2020 (1) TMI 1526 - AT - Income Tax

Tribunal Invalidates Tax Notice: Proper Service Procedures Essential for Assessment

The Tribunal allowed the appeal, setting aside the impugned order due to the invalid service of the notice under Section 148 of the Income Tax Act, 1961. ... Validity of reopening of assessment u/s 147 - notice u/s 148 was not validly served - no proof of serving notice in the normal course before proceeding with service of notice by way of affixture - mandation of serving officer has to show that all due and reasonable diligent efforts were made to serve the assessee/defendant with the notice - HELD THAT:- As notices are to be served by post or through courier service approved by the Board. In the present case, it is not emanating from records that any effort was made by the Assessing Officer to serve the notice u/s 148 of the Act either through post or courier service approved by the Board. It appears that the Inspector in the first instance itself served the notice on assessee by way of affixture. Rule 20 mandates that before proceeding with substituted mode of service of notice/summons, the Presiding Officer has to record satisfaction that the notice/summons could not be served in ordinary course. In the instant case, it is not emanating from the records that due and reasonable diligence was exercised by the Assessing Officer for serving notice in the normal course before proceeding with service of notice by way of affixture. As from the records before us it is not emanating that the AO has recorded satisfaction as envisaged under O5 R20 of CPC that the notice could not be served on the assessee in ordinary course and hence, service of notice has to be effected through substituted mode. AO has merely observed that notice under Section 148 dated 31.03.2016 was served on the assessee by way of affixture as per Inspector’s report on the same date. The manner of service of notice on assessee is certainly not in accordance with the provisions of Section 282 of the Act or even as per the provisions of Code of Civil Procedure, 1908. Thus, notice u/s 148 of the Act was not validly served on the assessee. In the absence of valid service of notice issued u/s 148 of the Act, the proceedings under Section 148 of the Act are void ab initio and the assessment order passed consequent thereto is null and void. No notice u/s 143(2) was served on the assessee after filing of return of income - As omission to issue notice under Section 143(2) of the Act is incurable and the requirement to issue such notice cannot be dispensed with. The assessment proceedings sans valid notice under Section 143(2) of the Act are bad in law. Thus, in view of the fact that reassessment order was passed without valid notice under Section 148 of the Act, and notice u/s143(2) of the Act, the same is unsustainable in law. - Decided in favour of assessee. Issues:Challenge to reopening under Section 147 of the Income Tax Act, 1961 due to invalid service of notice under Section 148 and absence of notice under Section 143(2).Analysis:The appellant contested the reopening, arguing that the notice under Section 148 was not validly served and no notice under Section 143(2) was issued post filing of return. The appellant's representatives highlighted that the notice was served via affixture without proper witnessing by an independent party. They emphasized that the assessment without serving notices under Sections 148 and 143(2) is legally flawed. The Department defended the order, stating that notices were duly issued and the appellant failed to comply. The Tribunal noted the primary objection regarding the invalid service of the Section 148 notice through affixture.The Tribunal referred to Section 282 of the Act, emphasizing the prescribed methods of service. It was observed that no effort was made to serve the notice through approved postal or courier services. The Tribunal highlighted the provisions of the Code of Civil Procedure regarding substituted service, emphasizing the need for diligent attempts before resorting to such methods. The Tribunal concluded that the notice under Section 148 was not validly served, rendering subsequent proceedings void.Regarding the absence of notice under Section 143(2), the Tribunal noted the appellant's reply to the Section 148 notice but the lack of a subsequent Section 143(2) notice. Citing legal precedents, the Tribunal stressed the mandatory nature of issuing a valid Section 143(2) notice for assessment/reassessment. Rulings from the Supreme Court and High Courts underscored the importance of this notice, deeming proceedings without it as legally flawed. Consequently, the Tribunal found merit in the appellant's legal grounds, leading to the allowance of the appeal.Given the success on legal grounds, the Tribunal did not delve into the merits of other grounds raised by the appellant. Ultimately, the impugned order was set aside, and the appeal was allowed, highlighting the significance of valid notice issuance under Sections 148 and 143(2) for lawful assessment proceedings.