DHANOTTAM VASANT LONKAR,PUNE vs. INCOME-TAX OFFICER, WARD 3(3), , PUNE

IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCHES “A”, PUNE

BEFORE DR.MANISH BORAD, ACCOUNTANT MEMBER
AND SHRI VINAY BHAMORE, JUDICIAL MEMBER

आयकर अपील सं. / ITA No.214/PUN/2022
Assessment Year : 2013-14

Dhanottam Vasant Lonkar,
Flat No.301, Kamala Residency,
CTS No.1050, Shivajinagar,
Model Colony, Pune 411 016
Maharashtra
PAN : AAJPL7246E
Vs.
Income Tax Officer,
Ward-3(3), Pune
Appellant

Respondent

आदेश / ORDER

PER DR. MANISH BORAD, ACCOUNTANT MEMBER :

This appeal filed at the instance of assessee pertaining to the Assessment Year 2013-14 is directed against the order dated
24.03.2022 passed by National Faceless Appeal Centre, Delhi which in turn is arising out of the Assessment order dated
31.03.2016 passed u/s.143(3) of the Act.

“Modified Grounds

1) Lower Authorities/Commissioner of Income Tax (Appeals) has grossly erred in not holding the Assessment Order u/s 143(3) as Bad in Law, void and ab-initio invalid.

Appellant pray to hold so and cancel the Order.

2) Commissioner of Income Tax (Appeals) has erred in holding the Order u/s 143(3) as valid.
Appellant by :
Shri S.N. Puranik
Revenue by :
Shri Ramnath P. Murkunde
Date of hearing
:
29.01.2025
Date of pronouncement
:
08.04.2025
Dhanottam Vasant Lonkar

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Appellant prays to annul the same holding it as Bad in Law, without juri iction for lack of service of notice u/s 143(2) on the Assessee.

3) Commissioner of Income Tax has erred in confirming the addition of Rs.2,20,09,000/-u/s. 68 made by Assessing Officer.

Appellant prays to delete the same as provisions of Sec.68 are not at all applicable to the Facts of the case. "

4) Commissioner of Income Tax (Appeals) has further erred in observing

"The Claim u/s 54F @Rs.2,05,78,694/- Which is investment in residential house, is rejected because Transaction leading to Capital
Gain itself is rejected and is treated as business income."

Appellant prays for declaring claim of Long Term Capital Gain & u/s 54F is valid and allowed, And declare that order is Bad in Law, being without application of mind and violative of powers of CIT(A).

5) Commissioner of Income Tax (Appeals) has erred in not being Just &
Fair, Appellant pray for relief accepting Returned Income.

6) Assessee denies liability to Interest u/s 234A, 234B, 234C etc. Prays to cancel the same.

7) Appellant prays to add, alter, amend, take additional grounds, submit additional evidence and / or during or pending proceeding.

Additional Ground

Income Tax Officer Ward-3(3), Pune has erred is passing Order u/s 143(3) without having Pecuniary Juri iction.

Appellant prays to declare the said Order as bad in law being without
Juri iction.”

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then this appeal will be re-fixed for hearing the remaining legal issues as well grounds raised on merits for which due opportunity shall be granted to both the sides. Both the sides agreed and accordingly the parties proceeded ahead to argue the case on this legal issue of valid service of notice u/s.143(2) of the Act.

“2. The case was selected for scrutiny under CASS. Accordingly, the notice under section 143(2) was issued on 03.09.2014 and served to the assessee. As there was change in incumbent, fresh opportunity was provided to the assessee as provided under section 129 of the Income
Tax Act, 1961 by issuing notices under section 142(1) dated 17-08-
2015. The case was assigned to the undersigned vide Addl. CIT Range-
3, Pune's Order No.PN/Addl.CIT/R-3/Assign Order-1/2015-16/414
dated 05-08-2015. 3. The notice issued on 17-08-2015 was returned back with the remarks that the assessee is not in given address. The address of the assessee is 'Shri Dhanottam Vasant Lonkar, 268-A, Shivajinagar, Pune
411005' on which Notice u/s 143(2) was sent.

xxxxxxxxxxxxxxx xxxxxxxxxxxxxxx
Dhanottam Vasant Lonkar

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On perusal of the PAN data base of the assessee, it is found that the assessee's new address is 301, Kamla Residency, CTS No. 1050, Pune -
411016 having land-line and mobile no. 20-25677702 and 9822325282
respectively. A notice u/s 142 rws 129 issued on 15-02-2016 and served to the assessee on his new address requesting to submit the details as per notice by 24-02-2016. Assessee was also contacted over landline and mobile from time to time to submit the details. A SMS from mobile also sent to the assessee to submit the details.

Assessee vide his letter dated 01-03-2016 has stated that:

.... Further, I reiterate that neither had I received any notice nor any communication as per the provisions of the Income Tax Act,
1961 for the assessment proceedings for A. Y. 2013-14 till date except an SMS received on 27-02-2016. In absence of any notice or communication as required to be given under the Act, how can you expect us to attend the assessment proceedings.

Again, assessee vide his letter dated 05-03-2016 received in this office on 07-03-2016 has submitted that:

'Kindly refer you notice u/s 142 r.ws. 129 of the Income Tax Act,
1961 dated 15-02-2016 send to me through our servant the same notice was again received by RPAD on 04-03-2016. This is the first notice/communication received from the Income Tax department regarding the scrutiny assessment proceedings for A.
Y. 2013-14. Til date neither we received any communication nor any notice regarding the initiation of scrutiny assessment proceedings for A. Y. 2013-14, hence neither I nor my A/R appeared and or submitted any details.

As per the provisions of section 143(2)(ii), no notice under clause
(ii) shall be served on the assessee after the expiry of 6 months from the end of the financial year in which the return is furnished.
In my case, notice u/s 143(2) was not served before the expiry of 6 months from the end of the F. Y. in which the return is furnished and hence the scrutiny proceedings are time-barred.'

In view of the above, the undersigned vide this office letter
No./Pune/Ward-3(3)/DVL/2015-16/ dated 22-03-2016 served by the Inspector of Income Tax of this Ward and received by Mrs.
Lonkar and stated that:

'In your above referred letter, you had talked about the objection w.r.t. the non-service of the notice. It may be noted that once a notice is sent through RPAD and is not received back, it is assumed to be deemed served on the assessee. Reliance in this regard is placed on Ramesh Khosla vs. ITO & Ans. (P & H) 155
556 whereby the Hon'ble Punjab & Haryana High Court has ruled that the notices dispatched by registered post which has not been received back are deemed to be served upon the assessee.
No. 5677/Del/2011. Hence, in your case you can't stated that the service was not done.

Further, it is worthwhile to mention here that Notice u/s 143(2) are generated online and bear the address as provided by the assessee in its PAN database. It is verified that the notice was sent through RPAD on the address i.e. 268A, Shivajinagar, Pune available in your PAN database and there is no reason for the same being unserved upon you. It is also seen that the notice which was sent by RPAD on 03-09-2014 has not been received back. Proof of dispatch through RPAD in the form of acknowledgement by Department of Post (dated 10-09-2016) is hereby enclosed for your reference.

In respect of the above, you are once again being provided an opportunity by the undersigned to submit the documents as per
Notice u/s 142 dated 15-02-2016. If your submission either personally or by your Authorized Representative will not be received in the office of the undersigned on or before 28-03-2016, it will be assumed that you have nothing to say and the assessment will be completed u/s 144 of the Income Tax Act,
1961.'

On 28-03-2016, a letter dated 28-03-2016 received in this office on 28-03-2016 from the assessee submitted that:

"The assessment proceedings are being conducted unlawfully without following the procedures laid down in the Income Tax Act and Rules. Hence, the proceedings are null and void ab initio. I need 2 days time to submit the information as asked by you'.”

“2.APPELLANT ADDRESS:
Dhanottam Vasant Lonkar

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301 Kamala Residency, CTS NO 1050 MODEL COLONY PUNE 411016. The Address mentioned on notice us 143(2) dated 03/09/2014 and notice under section 142 r.w.s 129 dated 17/08/2015 is as follow.

268-A, Shivaji Nagar Pune Maharashtra 411005

which is not/never the address of the appellant. The notice was sent on wrong address. Notices were sent on wrong address hence are not valid notices. Assessment done by issue of invalid notices are null and void.
Appellant by submission dated 29/02/2016,01/03/2016,7/03/2016,
28/03/2016 before assessing officer objected to the invalid notices.
Appellant craves that notices send into wrong addresses and assessment based on that is null and void.

Following case laws up held that procedure laid down in section 143(2) must be followed strictly, otherwise the assessment order passed, by issuing notices on wrong address or notices not issued within time or without juri iction or issue in improper way, are null and void ab initio, is not only procedural irregularity and not curable.

Supreme Court of India

Asstt.Commr. Of Income Tax & Other vs M/S Hotel Blue Moon on 2
February, 2010 321 ITR 362(SC)

The Hon'ble Supreme Court in the case of AC Vs Hotel Blue Moon (supra) has held that failure on the part of the assessing authority to issue notice U/s 143(2) of the Act cannot be a mere procedural irregularity and the same is not curable. It is not a mere formality but it given the juri iction to the A.O. to complete the assessment U/s 143(3) of the Act, therefore, non-issuance of notice U/s 143(2) of the Act vitiates the assessment proceedings. In view of decision of Hon'ble Supreme Court in the case of ACIT Vs Hotel Blue Moon (supra) as well as other decisions in this regard cited above, the assessment proceedings completed without issuance of notice U/s 143(2) of the act and void ab initio and liable to be quashed.
Equivalent citations: (2005) 197 CTR Del 312, 2006 281 ITR 1 Delhi
August, 2005 Equivalent citations: 2006 287 ITR 360 G

M/s. Cosmat Traders Pvt. Ltd Vs ITO (ITAT Kolkata)

ITA No. 457/Kol/2020 Date: 21/04/2021, Assessment Year: 2012-13
All ITAT Kolkata
Dhanottam Vasant Lonkar

It was further submitted that issuance of notice under Section 143(2) of the Act being prerequisite, in the absence of such notice, the entire proceedings would be invalid.

Income Tax Appellate Tribunal-Mumbai
2203/1/2019

the fundamental requirement for initiation of proceedings under section 147 of the Act stands unsatisfied/unfulfilled. This being a juri ictional error, the consequence which follows would result in invalidation of the assessment order. Therefore, we hold that the assessment order passed under section 143(3) r.w.s. 147 of the Act without valid service of notice under section 143(2) of the Act is void ab initio.

“4. Reply of CIT(Appeals)

The 1st ground of appeal is that the notice was send to the wrong address. The assessing officer has given a strong rebuttal to this argument. Once a notice is sent through RPAD and is not received back, it is assumed to be deemed served on the assessee. Reliance in this regard is placed on Ramesh Khosla vs ITO & Anr (P & H) 155 556 where by Punjab & Haryana HC has ruled that the notices despatched by registered post-which has not been received back are deemed to be served upon the assessee. Further in the case of Sonal Industries (P) Ltd
Vs Delhi of Income Tax, the Delhi ITAT has taken the same view. ITAT
Delhi ITA No.5677/Del/2011. Hence in the assesee's case the service of demand is done properly.

Further, it is worthwhile to mention that notice u/s 143(2) are generated online and bear the address as provided by the assessee in its PAN database. It is verified that notice was sent through RPAD on the address ie 268A, Shivaji Nagar, PUNE available in your PAN database and there is no reason for the same being unserved upon you. It is also seen that the notice which was sent by RPAD on 3/9/2014 has not been received back. Proof of dispatch through RPAD in the Form of acknowledgement by Dept of Post (dtd 1/9/2016) was send by assessing officer to the taxpayer as evidence for the same.
Dhanottam Vasant Lonkar

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The assessing officer send a notice under sec 143(2) on 3/9/2014, since the case was elected for scrutiny under CASS and served to the assessee. Since there was a change in the incumbent, to provide fresh opportunity notice was issued u/s 142(1) dt 17/8/2015. The case which was under the juri iction of ITO, ward 3(3), Pune was later assigned to Addl CIT, Range -3, Pune. The address used for issuing notice u/s 143(2) and 142(1) are one and the same. When notice was served u/s 143(2) it is not known why the notice was not served under sec 142(1). The address on which notice was sent u/s 143(2) and under sec 142(1) are the same and is given below:

Address as per PAN database
Disputed address

Shri Dhanottam Vasant Lonkar,
Shri Dhanottam Vasant Lonkar,
268-A 301, Kamala Residency
Shivaji Nagar,

CTS No.1050
Pune-411005

Pune-411016

The disputed address is entered as the new address in PAN database having landline no 20-25677702 and 9822325282 respectively. During appellate proceedings the copy of the notices filed were perused and the following picture emerges.

Table 1

Notice u/s.
Date of notice
Address used
143(2)
3/9/2014
Shivaji Nagar address
142(1)
17/8/2015
Shivaji Nagar address
142(1)
15/2/2016
Kamala residency, model colony address
143(3) order
31/3/2016
Kamala residency, Model colony address
Letter to CIT(Appeals)
5/12/2017
Kamala residency, Model colony address
Letter to CIT(Appeals)
1/2/2018
Kamala residency, Model colony address

The taxpayer has also raised the issue that 143(2) was not served within the time limit prescribed under section 143(2)(ii). This section was amended w.e.f 1/6/2016. Prior to that Finance Act, 2008 w.e.f
1/4/2008 read as under –

[(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall, (i) where he has reason to believe that any claim of loss,
Dhanottam Vasant Lonkar

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exemption, deduction, allowance or relief made in the return is inadmissible, serve on the assessee a notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him, on a date to be specified therein to produce, or cause to be produced, any evidence or particulars specified therein or on which the assessee may rely, in support of such claim.

[Provided that no notice under this clause shall be served on the assessee on or after the 1st day of June, 2003;] (ii) notwithstanding anything contained in clause (i), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return.

[Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.]]

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the notice being not served validly u/s.143(2) of the Act summarized by the assessee in the following manner :

“Issue:
Notice u/s 143(2) not received by Assessee. As issued on different
Address.

i. Assessing Officer states, it is issued on address as per PAN DATA and RPAD envelop not received Back, unserved.

ii. PAN DATA SHOWS THAT ADDRESS as Office Address. However, PAN
DATA CARD Specifically marked Address for Correspondence as Residential Address.

iii. Affidavit stating all facts submitted before ITAT with cross references of Proof. 268A Shivajinagar had never been his address, it was 1286A
Shivajinagar.

iv. But except this one Notice, there is no Notice, Order, Return showing said Address-From 2003-04 to 2018-19 (even till date).

(Sample Copies enclosed Paper Book.)

V. 142(1) Notice dated 15/02/2016 on same wrong address, returned back with Postman's remark. 'Not on given address'.

vi. Non receipt of Notice strongly objected during Assessment proceeding which is noted by Assessing Officer in the Order.

vii. Assessing Officer has no Acknowledgment as proof of Service.

viii. Point raised before Assessing Officer & CIT(A), CIT(A) upheld service since Registered envelope notice is not returned back.

ix. Assessing Officer to have not brought any Positive Proof of service of Notice or Status.

He should have written to Post office for Proof.

x. Assessing Officer says Presumed service since said article not received back

Onus of Service Proof is on Assessing Officer - Para. 20 of Supreme
Court Decision V.N. Bharatv/s D.D.A.

xi. Assessing Officer says Notice Issued u/s 143(2) is "generated online".

The Notice u/s 143(2) for Assessment Year 2014-15 dated 22/08/2015
is also generated online. However, addressed to my correct address
301, Kamala Residency Model Colony Pune 411016. Dhanottam Vasant Lonkar

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xii. Summary Statement of Assessing Officer's Observations and Assessee's Submission before Bench.

xiii. Additional Evidence 268A Shivaji Nagar, such CTS/Property no does not exist.

xiv. Case referred to and relied by CIT(A) –

•
In these cases Notices were Issued by Correct address
(283)

•
Postman's remark addressee refused to accept (284)
(Appellant's Case - Notice not on correct address - Not served)
9. On the other hand, ld. Departmental Representative vehemently argued supporting the order of ld.CIT(A) and also relied on the following decisions and also the judgment of Hon’ble
(2019) 110 taxmann.com 332 (SC) where the Hon’ble Court observed that since no application was made by the assessee to change address in PAN database and the old address was continued in the PAN database and further the assessee having failed to produce alleged communication intimating the AO about the new address, the Hon’ble Court held in favour of the Revenue holding that the AO was justified in issuing notice at address available as per PAN database more particularly when return has been filed in e-module scheme :

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of Hon’ble Supreme Court in the case of PCIT Vs. I. Ven Interactive
Limited (supra) which reads as follows :

“In this case, After change in Address, Company filed Return giving new address.

Supreme Court held in favour of Revenue for the reasons that Assessee
Company' did not communicate the change that alleged communication dated 06/12/2005 is not available. In the absence of Communication of change in Address, Service of Notice on PAN DATA BASE address, is valid by Law.

Supreme Court reversed the High Court Order for Non Communication of Change in Address.

Facts of Mr. D.V.Lonkar's Case

In Appellant's Case, it is not the Case of change in Address. All along from A.Y.2006-07, Assesse has been receiving Notices, Orders on the Address 301, Kamala Residency, Model Colony, Pune 411016 which is address for communication marked on PAN DATA BASE and before that on Address 1286A, Shivaji Nagar, Pune-411005. Assesse was not even aware of existence of Address 268A,
Shivajinagar on PAN DATA BASE.

On receipt of PAN DATA BASE Copy, It is found that PAN DATA BASE clearly mentions address for Correspondence 301, Kamala Residency,
Model Colony, Pune.

In fact, such Property No. 268A Shivajinagar, Pune does not exist at all.
It appears to be mistake on the part of Departmental Data Entry
Operator is entering said address instead of 1286A Shivajinagar, Pune.

In view of these facts, Supreme Court decision is not applicable to the facts of this case.”
Dhanottam Vasant Lonkar

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11. We have heard the rival contentions and perused the record placed before us. The only issue for our consideration at this stage is that whether a valid notice u/s.143(2) of the Act has been served upon the assessee or not. It has been consistently held by Hon’ble Courts that if a valid notice u/s.143(2) is not served upon the assessee then such assessment proceedings are vitiated and deserves to be quashed as void ab-initio. The year under appeal is A.Y. 2013-14 and the return of income was filed by the assessee on 27.09.2013. Now for carrying out the assessment proceedings in case of the assessee who has furnished the return of income, there is statutory requirement of serving a notice u/s.143(2) of the Act within six months from the end of the financial year in which the return is furnished. For necessary guidance, section 143(2) of the Act is reproduced below :

“(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing
Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return.

Provided that no notice under this sub-section shall be served on the assessee after the expiry of three months from the end of the financial year in which the return is furnished.”

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u/s.143(2) needs to be served on the assessee within six months from the end of financial year in which return is filed. So mere issuing of notice will not serve the purpose but notice needs to be served upon the assessee.

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assessee has opted the residence address as communication address. In other words, the communication address requested by the assessee has been 301, CTS No.1050, Kamala Residency,
Shivaji Nagar, Model Colony, Pune Maharashtra, India-411016”
and even the return of income has been filed at this address.

“Service of notice generally.
282. (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 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.
Dhanottam Vasant Lonkar

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(2) The Board may make rules providing for the addresses (including the address for electronic mail or electronic mail message) to which the communication referred to in sub-section (1) may be delivered or transmitted to the person therein named.
Explanation.—For the purposes of this section, the expressions "electronic mail" and "electronic mail message" shall have the meanings as assigned to them in Explanation to section 66A of the Information Technology Act,
2000 (21 of 2000).”

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states that when notice u/s.142(1) of the Act was issued on 17.08.2015 at “268A, Shivaji Nagar, Pune 411005” on which notice u/s.143(2) of the Act was served, the same was returned back with the remarks that “the assessee is not in given address”.
Thereafter, ld. AO observed that the PAN database indicates that the assessee’s new address is “301, Kamala Residency, CTS
No.1050, Pune 411016” and then the notice u/s.142(1) was issued and served upon the assessee. Here. Ld. AO has referred the address “301, Kamala Residency, CTS No.1050, Pune 411016”
as new address. We however find that this observation of ld. AO is totally incorrect because this was always the address of the assessee as per the PAN database and also the address mentioned in income-tax return and there is no change in that address. Ld. AO has himself observed that “268A, Shivaji Nagar,
Pune 411005” is wrong address, therefore, when the notice u/s.142(1) was issued on 17.08.2015 it was returned unserved, the same would have been the fate of the notice u/s.143(2) of the act dated 03.09.2014 issued u/s.143(2) of the Act at wrong address “268A, Shivaji Nagar, Pune 411005”.

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easily inferred that the first notice issued on 03.09.2014 was actually issued on wrong address and was never served upon the assessee. Ld. AO had access to the PAN database and the address of communication and even the address of “301, Kamala
Residency, CTS No.1050, Pune 411016” was mentioned in the income-tax return, but then no efforts was made to serve the notice. Ld. AO has even not resorted to any other modes available for serving the notice u/s.282(1)(b)/(c)/(d).

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such proceedings on the basis of no service before the expiry of the period, i.e., 30th November, 2007 in this case the Assessment
Order would not be saved by Section 292BB of the Act. Hon’ble
High Court before arriving at a decision favourable to the assessee referred to the provisions of section 282 of the Act and section 27 of the General Clauses Act to understand/explain the expressions "serve" or "given" or "sent".

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23. Hon’ble Apex Court in the case of ACIT Vs. M/s. Hotel Blue
Moon 321 ITR 362 (SC) has held that failure on the part of the AO to issue notice u/s.143(2) cannot be a mere procedural irregularity and the same is not curable. Hon’ble Apex Court further held that it is not a mere formality but it gives the juri iction to the AO to complete the assessment u/s.143(3) of the Act, therefore, non-issuance of notice u/s.143(2) of the Act vitiates the assessment proceedings and in absence of valid issuance of notice u/s.143(2) of the Act the assessment proceedings are held to be void ab-initio and liable to be quashed.

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being bad, illegal and void ab-initio and the impugned additions stands deleted. Finding of ld.CIT(A) is set aside and legal ground raised by the assessee challenging the validity of assessment proceedings in absence of valid notice u/s.143(2) of the Act not served upon the assessee within the statutory time limit is hereby allowed.

Order pronounced on this 08th day of April, 2025. (VINAY BHAMORE)
ACCOUNTANT MEMBER

पुणे / Pune;
दनांक / Dated : 08th April, 2025. Satish

आदेश क ितिलिप अ ेिषत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. यथ / The Respondent.
3. The Pr. CIT concerned.
4. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, “A” बच,
पुणे / DR, ITAT, “A” Bench, Pune.

//// Senior Private Secretary

आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.