THE issue is - Whether service of notice issued u/s 132 is required to be made in the manner specified u/s 282, before passing of the order u/s 127. YES is the verdict.
Facts of the case
The assessee is a partnership firm and is engaged in the business of development of real estate. The principal place of business as indicated in the returns was situate at E-41, Ashok Vihar, Phase I, New Delhi. Subsequently, the office was shifted at A-193, Ist Floor, Okhla Industrial Area, Phase I, New Delhi. Due intimation was given to the I-T Authorities and acknowledgement was received by the assessee through National Securities Depository Ltd. (NSDL). A search and seizure operation took place u/s 132(1) at the business premises of the assessee's firm at A-193, Ist Floor, Okhla Industrial Area, Phase I, New Delhi, and various documents and cash was seized and a panchanama was prepared. Thereafter, the CIT issued an order u/s 127 transferring the case from the Asst CIT, Circle 23(1), New Delhi to the Asst CIT, Central, Circle Meerut. The assessee contended that he was unaware of this order and came to know for the first time on 31st August, 2009 when he received a notice u/s 153A issued by the Asst CIT, Meerut intimating him that the I-T return for the A.Y 2008-09 had not been filed and directed him to show cause as to why action u/s 271F should not be initiated. After considering the objections of assessee, the Asst CIT, Meerut issued a notice directing the assessee to submit various information in connection with the assessment proceedings u/s 153A.
Having heard the parties, the High Court held that,
++ it is found from a perusal of the counter affidavit that for the A.Y 2008-09, the assessee's case was selected for scrutiny through computer aided selection scheme and notice was generated by the computer since the PAN of the assessee was still lying with the Asst CIT, New Delhi, inasmuch as the PAN of the assessee had not migrated to the new AO of Okhla and, therefore, the Asst CIT, New Delhi retained the jurisdiction. It was further submitted that before passing the order u/s 127, the CIT, New Delhi issued a notice, which was sent by registered post on 29th August, 2008. Since no reply was received till 23rd September, 2008, an order dated 23rd September, 2008 was passed transferring the jurisdiction to Asst CIT, Meerut. In the counter affidavit, a vague reply has been given that before issuing the corrigendum, a notice was issued to the assessee and since no reply was received, a corrigendum was passed. No proof of issuance of notice has been filed. In our opinion, the assertion made in the counter affidavit is not only vague, and cannot be believed. Service of notice is required to be made in the manner specified u/s 282. In the instant case, it has not been disputed that the assessee's principle place of business shifted from Ashok Vihar to New Okhla, New Delhi. Due intimation was given to the income tax authorities through their agency NSDL and change of address was acknowledged by this agency. Further, the department knew about the change of address, inasmuch as, a search was carried out at the new address u/s 132. Therefore, it does not sounds logical nor reasonable for the CIT, New Delhi to issue notice at the old address of the assessee at Ashok Vihar. The notice, if any, should have been sent to the principal place of business, which had shifted to New Okhla where the search u/s 132 was carried out by the department. We also find that there is nothing to indicate by the department that the assessee was still carrying on his business from the old place at Ashok Vihar or that the said place was still in existence and was under the control of the assessee. In the light of the aforesaid, this Court is of the opinion that the impugned order passed by the CIT, New Delhi transferring the case to the Asst CIT, Meerut was patently illegal and in gross violation of the principles of natural justice. It was imperative for the authority to give notice and an opportunity of hearing to the assessee before transferring the case u/s 127, which in the instant case has not been done. In the light of the aforesaid, all consequential proceedings initiated by the Asst CIT, Meerut directing to conduct a special audit u/s 142(2A) being without jurisdiction also cannot be sustained.
++ further, we are of the opinion that an order dated under Section 142(2A) of the Act entails civil consequences and, an order is required to be passed upon an application of mind and with due care. Complexity of the accounts can only be judged upon a perusal of the books of accounts and after inviting explanation from the assessee. If the books of accounts are not perused, the question of complexity cannot be judged. We are of the opinion that an order u/s 142(2A) cannot be passed on the basis of the seized material unless the assessee failed to produce books of accounts, which in the instant case has not happened, inasmuch as no hearing took place on 4th December, 2009 on the date when the assessee was required to produce the books of accounts. We are, therefore, of the opinion that the order dated 18th December, 2009 was passed mechanically and without any application of mind. We are also of the opinion that the impugned order does not contain any reasons. In our opinion, it is necessary and essential for the authority to give reasons indicating the complexity of the accounts and the need to get the accounts audited u/s 142(2A). For the reasons stated aforesaid, the order passed by the CIT, New Delhi and the corrigendum issued by the said authority are quashed as a consequence thereof notices issued u/s 153A issued by the Asst CIT, Meerut is also quashed.
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