DCIT,, NEW DELHI vs. M/S DINESH PANDEY,, NEW DELHI

This appeal is filed by the AO against the order of the ld CIT(A)-27, New Delhi dated 30.03.2017 for the Assessment Year 2006-07. The ld AO has challenged the deletion of the addition on account of deemed dividend u/s 2(22)(e) of the Income Tax Act, 1961. The assessment u/s 153A was completed at income of Rs. 1,55,200/-. Subsequently, notice u/s 148 was issued on 22.03.2013 reopening the case of the assessee. It was noted that the assessee objected reopening by letter dated 20.02.2014. The assessee also filed the return along with that letter. The objection of the assessee were disposed off on 03.03.2014. Thus, the ld AO made an addition of Rs. 4059830/- on account of deemed dividend on substantive basis with respect to different companies where he is holding substantial interest. The assessee was holding substantial interest in Samag Construction Ltd, Samag Developers and Saga Developers Ltd. Samag Construction has given the payment to land owners on behalf of the other companies. The ld AO therefore, noted that sum of Rs. 2,04,01,195/- is taxable as deemed dividend u/s 2(22)(e) of the Act in the hands of Samag Construction Ltd on protective basis as the assessee was having substantial interest in all these companies. However, as free and accumulated reserve available with the Page | 1 company was only Rs. 4059830/- the addition was made to that extent. Thus, Rs. 4059830/- was added to the income of the assessee u/s 2(22)(e) of the Act on substantive basis. Another addition of Rs. 1,63,41,365/- out of the advances of Rs. 2,04,01,195/- which was deleted by the ld CIT(A) in the hands of Samag Construction Ltd. he made an addition in the hands of the assessee on protective basis u/s 2(23)(e) of the Act.

Both these parties were in challenge before the ld CIT(A) on the ground that no valid service of notice u/s 148 of the Act is made on assessee. The ld CIT(A) found that on perusal of the assessment record that notice dated 22.03.2013 issued u/s 147 of the Act has been sent to incorrect address instead of correct address of the assessee. He therefore, quashed the reopening of the assessment order as null and void. Thus, the ld AO is in appeal.

The ld DR was not present at the time of hearing but filed an adjournment petition stating that he needs more time to prepare the case. Even on behalf of the assessee none appeared. Therefore, the issue is decided on the merits of the case.

We have carefully considered the order of lower authorities.

The ld CIT(A) has held as under:- “5.2 I have gone through the facts of the case, written submission of the appellant and considered them. In the instant case the appellant had contested that he had not received any notice issued u/s 148 of the act. On the hand the AO has maintained that he had issued the notice as per the ti limits specified u/s 149 of the act. I have perused the reassessment record the appellant for the year under consideration. From such perusal I have foun a notice dated 22.03.2013 issued u/s 147 of the Act through speed post. Such 148 notice is addressed to C- 2/101, Sector- 26, Noida, U.P. Appellant has submitted in this appeal proceedings as well as in the reassessment proceedings before the AO that C-2/101, Sector- 26, Noida, U.P. is incorrect address concerning the appellant. In fact as submitted by the appellant, C- 2/101, Sector- 36, Noida, U.P is the correct residential address of the appellant. Further the address for income tax purposes is B-67, Sarita Vihar, New Delhi- 110076. Another notice u/s 142(1) dated 01.10.2013 has been handed over to the authorized representative of the appellant. The appellant has vide letter dated 20.01.2014 has objected to the notice issued u/s 142(1) of the act. The letter filed by the appellant on 20.01.2014 is reproduced as under: “Your Honour has served on my authorized representative Shri Sanjeev Kumar Thakur, Chartered Accountant by hand, a notice dated 1st Page | 2 October 2013 under sub-section (1) of Section 142 of the Income-tax Act, 1961. A copy of the said notice is enclosed herewith. In this notice, your Honour has directed me to furnish a true and correct Return for the captioned Assessment Year. To the best of my knowledge, the assessment for Assessment Year 2006-2007 has already been completed and there are no proceedings pending. I humbly request your Honour to kindly clarify the compliance to be done by me in pursuant to this notice. This may please be clarified to my authorized representatives, Shri Sanjeev Kumar Thakur, Chartered Accountant and Shri S. Srikanth, Chartered Accountant who will be appearing before your Honour in respect of the above referred notice. ” On 20.01.2014 the AO gave a copy of the 148 notice along with the reasons to believe that income has escaped assessment to the authorized representatives. In response to this the appellant filed a letter which is reproduced as under: On 20/01/14, your honour had furnished copies of following documents to my Authorised Representatives, Shri Sanjeev Kumar Thakur & Shri S. Srikanth, Chartered Accountants:- i.) Notice dated 22.03.2013 issued u/ s 148 of the Act ii.) Reasons for reopening the assessment In this regards I wish to submit that the returns of income filed u/s 139 (1) &153A of the Act may be taken as the return of income filed pursuant to the issue of notice dated 22.03.2013 issued u/s 148 of the Act. In both these returns of income the same sum has been admitted as “income.” I also wish to submit that this return of income which is stated to be filed, is filed UNDER PROTEST. Since the notice issued u/s 148 of the Act has never been served on me till 20.01.2014 on which date I have only been given a photocopy of the section 148 notice. On a second occasion also, the appellant has contested the service of notice u/s 148 and filed reply along with the affidavit of the appellant regarding non service of notice. Such reply is placed at pages 15-18 of the paper book. In such reply the appellant has requested the AO to inspect the reassessment folder/records with regard to the evidences concerning the issue/service of notice u/s 148 of the act. From the above communications by the appellant, it is clear that he had contested the non service of notice well before complying with the reassessment proceedings. In fact through the letter placed at pages 15-18 of the paper book, the appellant had requested the Assessing Officer to inspect the documents relating to service of notice. However the Assessing Officer instead of providing opportunity to the appellant to inspect the documents relating to the service notice took the objection of the appellant in a casual manner and disposed such objection (in the order disposing objections to reasons to believe) by observing as under: Page | 3 “The notice was duly issued and sent by Speed Post. Further, the provisions of section 149 puts an embargo for not issuing the notice after the due date.. In this case notice was issued within the due time with prior approval of the competent authority therefore, the objections raised by the assessee in this regard are not acceptable” In the reassessment order at page 2 the AO further helds as under: “The assessee claim that no notice has been issued is not accepted. The notice u/s 148 was duly issued & dispatched through speed post on 22.03.2013, it was duly served since it never returned back. However, on the request of assessee, copy of notice dated 22.03.2013 issued u/s 148 of the Act and reasons for reopening the assessment were given. ” In my considered view the Assessing Officer has not discharged the burden to prove that notice u/s 148 was duly served on the appellant. The presumption of service of notice cannot be assumed merely on the basis of issue/dispatch of notice. Therefore dispatch of notice by speed post cannot be a guarantee of the service, unless and until the service is substantiated by bringing cogent evidence on record. Moreover the address specified in the notice issued u/s 148 is not the correct address of the appellant. The presumption of the AO that the notice was duly served since it never returned back could not be accepted, as there could never be a service of notice to a wrong address and also when the appellant has taken a categorical stand that he had not received the notice. As per the provisions of section 148 of the Act the notice must be SERVED upon the appellant and it is not the requirement of the section that the notice should be ISSUED. It means the onus to prove the service of notice is on the Assessing Officer and not upon the appellant. In the instant case considering the facts of the case, I find that the Assessing Officer failed to discharge the onus of proving the service of notice u/s 148 of the Act on the appellant. Although from the perusal of the reassessment record a speed post number is present in the record indicating the issuance of notice but there was no evidence on record to show that either the same was received back by the Assessing Officer or the same was served upon the appellant. Thus, in this case, the notice u/s 148 of the Act was not proved to have been served upon the appellant. Therefore following the case laws relied upon by the appellant, particularly the case of CIT v. Rajesh Kumar Sharma (Delhi High Court) wherein the facts are similar to the case of the appellant, I hold that there was no service of notice u/s 148 of the Act, the reassessment proceedings initiated thereafter were null and void as they assume jurisdiction without following the procedures laid down in the Act. Accordingly, I quash the reassessment order passed by the Assessing Officer in this case as null and void. Since, I have allowed the legal ground of the appellant, I do not deem it necessary to decide the other grounds raised by the appellant as adjudication of the same will be for academic purposes only.”