TMI Blog2012 (6) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 142 calling for information but not furnishing information in response to the notice, cannot be said to have 'co-operated in any inquiry in relation to an assessment or reassessment'. Hence provisions of Section 292BB are not attracted and it is held that there is no valid service of notice u/s 143(2) rendering assessment order passed void ab initio - Decided in favor of assessee. - IT Appeal NO. 1492 (MUM.) of 2012 - - - Dated:- 30-5-2012 - R.S. SYAL, VIVEK VARMA, JJ. ORDER R.S. Syal, Accountant Member This appeal by the assessee arises out of the order passed by the Commissioner of Income-tax (Appeals) on 31.01.2012, in relation to the assessment year 2008-2009. 2. First ground of the assessee's appeal reads as under:- "The learned CIT(A) erred in facts and circumstances of the case and in law in holding that the assessment u/s 144 has been framed by valid service of the notice u/s 143(2) as per provisions of sec.282 of the Income Tax Act 1961 and by issue of valid show cause notice contemplated u/s 144 of the Income Tax Act, 1961." 3. The factual matrix of the case is as follows : The assessee filed his return on 16.03.2009 declaring total income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .07.2010. Next part of the remand report, which has been reproduced on pages 21 and 22 of the impugned order in tabular form, discusses about various subsequent letters and notices etc. served on the assessee. From this tabular statement it can be observed that notice u/s 142(1) dated 04.10.2010 was served on the same day on Mansi Gawali, the spouse of the assessee. Similarly a letter along with notice u/s 142(1) dated 02.12.2010 was served on the same day on her. Notice for penalty u/s 271(1)(b) dated 08.12.2010 was served on her on the same day. Apart from other penalty notices/penalty order, there is reference to order u/s 144 r.w.s. 143(3) along with demand notice dated 29.12.2010 which was served on Mansi Gawali on 01.01.2011. In the said remand report the Assessing Officer has also mentioned that the assessee never took a plea about non-service of notice before the completion of assessment proceedings. Invoking the provisions of section 27 of the General Clauses Act, 1897, the Assessing Officer opined in the remand report that there was a valid service of notice which was sent at the address given by the assessee to the database of the department. The Addl. CIT, while forward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service of notice u/s 143(2) and hence the assessment be declared as null and void. Per contra, the learned Departmental Representative has vehemently argued that there was a valid service or at least presumption could be drawn about the valid service of notice u/s 143(2) on the assessee and hence the view canvassed by the learned CIT(A) in declaring the assessment to be valid, be not disturbed. In order to find out whether the assessment be declared as valid or void, we need to ascertain as to whether non-service or improper service of notice u/s 143(2) calls for declaring the assessment to be bad in law; whether on facts and in the circumstances of the case the assessee could be said to have been served notice u/s 143(2); and the effect of section 292BB. I. EFFECT OF NON-SERVICE OF NOTICE U/S 143(2). 5.1 Section 2(8) defines "assessment" as including reassessment. Section 2(40) defines "regular assessment" to mean "the assessment made under sub-section (3) of section 143 or section 144". Since 'assessment' includes 'regular assessment', which, in turn, encompasses scrutiny assessment u/s 143(3) and also best judgment assessment u/s 144, all the provisions relating to 'ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding to the passing of the assessment order and the immediate link in such a chain before finally passing of assessment order is to serve notice u/s 143(2) and that too within the prescribed period. It, therefore, boils down that if notice u/s 143(2) is not served within the prescribed period, no assessment can be framed u/s 143(3). Section 144, dealing with the best judgment assessment, provides through sub-section (1) that : "If any person-- (a) .. or (b) or (c) having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143, the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment ..". On going through the prescription of section 144, it transpires that service of notice u/s 143(2) is as essential a requirement as it is to finalize the assessment u/s 143(3). In fact, where a return has been filed by the assessee and the AO proposes to make assessment, he is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviso to section 143(2). Omission on the part of the assessing authority to issue notice u/s 143(2) cannot be a mere procedural irregularity and the same is not curable. From the above discussion it clearly comes to light that the issuance and service of proper notice u/s 143(2) is not a procedural irregularity but goes to the root of the jurisdiction of the Assessing Officer to frame assessment u/s 143(3). If no notice u/s 143(2) is issued, the Assessing Officer cannot proceed to frame assessment u/s 143(3). The assessment so finalized, in the absence of such a notice, is void. 5.3 Having seen that the non-service of notice renders the assessment void ab initio , let us see the consequences if there is any other lapse in the matter of service of notice, such as where such notice is served beyond the prescribed period or is improperly served. In the case of CIT v. Lunar Diamonds Ltd. [(2006) 281 ITR 1 (Del.)] the assessee filed an affidavit stating that it did not receive notice u/s 143(2) within the specified time. The Tribunal set aside the assessment on the ground that notice u/s 143(2) was served upon the assessee beyond the prescribed period of one year. When the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year under consideration. The return for the current year, a copy of which is available in the paper book, was filed giving Thane address. Not only that, the return for the earlier year was also filed giving the Thane address. Admittedly the Assessing Officer issued notice u/s 143(2) on Kurla address, which remained unserved and was returned by the postal authorities. On an earlier hearing, the learned Departmental Representative was directed to produce the assessment record for verification of the correct factual position. Such record was produced today in the open Court. On the perusal of such record, it was noticed as also admitted by the ld. DR that the notice u/s 143(2) was issued by the Assessing Officer at the Kurla address which remained unserved and was returned by the postal authorities and further no notice u/s 143(2) was thereafter issued or served on the assessee either on Kurla or Thane address. Despite that, the ld. Departmental Representative accentuated on the contention that the assessee gave Kurla address at the time of applying for PAN and the change in address was not intimated to the Assessing Officer in terms of section 139A(5)(d). He emphasized that w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf, cannot be brushed aside. When the notice sent by the Assessing Officer at Kurla address was returned unserved, it was for him to ensure the correctness of address along with the particulars given in the return of income. He did not consider it expedient to verify such particulars with the return of income in order to ensure the proper service of notice u/s 143(2), which forms the bedrock of a valid assessment order. Though notice u/s 142(1) was served on the spouse of the assessee at their new address of Mulund, it was however only pursuant to sending of such notice at the Thane address. Be that as it may, the Assessing Officer cannot wash off his hands from the duty to serve notice u/s 143(2) on the address given in the return, simply on the premise that the assessee shifted his base to another address at a subsequent date. The situation would have been different if the Assessing Officer had served the notice at the Thane address either personally or affixture. 6.4 The learned Departmental Representative has also pressed into service the prescription of section 27 of the General Clauses Act, 1897 to bolster his submission about the valid service of notice. This section giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice u/s 142(1) was served on the assessee and only thereafter the assessment was completed, it should be considered as compliance to the provisions of section 292BB. He stressed on the point that once the assessee co-operated in the inquiry relating to assessment by receiving the notice u/s 142(1), it shall be deemed that any notice required as per law including the one u/s 143(2) was properly served. 7.2 The Finance Act, 2008 inserted section 292BB with effect from 01.04.2008. This section reads as under:- "292BB. Notice deemed to be valid in certain circumstances.-Where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was- ( a ) not served upon him ; or ( b ) not served upon him in time ; or ( c ) served upon him in an improper manner : Provided that nothing contained in this sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of section 292BB, it is essential that the assessee must have either appeared in any proceedings or co-operated in any inquiry relating to assessment or reassessment. In other words, if the assessee does not appear in any proceedings at all or does not co-operate in any inquiry relating to assessment or reassessment, then the command of section 292BB shall not apply. In such a situation, it will be incumbent upon the authorities to prove the service of notice upon the assessee well within time as per the requisite provisions of the Act. It means that section 292BB is of no assistance to the Revenue unless it is shown that the assessee appeared in any proceedings or co-operated in any inquiry relating to assessment or reassessment. If the assessee fails to appear or co-operate in any inquiry relating to assessment or reassessment, then it is open to him to require the Assessing Officer to prove the service of requisite notice on him in time. Turning to the assessment order, it is found that there is a mention on the first page that : "On account of change of incumbent officer, notice u/s 142(1) of the I T Act was issued on 14.7.2010 calling for information. Nobody atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice of any notice under the provisions of this Act, cannot be held to have been activated in the present circumstances. Though section 292BB which has been inserted by the Finance Act, 2008 is technically applicable to the year in appeal, being assessment year 2008-2009, but because of non-fulfillment of the primary condition of the assessee appearing in or co-operating in an inquiry relating to assessment, the consequential mandate of this section will not apply. The contention of the learned Departmental Representative about the deemed service of notice u/s 143(2) on the assessee in the present circumstances would have been valid if the assessee, despite no valid service of such notice, had appeared before the A.O. or co-operated in any inquiry relating to assessment with or even without notice u/ss 143(2) or 142(1). The change in law as introduced by section 292BB with effect from assessment year 2008-2009, is inapplicable in the peculiar facts and circumstances prevailing in this case. 8. We, therefore, sum up our conclusion that service of notice u/s 143(2) is sine qua non for making assessment u/ss 143(3)/144 except as otherwise provided in section 292BB with effect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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