2009 (5) TMI 591 - AT - Income Tax

Tribunal upholds CIT(A) decision on reassessment, cites improper notice service and lack of approval.

Deputy Commissioner Of Income-Tax. Versus KG Singhania.

The Tribunal upheld the CIT(A)'s decision declaring the reassessment invalid due to improper service of notice and lack of prior approval for 'Samman ... Reassessment - Validity of notice - Deduction u/s 80-O - Interest u/s 234B - The learned first appellate authority has highlighted the issue on non-service of notice not only in the original return but also on the revised return filed under protest by the assessee - The learned first appellate authority has cancelled the reassessment after thoroughly going through the procedure laid down under order 5, r. 20 of CPC and after going through the written submissions of the assessee along with various judgments cited on this issue delivered by various High Courts - Held that: before issuance of notice under s. 148 of the Act no prior approval from the competent authority was taken as the notice was issued after taking prior approval of the Jt. CIT, Phagwara. in the month of March, 2003 - As per record, the AO had only served the notice under s. 148 of the Act through affixture without even attempting to serve the notice on the assessee - Decided in favor of the assessee Issues Involved:1. Validity of the reassessment made under section 147/143(3) of the Income Tax Act.2. Deletion of interest levied under section 234B of the Income Tax Act.Detailed Analysis:1. Validity of the Reassessment under Section 147/143(3):Grounds of Appeal by the Revenue:- The Revenue contended that the CIT(A) erred in canceling the assessment made under section 147/143(3) without appreciating the facts on record.- The Revenue requested the Tribunal to set aside the CIT(A)'s order and restore the AO's assessment.Facts and Procedural Background:- The assessee filed a return of income on 30th Oct 1996, which was processed under section 143(1)(a) on 30th Oct 1998.- The AO issued a notice under section 148 on 28th March 2003, alleging that the assessee claimed excess deduction under section 80-O.- The notice was served by affixture on 29th March 2003 at the last known address and also sent by post.- The assessee, an advocate, filed a return in compliance with the notice on 30th July 2003, reiterating the original return.CIT(A)'s Decision:- The CIT(A) declared the reassessment invalid, citing improper service of the notice under section 148 as per Order 5, Rule 20 of CPC.- The CIT(A) noted that no attempt was made to serve the notice in the ordinary course, and the procedure for affixture was not followed correctly.- The CIT(A) also highlighted that the assessee was a 'Samman Patra' awardee, and the case could only be scrutinized under very special circumstances with prior approval from the CIT/Chief CIT, which was not obtained.Tribunal's Analysis and Conclusion:- The Tribunal upheld the CIT(A)'s decision, agreeing that the AO did not follow the prescribed procedure for serving the notice.- The Tribunal emphasized that service by affixture should only be used if normal service methods are exhausted, which was not demonstrated by the AO.- The Tribunal also noted that the reassessment proceedings violated the commitments made to 'Samman Patra' awardees, as no prior approval from the competent authority was obtained before issuing the notice.- The Tribunal referenced several judicial precedents supporting the invalidity of the reassessment due to improper service of notice and lack of prior approval for 'Samman Patra' awardees.2. Deletion of Interest under Section 234B:Grounds of Appeal by the Revenue:- The Revenue argued that the CIT(A) erred in deleting the interest levied under section 234B following the cancellation of the reassessment.CIT(A)'s Decision:- The CIT(A) ruled that since the reassessment was canceled, the question of charging interest under section 234B did not arise.Tribunal's Analysis and Conclusion:- The Tribunal upheld the CIT(A)'s decision, stating that the deletion of interest under section 234B was a direct consequence of the invalid reassessment.- The Tribunal found no merit in the Revenue's appeal on this ground.Final Decision:- Both appeals filed by the Revenue were dismissed, and the orders of the CIT(A) were upheld.