2019 (3) TMI 1927 - AT - Income Tax

Appeal allowed due to invalid notice service; Revenue's appeal dismissed as infructuous. Importance of due process emphasized.

The Tribunal allowed the assessee's appeal, quashing the reassessment proceedings and the consequent order due to the invalid service of notice under ... Reopening of assessment u/s 147 - No proper and valid service of notice issued u/s 148 - notice was served by way of affixture - mandation of serving officer to show that all due and reasonable diligent efforts were made to serve the assessee/defendant with the notice - whether the notice affixed on the door of the assessee on 31.3.2015 on the last day of limitation for service of notice under the provisions of section 151 of the Act is a valid service specially when no efforts were made by the revenue to serve the notice through the normal course and straightway affixed the notice? - HELD THAT:- The order V of CPC Rule 17 provides service of notice by way of affixture on the defendant on his residence or place of business on the outer door if defendant refuses to accept the service or can not be found. The serving officer can affix the notice on the out door of the house/residence where the defendant ordinarily resides or carries on business. The serving officer then report the circumstances under which the notice was affixed and name and address of the person by whom the house/place of business was identified and in whose presence the copy of the notice was affixed. As is clear from the above that the inspector income tax stated in his report that only upon finding the door closed he has no option but to make affixture of the notice on the out door of the assessee. There is no doubt that the AO has not made any due effort or diligence to serve the notice and affixed the same on the date of issuance of the said notice. There is nothing on records that the assessee was hiding or avoiding the service of notice and there is also no evidence on records that the service could not be made through ordinary ways/means. In this the case the ordinary means of service of notice were not used or exhausted and the service was made directly through affixture at the last minutes on 31.3.2015 to avoid limitation expiring on 31.3.2015. Thus there is merit and force in the arguments of the ld AR that there is no valid service of notice and the proceedings are null and void as the notice issued u/s 148 was not served upon the assessee. In the Hon’ble Delhi High Court in the case of CIT Vs Hotline International (P) Ltd [2007 (4) TMI 44 - DELHI HIGH COURT] held has that where the serving officer does not make any efforts to locate the assessee, the service by affixture in invalid and re-assessment proceedings are bad in law. The background facts in this case are that the serving officer visited the office of the assessee to serve the notice and security guard informed that the office is closed for holi festival. The serving officer made the affixture which was held to be invalid. Service of notice issued u/s 148 dated 31.3.2015 through affixture on 31.3.2015 is not a valid service and accordingly the re-assessment proceedings and consequent order are quashed. - Decided in favour of assessee. Issues Involved:1. Validity of reopening the assessment under Section 147 read with Section 148 of the Income Tax Act, 1961.2. Validity of service of notice under Section 148 of the Act.3. Reopening of assessment based on statements of third parties.4. Disposal of objections against reopening of assessment.5. Requisite prior approval for reopening assessment under Section 151 of the Act.6. Issuance of notice after the expiry of four years from the end of the relevant assessment year.Detailed Analysis:1. Validity of Reopening the Assessment under Section 147 read with Section 148:The assessee argued that the reopening of the assessment by the Assessing Officer (AO) was bad in law, illegal, ultra vires, and contrary to the provisions of the Act. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the AO's action, stating that the reopening was based on valid reasons and followed the due process. The Tribunal examined whether the notice issued under Section 148 and the subsequent reopening of the assessment were valid. The Tribunal found that the AO had issued the notice on 31.3.2015, which was served through affixture on the same day due to the office being closed. The Tribunal concluded that the reopening was not justified as the notice was not properly served.2. Validity of Service of Notice under Section 148:The Tribunal scrutinized the service of notice under Section 148. The AO served the notice through affixture on 31.3.2015, the last day of the limitation period. The Tribunal noted that the AO did not make due efforts or exercise due diligence to serve the notice through ordinary means before resorting to affixture. The Tribunal emphasized that affixture is only valid when the assessee is avoiding service or cannot be found after due diligence. The Tribunal cited several judicial precedents, including Heaven Distillery (P) Ltd vs. Income Tax Officer and Sanjay Kumar Mishra vs. ACIT, which supported the requirement of exhausting ordinary means before affixture. The Tribunal held that the service of notice was invalid, rendering the reassessment proceedings null and void.3. Reopening of Assessment Based on Statements of Third Parties:The assessee contended that the reopening was based on general statements of third parties, which were later retracted. The CIT(A) upheld the AO's action, stating that the reopening was justified based on the information obtained during a survey on the Capri Group. The Tribunal did not delve into this issue in detail as it quashed the reassessment proceedings on the grounds of improper service of notice.4. Disposal of Objections Against Reopening of Assessment:The assessee argued that the AO did not dispose of its objections against the reopening of the assessment. The CIT(A) found that the AO had addressed the objections in a letter dated 18.1.2016. The Tribunal did not address this issue separately as it quashed the reassessment proceedings on other grounds.5. Requisite Prior Approval for Reopening Assessment under Section 151:The assessee claimed that the AO reopened the assessment without obtaining the requisite prior approval under Section 151 of the Act. The CIT(A) confirmed that the AO had obtained the necessary approval from the Additional Commissioner of Income Tax on 30.3.2015. The Tribunal did not specifically address this issue as it quashed the reassessment proceedings due to improper service of notice.6. Issuance of Notice After Expiry of Four Years:The assessee argued that the notice under Section 148 was issued after the expiry of four years from the end of the relevant assessment year. The CIT(A) upheld the AO's action, stating that the reopening was justified based on new information obtained during the survey. The Tribunal did not address this issue separately as it quashed the reassessment proceedings on the grounds of improper service of notice.Conclusion:The Tribunal allowed the assessee's appeal, quashing the reassessment proceedings and the consequent order due to the invalid service of notice under Section 148. As a result, the Revenue's appeal on merits became infructuous and was dismissed. The Tribunal emphasized the importance of following due process and exhausting ordinary means of service before resorting to affixture.