Suresh Kumar Sheetlani Vs ITO (Allahabad High Court)
Conclusion: Since Department had correct address of assessee and sending notice for reassessment at incorrect address drawing a presumption of service of notice was rendered assessment proceedings as invalid.
Held: In the instant case, AO issued notice on the ground that assessee had obtained or credited an amount from a company who were providing entries to beneficiaries by showing that the transactions made by them in purchase and sale of shares of certain companies and gifts from certain persons which in fact never took place and found to be bogus, therefore, entire amount received by assessee was added assessee’s income from undisclosed sources. According to assessee, notice was invalid on the ground that notice under section 148 was never served upon him and it was sent on incorrect address. It was held notice under section 148 was not served upon assessee and the same was sent at the wrong address and, therefore, the service of notice could not be deemed to have been effected on assessee. The service of notice under section 148(A) was sine qua non and in absence thereof, assessment proceedings were rendered invalid.
FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT
1. This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as “the Act’) has been filed by the assessee against the order dated 17th June, 2011 passed by the Income Tax Appellate Tribunal, Agra Bench, Agra (hereinafter referred to as the “Tribunal”) in ITA No.467/Agra/2009, Assessment Year (hereinafter referred to as “A.Y.”) 1999-2000.
2. While admitting the appeal on 25th November, 2011, the following two questions of law were formulated:-
“(A) Whether the Income Tax Appellate Tribunal has erred in law and on the facts of the case in holding that the service of notice dated 28.3.2006 issued under Section 148 of the Act, on the last known address, which the department had collected from the bank, whereas the last known address was available in the return filed by the petitioner, can be treated to be valid service?
(B) Whether the proceedings in pursuance to the notice under Section 148 can be initiated without affecting service, which in accordance with Section 282 of the Income Tax Act, even if it is presumed can be made on an address, which is collected by the department from the bank, whereas known address was available with the department on Saral Form-5 of the petitioner?”
3. The Assessing Officer (hereinafter referred to as “A.O.”) issued notice dated 28thMarch, 2006 under Section 148 of the Act to the assessee at the address i.e. 109, North Idgah Colony, Agra available on the assessee’s Bank Account No.10309 in Canara Bank (SSI Branch), Sanjay Place, Agra.
4. The said notice was issued after recording reasons that the assessee had obtained or credited an amount of Rs.5,28,183.00 and Rs.5,79,424.00 from M/s Essar Pee Advertising, Delhi who were providing entries to the beneficiaries by showing that the transactions made by them in purchase and sale of shares of certain companies and gifts from certain persons, which in fact never took place. The assessee was alleged to be one of the beneficiaries, figuring in the list supplied by the Investigation Wing, Agra. Since the transactions of share trading were found to be bogus and, therefore, entire amount claimed to have been received by the assessee by bank draft was assessee’s income from undisclosed sources. The assessee had escaped assessment within the meaning of Section 147 of the Act. A.O. also found that one more amount of Rs.5,15,300.30 was deposited and he issued show cause notice to the assessee under Section 143(3) read with Section 142(1) of the Act dated 23rd November, 2006 requiring the assessee to explain and prove this amount also as the said amount also appeared to be of the same nature.
5. The A.O also issued notice under Section 142(1) of the Act dated 8th November, 2006 to the assessee. In response to the notice, the authorized representative of the assessee appeared and filed reply, challenging service of notice under Section 148 of he Act and also requested for supply of the reasons recorded. The reasons were supplied to the authorized representative on 28th November, 2006.
6. The A.O. completed the assessment by making addition of Rs.16,22,907.00 plus 1% commission and expenses, totaling to Rs.17,91,720.00 on account of amount of fictitious sale of shares, which had been held to be bogus and unexplained income of the assessee from undisclosed sources vide assessment order dated 5th December, 2006 under Sections 144 and 147 of the Act.
7. Aggrieved by the said order, the assessee had filed an appeal before the first appellate authority. The first appellant authority vide order dated 9th September, 2009 cancelled the said assessment order, declaring the same as invalid on the ground that the notice under Section 148 of the Act was never served upon the assessee.
8. The C.I.T.(A) held that notice under Section 148 of the Act was issued by I.T.O.-1(1), Agra on 28thMarch, 2006 to the assessee at 109, North Idgah Colony, Agra. The A.C.I.T., Circle-1, Agra transferred the case records to I.T.O.-1(1), Agra on 8th May, 2006. Subsequently, the case was assigned to ITO-1(3), Agra, who issued a requisition under Section 133(6) of the Act on 12th November, 2006 to M/s Essar Pee Advertising Company calling for various information in respect of the share transactions. The A.O. also issued a requisition under Section 133 (6) of the Act on 9th November, 2006 to the Manager, Canara Bank (SSI Branch), Sanjay Place, Agra calling for the bank statement of the assessee for the period 1st April, 1998 to 31st March, 1999.
9. The A.O. issued a notice under Section 142(1) of the Act on 8th November, 2006. Thereafter, the A.O. issued a show-cause-notice dated 23rd November, 2006 under Section 143(3) read with Section 142(1) of the Act proposing therein to add the following deposits in the Bank Account No.10309, Canara Bank (SSI Branch), Sanjay Place Agra as the assessee’s undisclosed income:
