ITAT Mumbai Cancels Section 147 Reassessment For Defective Service Of Section 148 Notice

The Mumbai Bench of the Income Tax Appellate Tribunal in Ravi Dilip Waghela Vs ITO (ITA No. 1799/MUM/2025) set aside a reassessment framed under Section 147 read with Section 144 for Assessment Year 2012-13, on the fundamental ground that the jurisdictional notice issued under Section 148 had never been validly served on the assessee.

The Tribunal drew a clear distinction between:

  • Issuance of a Section 148 notice within limitation; and
  • Service of that notice in accordance with law,

and held that while the notice here was issued in time (27/03/2019), the Revenue failed to establish lawful service on the assessee. As a result, the entire reassessment—along with additions aggregating to ₹1,46,47,500 under Section 68 and Section 69C—was quashed.

The appeal also involved a background dispute where the assessee alleged misuse of his KYC documents by a former employer, resulting in the creation of a different PAN and a proprietary concern named M/s Kingsy Pharma. The Tribunal, however, consciously refrained from ruling on those factual allegations, having already concluded that the reassessment itself was jurisdictionally void.

Background: Information Triggering The Reopening

Accommodation Entry Allegations

The reassessment proceedings arose from information shared by ADIT, Unit 2(2), Mumbai, via letter dated 19.03.2018. As per that communication:

  • Enquiries were made in the case of Shri Yogesh D. Waghela, proprietor of M/s Brown Pharmaceuticals and Chemicals.
  • M/s Brown Pharmaceuticals and Chemicals was stated to have been identified by the Maharashtra State VAT Department as a concern providing accommodation entries.
  • Examination of the relevant bank account revealed:
    • Debit entry of Rs.1,27,62,500; and
    • Credit entry of Rs.18,85,000
      in the name of M/s Kingsy Pharma, described as the proprietary concern of the assessee under PAN ABRPW5450E.

Acting on this information, the Assessing Officer initiated proceedings under Section 147 and issued a notice under Section 148 on 27.03.2019.

Additions Made In Reassessment

The reassessment order passed under Section 144 read with Section 147 proceeded ex parte and:

  • Treated Rs.1,27,62,500 as unexplained expenditure under Section 69C;
  • Treated Rs.18,85,000 as unexplained cash credit under Section 68;
  • Took the returned income at Rs.10,000;
  • Assessed total income at **Rs.1,46,57,500`.

These additions were challenged before the CIT(A) and further before the ITAT. However, at the threshold, the assessee pressed a legal ground questioning the very validity of reassessment on account of non-service of the Section 148 notice.

Assessee’s Stand: PAN Misuse And Lack Of Connection With Kingsy Pharma

Dispute Regarding PAN

The assessee consistently maintained throughout the assessment, appellate, and Tribunal proceedings that:

  • His actual and regularly used PAN is ACRPW8234D;
  • PAN ABRPW5450E, on the basis of which information had been received and reopening initiated, was not his.

He claimed to have been an office boy employed with one Shri Veeru Mehta for about 18 months from September 2009, drawing a monthly salary of Rs.3,500. According to him:

  • He had handed over his signatures and KYC papers to the employer, believing they were needed for employment and security purposes;
  • These documents were allegedly misused to obtain PAN ABRPW5450E and to create and operate M/s Kingsy Pharma and its bank account;
  • He neither carried on any business under the name M/s Kingsy Pharma, nor controlled the related bank account or transactions.

The Tribunal expressly noted these assertions but declined to adjudicate them, since the appeal could be resolved on the pure legal issue of valid service of the jurisdictional notice under Section 148.

Service Of Section 148 Notice: Factual Chronology Examined

Initial Dispatch And Unserved Notice

The Section 148 notice dated 27.03.2019 was first issued:

  • To the address:
    "4/532, Kherwadi GSC, Government Saskiya Colony, Bandra East, Mumbai–400051",
  • Mentioning PAN ABRPW5450E.

The copy of the notice in the record bore an endorsement showing that it remained unserved.

However, the form in which the Assessing Officer had recorded the reasons for reopening under Section 147 and obtained approval from the Principal Commissioner displayed a different address:

  • "5th Floor, Sonam Apartment, behind Ajay Nagar, Kasar Ali, Bhiwandi–421302".

Information About Non-Residence At Bhiwandi Address

The departmental record indicated that:

  • The authorities had received inputs that the assessee did not reside at the Bhiwandi address;
  • Notices sent to that address were being returned.

Despite this information, the AO attempted service at that location by way of affixture.

Affixture At Locked Room In Sonam Apartment

An Inspector’s report dated 16.07.2019 stated that:

  • He visited Sonam Apartment, Bhiwandi;
  • Found a room locked;
  • Affixed the Section 148 notice on the door of that room.