Notice before Initiating Reassessment Proceeding is a Mandatory Requirement: ITAT [Read Order]

The ITAT Amritsar held that notice under Section 148 or 142(1) of the Income Tax Act which is served upon the deceased assessee or his sole legal heir is a mandatory requirement.

In the instant case, proceedings under Section 148 had been initiated on the basis of information that assessee had sold land during the F.Y 2004-2005 and capital gain arising on the sale of such property. During the A.Y 2004-5, the assessee had filed returns. During the closure of assessment proceedings under Section 143(3), it was observed that capital gain on the said sale had not been disclosed by the assessee. Two notices under Section 148 were sent on March 2012 and May 2012 both yielded no result.  Thereafter, it was noticed by the A.O that the assessee had died and proceedings were initiated against the only legal heir of the assessee, his daughter. Another notice, under Section 142 was served upon her and even in reply to the said notice, no return of income was filed. A.O proceeded under Section 144 of the act and added to the income of the assessee, capital gain on the sale of property by the assessee. Assessee preferred appeal before CIT(A) which was dismissed and aggrieved by the same, ITAT was approached.

The Tribunal bench comprising of Judicial N K Choudhry and Accountant Member S H Sanjay Arora held that there are many doubts with regard to the genuineness of the notices sent. They added that the final notice sent under Section 142(1) has been claimed as served upon the legal heir through affixture only and while serving notice through substituted service to the legal heir, A.O never tried to serve the legal heir in an ordinary way but made an attempt only through substituted service which creates doubts validity of notices, which are mandatory. ITAT relied on the settled principle of law that if either no notice is issued or notice issued is shown to be invalid, the proceedings initiated or carried by an Income Tax officer without a valid notice or if notice issued is shown to be invalid, the proceedings shall be void.   On observing that no notice has been properly served, ITAT set aside the order of A.O and Ld. CIT(A).