ITO, GURGAON vs. SMT SUNITA CHAUHAN,, GURGAON

This appeal filed by the Revenue is directed against the order passed by the CIT(A) on 25.4.2012 in relation to the assessment year 2007-08.

We have heard the ld. DR and perused the relevant material on record. There is no appearance from the side of the assessee despite several notices issued starting from 21.2.2013. The last notice issued on 18.3.2016 for today has not been returned by the Postal Authorities and, as such, the same is presumed to have been served on the assessee. Since there is no appearance from the side of the assessee, we are proceeding to dispose of the appeal ex parte qua the assessee.

First two grounds are against the annulling of assessment made u/s 144 of the Income-tax Act, 1961 (hereinafter also called `the Act’).

Briefly stated, the facts of the case are that the assessee filed her return declaring total income of Rs.3,35,284/- The case was selected for scrutiny by issuing notice u/s 143(2) on 29.9.2009 fixing the date of hearing on 14.10.2008. None attended on behalf of the assessee nor any written reply was filed. Another notice was issued on 20.11.2008 which again remained uncomplied with. There is a mention on page 2 of the assessment order about various opportunities granted by the AO, only some of which were availed by the assessee, but, without furnishing any details called for by the AO. Left with no alternative, the AO completed assessment u/s 144 by adding a sum of Rs.48,54,323/- on account of sundry creditors appearing in the books of the assessee; Rs.8,20,000/- on account of unsecured loans; Rs.1,27,908/- on account of disallowance out of certain expenses; and without allowing set off of loss of Rs.1,50,000/- for want of necessary documentary evidence. This led to the making of assessment at a total income of Rs.62.87 lac. The assessee challenged the assessment order before the ld. CIT(A). A remand report was called for from the AO. Considering the material filed by the assessee, remand report and the rejoinder filed by the assessee, the ld. CIT(A) annulled the assessment on the ground that notice issued u/s 142(1) dated 29.9.2009 (sic. 29.5.2009) was issued by the AO at a wrong address. Thereafter, he also dealt with the additions on merits and gave substantial reliefs.

The first issue raised by the Revenue is against the annulment of assessment. It is observed that the ld. CIT(A) dealt with issuance of notice u/s 143(2) as well as notice u/s 142(1). While dealing with notice u/s 143(2), he held on page 21 of his order that once the assessee had participated in the assessment, it could not be held that notice u/s 143(2) 3 was improperly served. However, on page 18 of his order, he annulled the assessment by observing that notice u/s 142(1) was issued at the wrong address. We are unable to reconcile the inconsistent stands taken by the ld.CIT(A) on notice u/s 143(2) on the one hand and notice u/s 142(1) on the other. Once the position is admitted that the notice was issued and the assessee did participate in the proceedings, then, it was not open to the ld. CIT(A) to annul the assessment by holding that the service of notice u/s 142(1) was not proper. Our view is fortified by the judgment of the Hon’ble jurisdictional High Court in CIT vs. Three Dee Exim (P) Ltd. (2011) 55 DTR 147 (Del), in which it has been held that when the assessee did not raise any objection regarding non-service of notice and appeared before the AO, then, it can’t be argued that the service of notice even at the old address of the assessee was improper. Similar view has been taken by the Hon’ble jurisdictional High Court in CIT vs. Vision Inc. (2012) 208 Taxmann 153 (Del), holding that when notice u/s 143(2) was served upon the assessee’s premises pursuant to which the assessee participated in assessment proceedings, it could not be said that there was no valid service of notice. 4

Section 292BB inserted by the Finance Act, 2008 w.e.f. 1.4.2008 provides that: “Where an assessee has appeared in any proceeding or co- operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was— (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner”. The Hon’ble Punjab & Haryana High Court in Om Sons International vs. CIT (2011) 244 CTR 110 (P&H), has held that the provisions of section 292BB are applicable to the proceedings pending on 1st April, 2008. This shows that section 292BB is applicable prospectively qua the pendency of proceedings on 1.4.2008 and not the A.Y. 2008-09. Since, in the instant case, the notice u/s 142(1) was admittedly issued on 29.9.2009, which is after 1.4.2008 and the assessee did attend the proceedings, albeit partly, we hold that the view taken by the ld. CIT(A) in annulling the assessment on the ground that notice was not properly served, cannot be 5 countenanced. It is not a case, in which the assessee raised any objection before the AO about the improper service of notice so as to attract proviso to section 292BB, which provides that : `nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment.’ These grounds of the Revenue are, therefore, allowed.

Ground No.3 is against the deletion of addition of Rs.48,54,323/-.

The next ground is against the deletion of additions of Rs.2,70,000/- and Rs.70,000/- out of unsecured loans. The AO made addition of Rs.8.20 lac on the ground that the assessee did not furnish any confirmations. The ld. CIT(A) deleted the addition of Rs.2.70 lac representing the brought forward balances and another amount of Rs.70,000/- was deleted which was loan received by the assessee from her husband. The remaining amount of Rs.4.80 lac was sustained by the ld. CIT(A).

Having regard to the facts of the instant case, we find that the ld. CIT(A) was fully justified in deleting the addition of Rs.2.70 lac which represented brought forward balances. Section 68 does not contemplate making of addition in respect of brought forward balances. Similarly, as regards the loan of Rs.70,000/- received by the assessee from her husband, Shri D.S. Chauhan, it can be found that same AO passed order u/s 143(3) and the ld.CIT(A) decided the appeal in the case of Shri D.S. Chauhan. It is only thereafter and on the strength of such proceedings that the ld. CIT(A) chose to delete the addition. In the above backdrop of facts, we are of the considered opinion that this addition of Rs.70,000/- was also rightly deleted. There is no cross appeal from the side of the assessee. As such, the balance addition of Rs.4.80 lac sustained by the ld. CIT(A) remains as such.

The last ground is against the deletion of disallowance of Rs.1,50,000/-. The AO did not allow set off of Rs.1,50,000/- for want of verification/documentary evidence. The ld. CIT(A) deleted the addition by considering the additional evidence filed by the assessee in this regard.

Having regard to the facts of the instant case, we find that the only issue reason assigned by the AO in not allowing loss suffered by the assessee under the head ‘Income from house property’ was that the assessee did not furnish any details about the payment of interest, which resulted into loss under the head ‘Income from house property’ before the AO. Such evidence was furnished by the assessee before the ld. CIT(A), the details of which have been incorporated on page 25 of the impugned order. Despite the fact that the remand report was called for from the AO, there is nothing adverse in such remand report justifying the reversal of the view taken by the ld. CIT(A) on this issue. We, therefore, approve the impugned order on this score.

In the result, the appeal is partly allowed.