Service of the notice u/s 143(2) on the Assessee is a sine qua non or condition precedent for the validity of the Assessment Proceeding

 

Recently, Mumbai ITAT in the case of Seema A Talesara Vs ITO (2024-TIOL-484-ITAT-MUM) was faced with an issue as to whether absence of service of notice u/s 143(2) through specified means, cannot be cured by invoking provisions of section 292BB?

Let us have a short overview of the case

In this case, Assessee had declared total income of R.6,43,160/- by filing its return, which was processed under section 143(1) of the Act. Subsequently, the case of the Assessee was selected for scrutiny through CASS and accordingly, statutory notices were issued to the Assessee, in response to which the Assessee submitted the relevant details and documents. The Assessing Officer considering the same observed that Assessee has shown long term capital gain income of Rs.97,15,890/- and the same has been claimed as exempt. The said long term capital gain income is earned on account of sale of shares of M/s Kadwani Securities Ltd and Lifeline Drugs and Pharma Ltd. The Assessing Officer further on the basis of report of the Kolkata Investigation Wing, treated the said shares as penny stock as ingenuine and manipulated and ultimately, treated the sale price of the said share amounting to Rs.1,01,69,601/- as un-explained cash credit and added the same in the income of the Assessee.

On appeal, the ITAT held that,

Whether absence of service of notice u/s 143(2) through specified means, cannot be cured by invoking provisions of section 292BB – YES: ITAT

it is trite to say that notice under section 143(2) of the Act is a statutory notice and service of the same upon the Assessee is required to be done before finalization of the assessment by any of modes. When the service of notice in any of said modes, can not be served through ordinary process, owing to the reasons as specified in Order V Rule 17 of the Civil Procedure Code. Hence by considering the mandate of Order V Rule 17 of CPC, after receipt of order/direction for substituted serve through affixture, the service of notice/summon through affixture can only be done in certain circumstances, by affixing the copy of the notice on the outer door or on a conspicuous part of the house in which the Defendant/Assessee ordinarily resides or carries on business or personally works for gain, and thereafter the serving officer shall return the original summon to the Court/Officer, by which it was issued, with a report endorsed thereon or annexed thereto stating that he has so affixed the copy, the circumstances under which he did so, and the name and address of the person (if any) by whom the house was identified and ‘whose presence the copy was affixed;

in simple terms, by serving notices under the Act, a report is to be drawn up by the Serving Officer/Inspector, on the facts and circumstances of the service by affixture, specifying the date and time of service and the name of the identifier, if any who identified the premises and witnessesed the affixing of notice and in the absence of identifier, mention the efforts made to find out any identifier. The Serving Officer/Inspector can prove the service by solemnly affirming the facts and particulars of service as reported and by producing the documents such as photos etc.. The report is to be filed as an endorsement to the original notice after being docketed in the order sheet. The report should be verified by an affidavit. In the absence of such an affidavit, it is imperative that the Assessing Officer must examine the Inspector on oath. Admittedly, in the instant case, the Revenue department failed to produce any material on record that at the initial stage the notice u/s 143(2) of the Act was ever tried to be served through ordinary course/mode, whereas the Assessee by filing its duly sworn affidavit has claimed that the Assessee along with her family members are residing for the past 26 years at the address where the affixture of notice has allegedly been affixed/served;

the Revenue department has only claimed that the provisions of section 292BB of the Act has taken care of the case of the Assessee, as section 292BB of the Act clearly covers any infirmities / non service of the notice, if there was requisite participation on the part of the Assessee. Admittedly, the Revenue department failed to produce / prove the sending of the notice through ordinary post or through RPAD, etc. and also failed to bring on record any order passed for substituted service by affixing the notice and even otherwise the report of the Inspector on the basis of which the Revenue department is claiming that notice has been served through affixture, in fact, shrouded with many doubts. Thus, the service through affixture remained un-proved/un-substantiated, as no efforts were made to serve the notice u/s 143(2) of the Act through ordinary process and there is no specific order for substituted service by the AO and even otherwise the affixture as appears in report of Inspector, is also not as per the procedure established by law. Hence, in the instant case, infact no service of notice 143(2) of the Act has been made and/or attributed. The service of the prescribed notice such u/s 143(2) of the Act on the Assessee is a sine qua non or condition precedent for the validity of the assessment proceedings. If no notice is issued or if the notice issued is shown to be invalid, then proceedings initiated and carried out by the Assessing officer without a notice or in pursuance of invalid notice, would be void-ab-intio and shall vitiate the entire proceedings and invalidates the Assessment Order as well, hence the Assessment order being passed sans serving notice u/s 143(2) of the Act, is liable to be quashed.

The copy of the order is as under:

Seema_A_Talesara_31_jan_2024