An assessment order under Section 148 is invalid if notice is not effectively served, violating principles of natural justice.

ORDER :

1. Heard Mr. Mohd. Mukhairuddin, learned counsel for the petitioner/assessee; Mr. Vijhay 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.1,52,10,000/-, 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 271(1)(c) of the INCOME TAX ACT , 1961 (briefly the ‘Act’ hereinafter) for concealment of income.

3. The primary challenge by the petitioner while assailing the impugned order of assessment rather than preferring an statutory appeal was that:-

a) The proceedings are in violation of the principles of natural justice;

b) The proceedings are being initiated without proper service of notice on the petitioner as is otherwise prescribed under Section 148 of the Act.

4. The whole case of the petitioner is that he is a non-resident Indian who is settled and obtained a citizenship of USA since 1994 onwards. According to the petitioner, he did not have any source of income in India and therefore he was not filing any income tax returns in India. According to the petitioner, he has a bank account in HDFC Bank, S.R. Nagar Branch, Hyderabad. According to the petitioner, recently when he visited India and went to his bank account, he came to know that the Income Tax Department has issued a recovery notice dated 22.05.2024 under Section 226(3) of the Act in respect of the aforementioned unexplained cash credits to the tune of Rs.1,52,10,000/-, and for which petitioner is due to pay income tax along with interest and penalty for the assessment year 2016-17. 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 petition.

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, 2007, 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 deputed for Serving Notice to the assessee but the inspector failed to trace the assessee and the inspector served the notice by Affixture.”

7. Another aspect which needs to be considered is that all the notices and correspondences which were made by the Department upon the petitioner was at the address i.e. 22 Doctors Colony, Madhapur, Hyderabad – 500033 which was already sold by the petitioner long back and is presently residing at a different location and address altogether. Thus, it stands proved that the notices issue