2024 (8) TMI 1241 - AT - Income Tax

Assessee's seven-year delayed appeal remanded for verification of Section 282 service by affixture procedures

Babulal Punmaji Gehlot Versus Income Tax Officer, Ward-5 (3) (3), Ahmedabad

ITAT Ahmedabad remanded matter to CIT(A) for verification of proper service procedures after assessee filed appeal seven years late claiming non-receipt ... Condonation of delay filling appeal before CIT on non-receipt of the assessment order - assessee filed appeal against assessment order of AO after gap of over seven years - only reason given by the assessee for the inordinate delay in filing of appeal was that due to change in address of the assessee, the assessment order was not received by the assessee Whether the AO had followed the due process laid down for service of notice by affixture in the instant facts? - Scope of Procedure for service of notice - HELD THAT:- It is evident that the assessee has been deliberately avoiding receipt of notices issued by the Income Tax Department and had also deliberately not participated in assessment proceedings. The assessee had changed his address and such change in address was also intimated to the Income Tax Department and neither was the PAN data base was updated by the assessee to keep the Income Tax Department informed about the whereabouts of the assessee. It was only when the bank account of the assessee was attached by the Tax Recovery Officer that the assessee decided to file appeal before the CIT(A) and that also after a gap of over seven years. As per the provisions of Section 282 of Income Tax Act,1961, the service of notice of summon or requisition or order under the I.T. Act may be made by delivering a copy thereof, by post or by such courier services as may be approved by the Central Board of Direct Taxes. Sub-Rule (1) of the Rule 127 of the Income Tax Rules, 1962 provides that for the purposes of sub-Section (1) of Section 282, the addresses (including the address for electronic mail or electronic mail message) to which a notice or summons or requisition or order or any other communication under the may be delivered or transmitted shall be as per sub-Rule (2). AO can also serve the assessment order by affixture. Service by affixture is resorted to in two circumstances: First, when the assessee or his agent refuses to sign the acknowledgement for service or when the serving official, after using all due and reasonable diligence, cannot find the assessee in his residential or business premises within a reasonable time and second, when there is nobody else authorized to receive the notice. In the above circumstances, the Income Tax Inspector can effect the service by affixture on his own initiative without waiting for an order from the AO. A report is to be drawn up by the Income Tax Inspector, on the facts and circumstances of the service by affixture, specifying the date and time of service and the name of the identifier if any. From the facts placed on record before us, it is not clear where the complete process of affixture as laid down u/s 282 r.w.r. 127 of the Income Tax Rules, 1961 has been followed by the Income Tax Department. Accordingly, in the interest of justice, the matter is restored to the file of Ld. CIT(A) to call for the relevant assessment records for the purpose of verifying whether the due process of service of assessment order by way of affixture has been followed in the instant case. Assessee has not pressed for vacating / setting-aside of the assessment order, as being bad in law, but the only request of the Counsel for the assessee before us is that in case it is found that the due process for service of notice has not been followed by the Income Tax Department, then the Ld. CIT(A) may condone the delay in filing of the appeal before him and thereafter, decide the issue on merits after giving due opportunity of hearing to the assessee. Accordingly, the matter is set-aside to the file of Ld. CIT(A) for carrying out the verification as directed - Appeals of the assessee are allowed for statistical purposes. Issues Involved:1. Addition of Rs. 62,37,123/- as unexplained cash credit.2. Addition of Rs. 2,08,67,654/- on account of estimation of net profit @ 8% on gross sales.3. Condonation of delay in filing of appeal before CIT(A).4. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.Issue-wise Detailed Analysis:1. Addition of Rs. 62,37,123/- as Unexplained Cash Credit:The Assessing Officer (AO) added Rs. 62,37,123/- as unexplained cash credit since the assessee did not furnish any details regarding unsecured loans. The AO's view was based on the absence of details and the unexplained nature of the loans. The CIT(A) confirmed this addition, and the assessee appealed, arguing that the loans had been verified in previous assessments.2. Addition of Rs. 2,08,67,654/- on Account of Estimation of Net Profit @ 8% on Gross Sales:The AO estimated the net profit at 8% of gross sales, amounting to Rs. 2,08,67,654/-, due to the absence of details such as opening stock, closing stock, purchases, sales, and various business expenses. The CIT(A) upheld this addition, and the assessee appealed, contending that the accounts were audited under section 44AB and that details were available on record.3. Condonation of Delay in Filing of Appeal Before CIT(A):The assessee filed an appeal against the assessment order after a delay of over seven years, citing non-receipt of the assessment order due to a change of address. The CIT(A) refused to condone the delay, noting that the assessee had not provided sufficient cause and had not updated the address with the Income Tax Department. The Tribunal found that the AO had initially tried to serve the order by speed post, which was returned, and then by affixture. However, the Tribunal noted that it was unclear if the complete process of affixture was followed. The Tribunal restored the matter to the CIT(A) to verify whether the due process of service by affixture was followed.4. Imposition of Penalty Under Section 271(1)(c) of the Income Tax Act:The AO initiated penalty proceedings under Section 271(1)(c) for concealment of income, which the CIT(A) upheld. Since the quantum appeal was restored to the CIT(A), the penalty proceedings were also restored to the CIT(A) for re-evaluation.Conclusion:The Tribunal restored both the quantum appeal and the penalty proceedings to the CIT(A) for verification of the service process and re-evaluation of the issues on merits. The appeals were allowed for statistical purposes, and the CIT(A) was directed to verify whether the due process of service by affixture was followed and to decide the issues after providing due opportunity of hearing to the assessee.Judgment Pronounced:The order was pronounced in open court on 23/08/2024.