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Facts
The assessee's case was reopened based on information from AIR statements indicating interest income and cash deposits that were not reported. The assessee claims the reassessment proceedings are invalid due to non-service of the notice and reasons recorded.
Held
The Tribunal held that the revenue failed to prove the proper service of the reassessment notice and reasons recorded as per the prescribed procedures under Section 282(1) of the Act and Rule 127 of the IT Rules. Consequently, the reassessment proceedings were deemed invalid.
Key Issues
Whether the reassessment proceedings are valid when the notice under Section 148 and reasons recorded were not duly served upon the assessee.
Sections Cited
147, 148, 68, 111A, 250, 144, 282, 149, 148(1)
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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
(Assessment Year: 2012-13) Dharmendra Vadilal Parmar ITO, Ward – 32(1)(1) Room No. 703, 7th Floor, Kautilya B-802, Videocon Towers, Opp. Thakur V. M. H. School, Thakur Complex, Bhavan, C-41 to C-43, G Block, Vs. Kandivali (East), Mumbai – 400101. Bandra Kurla Complex, Bandra East, Mumbai – 400051. PAN/GIR No. AAHPP6993L (Appellant) : (Respondent) Assessee by : Shri. Om Kandalkar Respondent by : Shri. P. D. Chougule, SR. DR. Date of Hearing : 20.02.2025 Date of Pronouncement : 20.05.2025 O R D E R Per Kavitha Rajagopal, J M: This appeal has been filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) 57, Mumbai (‘ld. CIT(A)’ for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2012-13.
The assessee has raised the following grounds of appeal: “1. Legal grounds:
1. The reassessment proceedings initiated by issuing the notice dated 29.03.2019 under section 148 of the Income tax Act, 1961 [herein after referred to as "Act'] is invalid as the impugned notice under section 148 of the Act was never served/provided to the Appellant. Hence, the reassessment proceedings initiated by (A.Y. 2012-13) Dharmendra Vadilal Parmar way of issuing notice under section 148 of the Act is unlawful, invalid, and bad in law. II. On merits: 2. The Ld. Commissioner of Income Tax (Appeals) 57, Mumbai (hereinafter referred to as 'CIT(A)'] is not justified in upholding the additions aggregating to Rs.14,55,000/- made by the Income Tax Officer, Ward 32(1)(1), Mumbai [hereinafter referred to as 'Ld. A.O.'] under section 68 of the Act without appreciating the fact that the Appellant is a Non-Resident Indian, having no income taxable in India. Thus, the order passed by the Ld. CIT(A) is unlawful, bad in law and the same may be quashed and set aside.
The Ld. CIT(A) is not justified in upholding the addition of Rs.9,40,000/- under section 68 of the Act without appreciating the fact that the said amount represents the amount redeposited into the bank account out of withdrawal made earlier from Appellant's Standard Chartered Bank account and hence, the source stands explained. Hence, the impugned addition made under section 68 of the Act is without any basis, unwarranted and therefore, bad in law.
The Ld. CIT(A) is not justified in upholding the addition of Rs 9,40,000/- under section 68 of the Act without appreciating the fact that the Appellant had duly furnished the relevant documentary evidence and had discharged the onus as specified under section 68 of the Act. Hence, the impugned addition made under section 68 of the Act is unlawful, illegal, and bad in law.
The Ld. CIT(A) is not justified in upholding the addition of Rs.3,50,000/-under section 68 of the Act being pin money i.e., savings of his spouse without appreciating the fact that the Appellant had discharged the onus as specified under section 68 of the Act by furnishing all the relevant documentary evidence. Hence, the impugned addition made under section 68 of the Act is unlawful and deserves to be deleted.
The Ld. CIT(A) is not justified in upholding the addition of Rs.1,65,000/- under section 68 of the Act being amount received on sale of personal household items without appreciating the fact that the Appellant had discharged the onus as specified under section 68 of the Act by furnishing all the relevant documentary evidence. Hence, the impugned addition made under section 68 of the Act is perverse, arbitrary, and bad in law.
The Ld. CIT(A) is not justified in upholding the addition of Rs.4,608/- under section 111A of the Act being short term capital gains without appreciating the fact that the same was below the taxable limit. Hence, the impugned addition made under section 111A of the Act is without any basis and deserves to be deleted.”
(A.Y. 2012-13) Dharmendra Vadilal Parmar 3. The assessee has also raised the following additional grounds of appeal
, vide letter dated 16.12.2024. “1. The reopening under section 147 of the Income-tax Act, 1961 (hereinafter referred to as "the Act") by way of issuing a notice dated 29.03.2019 is invalid as the Ld. A.O. failed to furnish the copy of the reasons recorded for issuing the impugned notice under section 148 of the Act, in spite of request made by the Appellant. Hence, the entire reopening proceedings are unsustainable and hence, bad in law.
2. The failure or inability on the part of the Ld. A.O. to furnish the copy of the reasons recorded for issuing notice under section 148(1) of the Act is in contravention with the law laid down by the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC). Hence, notice dated 29.03.2019 issued u/s. 148(1) of the Act and the consequent assessment order dated 09.12.2019 passed under section 144 r.w.s. 147 of the Act may be quashed and set aside.”
4. As the additional grounds raised by the assessee challenging the validity of the reopening proceedings goes to the root of the case, we deem it fit to admit and adjudicate the same in terms of the proposition laid down by the Hon'ble Apex Court in the case of National Thermal Power Corporation vs. CIT (1999)
97. Taxmann.com 358/(1998) 229 ITR 383 (SC).
5. Briefly stated, the assessee is an individual and had not filed his return of income for the year under consideration. The assessee’s case was reopened based on the information under 26AS (AIR) in Individual Transaction Statement (ITS) that the assessee has received interest income from bank amounting to Rs. 24,208/-, cash deposits of Rs. 14,55,000/- in ICICI bank, BKC and is also said to have transacted in national/multi commodities contracts amounting to Rs. 31,18,500/- which has not been reported by filing his return of income. The learned Assessing Officer ('ld. A.O.' for short) reopened the assessee’s case u/s. 147 which according to the ld. AO was after (A.Y. 2012-13) Dharmendra Vadilal Parmar duly recording the reasons for reopening dated 20.03.2019 and notice u/s. 148 dated 29.03.2019 was said to have been duly issued and served upon the assessee. The ld. AO issued notice u/s. 142(1) of the Act seeking for details pertaining to the above transactions. The ld. AO then passed the assessment order dated 09.12.2019 u/s. 144 r.w.s. 147 of the Act, being the best judgement assessment, for the reason that the assessee had failed to furnish details or documentary evidences inspite of several opportunities, thereby determining total income at Rs. 45,84,230/- after making various additions to the total income of the assessee.
6. Aggrieved the assessee was in appeal before the first appellate authority, who vide order dated 16.05.2024, upheld some of the additions made by the ld. AO on the ground that the assessee has failed to furnish supporting documentary evidences to explain the nature of transaction entered into by the assessee and deleted some.
7. The assessee is in appeal before us, challenging the impugned additions.
8. It is observed that the assessee has raised the legal grounds by regular as well as additional grounds challenging the reopening proceeding on the ground that the ld. AO has failed to furnish copy of the reasons recorded for reopening and that the same is in contravention with the decision of the Hon'ble Apex Court in the case of GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC). As the legal grounds challenging the validity of the reassessment, raised by the assessee goes to the root of the reassessment proceeding, we hereby deem it fit to prima facie adjudicate the same before getting into the merits of the case.
(A.Y. 2012-13) Dharmendra Vadilal Parmar 9. The learned Authorised Representative ('ld. AR' for short) for the assessee contended that the assessee was a non-resident with no taxable income in India and had not filed his return of income for the year under consideration. The ld. AR further contended that the reasons recorded for reopening and the notice u/s. 148 was not served upon the assessee. In the assessment order, it was specified that the notices were issued through ITBA system to the designated email address of the assessee and that the ld. AO has not stated anything pertaining to the non-receipt of the said notice in the ITBA portal. The ld. AR further contended that this issue was raised by the assessee before the first appellate authority, where the ld. CIT(A) has dismissed the said grounds without any justification. The ld. AR contended that the mere issuance of notice without service tantamount to the violation of the mandatory conditions prescribed by the Act. The ld. AR relied on the decision of the Hon'ble Punjab and Haryana High Court in the case of CIT vs. Avtar Singh, [2008] 304 ITR 333 (Punjab and Haryana) and the decision of the jurisdictional High Court in the case of Harjeet Surajprakash Girotra vs. Union of India, [2019] 108 taxmann.com 491 (Bombay).
The learned Departmental Representative (‘ld. DR’ for short) for the revenue on the other hand controverted the said fact and stated that the assessment order has categorically stated that the reasons recorded for reopening and notice u/s. 148 were duly issued and served upon the assessee. The ld. DR relied on the order of the lower authorities.
We have heard the rival submissions and perused the materials available on record. It is observed that the assessee has challenged the legal grounds of non-service of the (A.Y. 2012-13) Dharmendra Vadilal Parmar reasons recorded for reopening and the notice u/s. 148 of the Act before us as well as before the ld. CIT(A). Upon considering the submissions of the assessee the Bench had directed the revenue to furnish copy of receipt of the service of notice and had granted several adjournments at the request of the ld. DR for the revenue. Inspite of the several opportunities, the ld. DR could not prove anything on record to show that the reasons recorded for reopening and the notice u/s. 148 of the Act were served upon the assessee. In the absence of the proof of postal receipt on service of the reassessment notices and reasons recorded for reopening an adverse inference is drawn by holding that the statutory notices were not duly served upon the assessee. In the absence of the same, the issue now remains for adjudication is whether the reassessment proceeding is valid in the absence of the service of the notice u/s. 148 of the Act. For this, we would place our reliance on the decision relied upon by the ld. AR in the case of Jurisdictional High Court in the case of Harjeet Surajprakash Girotra (supra), where it was held that notice of reassessment has to be in accordance with the modes specified u/s. 282(1) of the Act and also in accordance with the Rule 127 of the IT Rules, 1962 which prescribes for service of the notice, summons, requisition, order and other communications. The relevant extract of the said provisions is cited herein under for ease of reference: “Section 282(1) [ Service of notice generally. [ Substituted by Act 33 of 2009, Section 77 (w.e.f. 1.10.2009).] (1)The service of a notice or summon or requisition or order or any other communication under this Act (hereafter in this section referred to as "communication") may be made by delivering or transmitting a copy thereof, to the person therein named,-(a)by post or by such courier services as may be approved by the Board; or(b)in such manner as provided under the Code of Civil Procedure, 1908 (5 of 1908) for the purposes of service of summons; or(c)in the form of any electronic record as provided in Chapter IV of the (A.Y. 2012-13) Dharmendra Vadilal Parmar Information Technology Act, 2000 (21 of 2000); or(d)by any other means of transmission of documents as provided by rules made by the Board in this behalf.” 54[Service “Rule 127 of notice, summons, requisition, order and other communication. 127. (1) For the purposes of sub-section (1) of section 282, the addresses (including the address for electronic mail or electronic mail message) to which a notice or summons or requisition or order or any other communication under the Act (hereafter in this rule referred to as "communication") may be delivered or transmitted shall be as per sub-rule (2). (2) The addresses referred to in sub-rule (1) shall be— (a) for communications delivered or transmitted in the manner provided in clause (a) or clause (b) of sub-section (1) of section 282— (i) the address available in the PAN database of the addressee; or (ii) the address available in the income-tax return to which the communication relates; or (iii) the address available in the last income-tax return furnished by the addressee; or (iv) in the case of addressee being a company, address of registered office as available on the website of Ministry of Corporate Affairs: Provided that the communication shall not be delivered or transmitted to the address mentioned in items (i) to (iv) where the addressee furnishes in writing any other address for the purposes of communication to the income- tax authority or any person authorised by such authority issuing the communication:”
From the above, it is evident that Section 282(1) of the Act prescribes that the service of the notice or summons or requisition or order or any other communication may be delivered or transmitted either by post or by such courier service as may be approved by the board or as per the manner specified in the Code of Civil Procedure, 1908 for any service of summons or any form of any electronic record as per Chapter IV of Information Technology Act, 2000 or as per any other mode prescribed by the board. Further, Rule 127 of the IT Rules, 1962 lays down the procedure for service of the (A.Y. 2012-13) Dharmendra Vadilal Parmar notice, summons, etc. as per Section 282(1) of the Act and Rule 127(2) states the address available as per PAN database or the income tax return of the assessee or the last income tax return furnished or the address available with the banking company or cooperative bank has to be considered for service of notice, summons, requisitions or other communications unless the assessee has in writing communicated to the department an address different from the above mentioned addresses. It is also observed that when delivery of notice could not be affected at the address specified in PAN database then the ld. AO will have to consider the address which is available with the banking company.
In the present case in hand, the revenue has failed to establish the fact that the ld. AO has followed the procedure prescribed u/s. 282 of the Act and Rule 127 of the IT Rule, 1962. In the absence of the service of the reassessment notices, the Hon'ble High Courts have held the reopening to be invalid. Similarly, the Hon'ble High Court of Punjab and Haryana in the case of Avtar Singh (supra) has held that when no evidence of the postal receipt was furnished by the revenue, there can be no valid service of notice u/s. 148, which is a condition precedent for the reopening of the assessment and also mere issuance of notice u/s. 148 of the Act cannot be held to be within the limitation period specified u/s. 149 without evidencing the service of the notice u/s. 148 of the Act.
From the above observation, it is observed that on identical facts, the Hon'ble High Courts have held the reassessment to be invalid and bad in the eyes of law. By respectfully following the propositions laid down in the above decisions, we deem it fit to hold that the reassessment proceeding initiated in the assessee’s case is held to be (A.Y. 2012-13) Dharmendra Vadilal Parmar invalid and liable to be quashed in the absence of the service of the reasons recorded for reopening and also the statutory notice u/s. 148 for reassessment.
In the result, the legal grounds raised
by the assessee is hereby allowed.