Acknowledgement of Notice served u/s 143(2) not available, Assessment is Void

By | November 25, 2016
(Last Updated On: November 25, 2016)

Held

The AO had failed to produce any evidence regarding the issuance of notice or service of said notice. In our opinion, notice of hearing should not only the issue properly but it has to be served upon the assessee and the prove of service has to be placed on record. In the case under consideration, the AO has not produced any evidence as required by the FAA therefore, we are of the opinion, that assessment order passed by the AO was bad in law.

IN THE ITAT GUWAHATI BENCH

Assistant Commissioner of Income Tax

v.

Meghalaya Fusions Ltd.

H.L. KARWA, PRESIDENT
AND RAJENDRA, ACCOUNTANT MEMBER

IT APPEAL NO. 129 (GAU.) OF 2012
[ASSESSMENT YEAR 2007-08]

JANUARY  23, 2015

Nirmal Singh Dugar, AR for the Appellant. A. Sangma, DR for the Respondent.

ORDER

Rajendra, Accountant Member – Challenging the order dated 14-09-2012 of the Commissioner of Income Tax (Appeals) [CIT(A)], Shillong, the Assessing Officer [AO] has raised the following grounds of appeal:

‘”1. For that the ld. CIT(Appeals) erred in holding that there was no valid service of notice u/s 143(2) of the Act and, moreover, it ought to have been held that the said notice was duly issued with opportunities afforded to participate in the proceedings, and to this extent, the decision rendered in the case of V.R.A. Cotton Mills (P.) v. UOI (P&H) (CWP No. 18193 of 2011), was not noticed.

2. For that the ld. CIT (Appeals) erred in allowing the claim u/s 80IC of the Act ignoring the fact that the audit report and other supporting documents were not filed despite opportunities being given and, thus, it remained unverified.

3. For that the ld. CIT (Appeals) erred in allowing the claim of depreciation ignoring the fact that the assessee failed to furnish details in support thereof despite opportunities being given, and thus, it remained unverified.”

In respect of the aforementioned grounds, it is respectfully prayed that the order of the Ld. CIT(Appeals) be reversed and the order of assessment passed be restored.’

2. The assessee-company engaged in the business of food processing filed its return of income on 30-11-2006 declaring nil income. The AO finally estimate the assessment u/s 144 of the Income Tax Act, 1961 (‘the Act’) on 29-12-2008 determining the income of the assessee at Rs. 37,92,870/-.

3. As per the AO, notice u/s. 143(2) of the Act was duly served on the assessee but there was no comply, that case was re-fixed for hearing on 14-2-2008 and 15-12-2008, that there was no compliance from the assessee and AO found that assessee had claimed deduction of Rs. 25,76,475/- u/s 80IC of the Act. As per the AO, a notice issued u/s 142(1) of the Act, dated 25-11-2008. He asked the assessee furnished details of business activities, details of sundry creditors etc., He further observed that assessee had not submitted audit report in Form No. 10CCB for claiming deduction u/s 80IC of the Act. Aggrieved by the order of AO assessee preferred an appeal before First Appellate Authority (FAA). Before him, it was submitted that notice u/s. 143(2) of the Act was not served on the assessee, that it was not given any opportunity to explain the matter, as that, it should be allowed to file audit report Form No. 10CCB, Form No. 29B for computation of taxable income Form No. 3CA, Form No. 3CD with the audited balance-sheet and the profit and loss account as per the provisions of Rule 46A(l)(d) of the Act, that the AO had wrongly disallowed the claim made u/s. 10IC of the Act for Rs. 25,76,475/- that the return of income was filed electronically, that the AO had sent intimation u/s. 143(1) of the Act on 27-7-2007 vide SI. No. 5992 dated 24-09-2008, that the AO had not sent notice u/s. 143(2) of the Act because intimation itself was sent on or after 24-09-2008, that AO had not mentioned the date of issuance of notice u/s. 132 of the Act in the assessment order, that the date of service of notice has also been mentioned, that assessment made u/s. 144 of the Act was null and void.

4. Before the FAA, new ground of appeal challenging the validity of the assessment were also raised and it was reiterated that assessment was completed without serving notice u/s 143(2) of the Act. The assessee filed notice dated 14-09-2014 declaring that notice u/s 143(2) of the Act was not received by it that it had not received in the notice u/s 142(1) or hearing notices as mentioned by the AO. The FAA called for remand report from the AO, while its remand report dated 09-07-2010 AO stated that notice u/s. 143(2) of the Act were generated in ITD system on 28-09-2007 and was issued to the assessee on 01-10- 2007 by registered post, that verification of the record it revealed that acknowledgment slip was not placed on record, that notice u/s. 143(2) was sent by registered post and had not been received back within 30 days from the issuance of notice. The FAA directed the AO to send postal receipt of the registered letter which already sent to the assessee along with the issue register but the AO could not produce the said registered letter sent to the assessee as well as issued of register for verification. After considering the submission of the assessee and remand report of the AO, he held that examination of assessment records revealed that no registered letter was sent to the assessee that could prove the centralize of notice issued u/s 132 of the Act. Referring to the provisions of Sec.282 of the Act and reliance upon the order of CIT v. Hotline International (P.) Ltd. [2008] 296 ITR 333 (Delhi) and Nulon India Ltd. v. ITO [2010] 323 ITR 681 (Delhi). He held that fact of survey of notice was to be proved by the AO, that no record of Postal receipt was produced by the AO, that no acknowledgement on the record, that the AO had not done service by affixion, that there had been no valid service of the notice claimed to have been issued u/s 143(2) of the Act to the assessee, that same was neither tender to the assessee or his agent. Finally, he held that there had been no proper service of notice on the assessee, therefore assessment proceedings resulting in the order dated 31-12-2008 was bad in law.

5. Before us ld. Departmental Representative (DR) stated that notice was generated by system, that it was dispatched to the assessee. The ld. Authorized Representative (AR) of the assessee contended that the notice issued u/s 143(2) of the Act by the AO was never served upon the assessee, that assessment completed without issuance the said notice was void ab initio, that AO had not produced any evidence on service of notice.

6. We have heard rival submission and perused the materials before us. We find that the FAA had specifically directed the AO to place on record the acknowledgement of service of notice allegedly service of notice that was issued during the course of assessment proceedings. The FAA has given a categorical finding of fact that the AO had failed to produce any evidence regarding the issuance of notice or service of said notice. In our opinion, notice of hearing should not only the issue properly but it has to be served upon the assessee and the prove of service has to be placed on record. In the case under consideration, the AO has not produced any evidence as required by the FAA therefore, we are of the opinion, that assessment order passed by the AO was bad in law. We do not find any legal infirmity in the order passed by the FAA. We find that case laws relied upon by the FAA support the stand taken by us. Therefore, confirming the order of FAA. We decide the effective ground of appeal against the AO.

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