DARSHANA JATIN SHAH ,MUMBAI vs. ITO WARD 19(1)(1), MUMBAI

The Assessing Officer, however, held that the explanations were not substantiated with satisfactory evidence and proceeded to make following additions:

The assessee preferred appeal before CIT(A). Before the Ld. CIT(A), the assessee raised legal as well as factual grounds. The assessee contended that notices under sections 148A(b), 148 and order under section 148A(d) were not validly served and therefore the reassessment proceedings were vitiated for want of proper service. It was also contended that the notice under section 148 was issued by the Jurisdictional Assessing Officer and not in accordance with section 151A and the faceless reassessment scheme. It was further contended that the sanction under section 151 was mechanical and copy thereof was not provided.

On merits, the assessee reiterated the double counting of cash deposits, incorrect computation of interest income, joint ownership of property and payment in subsequent year and non- grant of TDS credit.

The Ld. CIT(A), after considering the submissions, on the issue of service of notice, observed that notices were uploaded on the portal and alternate modes of service as per CBDT SOP were not followed. It was held that the assessment suffered from legal

On addition under section 69A, it was found that Rs. 49,55,500/- was wrongly double counted. To that extent, addition was deleted and balance addition of Rs. 62,78,000/- was sustained. On addition under section 69, it was held that property was jointly purchased and payments were reflected in subsequent year. Addition of Rs. 33,00,000/- was deleted. On interest income duplication was noticed. Correct interest income was determined at Rs. 1,79,764/-.Relief was granted accordingly. TDS credit of Rs. 40,151/- was directed to be allowed. Thus, the appeal was partly allowed.

Aggrieved by the order of CIT(A), the assessee is in appeal before us raising following grounds of appeal:

The Ld. Commissioner of Income Tax (Appeals) – NFAC erred in confirming the action of the Assessing Officer in re-opening the assessment u/s. 147 of the Income Tax Act, 1961 without adjudicating on various legal grounds and non-compliances by the Ld.AO. That the re-assessment is illegal, void and bad in law.

The learned AR further submitted that the Ld. CIT(A), after examining the record, has categorically recorded a finding (in para 5.5 of his order) that the notices issued under sections Darshana Jatin Shah 148A(b) and 148 were not validly served upon the assessee and that the assessment order suffered from legal infirmity on account of non-compliance with mandatory requirements of service. It was pointed out that the Ld. CIT(A), while adjudicating Ground No. 2, has observed that the notices were merely uploaded on the portal when the assessee was not registered and that the Standard Operating Procedure prescribed by the CBDT for alternate modes of communication was not followed. On that basis, the legal ground regarding invalid service was allowed.

However, the learned AR submitted that despite having held that the reassessment order suffers from legal infirmity, the Ld. CIT(A) proceeded to examine the additions on merits and partly confirmed the addition under section 69A to the extent of Rs. 62,78,000/-. According to the learned AR, once the foundational jurisdictional defect in service of notice was accepted and the reassessment proceedings were held to be legally infirm, the Ld. CIT(A) ought not to have sustained any part of the additions on merits. It was contended that after holding the reassessment to be vitiated in law, there remained no valid assessment order in existence which could be partly confirmed.

The learned AR therefore submitted that the approach adopted by the Ld. CIT(A) is internally inconsistent and contrary to settled principles of law. It was urged that if the jurisdictional defect goes to the root of the matter, the entire reassessment must fall and the additions sustained on merits cannot survive independently. On this premise, the learned AR prayed that the Darshana Jatin Shah reassessment proceedings be quashed in entirety and the addition of Rs. 62,78,000/- sustained by the Ld. CIT(A) be deleted.

Per contra, the learned Departmental Representative supported the orders of the Assessing Officer as well as that of the Ld. CIT(A).

We have carefully considered the rival submissions, perused the material available on record, examined the assessment order as well as the order of the Ld. CIT(A), and deliberated upon the statutory provisions and judicial precedents relied upon before the first appellate authority.

The core issue which arises for adjudication is whether the reassessment proceedings initiated under section 147 pursuant to notice issued under section 148 are sustainable in law, particularly in light of the finding recorded by the Ld. CIT(A) regarding non-service of notice.

The learned AR had strongly relied upon the statutory mandate contained in sections 148A(b) and 148 of the Act and the provisions of section 282 read with Rule 127 of the Income- tax Rules, 1962. It was contended that service of notice is a jurisdictional requirement and that in the absence of valid service, the reassessment proceedings are vitiated. Before the Ld. CIT(A), reliance was placed upon judicial precedents including the decision of the Hon’ble Bombay High Court in Chitra Supekar vs ITO (2023) 149 taxmann.com 26 and the decision of the Darshana Jatin Shah Hon’ble Punjab & Haryana High Court in CIT vs Avtar Singh (2008) 304 ITR 333, wherein it has been held that service of notice under section 148 is a condition precedent for assumption of jurisdiction and that absence of proof of valid service renders the reassessment void.

The Ld. CIT(A), after examining the material on record, recorded specific findings on the issue of service of notice. Para 5.5 of the appellate order reads as under:

The above finding of the Ld. CIT(A) is categorical and unequivocal. The appellate authority has clearly held that there was no valid service of notice and that the assessment order suffers from legal infirmity. Once such a finding is recorded, the legal consequence necessarily follows. Service of notice under section 148 is not a mere procedural requirement; it is a foundational jurisdictional condition. The Hon’ble High Courts in the decisions relied upon before the Ld. CIT(A) have consistently held that where notice under section 148 is not validly served, the Darshana Jatin Shah entire reassessment proceedings are null and void. The defect strikes at the root of jurisdiction and is not curable.

In the present case, the Revenue has not placed any material before us to demonstrate that notice was served through any of the statutorily recognised modes. Uploading of notice on the portal, when the assessee was admittedly not registered and had no access to the portal, cannot by itself be equated with valid service, particularly when no alternate mode was attempted and when even the Assessing Officer recorded that notice was issued but not served.

We also note that the Ld. CIT(A), despite having recorded a finding that the assessment order suffers from legal infirmity on account of non-service of notice, proceeded to adjudicate the additions on merits and partly sustained the addition under section 69A. In our considered view, once the jurisdictional defect is established and the reassessment is held to be legally infirm, the consequential assessment order cannot survive in part. A jurisdictionally defective proceeding cannot be partly validated on merits.

The law is well settled that if the assumption of jurisdiction is invalid, the entire superstructure built upon it collapses. There cannot be a valid assessment in the absence of a valid notice conferring jurisdiction.

Accordingly, in view of the categorical finding recorded by the Ld. CIT(A) in para 5.5 of the order, and applying the Darshana Jatin Shah principles laid down in the judicial precedents relied upon, we hold that the reassessment proceedings initiated under section 147 pursuant to notice under section 148 are void ab initio for want of valid service of notice.

In view of the above conclusion on the foundational jurisdictional issue, the other legal grounds raised