Delivery of Notice by Assessing Officer at the Right Address

Facts of the case:

• Petitioner was a widowed lady, who being a housewife had never filed any income tax return since she didn’t have any taxable income. After death of her husband, she didn’t reside at the address mentioned in her PAN.
• The Assessing officer (AO) issued a notice for reopening of the assessment of petitioner for AY 2011-12.
• The notice was delivered but the same was returned since no one resided at the mentioned address. Income Tax Department (ITD) was of the contention that address on postal communication was as stated in PAN, which the petitioner never requested to be changed.
• AO concluded the assessment ex-parte and a recovery notice was also sent.

Contention of AO:

• The notice was dispatched at petitioner’s address as per her PAN card. The petitioner never intimated the change of address to ITD. Therefore, ITD had no information about her not residing at the said place. The petitioner was systematically dodging the service of notice and hence the assessment was concluded ex-parte.

Contention of Petitioner:

• Mere issuance of notice of reopening of the assessment by ITD was not sufficient, service thereof to the assessee was also necessary. The notice issued by ITD could not be served since the petitioner had changed her address. The Department, therefore, had to follow the procedure prescribed under the Income Tax Rules, 1961 (“the Rules”) to serve such notice. The same was not done by the AO. Without valid service of notice, the reassessment could not be done.

Held by High Court of Bombay:

• The notice of reassessment under section 148 of the Income Tax Act, 1961 had to be served on the assessee.
• It is consistent view of the Courts that not mere issuance of notice of reopening of assessment but its service on the assessee, that too within the time frame envisaged under section 149 of the Act is necessary for valid reopening of assessment.
• As per the Act, where communication cannot be delivered or transmitted to the addresses mentioned in the PAN, the communication shall be delivered or transmitted to the addresses as available with the Banking company or a Cooperative bank to which Banking Regulations Act, 1949
• Since the delivery of the notice could not be made at the address of the assessee available in PAN database, by virtue of the further proviso to sub-rule (2) of Rule 127 of the Rules, the communication had to be delivered at the address available with the banking company.
• The Court held that in the result, the impugned notice and the consequential order of reassessment passed by the AO were set aside. All subsequent steps for coercive recovery of tax dues arising out of such order of assessment were also set aside.

Conclusion:

Mere issuance of notice does not cover the AO’s duty, the AO must ensure that the notice is properly served to the assessee. Ex-parte assessment can’t be done on the sole basis that notice was issued at the address available in the PAN database.

Source: Harjeet Surajprakash Girotra v. Union of India [2019] 108 taxmann.com 491 (Bombay).