ITO 12 (1)(1), MUMBAI vs. M/S ARUNS HOUSING REMEDIES LTD., MUMBAI

On the facts and circumstances of the case, the Hon’ble ITAT is requested to entertain this appeal though the tax effect is below the monetary limit prescribed in the CBDTs Circular no. 17/2019 dated 08.08.2019 read with circular no. 3/2018 dated 11.07.2018 as amended on 20.08.2018 as the case falls in the exception received from external sources in the nature of law enforcement agencies, namely, Sales Tax Authorities.”

Briefly the facts are, the assessee is a resident company engaged in the business of installation and erection of pre-fabricated houses and other structures.

For the assessment year under dispute, assessee filed its return of income on 13.09.2009 declaring nil income. Subsequently, on the based on information received from Sales Tax Department through DGIT (Inv.), Mumbai that purchases worth Rs. 25,19,878/-, being in the nature of accommodation entries, are non genuine, the Assessing Officer (AO) reopened the assessment under section 147 of the Act. After calling for details/supporting evidences from the assessee to prove the genuineness of the disputed purchases, the AO ultimately held the purchases to be non-genuine and added back to the income of the assessee. Against the assessment order so passed assessee preferred appeal before learned Commissioner (Appeals). Before the First Appellate Authority, the assessee inter alia challenged the validity of the Assessment Year: 2009-10 assessment order on the ground that the AO had not served the notice under section 143(2) of the Act within the period of limitation. After considering the submissions of the assessee in the context of facts and material on record, learned Commissioner (Appeals) being convinced that no notice under section 143(2) of the Act was served on the assessee within the prescribed period, held the assessment order passed as invalid. While doing so, learned Commissioner (Appeals) held that the case of revenue will not be protected under section 292BB of the Act as the assessee had raised objection during the assessment proceedings. Accordingly, he annulled the assessment order.

The learned Departmental Representative submitted, in course of appellate proceedings, the AO had filed a report stating that notice under section 143(2) and 142(1) of the Act issued in the name of the assessee were handed over to the postal authority on 30.04.2014, within the period of limitation. Thus, he submitted, once the notices were handed over to the postal authorities for service on the assessee within the period of limitation, it would amount to proper service of notice in terms of business post management between the Income Tax Department and Department of Post. In support of such contention, he relied upon the decision of the Hon'ble Madras High Court in case of M/s Abad Offshore Ltd. vs. DCIT WP No. 29643 of 2015 judgment dated 08.11.2016.

I have considered submissions of learned Departmental Representative and perused the material on record. A reading of the observations of learned Commissioner (Appeals) in paragraph 4.4.1 and 4.4.2 would reveal that in reply to assessee’s challenge regarding validity of the assessment order due to non service of notice under section 143(2) of the Act, the AO had furnished letter dated 23.02.2017 stating that notice under section 143(2) and 142(1) of the Act dated 28.04.2014 were handed over to the postal authority on 30.04.2014 for onward service on the assessee. Thus, it is the contention of the revenue that once the notice issued under section143(2) of the Act was Assessment Year: 2009-10 handed over to the postal authority, it would amount to valid service on the assessee as per the business post management. However, the following observations of Commissioner (Appeals) will have crucial bearing in deciding the issue:

As could be seen from the aforesaid extracts from the impugned order of learned Commissioner (Appeals), while dealing with specific contention of the assessee that no notice under section 143(2) was ever received by it, learned Commissioner (Appeals) had called upon the AO to furnish a report as to whether the notice issued under section 143(2) was actually served upon the assessee. However, inspite of repeated reminder and request by learned Commissioner (Appeals), no response from the AO was forthcoming. Thus, in absence of any reply from the AO, learned Commissioner (Appeals) was convinced that the notice under section 143(2), alleged to have been issued, was never served on the assessee within the period of limitation. Thus, he quashed the assessment order. Thus, keeping in view the provisions of section 143(3) read with its proviso, I am covinced that no notice under section 143(2) of the Act was served on the assessee as mandated by the statute. That being Assessment Year: 2009-10 the case, assessment order was rightly held as invalid. I also agree with the view of learned Commissioner (Appeals) that the assessment order would not be protected under the exceptions provided under section 292BB of the Act as the assessee had objected to the proceedings.

As regards, the decision relied upon by the learned Departmental Representative as noted above, in my considered opinion, due to factual distinction the aforesaid decision would not apply. As could be seen from facts of the case relied upon by the learned Departmental Representative, the notice issued under section 143(2) of the Act was actually served upon the assessee, though, the assessee claimed that it was not served within the period of limitation. However, in the facts of the present case, the assessee from the very beginning has stated that no notice under section 143(2) of the Act was ever served on it. In fact, in course of proceedings before the First Appellate Authority, the assessee had furnished an affidavit reiterating the aforesaid claim.

In view of the aforesaid, I uphold the decision of learned Commissioner (Appeals) by dismissing the grounds raised.

In the result, appeal is dismissed.