Proper service of an income tax notice

The ITAT Mumbai in the case of Shri Sanjay Badani vs. DCIT (ITAT Mumbai), SA No.216/Mum/2014 (Arising out of ITA No.5221/Mum/2014) has explained the procedure to serve Proper Notice by post and affixtures.

Facts of the case:

The assessee challenged legality of the assessment concluded under section 143(3) of the Income Tax Act on the ground the fact that there was no service of notice under section 143(2) of the Act. It was argued by the learned counsel on behalf of the assessee that in reply to the notice under section 148 dated 30.8.2011, the assessee has filed his return on 10.10.2011. The time limit to serve a notice under section 143(2) as provided by the statute was till 30.9.2012 that is six months from end of the financial year in which the return was filed. According to the learned counsel no notice under section 143(2) was served upon the assessee before the assessment was completed.
For the reason non-compliance of statutory notice under section 143(2) of the Act, the assessee filed objection challenging the jurisdiction of the Revenue by a letter dated 10.10.2012 filed at the office of the department on 2.11.2012 according to the provisions of Section 292BB of the Act.
As per the contentions of the learned counsel of the Revenue, the objection of the assessee has not been disposed by the Assessing Officer and he proceeded with the assessment. The basic argument of learned counsel to substantiate the case of the assessee for grant of stay was non-service of notice under section 143(2), which challenges validity of the assessment so framed. The Learned counsel argued that notice was neither served by postal authorities nor through affixtures.

Provisions of the statute:

The Income Tax Act allows assessment in three ways;
(i) Assessment as per returned income;
(ii) Assessment as per returned income subject to adjustments under section 143(l) of the Act with prior intimation; and
(iii) Scrutiny assessment as per section 143(3).
The issuance of notice under section 143(2) during assessment goes with the third way which is scrutiny assessment. Section 143(2) of the Act provides that where a return is filed by an assessee, if the Assessing Officer feels that the assessee has understated his income or has under-paid tax, he shall serve a notice upon the assessee to attend his office or to produce any evidence in support of the return.
Proviso under section 143(2) states that no notice shall be served after the expiry of six months from the end of the relevant financial year in which the return is filed.

The judgment:

it was held that provisions of Section 292BB was introduced on and from 1.4.2008 relevant to the Assessment Year 2008-09 according to which, where an assessee has appeared in any proceeding relating to an assessment, it shall be deemed that any notice which is required to be served upon him, has been duly served upon him in accordance with the provisions of law, and he shall not be allowed to raise any objection in any proceeding that such notice was not at all served upon him or was not served upon him in time or was not served in a proper manner.
In the instant case, it was observed that the assessee raised his objection before the Assessing Officer which has been noted by the Assessing Officer in his order that the said assessee has objected on the ground of non-service of notice under section 143(2) during the assessment proceedings.
Thus the assessee shall not be disentitled from applying his right to object to the service of notice under section 143(2) of the Act. It was found that notice issued to the assessee returned unserved by postal authorities and thereafter the same was affixed. For service by fixture the necessary report was filed.
Order V, Rule 17 to 20 of the Code of Civil Procedure provides that a notice should be served either by post through affixture. It is also provided in the income tax laws that service should be done after making all required efforts to establish its genuineness.
The reasons for service through affixture was not been recorded by the Assessing Officer. There was also no mention of name and address of the person who identified the assessee’s residence. Therefore the procedure under order V rule 17, 19 or 20 was not followed.
In view of the above, it was held that there was no valid service of notice under section 143(2) through affixation. In the instant case, the department failed to establish that notice under section 143(2) was served within the time limit, as such, the assessment made based on such invalid notice could not be treated to be valid and the assessment order was declared as null and void and liable to be rejected. The assessee’s appeal was allowed.