UMA SHANKAR,NEW DELHI vs. ITO WARD - 44(2), NEW DELHI

In ground no.1, assessee has challenged the validity of the assessment order passed under Section 147/144 of the Income-Tax Act, 1961 due to non-service of notice issued under Section 148 of the Act.

Briefly, the facts are, the assessee is a resident individual. On the basis of information received indicating that in the year under consideration, the assessee had deposited cash of Rs.10,22,000 in an account held with Bank of Baroda, whereas, for the year under dispute the assessee had not filed any return of income, the Assessing Officer formed a belief that income chargeable to tax as escaped assessment.

I have considered rival submissions and perused the material available on record.

The primary grievance of the assessee is in relation to non- service of notice issued under Section 148 of the Act. As could be seen from the observations of Learned Commissioner (Appeals) in paragraph 4.1 of the impugned order, the notice issued under Section 148 of the Act sent through speed post returned back unserved with the postal remarks “incomplete address”. As it appears, thereafter the Assessing Officer without making any further attempt to serve notice on the assessee through various modes available under the statute, served the notice by way of affixture. No material has been placed before me by the Revenue to demonstrate that the service of notice by way of affixture was after exhausting all other modes available under the statue. Even there is no material placed on record to demonstrate that the notice by way of affixture was served on proper address and by following the procedure laid down for service of notice through affixture.

Unfortunately, Learned Commissioner (Appeals) without examining the issue in proper perspective has observed that assessee’s plea cannot be accepted as the action of the Assessing Officer is protected under Section 292BB of the Act. On a reading of section 292 BB of the Act, it becomes clear, where an assessee appears in any proceeding or cooperates in any inquiry relating to an assessment or reassessment, it shall be deemed that the notice under the provision of the Act has been served and the assessee shall be precluded from taking any objection with regard to non-service of notice. In the facts of the present appeal, admittedly, the Assessing Officer has passed the assessment order ex parte under Section 144 of the Act. In other words, there was no participation by the assessee in the assessment proceeding. That being the factual position emerging on record, it is not understood how Learned Commissioner (Appeals) can give a finding that the improper service/non-service of notice issued under Section 148 of the Act will be protected under Section 292BB of the Act. Thus, Learned Commissioner (Appeals) has misconceived the facts completely while upholding the validity of the assessment order.

In view of the aforesaid, I hold that due to improper service/non- service of notice issued under Section 148 of the Act on the assessee, the assessment proceeding culminating in the impugned assessment order is vitiated. For this reason, the assessment order deserves to be quashed. Accordingly, I do so.

For the sake of completeness, I deem it appropriate to address the issue on merits as well. Undisputedly, the cause of reopening of assessment is to assess the income of Rs.10,22,000 representing cash deposited in the bank account. However, ultimately, while completing the assessment, the Assessing Officer has not added the cash deposit of Rs.10,22,000. On the contrary, he has added two completely new items of income which are not subject matter of reopening of assessment. It is fairly well settled, without making addition of the item of income which is subject matter of reopening of assessment, the Assessing Officer cannot make any other addition. That being the settled legal position, the additions made, on merits, are unsustainable.