Case Law Details
PCIT Vs Madhu Gupta (Delhi High Court)
Introduction: A recent judgment by the Delhi High Court in the case of PCIT vs. Madhu Gupta has underscored a crucial aspect of reassessment proceedings under the Income Tax Act. The court’s ruling, dated 21.08.2022, emphasizes the pivotal role of a validly served notice under Section 148 for initiating reassessment. This article delves into the details of the case, shedding light on the court’s findings and the implications for taxpayers.
Background: The case pertains to the assessment year 2007-08, and the primary contention revolves around the service of notice under Section 148 of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) [CIT(A)] had earlier found that the notice had not been served at the correct address of the assessee, leading to the appeal before the Income Tax Appellate Tribunal (ITAT).
Tribunal’s Observations: The ITAT, in its order dated 21.08.2022, considered the critical question of whether the notice served at the address, 501 Hawa Singh Block, was valid. Notably, the recipient had sold the property three years prior, rendering the service ineffective. Despite this, the Assessing Officer (AO) proceeded with the assessment order on 20.03.2014.
Disputed Facts: The AO’s assertion that the address in the PAN database remained unchanged was challenged. The respondent consistently provided her address as Flat No. 100, Milan Apartment, West Enclave, Pitampura, Delhi, during the relevant assessment years. The court highlighted this inconsistency between the AO’s claim and the factual records.
Legal Standpoint: The appellant contended that, as per the PAN database, the notice under Section 148 was valid. The court, however, referred to the Supreme Court’s judgment in Principal Commissioner of Income Tax, Mumbai v. I-Ven Interactive Limited (2019), emphasizing that proceedings aren’t rendered inefficacious solely because the new address is stated in the Income Tax Return (ITR).
Lack of Compliance: Despite the AO’s awareness of the incorrect address and efforts made to trace the correct one, reassessment proceedings were initiated. The court observed that the foundation for the arguments presented by the appellant wasn’t adequately laid, especially regarding the PAN database showing the incorrect address.
Subsequent Developments: The court, during the hearing on 10.03.2023, directed the appellant to present the relevant record before it. However, on 13.04.2023, the appellant sought further time to submit the records but failed to comply with this directive.
Conclusion by the Court: In its final decision, the court upheld the findings of the CIT(A) and ITAT, asserting that reassessment proceedings hinge on a validly served notice under Section 148. The failure of the AO to serve the notice at the correct address, despite being aware of the discrepancy, was deemed fatal to the reassessment process.
Conclusion: The Delhi High Court’s ruling in PCIT vs. Madhu Gupta reinforces the principle that reassessment proceedings must be initiated with a validly served notice under Section 148. The court’s meticulous examination of the facts and its insistence on compliance with procedural requirements serve as a reminder to tax authorities to adhere to due processes. Taxpayers can draw from this judgment the importance of ensuring that notices are correctly served and that any discrepancies are duly addressed to maintain the integrity of the assessment process.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
The co-ordinate bench had heard the above-captioned appeal at some length on 10.03.2023. After hearing the counsel for the parties, the coordinate bench had etched out the broad contours of the case. For convenience, the relevant parts of the order dated 10.03.2023 are extracted hereafter:
“1. This appeal is directed against the order dated 21.08.2022 passed by the Income Tax Appellate Tribunal [in short, “Tribunal”] concerning Assessment Year (AY) 2007-08.
2. The short point which arose for consideration before the Tribunal was as to whether the finding returned by the Commissioner of Income Tax (Appeals) [in short, “CIT(A)”], that the notice under Section 148 of the Income Tax Act, 1961 [in short, “the Act”] had not been served on the correct address of the respondent/assessee, was correct.
3. The Tribunal, via the impugned order, noted that the CIT(A) had called for the remand report and had also examined the record available with the Assessing Officer (AO) before concluding that the notice issued under Section 148 of the Act dated 25.03.2013 had been served at the wrong address.
4. To be noted, the notice dated 25.03.2013 was served on the following address: 501, Hawa Singh Block, Asiad Games Village, New Delhi, 110049 [hereinafter referred to as “501 Hawa Singh Block”]. The record shows that this notice was returned with an endorsement by the Notice Server that the person concerned had sold the house three years ago.
4.1 Despite this endorsement, admittedly, the AO passed the assessment order on 20.03.2014 under Section 148/144 of the Act. The record shows that consistently between 2007-08, which is the concerned AY, and 201314, the respondent/assessee has been showing her address in the ITRs as Flat No. 100, Milan Apartment, West Enclave, Pitampura, Delhi [hereinafter referred to as “100 Pitampura”]. Concededly, the respondent/assessee’s return was available with the AO. Curiously, even in the face of this undisputed fact, the question of law proposed by the appellant/revenue in the instant appeal is suggestive of the fact that the return filed by the assessee was not available with the AO.
5. We may note that via communication dated 22.08.2014, the AO had written to the IT Investigation Wing to provide further information because the respondent/assessee was not available. This communication is revealing, as the AO asserts that reassessment proceedings were initiated upon receipt of information from the Investigation Wing via communication dated 07.05.2012. The communication is also suggestive of the fact that efforts were being made at this juncture to trace the address and PAN of the respondent/assessee to recover the outstanding demand.
6. Mr Ruchir Bhatia, Senior Standing Counsel, who appears on behalf of the appellant/revenue, says that since the address in the PAN data base had not been changed by the respondent/assessee, the notice issued under Section 148 of the Act was valid in the eyes of law.
6.1 In support of his submission, Mr Bhatia has relied upon the judgment of the Supreme Court rendered in Principal Commissioner of Income Tax, Mumbai v. I-Ven Interactive Limited, Mumbai 2019 110 Taxman.com 332 (SC). We may note that this was a case where the assessee, despite being served on the old address, had continued to participate in the proceedings, and therefore, the Court observed that merely because the new address had been set out in the ITR, would not render the proceedings inefficacious.
7. As noted above, the facts in the instant case are somewhat different. Not only did the respondent/assessee’s ITR from 2007-08 to 2013-14 continue to show her 100 Pitampura address, but also the AO was made aware of the fact, albeit, before the assessment order was passed, that the respondent/assessee was not available at the 501 Hawa Singh Block address.
7.1 Furthermore, we also find that in this case, the appellant/revenue, prima facie, did not lay the foundation for the arguments that are sought to be raised before us, which is, that in the PAN data base, the respondent/assessee’s address continued to be shown as 501 Hawa Singh Block.
8. Since Mr Bhatia seeks short accommodation to place before us the record that was made available to the Tribunal, the appeal is stood over. 8.1 Mr Bhatia will place the relevant record before us and also serve the copy of the same on Mr Ruchesh Sinha, learned counsel who appears on behalf of the respondent/assessee.
9. List the matter on 13.04.2023.”
2. On 13.04.2023, the counsel for the appellant/revenue had sought further time to place before the court the record that was made available to the Income Tax Appellate Tribunal [in short, “Tribunal”].
3. It was on this plea that the matter was not closed on 10.3.2023.
4. The appellant/revenue has not filed the record that was made available to the Tribunal.
5. According to us, insofar as the facts recorded by the Commissioner of Income Tax (Appeals) [CIT(A)] and the Tribunal insofar as the service of the notice on the rspondent/assessee is concerned, are not in dispute.
6. As noted on 10.03.2023, the respondent/assessee was not served with a notice under Section 148 of the Income Tax Act, 1961 [in short, “the Act”].
7. The assessment order was passed by the Assessing Officer (AO) despite being made aware of the fact that the respondent/assessee had not been served with a notice under Section 148 of the Act.
8. The reassessment proceedings can be triggered only when a notice under Section 148 has been issued and served on the concerned assessee. This is a finding of fact. Both the CIT(A) as well as the Tribunal have come to a definitive conclusion that the service of notice under Section 148 was not effected on the respondent/assessee.
9. Therefore, according to us, no interference is called for with the impugned order dated 21.08.2020 passed by the Tribunal.
10. The Tribunal has returned, as indicated above, a finding of fact. Thus, no substantial question of law arises for our consideration.
11. The appeal is accordingly closed.
12. Parties will act based on the digitally signed copy of the order.
