Notice served on CA of an assessee who was not specifically authorised to accept the same can’t be said to be served validly

It is mandatory to issue notice of hearing under section 143(2) of the Act within the stipulated period of 12 months from the end of the month in which the assessee has filed the return of income. In this case, we find that the return of income was filed on 30.10.2001, and therefore the notice under Section 143(2) for hearing of the case could have been served on or before 31.10.2002.

We find that it is an admitted fact that the notice of hearing under section 143(2) of the Act dated 29. 10.,2002 fixing the date of hearing on 14.11.2002 was served on 31.10.2002 on Shri Devang Shah, Chartered Accountant, who has audited the accounts of the assessee- firm. The CIT(A), in the second round, has sent the matter back to the AO for offering his comments on the service of notice under Section 143(2), and the AO has submitted his report vide letter dated 9.3.2006, whose extract has been reproduced by the CIT(A) in the impugned order. We find that the AO has not claimed that Shri Devang Shah, CA was authorized to receive any notice on behalf of the assessee- firm or was the representative of the assessee or that any power of attorney was executed by the assessee firm in favor of the said Chartered Accountant. In these facts of the case, it could not be said that the notice of hearing dated 29.10.2002 issued under Section 143(2) fixing the date of hearing on 14.11.2002 was validly served within the statutory period of 12 months from the end of the month in which the assessee has filed its return of income. The subsequent notice issued by the AO under section 143(2) was after the expiry of the statutory period of 12 months from the end of month in which the return of income was filed by the assessee. The assessee- firm was closed on 15.5.2003 i.e. after the end of the statutory period of valid service of notice in this case. The non-service of notice under Section 143(2) within the statutory period goes to the root of the matter, and since the jurisdiction was not validly assumed by the AO, we have no alternative but to cancel the assessment framed in this case. In Shubham Enterprises Vs. ITO, 3 SOT 250 (Allahabad Bench), the Tribunal has held that the service of valid notice under Section 143(2) is mandatory and non-compliance of the said provision within the period of 12 months from the end of the month in which the return is furnished, make the assessment null and void. Accordingly, the grounds of the appeal of the assessee are allowed.

ITAT AHMEDABAD, “B” BENCH

BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND
TEJ RAM MEENA, ACCOUNTANT MEMBER)

ITA No. 1419/Ahd/2006

[Asst. Year : 2001-2002]

M/s. Devansh Enterprise Vs. ITO

Date of Pronouncement : 01-02-2013

O R D E R

PER G.C. GUPTA, VICE-PRESIDENT: This appeal by the assessee for the assessment year 2001-2002 is directed against the order of the CIT(A)-VI, Ahmedabad dated 28.03.2006.

2. The grounds of the appeal of the assessee are as under:

“1. The ld. CIT(A) has erred in confirming the finding oft he AO that the service of the first notice was a valid service in the yes of law and thereby rejecting the contention of the appellant.

2. The CIT(A) considering the facts of the case ought to have held that the order passed u/s.144 of the Act by the AO is without proper service of notice of hearing and without giving a reasonable opportunity of hearing to the appellant and hence the same is illegal and bad in law.”

3. The learned counsel for the assessee submitted that no valid service of the notice of hearing was made by the department, within the statutory time of 12 months from the end of the month, in which the return of income was filed by the assessee. He submitted that the whole proceeding of the assessment in this case under Section 144 of the Act are invalid due to non-service of notice of hearing within the time allowed under the provisions of the Act. He submitted that the assessee is in second round of the appeal before the Tribunal, and in the first round of the appeal before the Tribunal, the Tribunal has restored the issue to the file of the CIT(A) with certain directions. He submitted that the CIT(A) while deciding the matter afresh in accordance with the directions of the Tribunal, has sent back the matter to the AO for offering his comment on the service of notice under Section 143(2) of the Act. The AO, in turn, has submitted that the notice under Section 143(2) dated 29.10.2002 fixing the case for 14.11.2002 was served on 31.10.2002 on Shri Devang Shah, Chartered Accountant, who has audited the accounts of the assessee ­firm. He submitted that the said CA was never authorized to receive the said notice or to represent before the department on behalf of the assessee. He referred to the original assessment order dated 19.2.2004 wherein at page no.2 of the assessment order, the AO has reproduced the chart showing that the notice dated 29.10.2002 under Section 143(2) was served on 31.10.2002 and second notice was sent through speed post on 15.12.2003.

4. The learned DR has opposed the submissions of the learned counsel for the assessee. He submitted that the assessee has challenged the validity of the service of notice under Section 143(2) for the first time before the Tribunal. He submitted that the assessee ­firm was closed and the assessee has not intimated the closure of the firm to the department. He relied on the decision of the Trilok Singh Dhillon v. Commissioner of Income-tax, 332 ITR 185. He relied on the order of the AO and the CIT(A).

5. The learned counsel for the assessee, in his rejoinder, submitted that the assessee firm was closed on 15.5.2003 i.e. much after the service of the first notice of hearing on 31.10.2002. He submitted that the decision of Hon’ble Chhatisgarh High Court relied upon by the learned DR is distinguishable, since in the case before the Hon’ble High Court, the assessee has filed its return in response to the notice issued by the department, whereas in the case of the present assessee the return of income was filed by the assessee already. He relied on the decision of the ITAT, Cochin Bench in the case of Vamadeven Bhanu Vs. DCIT, 8 SOT 147 (Cochin) wherein held that the service of notice on the CA is not a valid service, when he is not authorized to accept the notice on behalf of the assessee.

6. We have considered rival submissions and have perused the orders of the AO and the CIT(A) and also order of the Tribunal in the first round of litigation in the case of the assessee and copies of various documents filed in the compilation by the assessee. We find that it is mandatory to issue notice of hearing under section 143(2) of the Act within the stipulated period of 12 months from the end of the month in which the assessee has filed the return of income. In this case, we find that the return of income was filed on 30.10.2001, and therefore the notice under Section 143(2) for hearing of the case could have been served on or before 31.10.2002. We find that it is an admitted fact that the notice of hearing under section 143(2) of the Act dated 29. 10.,2002 fixing the date of hearing on 14.11.2002 was served on 31.10.2002 on Shri Devang Shah, Chartered Accountant, who has audited the accounts of the assessee-firm. The CIT(A), in the second round, has sent the matter back to the AO for offering his comments on the service of notice under Section 143(2), and the AO has submitted his report vide letter dated 9.3.2006, whose extract has been reproduced by the CIT(A) in the impugned order. We find that the AO has not claimed that Shri Devang Shah, CA was authorised to receive any notice on behalf of the assessee- firm or was the representative of the assessee or that any power of attorney was executed by the assessee firm in favor of the said Chartered Accountant. In these facts of the case, it could not be said that the notice of hearing dated 29.10.2002 issued under Section 143(2) fixing the date of hearing on 14.11.2002 was validly served within the statutory period of 12 months from the end of the month in which the assessee has filed its return of income. The subsequent notice issued by the AO under section 143(2) was after the expiry of the statutory period of 12 months from the end of month in which the return of income was filed by the assessee. The assessee- firm was closed on 15.5.2003 i.e. after the end of the statutory period of valid service of notice in this case. The non-service of notice under Section 143(2) within the statutory period goes to the root of the matter, and since the jurisdiction was not validly assumed by the AO, we have no alternative but to cancel the assessment framed in this case. In Shubham Enterprises Vs. ITO, 3 SOT 250 (Allahabad Bench), the Tribunal has held that the service of valid notice under Section 143(2) is mandatory and non-compliance of the said provision within the period of 12 months from the end of the month in which the return is furnished, make the assessment null and void. Accordingly, the grounds of the appeal of the assessee are allowed.