2015 (6) TMI 1246 - AT - Income Tax

Appeal Dismissed Due to Invalid Notice: Revenue's Appeal Rejected, CIT(A)'s Decision Upheld

ITO, Ward 21 (1), Room No. D-3, New Delhi Versus Sh. Ajay Pal Singh And Vice-Versa

The Tribunal dismissed the Revenue's appeal, holding that the non-service of mandatory notices invalidated the assessment. The CIT(A)'s decision to delete ... Non service of notice u/s 143(2) - No proof of issue by speed post - HELD THAT:- The notice in question u/s 142(1) and 143(2) have not been served on the assessee though there is proof of issue by speed post, of only one notice at the address 5/5/81, Janta Flats, Sector 5, Rohini, Delhi 81. Which notice was sent is not known. There is no positive proof produced before us of serving of the notice u/s 143(2). The assessee in his return of income has shown the address as C-5/5/81, Janta Flats, Sector 5, Rohini, Delhi 85, and whereas all the notices except one have been sent to the address Door no.C- 5/81, Sector 5, Rohini, Delhi. As only one notice is said to have been sent to the address C-5/5/81, we at best can presume that one notice was served as the assessee. We do not know which is that notices. The fact that in the tax audit report and in the bank papers the address was noted as C-518, Sector 5, Rohini, Delhi, does not take us to the conclusion that the notice in question has been served on the assessee in the absence of any evidence, when the assessee has specifically denied service. Thus we hold that non service of notice u/s 143(2) results in the assessment order becoming bad in law. This is true even when the assessments are under normal provisions of the Act. Reliance is placed on the judgement in the case of ACIT vs. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] Whether the provisions of S.292BB would come to the rescue of the Revenue? - AO has wrongly assumed jurisdiction under the Act. We also hold that, this defect in the assumption of jurisdiction by the AO cannot be cured by taking recourse to the deeming fiction u/s 292 BB - Thus we dismiss the contentions of the Ld.D.R. as devoid on merit. Whether the First Appellate Authority had admitted additional evidence? - In our view no additional evidence has been admitted by the Ld.CIT(A) in this case. The AO has treated the account held by the assessee in Punjab National Bank as the Savings Bank account and whereas it was actually a current account. This was factual mistake committed by the A.O. The Ld.CIT(A) has also examined the books of accounts of the assessee and has observed that the deposits in the current account in the bank is less than the sale figure. Addition u/s 68 - unexplained deposits - As assessee had explained the deposits made in its current account. The sales were disclosed and it was these sales that were appearing as deposits in the bank account. DR could not controvert the factual finding of the Ld.CIT(A). Thus we uphold the same and dismiss this appeal by the Revenue. We allow the Cross Objection filed by the assessee. Issues Involved:1. Admittance of additional evidence by the CIT(A).2. Service of mandatory notices under sections 142(1) and 143(2) of the Income Tax Act, 1961.3. Validity of the assessment made under section 144 of the Act.4. Jurisdictional issue regarding the service of notices.5. Whether the CIT(A) examined additional evidence or the same evidence already on record.Detailed Analysis:1. Admittance of Additional Evidence by the CIT(A):The Revenue contended that the CIT(A) erred in admitting additional evidence and deleting the addition of Rs. 59,87,420/-. The CIT(A) was accused of ignoring the conditions prescribed under Rule 46A(1)(a) of the Income Tax Rules, 1962. Additionally, the CIT(A) did not provide the AO an opportunity to cross-check and rebut the additional evidence, violating Rule 46A(3) and principles of natural justice.2. Service of Mandatory Notices under Sections 142(1) and 143(2):The assessee argued that the AO did not serve the mandatory notices under sections 142(1) and 143(2) before completing the assessment under section 144. The record showed that notices were sent to incorrect addresses, and only one notice was sent to the correct address, but it was unclear which notice it was.3. Validity of the Assessment Made under Section 144:The assessee filed a cross-objection challenging the assessment under section 144 as bad in law due to non-service of notices under sections 143(2) and 142(1). The assessee claimed that notices were sent to wrong addresses, and the affixture notice was also affixed at an inaccurate address. The assessment was argued to be liable for quashing.4. Jurisdictional Issue Regarding the Service of Notices:The Tribunal examined whether the AO served the notices correctly. It was found that the notices were not served as required. The Tribunal cited various High Court judgments, including CIT vs. Adarsh Travel Bus Service and CIT vs. Rajeev Sharma, which held that non-service of notice under section 143(2) invalidates the assessment. The Tribunal concluded that the AO wrongly assumed jurisdiction and that this defect could not be cured by section 292BB.5. Whether the CIT(A) Examined Additional Evidence or the Same Evidence Already on Record:The Tribunal found that the CIT(A) did not admit any additional evidence but examined the same bank statement already on record. The AO had mistaken the current account for a savings account, leading to an incorrect addition under section 68. The CIT(A) verified that the deposits in the current account were less than the disclosed sales, which were part of the assessee's books of accounts.Conclusion:The Tribunal dismissed the Revenue's appeal, holding that the non-service of mandatory notices invalidated the assessment. The CIT(A)'s decision to delete the addition was upheld as it was based on the same evidence already on record, not additional evidence. The assessee's cross-objection was allowed, and the assessment under section 144 was quashed. The Tribunal emphasized the importance of serving notices correctly and within the prescribed time to assume jurisdiction under the Income Tax Act.