2025 (6) TMI 1994 - AT - Income Tax

Validity of reopening of assessment - as argued assessment order passed without serving notice - HELD THAT - Considering the material placed before us it is clear that that the assessment order has been passed without serving the notice. Assessment Order has been passed without serving the notice u/s 148 of the Act either to the registered address of the Assessee or to the address mentioned in the PAN data and the address mentioned in the Return filed by the Assessee during the relevant point of time and the Revenue has also not produced any document to prove the same otherwise. Therefore the assessment order passed without serving the notice u/s 148 of the Act cannot be sustained. Accordingly both the assessment order as well as the order of the Ld. CIT(A) are hereby set aside. Assessee appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in these appeals are:

(a) Whether the assessment order passed under Section 144/147 of the Income Tax Act, 1961 (the Act) for the Assessment Year 2011-12 is valid and sustainable in the absence of proper service of notice under Section 148 of the Act?

(b) Whether the penalty order passed under Section 271(1)(c) of the Act and confirmed by the Commissioner of Income Tax (Appeals) (CIT(A)) can be sustained when the underlying assessment order itself is invalid due to defective notice?

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Validity of Assessment Order in Absence of Proper Notice under Section 148

Relevant Legal Framework and Precedents: Section 148 of the Income Tax Act mandates that before initiating reassessment proceedings, the Assessing Officer (A.O.) must issue a notice to the assessee at his last known address as per the records of the department or the address in the PAN database. The Supreme Court and various High Courts have consistently held that service of notice under Section 148 is a jurisdictional requirement and non-service or defective service renders the reassessment order void ab initio. The principle of natural justice demands that the assessee must be given an opportunity to be heard, which is facilitated by proper notice.

Court's Interpretation and Reasoning: The Tribunal carefully examined the notice issued under Section 148 dated 27/03/2018 and found that the address mentioned therein was 'D-66, Sector 30, Noida' in the name of a third party (Shivani Batra S/o. Shankar Batra), whereas the assessee's PAN and the return filed for the relevant years showed the address as 'A-6, Sector 31, Noida'. The assessee had consistently filed returns from AY 2016-17 to AY 2019-20 with the correct address 'A-6, Sector 31, Noida'. The department failed to produce any evidence to demonstrate that the notice was served at the correct address or that the assessee had knowledge of the notice.

The Tribunal noted that the lower authorities, including the CIT(A), did not decide the specific ground raised by the assessee regarding non-service of notice. On the material before it, the Tribunal concluded that the assessment order dated 14/11/2018 was passed without serving the mandatory notice under Section 148 at the correct address. This omission was fatal to the validity of the reassessment proceedings.

Key Evidence and Findings: The key evidence was the discrepancy between the address on the notice under Section 148 and the address in the PAN and income tax returns. The absence of any proof of service of notice at the correct address was critical. The Tribunal relied on the consistent address mentioned in the PAN and returns as the last known address of the assessee.

Application of Law to Facts: Applying the settled legal principles, the Tribunal held that since the notice under Section 148 was not served at the correct address, the reassessment proceedings were invalid. The assessment order passed in consequence thereof could not be sustained.

Treatment of Competing Arguments: The Revenue contended that the reassessment order and penalty should be upheld as per the orders of the lower authorities. However, the Tribunal found that the Revenue failed to produce any evidence of proper notice service, and the lower authorities had not addressed the issue. The Tribunal gave precedence to the statutory requirement of proper notice and the principles of natural justice over the Revenue's submissions.

Conclusions: The Tribunal set aside the assessment order dated 14/11/2018 and the order of the CIT(A) confirming the addition, on the ground of non-service of notice under Section 148 at the correct address.

Issue (b): Validity of Penalty Order under Section 271(1)(c) in Light of Invalid Assessment Order

Relevant Legal Framework and Precedents: Penalty under Section 271(1)(c) is contingent upon the validity of the assessment order and the establishment of concealment or furnishing inaccurate particulars of income. If the assessment order is invalid, the basis for imposing penalty collapses.

Court's Interpretation and Reasoning: The Tribunal observed that since the quantum appeal against the assessment order was allowed on the ground of non-service of notice, the penalty order and the CIT(A)'s order confirming the penalty could not be sustained. The penalty was inherently linked to the assessment order, which was set aside.

Key Evidence and Findings: The penalty order dated 23/05/2019 and the CIT(A) order dated 17/08/2023 were challenged. The Tribunal found no independent basis to uphold the penalty once the assessment order was quashed.

Application of Law to Facts: The Tribunal applied the principle that penalty proceedings cannot survive independently when the foundational assessment order is invalid.

Treatment of Competing Arguments: The Revenue sought dismissal of the appeals, relying on lower authorities' orders. The Tribunal rejected this, emphasizing the prerequisite validity of the assessment order for sustaining penalty.

Conclusions: The Tribunal set aside the penalty order and the order of the CIT(A) confirming the penalty.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"The assessment order dated 14/11/2018 has been passed without serving the notice u/s 148 of the Act either to the registered address of the Assessee or to the address mentioned in the PAN data and the address mentioned in the Return filed by the Assessee during the relevant point of time and the Revenue has also not produced any document to prove the same otherwise. Therefore, the assessment order passed without serving the notice u/s 148 of the Act cannot be sustained. Accordingly, both the assessment order as well as the order of the Ld. CIT(A) are hereby set aside."

Further, the Tribunal stated:

"Since, we have allowed the quantum appeal, the order of the penalty and the order of the Ld. CIT(A) in confirming the penalty order cannot be sustained. Accordingly, the same are set aside."

The core principles established are:

• Proper service of notice under Section 148 at the correct address is a jurisdictional and mandatory requirement for reassessment proceedings.
• Non-service or defective service of notice renders the reassessment order void and unsustainable.
• Penalty proceedings under Section 271(1)(c) cannot be sustained if the underlying assessment order is invalid.

The final determinations on each issue were that both the assessment order and the penalty order, along with the orders of the CIT(A) confirming them, were set aside due to non-service of notice under Section 148 at the correct address.