Notice u/s 143(2) served by affixture at wrong address without independent witness of locality quashed

Notice u/s 143(2) served by affixture at wrong address without independent witness of the locality made it bad in the eyes of law. ITAT allowed appeal of the assessee

ABCAUS Case Law Citation:
ABCAUS 3176 (2019) (10) ITAT

Important case law relied upon by the parties:
ACIT Vs. Hotel Blue Moon (2010) 321 ITR 362 (SC)
Coconut Palm Beach Garden Vs. CIT (2014) 224 Taxman 65 (Mag.)(Ker)
Romi Vs. CIT (2014) 363 ITR 311 (Ker)
CIT Vs. Salarpur Cold Storage Pvt. Ltd.
CIT Vs. Pradeep Kumar Gupta (2014) 221
CIT Vs. Cebon India Ltd. (2010) 229 CTR (P&H)
CIT Vs. Sunil Kumar Chhabra
CIT Vs. AVI-OIL India (P) Ltd. (2010) 323 ITR (P&H)
CIT Vs. Mukesh Kumar Agrawal (2012) 25 taxman.com
CIT Vs. CPOR Capital Services ltd. 330 ITR 43 (Del)
CIT Vs. Silver Streak Trading Pvt. Ltd. 326 ITR 418 (Del.).

Notice u/s 143(2) served by affixture at wrong address 

The main issue of assessee in this case is against the action of CIT(A) in in upholding  service of notice u/s 143(2) of the Income-tax Act, 1961 (the Act) which according to AO was sent by speed post  which according to assessee was to the incorrect address.

The said notice had returned by Postal authority with remarks “Not Known” and subsequently alleged to have been served by affixation which according to assessee was also in wrong address.

The assessee was an individual and was engaged in the business of jewellery. In the instant case a survey was conducted on the premises of the assessee in the physical absence of the assessee in person.

As claimed by the Assessing Officer (AO), during the course of survey, no books of account were produced. No stock registers, purchase register, sales register was also found. The manager of the assessee after consulting the assessee admitted undisclosed jewellery of 1785 grams.

Further, the manager stated that he intends to pay advance tax of Rs. 15 lakhs in March quarter.  

With a view to scrutinize the assessment of the assessee for the assessment year under consideration, the AO duly issued notice u/s 143(2) of the Act and despatched by Speed Post and when even after lapse of ten days, acknowledgment for services of notices were not returned, the AO deputed his Inspector and notice was served through affixation.

The AO further sent questionnaire to the assessee issuing notices u/s 142(1) of the Act. However, the assessee objected to the scrutiny proceedings on the ground that no notice u/s 143(2) was served upon him and, therefore, the assessee refused to comply with the questionnaire.

Subsequently, also the AO gave the assessee opportunity to submit the details. However, the assessee kept on repeating the ground that notice u/s 143(2) of the Act was not served upon him within the limitation prescribed by the statute and, therefore, did not submit the details asked for by the AO.

Subsequently, the AO completed the assessment u/s 144 of the Act and made additions on account of undisclosed profit and undisclosed investment.

Aggrieved, the assessee preferred an appeal before the CIT(A), who confirmed the action of AO. Aggrieved, the assessee approached the Tribunal raising the ground of non-service of section 143(2) notice on him, which according to assessee is mandatory for framing of assessment under section 143(3) of the Act.

The Tribunal observed that as per the AO he had issued the notice u/s 143(2) and later despatched the same via Speed Post addressing the assessee’s address in Block ‘C’ which according to assessee is wrong and it should have been Block-B.

Further, it was revealed by the ITO that when he found that even after ten days of despatch of notice by Speed Post that no acknowledgment of service of notice by Speed Post to assessee was received back from postal authorities as proof of service of ibid notice, he deputed an Inspector to serve the section 143(2) notice; and the Inspector filed a report that the notice by mode of affixture was made at the address wherein it is stated to be at Block “C” had been carried out.

Thus, the wrong address was mentioned on Speed Post as well as the Inspector affixture report. The case of the assessee was that even if that was assumed as correct, then also it would be evident that the service of notice was done/served at the wrong address and thus AO/ITO had not served the mandatory statutory notice u/s. 143(2) within the time prescribed by the statute, which already expired, so the scrutiny assessment was bad in law.

Further it was pointed out by the assessee that the department could not say that it was ignorant about the correct address of assessee when the very same department had conducted survey u/s 133A of the Act, in assessee’s premises pursuant to which the scrutiny assessment was ordered against the assessee.

The Tribunal observed that in the Inspector’s report the address mentioned was addressed Block-‘C’ and so, the action of Inspector to have affixed notice could not come to the rescue of the ITO, since this was the same address of the assessee which was written on the cover of the Speed Post which in turn was returned back un-served by the postal authorities later.

The Tribunal opined that in the light of the facts it was clear that no notice u/s 143(2) of the Act could be served upon the assessee by Speed Post or by affixation, since the address was wrongly mentioned as Block ‘C’. Moreover, the department had conducted the survey at the assessee’s premises, so, it does not lie in the mouth of the AO/ITO to say that they were not aware of the correct address. Be that at it may be, even if the address given in Speed Post is undisputedly was that of Block “C”, however when Inspector was deputed to serve the notice, he could have served it on the correct address, since physical survey was conducted at the assessee’s premises.

The Tribunal further observed that the assessee despite asking for the process server/Inspector’s affidavit, the Department failed to swear an affidavit of service of the notice even by mode of affixture at the address of assessee at the correct address at Block “B”. Thus there was force in the contention that the Inspector who purportedly affixed the notice had not taken the aid of an independent witness residing in the locality for identification of the assessee’s address, but had erred in carrying out the mode of service by affixation in the presence of departmental officer which action itself made the service of notice by affixture itself bad in law.

Following the decision of the Hon’ble Supreme Court, the Tribunal opined that the assessment made was bad in law since notice u/s. 143(2) of the Act could not be served upon the assessee. Since the ITO failed to serve the section 143(2) notice to the assessee within the stipulated time, the scrutiny assessment had been framed by AO without jurisdiction and sec. 292BB of the Act could not come to the rescue of AO since as per proviso to section 292BB, if the assessee had raised during the assessment proceedings itself the objection of non-service of notice then the shield provided to the department u/s. 292BB could not come to the rescue of the department.

The Tribunal held that assessment order was null in the eyes of law and quashed the assessment order framed by the AO.

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