R.SURYA NARAYNA,VISAKHAPATNAM vs. THE ITO, WARD - 5(2), VISAKHAPATNAM

आदेश / O R D E R

PER D.S. SUNDER SINGH, Accountant Member:

This appeal filed by the assessee is directed against order of the

Commissioner of Income Tax (Appeals) {CIT(A)}, Visakhapatnam dated

27.9.2013 for the assessment year 2009-10.

assessee has filed a petition for condonation of delay assigning health

ITA No.3/Vizag/2014 R. Suryanarayana, VSKP reasons and typhoid fever. After hearing both the parties, the delay is

condoned and the appeal is admitted.

Rs.1,90,920/- and the agricultural income of Rs.2,60,000/- on 5.3.2010.

The case was selected for scrutiny and the assessment was completed

on total income of Rs.1,06,68,785/-. In the assessment proceedings,

the assessing officer made the addition of Rs.1,04,29,785/- relating to

the sale of property. During the previous year relevant to the

assessment year, the assessee has sold the property consisting of land

and buildings in plot No.162/B, 161 & 161/A situated at APIIC

Pedagantyada in survey No.156 for a consideration of Rs.1,22,77,850/-

and claimed the cost of construction at Rs.97,88,000/- along with the

RCC buildings in two stories having built up area of 1300 sft.in ground

floor 1420 sft., in first floor and staff quarters in 8 Nos of RCC buildings

each of 660 sft with single floor, Engineering stores shed… 30x40 ft. AC

sheet shed and bloom cutting unit. The above structures are evidenced

by the balance sheet and the valuation report of the approved valuer.

The assessee claimed the cost of construction at Rs.97 lakhs as

deduction. During the assessment proceedings, the assessing officer

found that as per the sale deeds, the assessee has transferred the plots

with compound walls and sheds with AC sheets, but not the buildings,

ITA No.3/Vizag/2014 R. Suryanarayana, VSKP hence the A.O. did not allow the cost of construction claimed for the

buildings and only allowed the indexed cost of acuisition in respect of

plots in 161, 162/A, 162/B and the cost of sheds and compound walls

costing around Rs.8,62,500/- and brought the difference amount of

Rs.1,04,24,785/- as long term capital gains.

before the CIT(A) and raised the grounds with regard to non service of

notice u/s 143(2) of the Income Tax Act (hereinafter called as ‘the Act’)

and also raised grounds with regard to disallowance of cost of

construction of the building sold by the assessee. The ld. CIT(A)

dismissed the appeal of the assessee on the ground of non service of

notice and confirmed the addition made by the A.O. With regard to the

sale consideration the CIT(A) enhanced the sale consideration by

Rs.25,67,980/- applying the provisions of section 50C of the Act.

Against the sale consideration admitted by the assessee amounting to

Rs.1,22,77,850/-, the CIT(A) directed the A.O. to adopt the sale

consideration as determined by the stamp valuation authorities at

Rs.1,48,45,850/-.

before this Tribunal and raised the following grounds of appeal:

ITA No.3/Vizag/2014 R. Suryanarayana, VSKP

“1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts.

specific adjudication.

of the Act. During the appeal hearing, the ld. A.R. of the assessee

argued that the assessing officer has not served the notice u/s 143(2) of

the Act to the assessee. The assessee also filed an affidavit stating as

under:

“I, R.Suryanarayana S/o Adiranarayana, aged 59 years, resident of 2-228, Srinagar, Gajuwaka, Visakhapatnam-26 do hereby solemnly affirm and state as under:

ITA No.3/Vizag/2014 R. Suryanarayana, VSKP 1. My assessment for A.Y.2009-10 was completed u/s 143(3) of the Income Tax, 1961 vide order dt.30-12-2011.

assessment order invalid and the consequent assessment made u/s

143(3) of the Act required to be quashed.

generated the notice u/s 143(2) of the Act and served the notice in the

given address mentioned in the return of income on 13.9.2010. The 5

ITA No.3/Vizag/2014 R. Suryanarayana, VSKP copy of the acknowledgement also placed in the paper book of the

assesse in page No.30 wherein the date of hearing was mentioned as

17/09/2010 as against the 13/09/2010 and served on Mr. Raghu the

brother of the assessee. The Ld. DR argued that merely because of the

incorrect date mentioned in the acknowledgement and the notice was

served on Mr. Raghu, the brother of the assessee, the same cannot be

treated as invalid service. Since the notice dated 20.8.2010 was served

on the assessee’s brother Mr. Raghu, the same should be treated as

valid service and the assessment required to be upheld.

on record and gone through the orders of the authorities below. The

A.O. has issued the notice u/s 143(2) of the Act on 20.8.2010 and

dispatched the same on 26.8.2010 fixing the date of hearing on

13.9.2010. The assessee has placed the copy of acknowledgement

having served the notice on Mr. Raghu, the brother of the assessee on

13.9.2010. As per the acknowledgement, the date of hearing was fixed

on 17.9.2010 and there was a mismatch with regard to the date of

hearing in the notice issued u/s 143(2) and the acknowledgement dated

17.9.2010. Further, the notice was not served on the assessee but it

was stated to be served on Mr. Raghu, the brother of the assessee. We

have called for the assessment records and verified and it is found that

ITA No.3/Vizag/2014 R. Suryanarayana, VSKP the assessing officer has issued the notice dated 20.8.2010 fixing the

date of hearing on 13.9.2010 and the date of hearing was not altered as

mentioned in the tear of acknowledgement slip to 17.9.2010. There was

no change in the order sheet noting also with regard to the date of

hearing. Therefore, we are unable to accept the contention of the Ld.

D.R. that the notice mentioned in the tear of acknowledgement slip and

the office copy of the notice available in the office records is one and the

same due to mismatch of the date of hearing. Further, the revenue also

did not produce any evidence to show that the notice was served on the

person who is residing in the address given in the notice i.e. 2-228,

APIIC Layout, Srinagar, Gajuwaka, Visakhapatnam. The revenue also

did not place any confirmation from the brother of the assessee Mr.

Raghu that the notice dated 20.8.2010 was in fact served to the

assessee. During the appeal hearing, the ld. D.R. stated that the A.O.

has initiated proceedings u/s 271(1)(b) of the Act for assessee’s failure

to comply with the notice issued u/s 143(2) of the Act on 20.8.2010. On

verification of the penalty notice issued u/s 271(1)(b) of the Act, the

A.O. has not mentioned the notice dated 20.8.2010 and no action was

taken for the assessee’s failure to comply with the notice dated

20.8.2010. The above facts i.e. inconsistency of the date of hearing in

the notice and not changing the date of hearing in order sheet noting

ITA No.3/Vizag/2014 R. Suryanarayana, VSKP and the service of notice to Mr. Raghu establish that the notice dated

20.8.2010 was not served to the assessee. The revenue has not

established the fact that the notice dated 20.8.2010 was reached to the

assessee and served on the correct address. Therefore, we are unable

to accept the contention of the revenue that the notice was served to

the assessee. As per the provisions of Income Tax Act, non service of

notice u/s 143(2) of the Act render the assessment made invalid and

required to be quashed. This view is upheld by the Hon’ble Punjab &

Haryana High Court in the case of CIT Vs. Cebon India Limited reported

in 347 ITR 0583. Similar view was expressed by the Hon’ble Gujarat

high Court in the case of DCIT Vs. Mahi Valley Hotels & Resorts reported

in 287 ITR 0360. Since the revenue has failed to establish that the

notice was served on the assessee, we hold that the assessee’s case is

squarely covered by the case laws relied upon by the assessee.

Accordingly, the assessment made u/s 143(3) of the Act is hereby

quashed.

Act, we consider it is not necessary to adjudicate the remaining grounds

of appeal.

ITA No.3/Vizag/2014 R. Suryanarayana, VSKP 12. In the result, the appeal filed by the assessee is allowed. The above order was pronounced in the open court on 10th Jan’18.

Sd/- Sd/- (वी. दुगा�राव) ( ड.एस. सु�दर "संह) (V. DURGA RAO) (D.S. SUNDER SINGH) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 10.01.2018 VG/SPS आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-