TMI Blog2018 (5) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee - I.T.A. No. 743/HYD/2016 - - - Dated:- 27-4-2018 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For The Assessee : Shri Md. Afzal, AR For The Revenue : Smt. U. Minichandran, DR ORDER PER B. RAMAKOTAIAH, A.M. : This is an appeal by assessee against the order of Commissioner of Income Tax (Appeals)-5, Hyderabad, dated 28-03-2016. Assessee has raised originally seven grounds, which are as under: 1. The order of the learned Commissioner of Income Tax (Appeals), is against the law, weight of evidence and probabilities of case. 2. The learned Commissioner of Income Tax (Appeals) erred in not declaring the assessment as null and void as the assessment u/s. 144 r.w.s. 147 is completed on a notice u/s 148, which is an invalid notice. 3. The learned Commissioner of Income Tax (Appeals) erred in confirming the order of the Assessing Officer, which is made beyond the period provided u/s 153 (31.12.2011), on the strength of a notice alleged to have issued/served on 18.07.2011 by way of affixture, without following the procedure laid down for the substituted service. 4. The learned Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was taken in respect of proceedings initiated u/s. 142(1) pending such proceedings u/s. 142(1), further proceedings u/s. 147 were initiated, by issuing notice u/s. 148 of the IT Act, therefore, the order u/s. 144 r.w.s. 147 is bad in law . The additional ground being legal in nature and as facts are on record as stated in asst. order itself the same is admitted. 3. Briefly stated facts leading the present appeal are that, assessee is a partnership concern consisting of two partners. The firm came into existence on 04-01-2007. Survey proceedings u/s. 133A were conducted at the business premises of 19-02-2009. During the course of survey, certain documents and books of account were impounded by the Assessing Officer (AO) and statement of partners were recorded. Assessee has admitted incomes for AY. 2007-08 at ₹ 10 Lakhs for AY. 2008-09 at ₹ 20 Lakhs and for AY. 2009-10 at ₹ 50 Lakhs. While assessee complied with the disclosures for AY. 2007-08 and 2008-09 and filed returns, it did not offer the amount of ₹ 50 Lakhs disclosed for the impugned assessment year. AO has noticed that assessee has not filed any return of income in AY. 2009-10 and has issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 of the Act, it was submitted that in case assessee has not responded to the notice u/s. 142(1), the Act provides that an assessment u/s. 144 can be completed even without issuing any further show cause notice. Therefore, having been initiated the proceedings u/s. 142(1) without concluding those proceedings, initiation of proceedings u/s. 147 cannot be appreciated. He relied on the following case law: i. Arunlal Vs. Asst. CIT [1 ITR (Trib) 1]; ii. Co-ordinate Bench decision in the case of Sri Anthi Reddy Yamireddy Vs. The Dy.CIT in ITA No. 96/Hyd/2017, dt. 23-05-2017; 7. Coming to the issue of notice u/s. 148 and service by affixture, the contention of Ld. Counsel was that assessee is being served with notices regularly at the given address and referred to the proceedings for AY. 2007-08 and 2008-09, wherein various additions have been made by the AO and appeals were pending before the Ld.CIT(A) at that point of time. Pointing out to the show cause letter issued by the assessee asking for recovery of outstanding demand on 07-07-2011, it was the contention that AO is very much aware about the whereabouts and address of assessee. Therefore, service by affixture does not ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Airlines Vs. Asst. Director of Income Tax, in W.P.(C) No. 16574-75 of 2006 and 16576-77/2006, dt. January, 12, 2007, relied upon by the Ld. Counsel in his arguments are distinguishable as those judgments were given in the context of that assessee filing returns. But in this case, assessee has not filed return of income and there was no response even to the notice u/s. 142(1) or notice u/s. 148. It was the submission that there was no bar for initiating proceedings u/s. 147. Regarding service of notice u/s. 148 also, it was the contention of Ld.DR that assessee is evading the notices and therefore, there was no option than to straightaway serve the notice by affixture, as assessee is not cooperating in completing the proceedings. Further, assessee itself has filed the statement of income disclosure on the basis of which assessment has been completed and that is to be upheld as assessee itself admitted the income in respective assessment years and has honoured in earlier two years. It was stated that the statement has to be taken as correct in the absence of any contradictory evidence from assessee. It was the submission that proceedings are validly initiated and the addition was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e should have returned the books, rather than asking the assessee to take photo copies of the books which involves money and effort in copying. Thus, the action of AO cannot be supported on the facts of the case. 10.2. Coming to the contention that AO has un-necessarily initiated the proceedings u/s. 147 when proceedings u/s. 142(1) are pending, this contention is to be upheld. AO himself records in the assessment order that he has issued a notice u/s. 142(1), for which there is no response. The provisions of Section 144 permits the AO to complete the assessment u/s. 144, that is ex-parte, even without issuing any further show cause notice. Thus, when there is a failure to comply with the notice u/s. 142(1), AO could have completed the assessment ex-parte based on the books of account detained by him and had he based his assessment on the basis books available with him there could be some logic in completing exparte assessment. Surprisingly, he resorts to estimation of income on the so called turnover, which Ld.CIT(A) has deleted wisely. Therefore, we are not in a position to appreciate the initiation of proceedings u/s. 147 per se. We rely on the principles laid down by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginal assessment or by way of reassessment, he can issue a notice under Section 148 within the time mentioned, 12. In the present case, the time limit for completing the reassessment proceedings pursuant to the notice issued on 23September 2005 was 31December 2006. As is evident from the narration hereinabove, the reassessment proceedings were in progress and were being adjourned from time to time. Without those proceedings having come to an end a fresh reassessment could not have been initiated by the AO by issuing a notice under Section 148 of the Act on 24November 2006. The proceedings initiated by the notice dated 23September 2005 ought to have been completed within the time stipulated and till such time there was no occasion to initiate fresh reassessment proceedings by issuing notice under Section 148 of the Act. 13. Consequently, the impugned order of the ITAT annulling the assessments for AY 2001-02 to 2004-05 cannot be said to be erroneous . 10.2.i. Similar principles were also laid down in the case of in the case of KLM Royal Dutch Airlines Vs. Asst. Director of Income Tax, (supra), wherein the Hon'ble Delhi High Court has held as under: 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ITI placed in pg. 77 of the Paper Book, the ITI records that the above address is the last known address given in the return of income for the AY. 2009-10 whereas proceedings are initiated for AY. 2009-10; which itself throws some doubt about veracity of the report of the ITI. Moreover even though there are two signatures of so called witnesses- neither their names nor their addresses have been placed on report, therefore, the veracity of the witnesses evidencing the service by affixture cannot be verified. The procedure followed by the AO to get the notices by way of affixture itself shows some doubt about the whole procedure. In the case of Sri Anthi Reddy Yamireddy Vs. The Dy.CIT (supra), the Co-ordinate Bench of this Tribunal vide order dt. 23-05-2017, after analyzing various case law has held as under: 12. As per the provisions of Section 282 of the IT Act 1961, the notice may be served either by post or as if it were a court summons under the Civil Procedure Code. The procedure for service by post is given in Section 27 of the General Clauses Act. Requirements for valid service by post are: i. Proper addressing; ii. Prepaying iii. sending by re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he officer must examine the Inspector on oath. The AO can also order service by affixture or by putting a newspaper advertisement under certain circumstances. Such service is called substituted service. This can be resorted to (a) when AO is satisfied that there is reason to believe that addressee is kept out of the way for the purpose of avoiding service and (b) the notice cannot be served in the ordinary way for any other reason. In these cases, AO is expected to pass a speaking order to the affect that he is satisfied as to the existence of the circumstances which necessitates a substituted service. A detailed noting in the order sheet to this effect will satisfy the requirements. The above procedure stated in this Para 12 is as prescribed in the Manual of Office Procedure (Volume-II, Technical), [February, 2003] of the department. 12.4. . 12.5. Specifying the procedure of service of notice, in the case of Sanjay Badani Vs. DCIT-10(3), Mumbai, Co-ordinate Bench of ITAT [35 ITR(T) 536] has held as under: As per sub-section (1) of section 282, the notice is to be served on the person named therein either by post or as if it was a summons issued by Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll 30-9-2012. Nor there is any entry in the note-sheet by the Assessing Officer directing the Inspector for service by affixture and had only recorded the fact that the notice was served by the affixture. It appears that the report of the Inspector was obtained without issuing any prior direction for such process or mode. However, the fact remained that Serving Officer had not set out reason for passing subsequent entry nor for adopting the mode for service by affixture and without stating the reasons for doing so, the adoption of the mode of substituted service could not be legally justified. Notice was served by affixture. The reason for service through affixture has not been noted by the Assessing Officer in the note sheet nor he had issued any direction for issuing notice through affixtures. The next entry of note sheet dated 28-7-2012 just indicates that letter was filed by the Inspector regarding service of notice by affixtures, dated 17-7-2012. Thus, on 17-7-2012, the first entry was made and without recording any apprehension about the delay by such mode second entry for affixation was made on 28-7-2012 without showing justification for the same. Thus, it is clear that repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act claimed to have served notices by affixing them on assessee s place of business, but in his report did not mention the names and addresses of the proceedings, who identified the place of business of assessee nor did he mention in his report or in the affidavit filed by him that he personally know the place of business of assessees. Assessees, however, claimed that they had closed their businesses long before the notices were issued. In the Writ Petition filed by assessee, the High Court held that there was no proper service on assessee and the orders of Commissioner pursuant thereto could not be sustained. The Hon'ble Supreme Court upheld the judgment of Hon'ble High Court . 10.2.iii. Thus, we are of the opinion that procedure resorted to by the AO is not the prescribed procedure. Accordingly, the orders passed thereon becomes void ab initio. 10.3. Coming to the main issue of addition of ₹ 50 Lakhs as confirmed by the Ld.CIT(A), there is no merit in the addition itself. AO has not linked the disclosure either by way of investment or by way of any deposits or transactions supposed to have been undertaken by assessee. If there was any unaccounted incomes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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