2021 (2) TMI 278 - AT - Income Tax

Unsigned Section 148 notices invalid; reassessment unsustainable. Disallowed expenses deemed unjustified. Assessors' appeals allowed, revenue dismissed.

The tribunal ruled that unsigned notices under Section 148 were invalid, rendering reassessment proceedings based on audit objections unsustainable. ... Validity of reopening of assessment - no valid notice issued - Rectification u/s. 154 and Re-assessment Proceedings u/s. 147 based on Audit Objection - AO in the Assessment Order has stated that on finding the mistakes of non-disallowance of expenditure of Labour Charges for failure to deduct the tax u/s. 194C - HELD THAT:- The said notice issued u/s. 148 of the Act was typed on a plain paper, it was not signed by the Assessing Officer who issued the same and remained unsigned which is not in dispute before us. The contention of the ld. DR is that the office copy of the said notice was duly signed by the AO. This notice issued u/s. 148 is a manual notice and not a digital document. The digital document only does not require signature. A manual notice u/s. 148 is required to be dated and duly signed by the Officer who is issuing the same. A notice or an order without having signature of the person who issued such notice loses its relevance and importance and is to be treated as invalid. An order or notice without signature is not an order for execution or implementation. In all these cases, there was no signature of the AO who issued notice u/s. 148. Therefore, it has to be construed that no notice was issued by the AO to the assessee and the assessee was continuously objecting for the same. It is also a fact that from the assessment order it is found that it is an ex parte order u/s. 144 r.w.s 147 of the Act without participation of the assessee and the provisions of section 292BB of the Act is of no help to the assessee, which suggests that if the assessee cooperated in the proceedings of assessment, the assessee cannot raise objections in further proceedings. In our opinion, service of valid notice is a pre-condition to assume jurisdiction by the AO. Non-signing of a notice is not a clerical mistake and there cannot be any waiver by the assessee of an irregularity of an unsigned notice. In our view, section 282 of the Act provides that a notice under the Act may be served on the person name therein as if it were a summons issued by a court under the Code of Civil Procedure, 1908. Sub-rule (3) of Rule 1 of Order 5, CPC, provides that every summons shall be signed by the judge or such officer, as he appoints. In view of this provision, the notice issued u/s. 148 should have been signed by the AO and omission to do so invalidated the notice. The provisions of section 292B of the Act intended to ensure that an inconsequential technicality does not defeat justice. But, the signing of a notice under section 148 of the Act is not merely an inconsequential technicality. Under the circumstances, the provisions of section 292B of the Act would not be attracted so as to make it as a valid notice in the eye of law. Therefore, the requirement of the signature of the AO is a legal requirement. The omission to sign the notice u/s. 148 cannot be cured by relying on the provisions of section 292B of the Act. The notice issued by the AO without affixing signature, in our view, cannot be said to be an omission, which was sought to be covered by the provisions of section 292B of the Act. If such a course is permitted to be followed, then that would amount to miscarriage of justice. An unsigned notice of reopening of assessment cannot be said to be in substance and effect in conformity with or according to the intent and purpose of the Act. The provisions of section 282A of the Act is of no assistance to the department and it would be applicable only to a CPU which was nominated as designated authority by CBDT as required u/s. 282A of the Act. Therefore, we are of the opinion that the assessment framed on the basis of unsigned notice u/s. 148 is bad in law and cannot be sustained in the eyes of law. Accordingly, we quash all the assessment orders in these cases and allow the primary legal ground raised by the assesses in all these appeals. - Decided in favour of assessee. Issues Involved:1. Validity of unsigned notice under Section 148.2. Reassessment proceedings based on audit objections.3. Disallowance of marketing expenditure.4. Disallowance under Section 40(a)(ia) for non-deduction of TDS.5. Applicability of Section 282A regarding unsigned notices.Detailed Analysis:1. Validity of Unsigned Notice Under Section 148:The primary issue was whether an unsigned notice under Section 148 is valid. The tribunal noted that the notice issued to the assesses was not signed by the Assessing Officer (AO), which is a procedural requirement. The tribunal held that a manual notice under Section 148 must be signed by the issuing officer. The absence of a signature invalidated the notice, as it did not comply with the legal requirements. The tribunal emphasized that the unsigned notice could not be cured under Section 292B of the Act, which covers only inconsequential technicalities. Therefore, the reassessment framed on the basis of an unsigned notice was deemed void ab initio.2. Reassessment Proceedings Based on Audit Objections:The tribunal examined whether reassessment proceedings initiated based on audit objections were valid. The assessee argued that the AO initiated rectification proceedings under Section 154 based on audit objections, which were subsequently dropped. The tribunal referred to several judicial precedents, including the Supreme Court's ruling in Indian and Eastern Newspaper Society v. CIT, which held that audit objections do not constitute information for reopening assessments under Section 147. The tribunal concluded that the reassessment proceedings based on audit objections were not sustainable in law.3. Disallowance of Marketing Expenditure:The assessee contested the disallowance of marketing expenditure amounting to Rs. 9,97,920, which was initially allowed in the original assessment. The tribunal noted that the AO had completed the original assessment after considering the satisfactory submissions made by the assessee. The tribunal found no new material or evidence to justify the disallowance in the reassessment proceedings. Therefore, the tribunal held that the disallowance of marketing expenditure was not justified.4. Disallowance Under Section 40(a)(ia) for Non-Deduction of TDS:The AO disallowed labour charges amounting to Rs. 7,97,23,805 under Section 40(a)(ia) for non-deduction of TDS under Section 194C. The assessee argued that the labour charges were not paid to any contractor under a contract, and hence, there was no requirement to deduct TDS. The tribunal referred to the Supreme Court's decision in Associated Cement Company Limited v. CIT, which clarified that Section 194C applies only to payments made to contractors under a contract. The tribunal found that the assessee had not entered into any contract with the labourers and, therefore, the provisions of Section 194C were not applicable. Consequently, the disallowance under Section 40(a)(ia) was not justified.5. Applicability of Section 282A Regarding Unsigned Notices:The tribunal addressed the applicability of Section 282A, which pertains to the authentication of notices. The CIT(A) had upheld the unsigned notice under Section 148 by relying on Section 282A. However, the tribunal clarified that Section 282A applies only to designated officers authorized by the CBDT. Since the AO in this case was not a designated authority, the unsigned notice could not be validated under Section 282A. The tribunal concluded that the unsigned notice was invalid and quashed the reassessment orders.Conclusion:The tribunal allowed the appeals by the assesses, holding that the unsigned notices under Section 148 were invalid, and the reassessment proceedings based on audit objections were not sustainable. The disallowances of marketing expenditure and labour charges were also found to be unjustified. Consequently, the appeals by the revenue were dismissed.