S' Nachiar v. Income-tax officer an Othersl, wherein in pa'rgraph Nos B' g,lO

Petition under Section 151 cpc praying that in the cir: rmstances stated in the affidavit fired in support of the petition, the High court m;r be preased to stay all further proceedings including the Recovery Notice dated .,2_ 05_ 2024 issued by 2nd respondent pursuant to impugned Assessment Or::r having DIN No. lrBtuAsT/s/147r2022- 23r1o42gs\gg4(i) dated 06- 05- 2J22 passed by 2nd respondent for A. y. 2016- 17. Counsel..forthe Petitioner : SRI MOHD MUKHAIRUDDIN counsel for the Respondents No.1&2 : SRr VTJHAy K puNNr , (sR.sc FoR lrD) Counsel forthe Respondent No.3 : SRI N.BHUJANGA RAO, DY.SOLICITOR GENERI,I , OF INDIA The Court made the following: ORDER THE HON'BLE SRI JUSTICE P. SAM KOSHY AND THE HON'BLE SRI ]USTICE NARSING RAO NA NDIKONDA WRIT PETITION N0.32442 ot 2024 ORDER: (per the Hon'bte Sri lustice P.Sam Koshy) Heard Mr. Mohd. Mukhairuddin, learned counsel for the petitioner / assessee; Mr. Vilhay K. Punna, learned Senior Standing Counsel for the Income Tax Department appearing on behalf of respondent Nos.1 and 2, and the learned Deputy Solicitor General of India appearing on behalf of respondent No.3.

2. The instant writ petition under Article 226 of the Constitution of India has been filed by the petitioner assailing the assessment order dated 06.05.2022 passed by respondent No.2 / Assessing Officer holding that since the petitioner has failed to disclose the cash deposits to the tune of Rs.1,52,10,OOO/-, the same was added as unexplained cash credits in the hands of the petitioner and it was also held that the petitioner shall be liable to pay penalty under Section 2ll(l)(c) of the Income Tax Act, 1961 (briefly the 'Act'hereinafter) for concealment of income. \

3. The primary challenge by the petitioner whll, assailing the - impugned order of assessment rather than preferrir J an statutory appeal was that:- a) The proceedings are in violation of the prinr i rles of natural justice; and b) The proceed ings are being initiated without p- rper service of notice on the petitioner as is otherwise prr scribed under Section 148 of the Act. 4, The whole case of the petitioner is that he is r non-resident Indian who is settled and obtained a citizenship of SA since 1994 onwards. According to the petitioner, he did not hart any source of income in India and therefore he was not filing ,r ry income tax returns in India. According to the petitioner, he has ; bank account in HDFC Bank, S.R. Nagar Branch, Hyderabad. A::ording to the petitioner, recently when he visited India and we r t to his bank account, he came to know that the Income Tax [) rpartment has issued a recovery notice dated 22.O5.2024 under St:, tion 226(3) of the Act in respect of the aforementioned unexplaire d cash credits to the tune of Rs.1.52,10,0OO/-, and for which petit oner is due to pay income tax along with interest and penalty for the assessment year 2OL6-17. The petitioner immediately approached his Chartered Accountant and got the details of the proceedings initiated against him and has approached this Court by way of present writ petltion.

5. The contention of the petitioner is that the address at which the notices were issued under Section 148 of the Act was already sold by the petitioner way back in May, 2OO7, and thereafter the petitioner is not residing at the said address. Therefore, the service of notice under Section 148 of the Act could not be effectively served upon the petitioner.

6. So far as the non-service of notice under Section 148 of the Act is concerned is not in dispute, as this fact was admitted by the Assessing Officer himself in the course of passing the impugned assessment order, wherein in paragraph Nos.4, 5 and 6 it has been held as under: "4. Further, notices under section 142(1) of the Income Tax Act, 1961 were issued to the assessee on 21/11/2021 and 30/12/2021 to the assessee calling for information.

5. However, there was no response from the assessee till date. \

6. Subsequently, the Inspector of this office is deput: I for Serving Notice to the assessee but the inspector failed i t trace the assessee and the inspector served the notice by Affixlt -e."

7. Another aspect which needs to be consideretl is that all the notices and correspondences which were made by -l e Department upon the petitioner was at the address i.e. 22 ) Madhapur, Hyderabad - 500033 which was alrea i rctors Colony, I sold by the petitioner long back and is presently residing at a dil 'erent location and address altogether. Thus, it stands proved tr rt the notices issued by the Department could not be effectively s t rved upon the petitioner.

8. Yet another aspect which is glaringly vi; cle from the impugned assessment order and the notices tho; : were issued including the draft orders is that the Department i:; itself ag reeing to the fact that the petitioner is a non-resident I ndia n and is residing overseas. This would be reflected in the first line of each of the correspondences and orders including the drz ft assessment order passed by the Department.

9. The admission on the part of the respon.3nts that the petitioner being a non-resident Indian and only : rmes to India occasionally he could not have access to the notices issued or the affixture of notice made by the Department, has not been properly appreciated and considered by the Assessing Officer.

10. The learned Senior Standing Counsel for the Income Tax Department appearing on behalf of respondent Nos.1 and 2 tried to emphasize the fact that notices and summons have all been issued at the known and registered address of the petitioner; therefore the findings arrived at by the Assessing Officer does not warrant interference. It was also contended that if there was a change of address on the part of the petitioner / assessee, it was his duty to have intimated the respondents in respect of the same and ought to had amended the address so that the subsequent notices could had been sent to the changed address. Even messages by e_mail was also sent, which too the petitioner could not make much use of.

11. Moreoveq the learned Senior Standing Counsel argued that since there is a remedy of appeal available to the petitioner under the statute. the instant writ petition under Article 226 of the Constitution of India assailing an appeal order is no: justified and the writ petition deserves to be dismissed ' 12, A plain reading of the provisions of Section 148 i nd 148(3) of the Act would go to show that the proceedings ir tiated under Section 148 must be proceeded with only after prc I er service of notice and there cannot be any proceedings drawn 't thout proper service of n otice.

13. It would be relevant at this juncture to t' I e note of a judgment of the Madras High Court in the case of Snr:' S' Nachiar vs. Income-tax officer an Othersl, wherein in pa'rgraph Nos B' g,lO, 12 and 13, it has been held as under: "8. The undisputed fact remains that the petitioner hEs ex parte order of assessment and as against th) petitioner has preferred a revision under section 264 ol the said revision was dismissed through the impugne 1 February 23, 2005. However, it is stated in the count= the effect that the petitioner was served with the notitl respondent dated April 26, 2006 under section 221 asking the petitioner to pay the arrears of tax for the year 1994-95 and the same is avaitable on record a'' the same, the petitioner has not appeared, resulting i suffered an same, the the Act and order dated .-affidavit to of the th ird of the Act assessment J in spite of t passing an '20'10 SCC OnLine Mad 6205 : (2010) 326 ITR 177 ex parte assessment order. It is also stated in the counter that it is not the fault of the respondents for necessitating the authority to pass an ex parte order.

9. The crux of the question involved in this matter is to the effect that whether the assessment order could be passed without serving the notice under section 148 of the Act.

70. In respect of such question, it is categorically stated by the petitioner in the affidavit and also contended by the learned counsel for the petitioner that the notice contemplated under section 148 of the Act was not served on the petitioner. On the other hand, it is stated in the counter filed by the respondents and also contended by the learned standing counsel that the notice contemplated under section 148 was issued on September 17, 1999 and duly despatched on September 22, 1999 as per the despatch register. It is also further stated in the counter that subsequently on October 16, 2000, a reminder letter was issued calling for the return of income for the assessment year 1994-95 in response to notice under section 148. The abovesaid statement made in counter makes it crystal clear that though the notice said to have been issued under section 748 of the Act, the fact remains that the said notice was not served on the petitioner. Therefore, this court has no hesitation to hold that the respondents have not complied with the requirements contemplated under section 148 by serving a notice on the assessee, viz., the petitioner herein. It is also pertinent to point out that though it is claimed by the respondents that subsequently a reminder letter dated October 16, 2000 was issued to the petitioner and the same was also duly served on the petitioner on October 20, 2000, the said reminder letter is only for calling the petitioner to submit t'e return of income and by no stretch of imagination the said lL:t ler could be construed to be a notice under section 148 of the Act. XXX XXX XXX

72. The abovesaid decision was also subsequently T llowed by a Division Bench of this court in Thangam Textiles /. First ITO reported in [ 1973] 90 ITR 412 wherein the Division Et'rch has held in paragraph 7 which reads here under (page 415) : "In Y. Narayana Chetty v. ITO [1959] 35 tTIl Supreme Court held that the service of requisite n,t assessee, is a condition precedent to the valktt reassessment made under section 34 of the Incotr 1922 (which corresponds to section 147 of the t Act, 1961), and if a valid notice was not issued t: the proceedings taken by the Income-tax Officer ir of an invalid notice and consequent orders of rez passed by him would be void and inoperative." 388, the ice on the y of any ?-tax Act, tcome-tax required, )ursuance ;sessment

73. Section 34 of the old Act referred in the decision . ted supra, is equivalent to section 148 of the Act, 1961. The princi) es laid down by the hon'ble apex court as well as this court, tre squarely applicable to the facts of the instant case as in this:tse also, the notice contemplated under section 148 of the Act wa; not served on the petitioner. As a result, the entire proceedin!': culminating into the present impugned order dated February 23, .005, passed by the first respondent is vitiated." L4. Thus, From the aforesaid facts discussed in the preceding paragraphs and also taking note of the Madras High Court's judgment in Smt. S. Nachiar (supra), this Bench is of considered opinion that a strong case quashing the. impugned assessment order has been made out by the petitioner holding it to be in violation of the principles of natural justice resulting in remitting the matter back to the lurisdictional Authority for taking an appropriate decision in accordance with law.

15. Admittedly when the notices were issued, the petitioner was not present either in the territories of India and that he was in USA. So whatever notices have been issued at the Indian address could not result in any fruittul results and was only an empty formality. Though the learned Senior Standing Counsel has relied upon a bunch of judgments to support his contentions. but when we look into the factual matrix of each of those judgments and fhe question of law which arouse for consideration in the given facts therein, we have no hesitation in holding that all those judgments are distinguishable on facts itself. t i I I Page 10 oF 10 \:-=rF

16. For all the aforesaid reasons, we are of ti opinion that the petitioner ought to had been given ir e considered ia ir chance of defence in support of his contention that whatevt:t come to his bank account in India was a non-ta} Therefore, the writ petition stands allowed and the ir of assessment passed by the Assessing Officer t amount has r ble amount. pugned order set aside / quashed and the matter stands remitted back to he Assessing Officer for passing of a fresh assessment order after i ffording a fair opportunity of hearing to the petitioner. L7. As a sequel, miscellaneous petitions pendinc if any, shall stand closed. However, there shall be no order as to c )sts //TRUE COPY// \: SD/-C. DEEPIKA ! TANT REGISTRAR To,

1. The ITO (lNT Taxn)- 1, Hyderabad Aayakar Bhav Basheerbagh, Hyderabad - 500004 JECTION OFFICER \ n, Op r L. B. Stadium 2 The ADIT (lNT Taxn)- '1, Hyderabad Aayakar Bnlvan, O I Basheerbagh, Hyderabad - 500004 The Secretary, Union of lndia, Department of Revenue, l/ North Block New Delhi - 1 10001 One CC to SRI IVOHD MUKHAIRUDDIN, Advocate. [OPL Or,e CC 1o SRI N.BHUJANGA RAO, Deputy Solicitor Ge r Court for the State of Telangana at Hyderabad. [OPUC] One CC to SRI VUHAY K PUNNA, (SENIOR SC FOR lTt Two CD Copies. J 4 6 6 7 BSK LS r. L. B. Stadium nistry of Finance, rral of India, High ) toPUCl i' I I HIGH COURT DATED:21 11112025 ORDER WP.No.32442 ot 2024 ,._.=_. ./.,/ -, \, - IE I''i 6 j: .r'. tl a,) tt .\ '\_ . "', / ALLOWING THE WRIT PETITION WITHOUT COSTS d lql