invalid notice dated 17.06.2005, upon the assessee is immaterial. The Accountant Member of the Tribunal has misdirected himself in holding that the notice dated 28.03.2005 was actually served upon the assessee on 29.06.2005 and that date written in the notice as 17.06.2005 was an error, which was a curable defect in view of Section 292B of the Act. According to the Accountant Member, the notice dated 17.6.2005 was only a continuation of the notice dated 28.03.2005, which was du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the notice dated 28.3.2005. In Madan Lal Agarwal Vs. Commissioner of Income Tax, Kanpur, (1983) 144 ITR 745 (All), a Division Bench of this Court held that issuance of a valid notice is a condition precedent for validity of an assessment order under Section 147 of the Act. Similarly, in Commissioner of Income Vs. Shital Prasad Kharag Prasad, (2006) 180 ITR 541 (All), another Division Bench of this Court held that the authority does not acquire jurisdiction in the absence of a valid notice being served and held that issuance of a valid notice under Section 148 of the Act is a condition precedent to the validity of an assessment order passed under Section 147 of the Act. The Division Bench held that if the notice is invalid, the assessment order would be illegal and without jurisdiction. In Commissioner of Income Tax Vs. Mani Kakar, (2009) 18 DTR 145 (Del), the Delhi High Court held that proceeding under Section 147 of the Act cannot be initiated without the service of notice as provided under Section 148 of the Act and that a service of notice is a pre-condition for framing an order under Section 147 of the Act. Similar view was reiterated by the Delhi High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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