Reassessment Notice Validity and Jurisdiction Disputes Must

Reassessment Notice Validity and Jurisdiction Disputes Must Be Remanded to Assessing Officer for Verification

Issue

Whether valid service of a Section 148 notice (by affixation under the Code of Civil Procedure) and the correct jurisdiction of the issuing Assessing Officer are mandatory prerequisites for assuming valid reassessment jurisdiction, requiring factual verification.

Facts

The revenue initiated reassessment proceedings against the assessee under Section 147/148 of the Income-tax Act for the assessment year 2012-13.
The assessee challenged the validity of these proceedings, claiming they never received the statutory notice under Section 148.
The revenue contended that the notice was validly served by affixation in accordance with the proper legal procedure.
The assessee further objected to the assessment on the grounds that the Section 148 notice was issued by an Assessing Officer who lacked the correct legal and territorial jurisdiction under Section 124.

Decision

Held, that proper and valid service of the statutory notice under Section 148 is a mandatory, non-negotiable prerequisite for the revenue to assume jurisdiction and continue reassessment proceedings.
Held, that because the proper execution of service by affixation was disputed, the issue is remanded to the file of the Assessing Officer to verify compliance with all legal procedures (including Order V Rule 17 of the CPC) and adjudicate afresh.
Held, that the objection regarding the non-jurisdictional Assessing Officer must also be remanded to the Assessing Officer to verify the correct jurisdiction from the official assessment records and decide the issue afresh.

Key Takeaways

Notice Service is Sacred: Procedural compliance with service rules is not a mere technicality. If the revenue fails to follow the strict rules of service (such as those governing affixation under the CPC), they cannot legally assume jurisdiction to reopen an assessment.

Jurisdiction Cannot Be Assumed: A reassessment notice issued by an officer who lacks correct territorial or functional jurisdiction is fundamentally flawed. Any such jurisdictional challenge must be resolved by verifying the official allocation of tax circles.

IN THE ITAT AMRITSAR BENCH

Gulshan Vohra

Income-tax Officer

Udayan Das Gupta, Judicial Member
and DR. DIPAK P. RIPOTE, Accountant Member

IT Appeal No. 436 (Asr) of 2025
[Assessment year 2012-13]

MAY 27, 2026

Rajan Srivastava, CA for the Appellant. Charan Dass, Sr. DR for the Respondent.

ORDER

Udayan Dasgupta, Judicial Member.- This appeal is filed by the assessee against the order of ld. CIT(A), NFAC, Delhi, passed u/s 250 of the IT Act, 1961 (henceforth the Act) dated 19.03.2025, which has emanated from the order of the AO, Ward- 4 (2), Amritsar, passed u/s 147 r.w.s. 144 of the Act, dated 09.12.2019.

2. The grounds of appeal raised in Form 36 are as follows:

“1.

That the Learned Assessing Officer erred in law by imposing tax and penalties on appellant where no service of notice under section 1418 of the income Tax Act 1961 was ever done by learned assessing officer through speed post and by way of affixture. Without services of notice the addition has to be deleted for the sake of natural justice and judicial review.

That the learned Assessing Officer erred in law by imposing tas and penalties on appellant as Non PAN case whereas appellant is regularly filing his return of income to their ward with same name So the approval taken from prescribed authority and assessment completed without application of mind by the learned assessing officer. So assessment so completed is bad in law, illegal and liable to quash.

That the learned AO erred in law by sending notices on wrong addresses le different address, const helongs to appetant address. Notices were sent on VPO Ajnala, Amritsar Punjab instead of correct address VPO Chogawan, Ajnala, Amritsar No service through affixture and speed post has been ever done by the learned assessing officer on appellant. Difference between VPO Ajnala and VPO Chogawan is of 25 K.M. So assessment so completed is bad in law, illegal and liable to quash.

That the Learned Assessing Officer Ward no 4(2), Amritsar erred in law by issuing notice under section 148 of the income Tax Act, 1961 without jurisdiction and which was not served on appellant through speed post and affixture. Actual Jurisdiction lie with Ward no 5. Amritsar as per return of income filed. So assessment completed without having jurisdiction is also bad in taw, legal and liable to quash.

That the Learned Assessing Officer Ward no 4(2), Amritsar erred in law by issuing notite under section 148 of the Income Tax Act, 1961 without any DIN So notice under section 148 without DIN is void ab intio and also bad in law, unjust and illegal and liable to quash.

That the learned assessing officer erred in law by not allowing opportunity of being heard to the appellant by issuing notice on wrong address, which does not belong to the appellant. Again Commissioner of income Tax (Appeals) also did not give opportunity of being heard to the appellant, when the appellant furnished a part reply and request for adjournment to the Commissioner of Income Tax (Appeals) but no adjournment was granted and arbitrary order without application of mind was passed without giving any opportunity of being heard So assessment completed without allowing opportunity of being heard is bad in law, unjust and liable to quash.

That the learned AO erred in law by imposing tax and penalties on rural agriculture land, which is not a capital asset as per provisions of Income Tax Act, 1961 The learned Commissioner of Income (Appeals) also erred in law by imposing tax and penalties on rural agriculture land, which is not a capital asset as per provisions of Income Tax Act, 1961. The learned Commissioner of Income (Appeals) erred in law by passing order a vague order not clearly mentioned the facts case and on the basis of decision of Andhra Pradesh High Court Shareefa Beevi’s case without considering the facts of the case different from judgement followed. So assessment so completed is bad in law, illegal and liable to quash.

That the learned Assessung Officer erred in law by imposing tax and penalties on appellant for full value of consideration when appellant is owner for 1/4 th share in agriculture land and without giving benefit of indexation and cost of acquisition to the appellant. Raja Benoy Kumar Sahas Roy [1957] 32 ITR 466 (SC) v. Commissioner of Income Tax has different facts of case regarding agriculture income but in our case we are contesting on applicability of Capital Asset rural agriculture land. Moreover Raja Benay Kumar Sahas Roy [1957] 32 ITR 466 (SC) v. Commissioner of Income Tax is in favour of assesse by the Apex Supreme Court. So the assessment completed by learned assessing officer and Commissioner of Income Tax (Appeals) was without application of mind So assessment so completed is bad in law, illegal and liable to quash.

That the learned Commissioner of Tax (Appeals) has also applied landmark judgement of Shareefa Beevi in his decision while dismissing the appeal of the appellant but we did not find any such case and fact of the case. The order passed by the learned Commissioner of Tax (Appeals) is arbitrary and without application of mind. So assessment so completed is bad in law, illegal and liable to quash.

That the penalty proceedings u/s 271F. 271(1)(b) and 271(1)(c) of the income Tax Act, 1961 has been wrongly initiated.

11.

That the interest u/s 234A and 234B has been wrongly and illegally charged.

12.

Any other ground may be taken at the time of hearing.

13.

That the appellant reserve the right to add/amend/alter/delete the ground of appeals during appellant proceedings.”

3. From the above grounds of appeal it seems that the grievance of the assessee are all directed against the AO , rather than the order of the Ld CIT(A), except in ground number 9 and 10 , of the appeal memo.

3.1 Brief facts emerging from records are that the assessee an individual is regularly assessed to tax and has digitally filed his return for the assessment year 2012-13 (i.e. year under appeal on 22.02.2013 before AO – Ward -5, as per ITR – 4 enclosed in the paper book page 14, disclosing a total income of Rs.2.69 lakhs). Subsequently notice has been issued u/s 148 by the AO, Ward-4(2), Amritsar on the basis of information received that the assessee has sold immoveable property amounting to Rs.73.16 lakhs and has not paid capital gains tax on the said amount. It is further observed that service of notice u/s 148 dated 29^th March, 2019, has been claimed by the AO to have been made by affixation as per Code of Civil Procedure, 1908 (5 of 1908), after the notice issued by speed post has been returned unserved, which the assessee claimed to have been issued at a wrong address not belonging to the assessee.

3.2 Subsequently, in absence of any response from the assessee to various notices issued u/s 142(1), in course of assessment proceedings, the same was finally completed on a total income of Rs.73.16 lakhs being the long term capital gains determined on the sale of the immoveable property .

4. The matter carried in appeal before the ld. first appellate authority has been dismissed after considering written submissions filed by the assessee during the appellate proceedings.

4.1 During the course of first appellate proceedings, the mode of service of notice was challenged to which the Id. CIT(A) has observed in page – 6 para – VI of the order as under:

“VI. REPLY TO THE MAIN ARGUMENTS OF THE ASSESSEE ON SERVICE OF NOTICE – Proceedings under section 147 was initiated and notice under section 148 of the Income Tax Act, 1961 dated 29.03.2019 was issued after getting the approval of Pr. Commissioner of Income Tax-2, Amritsar through Speed Post, received back un-served and affixture was made. The assessment order is clear on this point. The moot point is the notice is served through ‘AFFIXTURE’ which is an accepted method of service of notice as per rules. It is not that the assessee did not receive the Self attested notice, the argument raised is that it is through affixture. Two concerns raised are that affixture should contain the name and address of the witnesses. The affixture is done through the inspector in the office, a copy of the same is usually available in the file. Since the assessee’s main arguments are on the technical side, if the assessee requires copy of the notice affixed, the same shall be collected from the assessing officer. As of now I take umbrage under section 292B.

[Return of income, etc., not to be invalid on certain grounds.

292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.

Even if the service of notice is not proper name and address of the witness not there as per the assessee, served on the wrong address 25 kms away still the assessment order passed without service of notice under section 148 of the Act is not bad in law, illegal and liable to quashed. The service of notice is correct as per the provisions of section 292B of the Act. To add here that notice under section 148 of the Income Tax Act, 1961 issued on 29.03.2019 was without DIN, having wrong address and not tenable in law. It will be in point to add here that notice u/s 148 of the Income Tax Act, 1961 was not served due to wrong address mentioned by LAO.

These arguments are again countered by section 292B which will contain all arguments raised. The notice is treated as a valid notice as per the provisions of section 292B.”

5. On the merits of the case, regarding the nature and situation of the land as to whether the same is an agricultural land exempted u/s 2(14)(iii) of the Act, the observation of the ld. CIT(A) in para 7.3 (page -10) of the appeal order is reproduced as under :

“The Full Bench of the Andhra Pradesh High Court evolved the following eight indicators to determine whether a land is in agricultural land, viz.,.:

(1) The words ‘agricultural land’ occurring in Section 2(e) (i) of the Wealth-tax Act should be given the same meaning as the said expression bears in entry 86 of List I and given the widest meaning;

(2) the said expression not having been defined in the Constitution, it must be given the meaning which it ordinarily bears in the English language and as understood in ordinary parlance;

(3) the actual use of the land for agriculture is one of the indicia for determining the character of the land as agricultural land;

(4) land which is left barren but which is capable of being cultivated can also be ‘agricultural land’ unless the said land is actually put to some other non-agricultural purpose, like construction of buildings or an aerodrome, runway, etc., thereon, which alters the physical character of the land rendering it unfit for immediate cultivation;

(5) if land is assessed to land revenue as agricultural land under the State revenue law, it is a strong piece of evidence of its character as agricultural land;

(6) mere enclosure of the land does not by itself render it a non-agricultural land;

(7) the character of the land is not determined by the nature of the products raised, so long as the land is used or can be sued for raising valuable plants or crops or trees or for any other purpose of husbandry;

(8) the situation of the land in a village or in an urban area is not by itself determinative of its character.”

Relying on the above observations the appeal of the assessee has been dismissed .

6. Now the assessee is before the tribunal on the ground contained in the memorandum of appeal.

7. The assessee has challenged the assessment on legal grounds as well as on merits of the case.

8. On the legal issue the assessee has disputed the service of notice u/s 148 by affixation on the ground that proper procedure laid down as per provisions of Civil Procedure Code has not been followed in the instant case. The assessee has also challenged that the service of notice by affixation is not supported by any affixture report, independent witness or compliance with section 282 of the Act read with Order V Rules 12, 17 and 19 of CPC, 1908 and has also disputed the affixation of notice on the ground that the same has an incorrect address without any affixation order and without any independent witness and in support of his contention he relied on the Hon’ble Apex Court’s decision in the case of CIT v. Laxman Das Khandelwal 417 ITR 325 (SC) to argue that the provisions of section 292B cannot cure non service of statutory notice or invalid service of notice u/s 148 because the same is not a procedural defect.

8.1 Thereafter, another legal issue taken up by the ld. AR is the jurisdictional issue where he further submitted, that the issue of notice u/s 148 has been made by a non-jurisdictional AO. It was pointed out that the notice u/s 148 dated 29.03.2019 has been issued by ITO Ward 4(2), Amritsar and the subsequent notice u/s 142(1) dated 23.10.2019 has also been issued by the same AO (copies placed in paper book page 8 and 9), whereas the jurisdiction lies with ITO – 5(2) Amritsar.

8.2 He further submitted that the ITO who holds valid jurisdiction over the assessee is ITO Ward 5(2)/ Amritsar, before whom the return of income for the year has been submitted (copy placed in paper book page 14). He submitted that when the reasons for reopening of assessment were recorded by an AO who had no jurisdiction over the assessee, the said notice issued u/s 148 was invalid. He further relied on the decision of the Kolkata Tribunal in the case of Aereo Dealcomm (P.) Ltd. v. ITO [IT Appeal No. 2484 (Kol) of 2019, dated 29-05-2020]/2020 (6) TMI 8 Kolkata to submit that in absence of any notice of reopening u/s 148 , given by the AO having jurisdiction over the assessee and in absence of any reasons being recorded by the jurisdictional AO, the notice issued u/s 148 by the AO who has no jurisdiction over the assessee, is null and void.

8.3 He further submitted that the belief or the reasons to belief that income chargeable to tax as escaped assessment must be that of jurisdictional AO and in the instant case, the jurisdiction of the assessee lies with AO Ward 5(2), Amritsar and not ITO Ward 4(2) .

8.4 On merits of the case, he submitted that the assessee has sold agricultural land and the said land in question was located in Village Billron, Tehsil Garhshankar, District Hoshiarpur, which is a rural agricultural area, and the assessee was holding the land as a co-owner having ¼ share (25% share as coowner) in the said property. In the instant case, the AO has considered the entire sale proceeds in the hands of the assessee without considering the factual aspect of the matter that the assessee is only (one fourth) ¼ co-owner in the said transaction of sale. He further submitted that the said property was purchased in the year 2005 and the AO has not allowed the benefit of indexed cost of acquisition on the sale of such land for determination of capital gains. He further submitted that without prejudice to the jurisdictional objections already raised , the rural agricultural land sold , is not a capital asset within the meaning of section 2(14)(iii) of the Act , and as such, the same cannot be subjected to capital gain tax.

8.5 As such, relying on the challenge to the legal issue regarding non service of notice u/s 148 and also the fact that the notice has been issued by a non-jurisdictional AO, the ld. AR of the assessee prayed for quashing of the assessment order on the legal grounds itself and has also prayed for deletion of the addition on merits of the case, the land in question being a rural agricultural land and does not qualify within the definition of capital asset.

9. Per contra, the ld. DR relied on the order of the ld. CIT(A) and submitted that in the instant case, though it is admitted by the AO that the notice issued vide speed post has been returned back unserved, subsequently the AO has taken adequate steps to serve the notice by affixation.

9.1 The Ld DR further submitted that the affixation has been made as per the procedure laid down under CPC 1908 (5 of 1908) order V, Rule 17, and is duly witnessed. He further submitted that he may be allowed further time for examination of assessment records and for furnishing of documentary evidences regarding actual service of notice u/s 148 through affixation as provided under law.

9.2 The Ld DR further relied on the decision of Hon’ble jurisdictional High court in the case of CIT v. Jasbir Singh [IT Appeal No. 253 (P&H) of 2012 to submit that when the proceedings has been started by the AO correctly and the same were found to be defective on technical and procedural ground on service of the assessee liability of payment and capital gain tax which has accrued against the assessee would not be lost and forgotten.

“(ii) CIT v. Jasbir singh ITA 253 of 2012(P&H)- “Because of procedural lapses, the assessee should not be a gainer and that too by default to escape his liability. Sequelly, order of the Tribunal also lacks merit Looking from another angle, default made by the revenue in compliance with the procedure in place for service of the assessee ipso-facto, is not a circumstance to let the assessee go scot free from the taxation regime when his liability of payment of capital gain tax is not Questioned. When the proceedings had been started by the Income Tax Officer, Kapurthala-1, Kapurthala but the same were found to be defective on technical and procedural grounds of service of the assessee, liability of payment and capital gains tax which had accrued against the assessee, would not be lost sight of and forgotten, as has been projected by the assessee”.

9.3 Thereafter the Ld DR relied on the Hon’ble Apex Court decision in the case of CIT v. Jai Prakash Singh (SC)/[1996] 219 ITR 737 (SC) where the Hon’ble Court has held.

“(iii) CIT v. Jai Prakash Singh (SC)/[1996] 219 ITR 737 (SC) holding that “The lack for a notice does not amount to the revenue authority having had no jurisdiction to assess, but that the assessment was defective by reason of notice not having been given to her. An assessment proceeding does not cease to be a proceeding under the Act merely by reason of want of notice. It will be a proceeding liable to be challenged and corrected.”

9.4 Regarding the jurisdictional issue the ld. DR further submitted that the jurisdictional issue was not raised by the assessee in course of assessment proceedings and it is seen from records that the assessee has not challenged the issue of jurisdiction u/s 124(3) of the Act , neither before the AO , nor even in first appeal before the ld. CIT(A) and as evident from records , there is no ground in Form 35 challenging the jurisdiction of the AO. The issue of jurisdiction is taken for the first time before the tribunal at appellate stage and since the same is being raised for the first time in appeal it is to be factually verified as to which AO holds the jurisdiction over the assessee , because no document or assessment order has been filed on record as proof that assessment has been completed earlier by the AO-, Ward 5(2), Amritsar as claimed by the assessee.

9.5 However, on merits of the case, regarding the share in agricultural land as claimed by the assessee where the assessee has claimed to be only ¼ co-owner of the entire property and considering the location and utilisation of the same for agricultural purpose , whether at all the same can be termed as agricultural land or as a capital asset, and also considering the factual issue raised that benefit of index cost of acquisition has not been allowed by the AO while computing the capital gains, the ld. DR has no objection if the matter is remanded back for fresh assessment after considering all factual aspect of the matter more so when the assessment order has been passed exparte u/s 144.

10. We have heard the rival submission and considered the materials on record and we find that in the instant case, the prima facie requirement for a valid jurisdiction is to issue and serve the statutory notice u/s 148.

10.1 In the instant case, it is admitted by the AO in the assessment order itself that the notice issued by speed post has been returned unserved, but subsequently, the AO has claimed to have made proper service of notice by affixation as per procedure laid down by order V , Rule 17 of CPC 1908.

10.2 However, when service of notice is being challenged by the assessee it is the duty of the AO to produce documentary evidences to prove service, and in this case, it is claimed to have done by affixation as per procedure.

10.3 The ld. first appellate authority has given a finding in the appellate order para 6 that the affixation is done through the inspector and in the office a copy of the same is available in the file. We are of the opinion that valid and proper service of statutory notice u/s 148 is basic mandatory requirement for assumption of valid jurisdiction and for continuation of assessment proceedings. In the instant case, we find that contrary claims are made by rival counsels regarding service of notice u/s 148 by affixation and the ld. DR has also filed written request for time for production of documentary evidence regarding service of notice through affixation.

10.4 We also find that the jurisdictional issue raised by the ld. AR where he has claimed the jurisdiction in this case, lies with the AO Ward 5(2) Amritsar, whereas the notice u/s 148 as placed in paper book has been issued by AO Ward 4(2), Amritsar, also needs to be verified from assessment records as to the correct jurisdictional AO, because no assessment records of earlier years has been placed before us to prove the jurisdictional AO of the assessee, and in absence of any ground in form – 35, the assessee has also not challenged the jurisdiction even in first appeal.

10.5 On merits of the case, we also find that the claim of the assessee that the land is situated in locality which is a rural village of Billron and the same is agricultural land which does not fall under the category of capital asset, and the fact that the assessee is a simply a co-owner holding ¼ share (one fourth) in the total property and further more the benefit of indexed cost of acquisition has not been allowed by the AO in absence of documentary evidence before him, we are of the opinion in the interest of justice, the matter should be remanded back to the files of the AO for fresh assessment after considering the all factual and legal issues in the matter.

11. We are also of the opinion that the service of statutory notice u/s 148 as claimed by the AO to have been served by affixation as per proper procedure should be proved with supporting documentary evidences (as per procedure) because fresh assessment proceedings cannot survive without actual and valid service of statutory notice.

11.1 As such, we set aside the matter back to the file of the AO for fresh adjudication after considering compliance of all legal formalities.

11.2 The assessee will be allowed reasonable opportunity of being heard and notice to be issued in proper address and also in email as per portal

11.3 We have not expressed any opinion on merits of the case, and all legal issues raised by the assessee are left open.

12. In the result the appeal of the assessee is allowed for statistical purpose.