Notice Service Defect Invalidates Reassessment: Section 148 Notice Must Comply

The Tribunal held that there was no valid service of notice under Section 148 as it was not properly tendered to the assessee or their agent. The affixture did not comply with procedural requirements, rendering the reassessment proceedings invalid. Consequently, the order under Section 148/143(3) was quashed, and the assessee's appeals were allowed. The Tribunal did not address other grounds as they were moot.

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Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Proper service of the notice under Section 148.
3. Reopening of assessment based on the statement recorded during the survey.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148:
The primary grievance of the assessee was that the notice under Section 148 was never served on the assessee society. The notice dated 26.03.2007 was allegedly issued but not sent to the correct address of the appellant trust. The notice was reportedly refused by a servant who was not associated with the assessee. The assessee argued that the notice was not served on them or their agent, making the notice invalid as per Order V, Rule 12 of the Code of Civil Procedure (CPC).

2. Proper Service of the Notice Under Section 148:
The notice was served through affixture on 16.04.2007, which was recorded by the Assessing Officer (AO). The assessee contended that the affixture was in violation of Order V, Rule 17 of CPC, as the conditions for affixture were not met. The department did not show that the assessee was evading service or that the notice could not be served in the ordinary way. The department claimed that the notice was issued by speed post, but the premises were found locked on multiple occasions. The Tribunal noted that no effort was made to serve the notice personally or to locate the assessee, and the notice was not sent with acknowledgment due, violating Order V, Rule 19A of CPC.

3. Reopening of Assessment Based on the Statement Recorded During the Survey:
The assessee argued that the reopening was invalid as it was based on a statement recorded during a survey under Section 133A, which is not considered evidence. The Tribunal referred to the Supreme Court's decision in CIT vs. S. Khader Khan Son, which held that statements recorded during surveys do not constitute evidence. The Tribunal found that the information used for reopening was not supported by any evidence.

Conclusion:
The Tribunal held that there was no valid service of notice under Section 148, as it was neither tendered to the assessee nor their agent, nor refused by them. The affixture did not comply with the procedural requirements of CPC. Consequently, the reassessment proceedings were deemed invalid, and the order passed under Section 148/143(3) was quashed. The Tribunal did not adjudicate the other grounds of appeal as they became infructuous. The appeals of the assessee were allowed.

Order Pronouncement:
The order was pronounced in the open court on 13th October, 2015.

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