2011 (3) TMI 543 - HC - Income Tax

Validity of Income Tax Act Section 148 notice upheld despite incorrect service address; assessee's participation deemed effective service.

The High Court held that the notice under Section 148 of the Income Tax Act was validly issued and effectively served despite not being physically served ... Reassessment - Validity of notice - Referring to the provisions of sub-Section (1) of Section 148 of the Act, learned counsel for the assessee has vehemently argued that the issue of notice before assessment was a pre-condition under the sub-Section (1) and since admittedly no notice was issued at the correct address of the assessee, notice issued at the wrong address could not be said to be a valid service in the eyes of law and as such the assessment based on such a notice was bad in law - In the present case, not only that no objection was raised with regard to non-issue of notice dated 27.03.2006, the assessee vide its letter dated 11th December, 2006 adopted the return as originally filed as the return in response to the said notice under Section 148 - During the assessment proceedings, certain queries were raised to which the assessee gave detailed response. Even during the reassessment proceedings no objection was raised of any kind with regard to defect or irregularity in the notice - In such circumstances, the service of copy of notice also would be service of notice within the ambit of Section 148(1) of the Act Since the Tribunal has not dealt with the findings of the CIT(A) on the remaining ten questions, the matter is remanded back to the Tribunal to decide the appeals afresh keeping in view our above findings with regards to the notice under Section 148 of the Act Issues Involved:1. Validity of the assessment framed by the Assessing Officer (AO) under Section 147/143(3) of the Income Tax Act.2. Validity of the notice under Section 148 of the Income Tax Act and its service upon the assessee.Issue-wise Detailed Analysis:1. Validity of the assessment framed by the AO under Section 147/143(3) of the Act:The Tribunal annulled the assessment on the basis that no valid notice under Section 148 was served upon the assessee, thereby rendering the assessment framed by the AO as bad in law. The Tribunal's decision was based on the premise that the notice was sent to an incorrect address and was not served in accordance with legal requirements.2. Validity of the notice under Section 148 of the Act and its service upon the assessee:The Tribunal found that the notice under Section 148 was not served at the correct address of the assessee, which was crucial for the AO to assume jurisdiction for reassessment. The Tribunal concluded that the absence of proper service of notice under Section 148 invalidated the reassessment proceedings.The High Court, however, disagreed with the Tribunal's interpretation. It emphasized that under Section 148(1), the issuance of notice is a precondition for reassessment, but the service of such notice can be inferred from the circumstances. The Court referred to various judgments, including R.K. Upadhyaya v. Shanabhai P. Patel, which distinguished between the 'issue of notice' and 'service of notice,' stating that the issuance of notice within the limitation period confers jurisdiction on the AO, while service is a condition precedent to making the assessment order.The Court noted that in the present case, the notice was issued at the address provided by the assessee in the return for the relevant year. The assessee's counsel appeared before the AO, received a copy of the notice, and participated in the reassessment proceedings without raising any objections to the notice's validity. The Court held that such participation and correspondence implied that the notice was served, fulfilling the requirements of Section 148(1).The Court also referenced Section 292BB of the Act, which, although not applicable to the assessment year in question, supports the inference that participation in assessment proceedings can imply service of notice.Conclusion:The High Court concluded that the Tribunal erred in annulling the assessment based on the alleged non-service of notice under Section 148. It held that the notice was validly issued and effectively served through the assessee's participation in the proceedings. The Court remanded the matter back to the Tribunal to address the remaining grounds of appeal not considered previously. The questions were answered in favor of the Revenue and against the assessee.