Judgment:
1. In this appeal, the assessee has objected to the order of the CIT(A) dated 5th Aug., 1996, by way of the following grounds : "(1) The learned ITO gravely erred in passing the assessment order without service of the notice as required by law. The learned CIT also erred in not considering the facts of non-service of the notices.
(2) The learned ITO and the learned CIT(A) gravelly erred in not considering the facts on the revenue records. The interest given to old creditors for Rs. 20,954 was also not allowed.
(3) The learned ITO erred in making addition of Rs. 6,000 for low withdrawals for household expenses. The learned ITO did not consider Rs. 7,500 withdrawn from accounts of assesee's wife who herself is an existing assessee. The learned CIT(A) also erred in not considering the said facts.
(4) The institution fee for Rs. 1,500 may kindly be directed to be refunded to the appellant.
(5) Other grounds as may be added at the time of hearing before your honour" 2. I have heard the counsel for the assessee as well as the learned Departmental Representative.
3. The counsel for the assessee preferred to rely on the written submissions which are in the following terms : "In the present case, the learned AO passed assessment order under Section 144 of the IT Act, 1961 on 21st March, 1996 alleging that the appellant failed to comply with notices under Sections 142(1) and 143(2) of the Act. The appellant very humbly submits that there was no such failure as has been alleged by the learned AO and therefore, he did not justify in passing the order under Section 144. The relevant facts and the appellant's submissions are as follows : As per learned AO., this notice was served on 25th Oct., 1994 on one Shri Pawan Kumar Bhartiya in Didwana. The date fixed for hearing was 21st Nov., 1994 (kindly refer to the para No. 1 of page No. 10) By that time, the appellant had left Didwana and settled in Jaipur, whereas his A.R (authorised representative) was practicing in Didwana and the AO.'s office was in Nagaur. Due to involvement of three different cities/towns and four different persons including the aforesaid Pawan Kumar Bhartiya, instead of the fixed date of hearing, i.e. 21st Nov., 1994, the appellant's Authorised Representative could attend the learned AO's office on 23rd Nov., 1994. On that date he informed the learned AO about the fact that the appellant had settled in Jaipur and also about the appellant's complete address of Jaipur (kindly refer to the page No. 4).
Jaipur's address was given with a view that henceforth the notice would be directly sent to the appellant.
2. Regarding the notice/s dt. 3rd May, 1995, the appellant very humbly submits that he never received any such notice/s (kindly refer to the page Nos. 7 and 9).
3. Regarding notice dt 2nd Feb., 1996: the learned AO has stated that it was served on 6th Feb., 1996 on Shri Pawan Kumar Bhartiya fixing the date of hearing for 12th Feb., 1996. The appellant's humble submissions are as follows : (i) that the appellant did not receive the notice (kindly refer to the page No. 9) (ii) that, in view of the fact that the appellant had settled in Jaipur and informed the AO about his complete address of Jaipur, the learned AO should have sent the notice dt. 2nd Feb., 1996 directly to the appellant at his Jaipur address; (iii) that, without any prejudice to the aforesaid submissions, it is very humbly submitted that period of six days (time gap between the date of service of notice to the aforesaid Pawan Kumar Bhartiya and the date of hearing) was not sufficient particularly in view of the following facts : (a) that notice was served on a person residing in Didwana (Pawan Kumar Bhartiya) whereas it concerned to the appellant who resided in Jaipur.
(b) that the person on whom the notice was served was not knowing significance thereof; and (c) that Shri Pawan Kumar Bhartiya did not have any interest in the matters concerning the appellant.
The appellant relies on the Hon'ble Kerala High Court's Judgment in the case of CIT v. Thayaballi Mulla Jeevaji Kapasi (1963) 47 ITR 184 (Ker).
4. Without any prejudice the aforesaid submissions, the appellant very humbly submits that, in view of the contents of the page Nos. 5 & 6, the learned AO was not justified in making additions of Rs. 79,120 to the appellant's returned income and the learned CIT(A) was not justified in sustaining the same to the extent of Rs. 78,620" 4. The learned Departmental Representative, on the other hand, supported the order of the CIT(A).
5. After having considered the written submissions furnished by the counsel for the assessee and relied upon during the hearing, the facts and circumstances of the case and the fact that the learned Departmental Representative has not disputed the fact of assessee having informed the AO as per order sheet entry dt. 23rd Nov., 1994, that he had shifted to Jaipur and had given complete address for communication as well as the fact that the notices dt. 3rd May, 1995 and 2nd Feb., 1996 issued under Section 143(2) of the Act were never served upon the assessee, I am of the opinion that the assessment order framed by the AO under Section 144 of the Act on 21st March, 1996 had been passed in violation of the principles of natural justice and similar was the order of the CIT(A). It is well settled law that assessment under Section 144 without proper service of notice under Section 142(1) and 143(2) in violation of the principles of natural justice cannot be said to be a valid assessment rather has to be termed as bad in law.
6. In view of the above admitted facts that the notices in question (which have been relied by the AO for assessment under Section 144 of the Act) were neither sent at the assessee's address at Jaipur nor served upon the assessee, the assessment order under appeal is declared to be bad in law and consequently quashed. AO may proceed from the stage of issuance and service of a proper notice, if the law relating to limitation permits so.