CREATIVE DYEING & PRINTING MILLS PVT. LTD.,NEW DELHI vs. ITO WARD - 6(4), NEW DELHI

In ground nos. 1.1, 1.2 and 1.3, the assessee has challenged the validity of the assessment order passed under section 147/143(3) of the Income-tax Act, 1961 (in short ‘the Act’) due to non-service of notice under section 148 of the Act. Whereas, in ground no. 2.1, 2.2 and 2.3, the assessee has challenged the addition made of Rs.5,01,502/-, representing alleged contractual receipts.

Briefly the facts are, the assessee is a resident corporate entity. From the system of the Department, the Assessing Officer noticed that the assessee had received contractual receipts of Rs.13,78,973/- during the year under consideration. Alleging that the assessee had not filed any return of income for the impugned assessment year, the Assessing Officer formed a belief that the income representing the contractual receipts has escaped assessment. Accordingly, he reopened the assessment under section 147 of the Act by issuing a notice under section 148 of the Act on 29.03.2017. As alleged by the Assessing Officer, the assessee did not comply with the notice issued under section 148 of the Act. However, in response to a notice under section 142(1) of the Act subsequently, the assessee filed a letter stating that the return filed originally for the impugned assessment year on 23.09.2010 should be treated as return in response to the notice issued under section 142(1) of the Act. In course of assessment proceeding, though, the assessee furnished a copy of return of income and some other documents, however, the Assessing Officer observed that the documents furnished did not indicate 2 | P a g e that the assessee has offered the contract receipts of Rs.16,71,672/- to tax. Accordingly, he treated 30% of gross contract receipts as the income of the assessee and added back an amount of Rs.5,01,500/- to the income of the assessee. Against the assessment order so passed, the assessee preferred an appeal before learned Commissioner (Appeals), inter alia, on the ground that due to non-service of notice issued under section 148 of the Act, the assessment order is invalid. However, learned Commissioner (Appeals) did not find any merit, either in the grounds raised

4. Before me, learned counsel appearing for the assessee submitted that no notice under section 148 of the Act was ever served on the assessee. He submitted, though, from assessment year 2001 onwards the assessee had been filing its return of income showing the address as G-6, Vaikunth, 82-83, Nehru Place, New Delhi, however, the notice under section 148 of the Act was issued on a wrong address and was never served. Further, he submitted, even in the return of income filed for the impugned assessment year, the assessee had mentioned the very same address. Despite that the Assessing Officer issued the notice 3 | P a g e under section 148 of the Act on a wrong address, which was never served on the assessee. Thus, he submitted, in absence of proper service of notice under section 148 of the Act, initiation of proceeding under section 147 of the Act is vitiated. He submitted, for the impugned assessment year, the assessee had voluntarily filed its return of income under section 139(1) of the Act. He submitted, the assessment in case of the assessee was completed under section 143(3) of the Act prior to reopening of assessment for the impugned assessment year. Thus, he submitted, the allegation of the Assessing Officer that the assessee had not filed any return of income for the impugned assessment year is factually incorrect, hence, reveals complete non-application of mind while reopening the assessment.

Learned Departmental Representative relied upon the observations of the Assessing Officer and learned Commissioner (Appeals).

I have considered rival submissions and perused the materials on record. The first issue arising for consideration is the validity of the assessment order due to non-service of notice issued under section 148 of the Act. On a perusal of the observations made by learned Commissioner (Appeals) in paragraph 6.2 of the appellate order, it is very much clear that he has accepted the fact that the notice under section 148 was issued on a wrong address. It is observed from the materials placed before me that from assessment year 2001 onwards, the assessee had been filing its return of income mentioning the address as G-6, Vaikunth, 82-83, Nehru Place, New Delhi. Whereas, the Assessing Officer has issued notice under section 148 of the Act on a different address, namely, E-25A, Rajouri Garden, New Delhi. Thus, it is a fact on record that notice under section 148 of the Act was never served on the assessee due to 5 | P a g e issuance of notice on a wrong address. Further, the assessment order reveals that the Assessing Officer has reopened the assessment assuming that the assessee had not filed any return of income for the impugned assessment. This finding of the Assessing Officer is factually incorrect and contrary to the materials available on record.

As could be seen, for the impugned assessment year, the assessee filed its return of income under section 139(1) of the Act on 23.09.2010. In fact, the assessment in case of the assessee was completed under section 143(3) of the Act vide order dated ‘nil’ accepting income returned at Rs.93,98,648/-, a copy of which is placed at page 34 of the paper-book. Thus, reopening of assessment has been made based on complete non-application of mind to the facts and material available in the records of the Department. Proper service of notice under section 148 of the Act on the assessee is a sine qua non for initiating proceeding under section 147 of the Act, which is lacking in the present case. Therefore, it is a gross jurisdictional error committed by the Assessing Officer which cannot be wished away by taking recourse to section 292B of the Act. Therefore, the observations of