Assistant Commissioner Of Income Tax vs Vindhya Telelinks Ltd. on 22 September, 2006

[Cites 59, Cited by 1]

Income Tax Appellate Tribunal - Jabalpur

Assistant Commissioner Of Income Tax vs Vindhya Telelinks Ltd. on 22 September, 2006

Equivalent citations: (2007)107TTJ(JAB)149

ORDER

U.B.S. Bedi, J.M.

1. This appeal of the Revenue and cross-objection of the assessee arise out of the order passed by learned CIT(A), Jabalpur dt. 20th Sept., 2002 relevant to asst. yr. 1993-94.

2. In the appeal of the Revenue, the following effective grounds have been raised:

On the facts and in the circumstances of the case, the learned CIT(A) erred in:

1. Holding that the reopening of the assessment under Section 147 was bad in law without properly appreciating the facts of the case.

2. Holding that the reopening of assessment was not valid since there was no proper service of notice, especially ignoring the decision of the Hon'ble Delhi High Court in R.L. Narang v. CIT .

3. Holding that the claim of the assessee of Rs. 12.17 lakhs was revenue expenditure as against capital expenditure as held by the AO, especially ignoring the decision in the case of Shree Digvijay Cement Co. Ltd. v. CIT , CIT v. Vummidi Bangaru Chetty & Company 168 ITR 453 (sic).

4. In allowing deduction under Section 80-I to the assessee without deducting carry forward losses without properly appreciating the facts of the case, ignoring the provision of Section 80B(5) and especially ignoring the decision in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT and CIT v. Canara Workshops (P) Ltd. .

3. In the cross-objection of the assessee, the following effective grounds have been raised:

1. The learned CIT(A) was justified in holding that reopening of assessment was not proper.

2. The learned CIT(A) was justified in holding that reopening of assessment at the instance of audit party is not permissible under the law and is against the judicial pronouncement.

3. The learned CIT(A) was justified in holding that there was no service of notice under Section 148 and therefore the entire assessment was bad in law.

4. The appellant is relying on decision of R.L. Narang which is actually against the appellant. The appellant is not appreciating that valid notice under Section 148 is a condition precedent to the validity of the reassessment.

5. The learned CIT(A) was justified in holding that entire expenditure of issue of rights share of Rs. 12.17 lakhs was revenue in nature and was rightly allowable under IT Act.

6. The learned CIT(A) was justified in holding that AO while calculating deduction under Section 80-I was not justified in deducting losses of Unit II again in asst. yr. 1993-94 when the loss was adjusted against income from other units in asst. yr. 1992-93 itself and was not carried forward.

7. The decision of Cambay Electric Supply Industrial Company Ltd. relied on by the appellant is not applicable to the present case as no loss is carried forward from asst. yr. 1992-93.

8. The decision of CIT v. Canara Workshops (P) Ltd. relied on by the appellant does not help the assessee (sic) as deduction under Section 80-I has been computed from income of Unit II only.

4. Ground Nos. 1 and 2 of the Revenue's appeal relate to challenge about learned CIT(A)'s order in holding that there was no proper service of notice under Section 148. Brief facts are that the assessee filed return of income for asst. yr. 1993-94 on 31st Dec, 1993 accompanied with audited copy of accounts and audit report with various prescribed particulars. The assessment was completed on 23rd Nov., 1994 under Section 143(3). Having aggrieved with this order, the assessee company filed appeal before learned CIT(A), Jabalpur which was disposed of by him on 7th Feb., 1995. Subsequently order under Section 263 of the IT Act was passed on 25th March, 1998 by the CIT, Jabalpur. Against this order, the Tribunal accepted the appeal and quashed the order of CIT against which appeal was preferred by the Department before the High Court of Madhya Pradesh which is registered as IT Appeal No. 112 which is stated to be pending.

5. The notice under Section 148 dt. 23rd Oct., 2000 was issued for the reasons that:

(1) Original assessment was completed under Section 143(3) on 23rd Nov., 1994 at the income of Rs. 8,24,56,810 and deduction under Section 80-I was allowed after reducing the amount of deduction under Section 80HH of the IT Act. The assessee preferred an appeal before CIT(A), Jabalpur. The CIT(A) directed to allow deduction under Section 80-I on gross income vide his order dt. 7th Feb., 1995.

(2) On perusal of record shows that the assessee company has debited in P&L a/c at Rs. 12.17 lakhs on account of expenditure of issue of right shares. This expenditure is not allowable being of capital nature. Further it has also been noticed that the positive income of Rs. 8,85,59,094 was offered from Unit II on which deduction under Section 80HH at Rs. 1,77,11,819 and Section 80-I at Rs. 2,21,39,774 totalling Rs. 3,98,51,597 was allowed without reducing earlier years, losses amounting to Rs. .... This resulted in excess allowance of deduction under Sections 80HH and 80-I at Rs. 1,75,44,375 (Rs. 77,97,500 + Rs. 97,46,875) with short levy of tax Rs. 90,79,214.

6. The AO, therefore, concluded that the income had been underassessed to the tune of Rs. 1,87,61,375 (Rs. 12,17,000 + Rs. 1,75,44,375) within the meaning of Section 147(a) of the IT Act. It was argued by the representative of the assessee that no notice under Section 148 was ever served upon the assessee and, therefore, the entire proceedings and the assessment completed under Section 147 was bad in law. It was further contended that as the reasons for reopening the assessment were not being disclosed, the assessee attended the office of the AO and filed another letter on 17th Jan., 2002 requesting to disclose the reasons for reopening of the assessment. The AO disclosed the reasons to the assessee, on the basis of which it was contended by him that the assessment was reopened only to tax expenditure incurred on raising right issues and to revise computation of deduction under Section 80-I of the IT Act. It was vehemently argued that as per the proviso to Section 147 the AO could acquire jurisdiction to reopen the assessment only if he had reason to believe that income chargeable to tax had escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts. Since all the facts were within the knowledge of the Department and after appreciating the same only the assessment was completed on 23rd Nov., 1994 and as there was no failure on the part of the assessee to disclose fully and truly all the material facts necessary for the purpose of assessment, the reopening of assessment beyond the period of 4 years was contrary to the provision of Section 147. This exercise undertaken by the AO was in the nature of re-examination of same set of facts, which had already been examined by his predecessor and even by the CIT in his order under Section 263 of the IT Act. It was also contended that the assessment was reopened at the instance of the audit party which was against the judicial pronouncement by the Hon'ble Supreme Court in the case of CIT v. Lucas T.V.S. Ltd. (2001) 168 CTR (SC) 311 : (2001) 249 ITR 306 (SC).

7. So far as the service of the notice under Section 148 upon the assessee is concerned, the learned CIT(A) observed that as per assessment order it was sent to the assessee by registered post on 23rd Oct., 2000. By this it was concluded by the AO that the notice was served upon the assessee. It was argued by the AO in his assessment order as under:

It is, therefore, the matter of maintenance of the record of the assessee company and it should have traced out the notice from its own record. Since the notice was issued to the assessee, it must have been received by it which should have been traced out by it and compliance to it should have been made. It is, therefore, clear that it was not the mistake of the Department but of the assessee who failed to trace out the notice under Section 148 from its record.

8. From the above, it appears that the AO did not try to bring out on record as to on whom and when the notice was effectively served. It was only the presumption of the AO that since the notice was issued, it must have been received by the assessee. However, it was not a correct legal position. It was the onus of the AO to bring out in the assessment order as to whom and when the notice was effectively served upon the assessee. Even in his parawise comments dt. 8th Aug., 2002 the AO has only commented that the notice under Section 148 was sent to the assessee on 23rd Oct., 2000 by registered post, but it is silent so far as its service upon the assessee is concerned. Even the acknowledgement card of the Postal Department is not available to verify as to whom this notice was served or who was the person who received this notice on behalf of the assessee company. Learned CIT(A) thus opined that apparently under the circumstances, it cannot be said that there was any effective service of notice under Section 148, and, therefore, it renders, consequentially, the entire assessment to be bad in law.

9. Against such observation of learned CIT(A), Department is in appeal and it is contended that while holding so learned CIT(A) has ignored the decision of Delhi High Court in the case of R.L. Narang v. CIT . Since notice was sent by registered post after pre-payment of postal charges and address as given in the notice has not been challenged. Therefore, presumption would be that the notice has been properly served and otherwise this is a case of limited company whose turnover is Rs. 14,157.48 lakhs and it is established company whose registered office is existing since long at a place which has been mentioned in the notice. Therefore, in the absence of categorical denial on oath, presumption would be that there is proper service of the notice. Therefore, action of learned CIT(A) in treating the service of the notice to be not proper is not legally correct and his order in this regard deserves to be vacated. It was urged for vacation of the order of learned CIT(A) in this regard.

10. Learned Counsel for the assessee while relying upon the basis and reasoning as given by learned CIT(A) has pleaded for confirmation of the impugned order. It was further contended that since acknowledgement is not placed on record so learned CIT(A) has rightly observed the service of notice was not proper because it is not known to whom this notice was served or who was the person who received this notice on behalf of the assessee company. It was thus urged for confirmation of the impugned order on this point.

11. After hearing both the sides and considering the material on record as well as precedent relied upon, we find that service of notice generally as per Section 282(1) provides that a notice or requisition under the IT Act may be served on the person therein named either by post or as if it were a summons issued by a Court under the CPC, 1908 (5 of 1908) and in this case notice under Section 148 has been sent by registered post and Section 27 of the General Clauses Act gives meaning of service by post as under:

Where any Central Act or regulation made after the commencement of this Act authorises or requires any document to be served by post, whether the expression 'serve' or either of the expressions 'give' or 'send' or any other expression is used, then unless a different intention appears, the service shall be deemed to be effected by properly addressing, pro paying and posting by registered post, a letter containing the document and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.

12. Since the expression by post implies service by registered post so sending notice by registered post is valid service and Section 27 of General Clauses Act, 1897, creates rebuttable presumption that service shall be deemed to be effective by properly addressing, posting by registered post at the time at which the letter would be ordinarily delivered. The presumption can be rebutted by stating on oath that the notice was never tendered as held by Hon'ble Supreme Court in the case of R.K. Vashisth v. Union of India (1993) Supp (1) SCC 431. In this case the assessee has not disputed the address given in the notice and otherwise also it is a case of a company which has magnitude of crores of turnover every year and has not disputed the address of registered office as given in the notice and nowhere it has challenged as wrong address and the assessee has also not stated on oath that notice has not been received by it. Therefore, since the presumption has not been rebutted by the assessee, as such, it is held that notice is properly served and order of CIT(A) in this regard is not correct and as such is reversed.

13. It is undisputed fact that no doubt the assessee has challenged that notice has not properly been served upon the assessee, yet he has acted upon the notice and filed return in response thereto and also raised objection with regard to the legality of the notice and the AO without considering and disposing of such objection has proceeded to make reassessment in this case. Hon'ble Supreme Court in the case GKN Driveshafts (India) Ltd. v. ITO & Ors. (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC) has categorically held as under:

On receiving notices under Section 148 the appellant filed the returns. The appellant also received notices under Section 143(2) calling for further information on certain points in connection with the returns. Thereupon the appellant filed writ petitions challenging the notices. The High Court dismissed the writ petitions holding that the petitions were premature and the appellant could raise its objections to the notices by filing reply to the notices before the AO [see GKN Driveshafts (India) Ltd. v. ITO ]. The appellant preferred appeals and the Supreme Court dismissed the appeals, observing that since the reasons for reopening of assessments under Section 148 had been disclosed in respect of five assessment years, the AO had to dispose of the objections, if filed, by passing a speaking order before proceeding with the assessments for those years.

14. Therefore, taking into consideration the entirety of facts and circumstances and the authoritative pronouncement of Hon'ble Supreme Court as reproduced above, we are of the view that the AO was duty bound to consider and dispose of objection filed against notice under Section 148 before proceeding further in the matter for reassessment. Since said procedure has not been adopted by the AO, so his order cannot be held to be valid and proper order, so all further proceedings are not sustainable. Therefore, we find it just and appropriate to set aside the orders of authorities below and restore the matter back to the file of the AO with the direction to adopt the procedure as laid down by the Hon'ble Supreme Court before proceeding in the matter. We hold and direct accordingly.

15. Since order of authorities below is set aside on this legal issue, therefore, other grounds raised and agitated in the appeal of the Revenue and cross-objection of the assessee are not being discussed or considered.

16. As a result, the appeal and cross-objection of the assessee are disposed of accordingly.

P.K. Bansal, A.M. 16th March, 2006

1. After going through the proposed order and having discussion with my learned Brother, it is not possible for me to agree with the proposed order drafted by him in ITA No. 288/Jab/2002 and in CO No. 6/Jab/2003. Accordingly, I decided to write a separate order. Although my learned Brother has stated the brief facts of the case but in my opinion it is necessary to lay down the facts at the cost of repetition and to decide the issues involved in these appeals.

2. The brief facts of the case as gathered from the order of the AO and the CIT(A) are that the assessee a public limited company claimed the deduction of right issue expenses and also claimed deduction under Section 80-I as per the computation given in the computation of total income. The assessment was completed under Section 143(3) on 23rd Nov., 1994 on a total income of Rs. 8,24,56,810. The AO issued notice under Section 154 for carrying out the rectification in respect of right issue expenses allowed and also the deduction allowed under Section 80-I but dropped these proceedings after getting the reply of the assessee.

3. The CIT, Jabalpur passed an order dt. 23rd March, 1998 under Section 263 setting aside the assessment as according to him expenditure on raising right issue was wrongly allowed and deduction under Section 80-I was allowed in excess and directed the AO to reframe the assessment after hearing the assessee.

4. The assessee filed appeal before the Tribunal against the order passed by CIT under Section 263. The Tribunal quashed the order of the CIT in ITA No. 132/Jab/1998 vide order dt. 1st May, 1999 holding that the order passed under Section 263 was barred by limitation. Being aggrieved by the order of the Tribunal, the CIT filed appeal before the Hon'ble High Court of Madhya Pradesh at Jabalpur. It is registered as IT Appeal No. 112 of 1999 and is pending before Hon'ble High Court.

5. Subsequently, the Asstt. CIT (Circle), Satna has issued notice under Section 148 dt. 28th Oct., 2000 to the assessee by recording the following reasons:

1. Original assessment was completed under Section 143(3) on 23rd Nov., 1994 at an income of Rs. 8,24,56,810 and deduction under Section 80-I was allowed after reducing the amount of deduction under Section 80HH of the IT Act. The assessee preferred an appeal before the CIT(A), Jabalpur. The CIT(A) directed to allow deduction under Section 80-I on gross income vide order dt. 7th Feb., 1995.

2. On perusal of record shows that the AO has debited in P&L a/c at Rs. 12.17 lakhs on account of expenditure of issue of right shares. This expenditure is not allowable being of capital nature. Further it has not been noticed that the positive income of Rs. 8,85,59,094 was offered from Unit II on which deduction under Section 80HH at Rs. 1,77,11,819 and Section 80-I at Rs. 2,21,39,774 totalling Rs. 3,98,51,597 was allowed without reducing earlier years' losses amounting to Rs. 3,89,87,498. This resulted in excess allowance of deduction under Sections 80HH and 80-I at Rs. 1,75,44,375 (Rs. 77,97,500 + 97,46,875) with short levy of tax Rs. 90,79,214.

3. I have thus reason to believe that the income-tax been underassessed to the tune of Rs. 1,87,61,375 (Rs. 12,17,000 + 1,75,44,375) within the meaning of Section 147(c) of the Act. It is therefore, requested that permission to issue notice under Section 148 of the IT Act be accorded.

6. When the case was selected for scrutiny and notice under Section 142(1) was issued, the assessee vide letter dt. 11th Jan., 2002 stated that it had not received notice under Section 148 and therefore requested for allowing the inspection, the AO gave a copy of the notice under Section 148 dt. 23rd Oct., 2000 to the assessee. The AO took the view that the notice was sent to the assessee on 23rd Oct., 2000 by registered post, therefore, the assessee should have traced out the notice from its record. The assessee also stated that the action under Section 147 was barred by limitation as no action under Section 147 can be taken after the expiry of four years from the end of the relevant assessment year unless income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of assessee to disclose fully and truly all material facts necessary for assessment. The notice under Section 142 was not served before 31st March, 2001 and the AO disclosed the reasons for reopening the assessment on 17th Jan., 2002. It was also submitted that in this particular case the expenses on right issue were allowed after detailed verification, and no assessment was done after the assessment was set aside by CIT under Section 263. On merits it was also claimed that provisions of Section 35D(2)(c) were applicable to the right issue expenses. The AO did not agree with the contention of the assessee on legality as well as on merit and reassessed the income of the assessee at Rs. 8,25,95,730. The assessee went in appeal before the CIT(A). Before the CIT(A) the assessee contended that notice under Section 148 was never served upon the assessee, therefore, the assessment was bad in law. It was also contended that the assessment was barred by limitation as the reopening was beyond the period of 4 years contrary to the provisions of Section 147. The exercise undertaken by the AO was in the nature of re-examination of same set of facts which had already been examined by his predecessor and even by the CIT in his order under Section 263 of the IT Act. The CIT(A) held the assessment passed to be bad in law and invalid. In respect of the service of notice the CIT(A) observed as under:

Now so far as the service of the notice under Section 148 upon the assessee is concerned, the assessment order says that it was sent to the assessee by registered post on 23rd Oct., 2000. By this, it was concluded by the AO that the notice was served upon the assessee. It was argued by the AO in his assessment order as under:

It is, therefore, the matter of maintenance of the record of the assessee company and it should have traced out the notice from its own record. Since the notice was issued to the assessee, it must have been received by it which should have been traced out by it and compliance to it should have been made. It is, therefore, clear that it was not the mistake of the Department but of the assessee who failed to trace out the notice under Section 148 from its record.

From the above, it appears that the AO did not try to bring out on record as to on whom and when the notice was effectively served. It was only the presumption of the AO that since the notice was issued, it must have been received by the appellant. However, it was not a correct/legal situation. It was the onus of the AO to bring out in the assessment order as to whom and when the notice was effectively served upon the assessee. Even in his parawise comments dt. 8th Aug., 2002 the AO has only commented that the notice under Section 148 was sent to the assessee on 23rd Oct., 2000 by registered post, but it is silent so far as its service upon the assessee is concerned. Even the acknowledgement card of the Postal Department is not available to verify as to whom this notice was served or who was the person who received this notice on behalf of the assessee company. Apparently under the circumstances, it cannot be said that there was any effective service of notice under Section 148 and, therefore, it renders, consequently, the entire assessment to be bad in law.

7. The relevant observations in respect of time barring of the assessment are given as under:

This is a case where the deductions under Sections 80HH and 80-I were allowed and similarly expenditure claimed on account of issue of right shares was also allowed after having examined the issues in detail and after discussing the same at length. This meant that there was proper application of mind by the AO and he was conscious of the fact when he was allowing such deductions. As a matter of fact the CIT(A) vide her Order No. J/Dy. CIT (Asstt.)/136/1994-95 dt. 7th Feb., 1995 had directed the AO to allow relief under Section 80-I independently of deduction under Section 80HH. Thus it cannot be said that while allowing deductions under Sections 80HH and 80-I as well as expenditure for issue of right shares, it was not within the knowledge of the Department and, therefore, the AO was authorized to invoke the provisions of Section 147 within the meaning of proviso to this section. The AO just cannot fall back of Section 147 to make good his own deficiency in the first completed assessment. It is clearly his duty to exercise due care and caution and to make intelligent enquiry. Failure to make such enquiries at the time of original assessment does not justify proceedings for reassessment. If the assessee had disclosed all the primary facts, it was for the AO to draw proper inference as to whether the income returned was correct or not. If he fails in his duty, reassessment under the provision of Section 147, particularly keeping in view the proviso of this section would not be valid. Similar view has been taken by the Hon'ble Madhya Pradesh Court in the case of H.H. Maharaja Martand Singh Ju Deo v. WTO & Anr. further confirmed the same view and has held that since there was no failure on the part of the assessee, it did not give jurisdiction to the AO to reopen the assessment under Section 147 read with its proviso. Thus ignoring the proviso to Section 147, reopening of the assessment was not in accordance with the law and hence it was not valid. Further the matter is still sub judice before the Hon'ble Madhya Pradesh High Court. Even if the order of the Hon'ble Tribunal, Jabalpur Bench, Jabalpur is reverted and it is held by the Hon'ble High Court that the order under Section 263 was not barred by limitation, both these issues, because of which the assessment was reopened, would be examined by the Hon'ble Tribunal, Jabalpur Bench, Jabalpur on merits and decision would finally be given. Under the circumstances, invoking the provisions of Section 147 was not proper. Even reopening of assessment at the instance of audit party is not permissible under the law and is against the judicial pronouncements.

8. On merit also the CIT(A) deleted the additions made by the AO in respect of right issue expenses as well as deduction under Section 80-I.

9. The Revenue being aggrieved has come before us in appeal by taking the grounds as are produced by my learned Brother in para 2 of his proposed order. The assessee also filed the cross-objection by taking the effective grounds as are produced in para 3 by learned Brother in his proposed order.

10. Ground Nos. 1 and 2 relate to the validity of the reopening of the assessment as well as the validity of the service of the notice on the assessee. First, I would like to deal with the issue of the service of the notice. Learned Departmental Representative in this regard contended that the CIT(A) has ignored the decision of Delhi High Court in the case of R.L. Narang v. CIT . The notice was sent through registered post after prepayment of the postal charges and address as given in the notice, this has not been challenged. Therefore, the presumption would be that the notice has been properly served. This is the case of the limited company having turnover in crores and having established registered office at the place mentioned in the notice. Therefore it cannot be held that there was no proper service on the assessee. Assessee has also not filed the affidavit in this regard. The CIT(A) therefore was not correct in law in holding that there was no proper service of notice on the assessee. The learned Authorised Representative on the other hand contended on this issue that the onus lies on the Revenue to prove that the notice has been served on the assessee. The AO has merely presumed that the notice might have been served on the assessee. The CIT(A) has asked for the parawise comment of the AO but the AO has not brought on record as to on whom and when the notice was effectively served. The AO has only commented that the notice under Section 148 was sent to the assessee on 23rd Oct., 2000 by registered post. There is a clear-cut finding of the CIT(A) that even the acknowledgement card of the Postal Department is not available to verify as to whom the notice was served or who was the person who received the notice on behalf of the assessee company. In the absence of the postal acknowledgement, the address at which the notice was sent cannot be ascertained. Thus it was vehemently contended that the order of the CIT(A) be confirmed on this issue.

11. I have carefully considered the rival submissions and have also gone through the order of the CIT(A). Section 148 which requires service of notice before making reassessment under Section 147 lays down as under:

148(1) Before making the assessment, reassessment or recomputation under Section 147, the AO shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under Section 139.

12. In view of the aforesaid provisions to Section 148, I am of the view that the service of the notice under Section 148 is mandatory for upholding the proceedings initiated under Section 148. Mere issuance of notice will not suffice. The legislature does not want that the AO should issue notice and keep it with him or with his office. While issuing the notice action to be taken that is the service of notice has been explicitly mentioned in Section 148. The service of the notice is based on the cardinal principle of natural justice that if a notice is issued the parties who are going to affected must be given effective opportunity of hearing so that they can meet the requirement of the notice issued. Merely issuing the notice will not be sufficient for meeting the natural rule of law. Therefore, I am of the opinion that the service is imbued with the issue of the notice. The proceedings cannot be said to have been validly initiated unless and until the notice is served to the parties or handed over to the communicating agency so that it becomes difficult for the person who has issued it. to withdraw it. I am of the opinion that the onus is on the party who required serving the notice to prove that the notice was served. There is a clear finding given by the CIT(A) that the AO did not try to bring out on record as to on whom and when the notice was effectively served. It was only the presumption of the AO that since the notice was issued it must have been received by the assessee. It was the onus of the AO to bring out in the assessment order as to whom and when the notice was effectively served. Even in his parawise comment dt. 8th Aug., 2002 the AO has only commented that the notice under Section 148 was sent to the assessee on 23rd Oct., 2000 by registered post but it is silent so far as its service upon the assessee is concerned. The CIT(A) even after examining the record has held that even the acknowledgement card of the Postal Department is not available to verify as to whom the notice was served or who received the notice on behalf of the assessee company. This finding given by the CIT(A) was not controverted before us by the learned Departmental Representative. No proof in the form of AD was filed before us. Even the proof of sending the notice through registered post AD was not filed before the Tribunal so as to prove that the notice was sent through registered post at the address of the assessee company. In view of this clear finding of the CIT(A) which has not been controverted by the learned Departmental Representative by adducing any material or evidence, I am of the view that the Revenue has not discharged the onus that the notice has been served on the assessee as was necessary for the validity of the proceedings under Section 148. The service of the notice is simply been presumed by the AO. Section 282 which prescribes the mode of service, although mentions that the notice may be served on the person therein named either by the post or as if it were a summon issued by the Court under CPC, 1908 but it further states under Sub-section (2) that in the case of the company, it must be addressed to the principal officer thereto.

13. I have also gone through the case law of the Hon'ble Delhi High Court in the case of R.L. Narang v. CIT (supra) as relied by learned Departmental Representative. The Hon'ble Delhi High Court in this case has held as under:

The IT Act is a Central Act and Section 282 provides for service by post. As such the provisions of Section 27 of the General Clauses Act, 1897, are applicable. A perusal of Section 27 of the General Clauses Act shows that in order to presume service having been effected, the document or letter should be sent by registered post. A notice sent under certificate of posting and not by registered post would not amount to proper service.

Where a notice is served through a process server and there is neither a service report nor any evidence to show the identity of persons on whom the service was effected, there is no proper service.

Once the statement with regard to non-service of notice is accepted by the AAC and no affidavit denying service was asked for by the Tribunal, the lack of affidavit denying service is not material.

14. If we look at the facts of this case to appreciate the controversy involved in this case I am of the view that this case supports the finding given by the CIT(A). The facts of this case are that the AO issued show-cause notice on the assessee on 31st Jan., 1969 which was said to have been served on 3rd Feb., 1969 for showing cause why the penalty under Section 140A(3) be not imposed. Subsequently reminder was issued on 2nd April, 1969 under certificate of posting. On 12th June, 1969 the ex parte order under Section 140A(3) was passed by the AO. Before the first appellate authority, the assessee contended that no notice was served or received by the assessee. The AAC found that though the notice dt. 31st Jan., 1969 had been served through process server on someone signing for the assessee, there was nothing on record to indicate the identity of the person on whom the said notice was alleged to have been served on 3rd Feb., 1969. The AO did not point out whether these persons were employees or Authorised Representatives of the assessee or the person who had received such notice in the past acting for the assessee. The AAC, therefore, took the view that the assessee was not given proper opportunity and, therefore, he cancelled the penalty imposed. When the matter went before the Tribunal, the Tribunal accepted the contention of the Revenue merely based on the fact that the assessee had not filed the affidavit categorically asserting that he had not received the notice and the notice was delivered to some other person. When the matter went before the Hon'ble High Court, the Hon'ble High Court referring to the provisions of Section 282 and Section 27 of the General Clauses Act and noticing that the reminders were issued under certificate of posting and not by registered post held as under:

...We also feel that not much importance can be attached to the non-filing of an affidavit by the assessees as the AAC accepted their version without an affidavit. Once their statement with regard to non-service had been accepted by the AAC and no affidavit had been asked for thereafter at the stage of the Tribunal, we think that the lack of an affidavit is not material.

15. In the case before us the CIT(A) accepted the contention of the assessee that the notice was not served without the affidavit. The Bench has not given an opportunity to the assessee to file affidavit. Therefore, I am of the view that the Revenue has not discharged its onus to prove that the notice was served on the assessee in the absence of proving that the notice was properly addressed. I, therefore, confirm the order of the CIT(A) on this issue that under these facts and circumstances of this case it cannot be said that there was any effective service of notice under Section 148 and accordingly, in the absence of effective service of notice, the entire assessment is held to be bad in law and the grounds relating to this issue stand dismissed.

16. Now coming to the other issue in this appeal which also relates to the legality of the proceeding, the learned Departmental Representative contended that the reopening of the assessment was valid. The assessment was not time barred as the reopening was done within the time as laid under Section 147 of the IT Act. The AO noticed that a mistake of law has occurred in allowing the deduction to the assessee under Section 80-I as well as treating the expenditure incurred on the issue of right shares to be revenue expenditure. The AO while allowing this deduction has not applied his mind and the deduction was allowed merely on the basis of the computation statement filed by the assessee. It is a case where there was failure on the part of the assessee to disclose fully and truly all material facts. Therefore, the assessment could have been reopened beyond the period of 4 years. Hence, the order of the CIT(A) must be reversed. At the most the matter may be restored to the file of the AO with the direction that the AO should dispose of the objections raised by the assessee by passing a speaking order in view of the clear-cut law laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. ITO & Ors. (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC).

17. Learned Authorised Representative relied on the order of the CIT(A) and reiterated the submissions made before the CIT(A). It was contended that the notice issued under Section 148 was invalid. The proviso to Section 147 was clearly applicable in the case of the assessee. The assessment could not have been reopened after the expiry of 4 years from the end of the relevant assessment year because there was no failure on the part of the assessee to make return under Section 139 or in response to the notice issued under Section 142(1). The assessee has disclosed fully and truly all the material facts necessary for assessment of impugned assessment year. Our attention was drawn towards the computation statement. These facts were also apparent before the CIT when he initiated the proceedings under Section 263 of the IT Act. The assessment was reopened at the instance of the audit party. The entire relevant materials on the subject relating to the claim of right share issue expenditure and the claim of the deduction under Section 80-I were placed before the AO at the time of original assessment proceedings and the AO has considered the same. The proceedings initiated under Section 154 were also dropped. Even these issues were also examined by the CIT while exercising the power under Section 263. Therefore, the subsequent proceeding to reopen the completed assessment was made on the basis of the opinion of the CIT, not that of the AO. Since the order of the CIT passed under Section 263 on the same issues could not be upheld by the Tribunal, the AO invoked the provision of Section 147. Thus the proceedings were initiated on the basis of belief formed by the CIT and not on the basis of independent belief of the AO. The Revenue has gone against the order of the Tribunal before the Hon'ble Madhya Pradesh High Court and the matter relating to Section 263 is sub judice before the Hon'ble Madhya Pradesh High Court and in case the Hon'ble High Court set aside the order of the Tribunal, the order passed under Section 263 will get survived and there will be two parallel proceedings on the same issues which is not permitted in law. Even if it is considered that there was omission on the part of the AO in considering the claim of the assessee for the right issue expenses as well as the deduction under Section 80-I, the power for reopening cannot be exercised on the basis of the error of judgment. The belief entertained by the AO must be based on the reasonable ground. It must be bona fide belief. It should not be the product of imagination and speculation. The assessee is responsible to disclose only primary fact and if the AO draws wrong conclusion on such primary facts, he cannot exercise power under Section 147 to review his judgment or conclusion and to correct the erroneous finding by taking recourse to the provisions of Section 147. Reliance was heavily placed on the decision of Hon'ble Madhya Pradesh High Court in the case of H.H. Maharaja Martand Singh Ju Deo v. WTO . Our attention was drawn towards the reasons recorded by the AO. Reliance was placed on the following cases as well as the case law relied before the CIT(A):

(i) Calcutta Discount Co. Ltd. v. ITO ;

(ii) ITO v. Lakhmani Mewaldas ;

(iii) CIT v. Hindustan Metal Works (1993) 112 CTR (All) 193 : (1993) 69 Taxman 269 (All);

(iv) Parshuram Pottery Works Co. Ltd. v. ITO ;

(v) Indian Oil Corporation v. ITO ;

(vi) Raymond Woollen Mills Ltd. v. ITO ;

(vii) Avani Corporation v. ITO ;

(viii) Meghdoot Leminart (P) Ltd. v. Rajiv Sinha or his Successor in office of the Dy. CIT ;

(ix) S. Sreeramachandra Murthy & Anr. v. Dy. CIT ;

(x) Marudhar Hotels (P) Ltd. v. Dy CIT ;

(xi) Bawa Abhai Singh v. Dy. CIT (2001) 168 CTR (Del) 521 : (2002) 253 ITR 83 (Del);

(xii) Amiya Sales & Industries & Anr. v. Asstt. CIT ,

(xiii) G.N. Shaw (Wine) (P) Ltd. v. ITO ;

(xiv) Simplex Concrete Piles (India) Ltd. v. Dy. CIT .

Thus it was vehemently contended that the assessment passed must be quashed as the proceedings initiated were not only time barred as per proviso to Section 147 but were also initiated not on basis of bona fide reasons to believe. There was change of opinion on the part of the AO. This Tribunal should decide the issue regarding the validity of the assessment. The assessment should not be restored to the file of the AO as desired by the AO for deciding the objections raised by the assessee as the AO has already decided the objections raised by the assessee in the assessment order. Restoring the matter for deciding the same issue will not serve any purpose as the AO has already taken his decision which he cannot review.

18. I have considered the rival submissions and the facts and entire materials relating to the issue involved in the ground relating to the validity of the reopening of the assessment. I consider it appropriate to formulate following issues on the basis of the submissions made before us in respect of validity of the reopening of the assessment:

(i) Whether the assessment should be set aside and restored to the file of the AO with the direction that the AO should first dispose of the objection of the assessee by passing speaking order ?

(ii) Whether there was failure on the part of the assessee to disclose the material fact truly and fully, etc. in view of the provisions contained under Section 147 of the IT Act ?

(iii) Whether the notice issued under Section 148 was time barred in view of the provision contained in proviso to Section 147 ?

(iv) Whether the order of reassessment can be treated as illegal and invalid ? Issue No. (i)

19. I find from the assessment order that the assessee has objected before the AO about the legality of the proceedings initiated under Section 147. It was contended that the proceedings were barred by limitation and it could not be initiated after the expiry of 4 years. The ground relating to the non-service of the notice as per the provision of Section 148 was also taken. The ground that the conditions as stipulated under Section 147 for the initiation of the proceedings are not satisfied was also taken. The issue that on the same basis the proceedings were taken by the CIT under Section 263 was also taken. All these objections of the assessee were related to the validity of the proceedings initiated under Section 147. The AO has disposed of all of these contentions in the impugned order rejecting all the pleas of the assessee and held that the proceedings under Section 147 have been legally initiated.

20. I have also gone through the judgment of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. ITO & Ors. (supra). In this case the validity of notice under Section 148 and subsequent notice of hearing issued under Section 143(2) were challenged by (way) of writ before the Delhi High Court. Hon'ble High Court dismissed the writ petition on the ground that the assessee could take up his objections against the notice in regular appeal. When the matter went before the Hon'ble Supreme Court, Hon'ble Supreme Court while confirming the order of Hon'ble High Court has held as under:

We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the IT Act is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. The AO is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the AO is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the AO has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years.

Insofar as the appeals filed against the order of assessment before the CIT(A), we direct the appellate authority to dispose of the same, expeditiously.

With the above observations, the civil appeals are dismissed.

21. Tribunal is the second appellate authority and created under the IT Act. In this case, the AO has already disposed of the objections raised by the assessee in the assessment order itself and held the initiation of the proceedings under Section 147 to be valid one. If the plea of the learned Departmental Representative in this case is accepted and the matter is set aside and restored to the file of the AO with the direction that the AO should pass a speaking order on the objection raised by the assessee, I am of the view that no fruitful purpose will be served with such direction because the AO has already discussed all the objections raised by the assessee in the assessment order itself. It is not a case where this Tribunal is hearing the appeal of the assessee in which the objections for the validity of the initiation of the reassessment proceedings had been raised before the appellate authority for the first time. The judgment of Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. ITO & Ors. (supra) in our opinion will not assist the Revenue for obtaining the direction for the restoration of the order to the file of the AO. From the judgment of the Hon'ble Supreme Court, I noticed that the assessee has challenged the validity of the issue of notice under Section 148 by way of writ petition before Hon'ble High Court. The Hon'ble Supreme Court confirmed the order of the Hon'ble High Court directing the assessee to take the entire objections before the AO. When the matter was pending before the Hon'ble Supreme Court in two of the assessment years, the assessments were completed and the details were filed before the CIT(A). Hon'ble Supreme Court has not directed the CIT(A) to restore the order of these two assessment years to the file of the AO and directed the CIT(A) for these two assessment years to dispose of the objections of the assessee regarding the validity of the issuance of the notice under Section 147. From these directions of the Hon'ble Supreme Court to the CIT(A) where the matters were in appeals, I am of the view that if the objections relating to the issuance of the notice and the validity of the proceedings have been raised by the assessee in appellate proceedings before us, this Tribunal is bound to dispose of these objections. Otherwise also, I am of the view that restoring the matter to the file of the AO on the basis of the facts as are available on record of this case when the AO has already disposed of all these objections of the assessee in the assessment order, it would not serve any purpose if we restore the matter again to the AO with the direction that the AO should dispose of the objections of the assessee by passing a separate speaking order. The AO since had already passed the order on the objections raised by the assessee, I am of the view that AO cannot be permitted to review his own decision under the law although he is bound to give effect to the finding given by the appellate authority. The AO will again dispose of the objections in the same manner. Therefore, I am of the view that appellate authority has to decide the issue relating to the validity of the reassessment proceedings and the issuance of the notice under Section 147 and the AO can give effect to our finding. I, therefore, dismiss the plea of the learned Departmental Representative of restoring the order to the file of the AO with the direction that the AO should pass a separate speaking order for meeting out the objections made by the assessee about the validity of the issuance of the notice under Section 148. No separate appeal can be filed against order passed by the AO disposing of the objection of the assessee. Such order had to be merged in the order passed under Section 143(3) for filing the appeal. The order passed under Section 143(3) is already in appeal before us. This will only delay the justice. This is the cardinal principle of natural justice that the justice delayed is justice denied. Thus this plea of the learned Departmental Representative stands dismissed.

Issue No. (ii)

22. Now for examining the contention of the learned Authorised Representative that the notice for the reassessment was not issued on the failure on the part of the assessee to disclose the material fact truly and fully, 1 have gone through the reasons recorded by the AO reproduced hereinabove. In the reasons, nowhere it has been mentioned that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. The para 2 of the reason rather clearly states that perusal of the record shows that the assessee company has debited in P&L a/c. This means that the assessee has disclosed the fact about the claim made by the assessee in respect of expenditure incurred on right issue as well as the claim made for deduction under Section 80-I. I have also gone through the computation statement and the P&L a/c filed by the assessee along with the return. In the computation statement the assessee has clearly disclosed how the deduction under Sections 80-I and 80HH has been computed by him in respect of Unit Nos. 1 and 2. The expenses incurred on the issue of right shares are duly debited to the P&L a/c. From para 2 of the so-called notice issued by the CIT while initiating the proceedings under Section 263 it is apparently clear that the assessee had made full disclosure in respect of expenses claimed on the right issue as well as the deduction claimed under Section 80-I of the IT Act. Thus, I am of the firm view that the assessee has made the full disclosure of the relevant facts, after going through the entire materials on record and the orders of the Departmental authorities.

23. In the case of CIT v. A.R. Enterprises (P) Ltd. , the Hon'ble Rajasthan High Court has explained the meaning of expression "material facts" by observing as under:

The expression 'material facts' refers only to the primary facts. There is no duty cast on the assessee to indicate or draw the attention of the AO to what factual or legal or other inferences can be drawn from the primary facts. Relying on the decision of the apex Court in Calcutta Discount Co. Ltd.'s case , the apex Court in a later decision, viz., Associated Stone Industries (Kotak) Ltd.'s case , held that the duty of the assessee is only to fully and truly disclose all material facts. Explaining the expression 'material facts' as contained in Section 34(1)(a), the Court observed that it refers only to the primary facts and the duty of the assessee is to disclose such primary facts. The Court further observed that there is no duty cast on the assessee to indicate or draw the attention of the ITO to what factual or legal or other inferences can be drawn from the primary facts disclosed. There is not a word in the order of assessment if the respondent assessee omitted to disclose any material fact.

24. The ratio of the above decision is fully applicable to the facts of the present case.

25. Hon'ble Madhya Pradesh High Court in the case of H.H. Maharaja Martand Singh Ju Deo v. WTO (supra) applying the decision of Hon'ble Supreme Court in the case of Lakhmani Mewal Das (supra) on the similar circumstances has held as under:

From the documents on record, it was clear that the petitioner had submitted complete returns and the statement of foreign shares and stocks. If the officer had accepted those details and made the assessment order, then any other officer could not ordinarily unsettle the assessment orders unless the three requisite conditions of Section 17 of the Act were satisfied. In the instant case, there was no material to show that the exercise of the powers under Section 17 was in accordance with the provisions of law. The notices of reassessment were liable to be quashed.

26. In view of these facts I hold that there was no failure on the part of the assessee to disclose the material facts fully and truly and the notice was not issued by the AO on that basis under Section 147 of the IT Act. Thus this issue is decided accordingly that there was no failure on the part of the assessee to disclose the material facts truly and fully.

Issue No. (iii)

27. For deciding this issue which relates to the time barring of the proceedings, we find that the proviso to Section 147 lays down as under:

Provided that where an assessment under Sub-section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year.

28. In view of the aforesaid specific provision under Section 147 there cannot be two opinions that in case the assessment has been completed under Section 143(3), no action can be taken under Section 147 after the expiry of four years from the end of the relevant assessment year unless the income chargeable to tax has escaped for such assessment year due to the failure on the part of the assessee to disclose fully and truly all the material facts necessary for his assessment or failure to file the return under Section 139 or notice issued under Section 142(1). This is an uncontroversial fact. In this case the original assessment has been completed under Section 143(3), therefore there is no failure on the part of the assessee to make the return under Section 139 or in response to notice under Section 142(1). I have already held in the preceding para that on the facts of the case there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the impugned assessment year. In view of these facts the AO could have invoked the provisions of Section 147 within 4 years from the end of the assessment year. The assessment year involved is the asst. yr. 1993-94 which ends on 31st March, 1994. The 4 years expires on 31st March, 1998. In view of these facts I am of the view that the proceedings under Section 147 could have been initiated within 4 years from the end of the assessment year i.e. within four years from 31st March, 1994. Even as per the learned Departmental Representative the notice for initiating proceeding under Section 147 was issued on 23rd Oct., 2000. This is also clear from the reason recorded by the AO available on the file. The original assessment was completed on 23rd Nov., 1994. The four years within which the proceedings under Section 147 could have been initiated expire on 31st March, 1998. In view of specific provision being provided in proviso to Section 147 as reproduced hereinabove, I am of the firm view that the proceedings initiated by the AO under Section 147 were barred by limitation and accordingly I hold that the proceedings initiated under Section 147 in this case are time barred.

Issue No. (iv)

29. So far as the issue No. 4 is concerned the submission of the learned Authorised Representative was that the notice was issued by the AO merely on the basis of surmises and conjectures and not on the basis of any specific information came to his notice. On the facts it was submitted by the learned Authorised Representative that all the facts relating to the claim of the deduction in respect of right issue shares expenses as well as deduction available under Section 80-I were already submitted by the assessee and were available to the AO at the time of original assessment and when the proceedings were initiated under Section 263. Even the proceedings initiated under Section 154 on these very issues were also dropped. No further material or change in law was brought to his notice or came to his notice for initiating the assessment proceedings. Even the reasons also do not speak of the same. Thus the notice issued under Section 148 cannot be considered to be a valid notice. The assessment framed on the basis of time barred initiation is invalid and must be annulled.

30. I have already held that the proceedings initiated were barred by limitation as the notice in this case was not issued within 4 years from the end of the assessment year in respect of which the AO has issued notice under Section 148 in view of the specific limitation provided in the proviso to Section 147 as the assessee had not failed to disclose all the material facts relating to the assessment year fully and truly. I am of the view that when the notice issued under Section 147 itself is barred by limitation, the proceedings initiated are void ab initio. If any assessment is framed in consequence of the illegally initiated proceedings, the assessment so framed is non est in eyes of law and is bound to be cancelled. I accordingly, quash the order passed by the AO as being void and illegal.

31. Since the order of the AO stands quashed on legal grounds, the other grounds raised on merit in the appeal and in the cross-objection are not being discussed or considered.

32. In the result the appeal of the Revenue and the cross-objection filed by the assessee are disposed of accordingly.

G.D. Agrawal, Vice President 27th July, 2006

1. Since there was a difference of opinion between the learned Members constituting the Division Bench with regard to the following issues, I was nominated as Third Member by the Hon'ble President, Tribunal under Section 255(4) of IT Act, 1961:

(1) Whether sending notice under Section 148 of the IT Act through registered post can be held to have been properly served in the absence of acknowledgement slip having been placed on record by the AO or specific denial on oath of service of such notice by the assessee or not ?

(2) Whether without disposing of objection of the assessee filed against the issuance of notice under Section 148 by the AO, the matter requires to be set aside on his file for disposing of such objection and then to proceed to make reassessment in view of decision of Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. ITO & Ors. or not ?

(3) Whether in the absence of non-disposal of objection admitted to have been filed before AO against notice under Section 148, the Tribunal can decide such objection while disposing of the appeal or not ?

2. At the time of hearing before me, at the outset, it was pointed out by the learned Counsel for the assessee that question Nos. 2 and 3 were not correctly drafted, because the said questions presuppose that the AO has not disposed of the objection of the assessee filed against the issuance of notice under Section 148 of the IT Act, 1961 (hereinafter will be referred as the Act) while, in fact, the AO has disposed of the objection of the assessee. The learned AM has recorded the finding that the AO has considered and rejected the assessee's objection raised against the issuance of notice under Section 148 of the Act. Therefore, he suggested that the question Nos. 2 and 3 should be modified and replaced by one question reading as under:

Whether on the facts and in the circumstances of the case, the Hon'ble JM was justified in setting aside the matter back to the file of the AO for readjudication as per the decision of the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO & Ors. (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC) or the Hon'ble AM was justified in holding that as there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment, the reopening of assessment beyond the period of four years was contrary to the proviso to Section 147.

3. The learned Departmental Representative has no objection to the modification of the question as proposed by the learned Counsel. On the other hand, he also agreed that the basic dispute raised in this Revenue's appeal is against finding of the CIT(A) holding the reopening of assessment under Section 147 of the Act to be bad in law. The learned AM has upheld the order of the CIT(A) while the learned JM has set aside the matter back to the file of the AO. Therefore, the question as proposed by the assessee correctly brings out the controversy in the conflicting orders of the learned Members.

4. In view of the above submissions of both the parties, I replace question Nos. 2 and 3 by the following question and it is numbered as question No. 2:

2. Whether on the facts and in the circumstances of the case, the Hon'ble JM was justified in setting aside the matter back to the file of the AO for readjudication as per the decision of the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO & Ors. (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC) or the Hon'ble AM was justified in holding that as there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment, the reopening of assessment beyond the period of four years was contrary to the proviso to Section 147 ?

Regarding question No. 1:

5. It is submitted by the learned Departmental Representative that the notice under Section 148 of the Act was sent by RPAD at the correct address of the assessee. The above notice was not returned unserved and, therefore, once the notice was issued by RPAD and the same is not returned unserved, service is to be presumed unless otherwise proved by the assessee. In support of this contention, he relied upon the decision of Hon'ble Delhi High Court in the case of R.L. Narang v. CIT . He further submitted that as per Section 147 issuance of notice within time is essential and not service thereof. That apart from issuing of notice by registered post, the same was also served during the course of assessment proceedings. Thus, the notice was duly served before the completion of assessment and the assessee has also raised the objection against the initiation of proceeding under Section 148 of the Act. Therefore, the learned AM was not justified in holding that the notice under Section 148 was not properly served upon the assessee and, therefore, reopening of assessment is bad in law.

6. The learned Counsel for the assessee, on the other hand, relied upon the order of the learned AM. He stated that during the course of assessment proceeding itself, the assessee has claimed that notice under Section 148 was not served. The Revenue has not brought on record any proof of the service of the notice or even of the posting of the notice by registered post. That during the course of first appellate proceeding, the CIT(A) called for the remand report in which also the AO has not given any evidence of either the service of the notice or of the posting of the notice by registered post. He further contended that as per Section 148 it is not only the issuance of notice but the service of the notice upon the assessee is essential. The onus is upon the Revenue to prove that the notice was served on the assessee. He further stated that the decision of Hon'ble Delhi High Court relied upon by the learned Departmental Representative is, in fact, in favour of the assessee. He, therefore, submitted that the order of the learned AM should be upheld.

7. During the rejoinder, the learned Departmental Representative was asked to produce the evidence, if any, with regard to the posting of the notice by RPAD, either in the form of dispatch register or the receipt issued by the postal authorities. The learned Departmental Representative stated that the notice was issued by the office of Jt. CIT (Asstt.), Spl. Range, Jabalpur. Now the case is being assessed by Asstt. CIT, Circle Satna. Moreover, the post of Jt. CIT (Asstt.), Spl. Range, Jabalpur has been abolished and, therefore, the dispatch register or the receipt for the posting of the notice by registered post could not be found out. He, however, produced the copy of the notice issued under Section 148 and pointed out that in the notice at the top RPAD is mentioned while at the bottom 'issued on 23rd Oct., 2000' is mentioned. Therefore, it should be presumed that the notice was issued by RPAD on 23rd Oct., 2000.

8. I have carefully considered the submissions of both the parties and perused the material placed before me. Sections 147, 148 and 149 of the Act read as under:

147. If the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year):

Provided that where an assessment under Sub-section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year.

Explanation 1.-Production before the AO of account books or other evidence from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure within the meaning of the foregoing proviso.

Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:

(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax;

(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the AO that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;

(c) where an assessment has been made, but-

(i) income chargeable to tax has been underassessed; or

(ii) such income has been assessed at too low a rate, or

(iii) such income has been made the subject of excessive relief under this Act; or

(iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed

148. (1) Before making the assessment, reassessment or recomputation under Section 147, the AO shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under Section 139.

(2) The AO shall, before issuing any notice under this section, record his reasons for doing so.

149. (1) No notice under Section 148 shall be issued for the relevant assessment year,-

(a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under Clause (b);

(b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year.

Explanation.-In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Expln. 2 of Section 147 shall apply as they apply for the purposes of that section.

(2) The provisions of Sub-section (1) as to the issue of notice shall be subject to the provisions of Section 151.

(3) If the person on whom a notice under Section 148 is to be served is a person treated as the agent of a non-resident under Section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of two years from the end of the relevant assessment year.

9. As per Section 147 of the Act, if the AO has reason to believe that any income chargeable to tax has escaped assessment, he may assess or reassess such income as per provisions of Sections 148 to 153 of the Act. As per Section 148, before making assessment or reassessment under Section 147 the AO is required to serve upon the assessee a notice requiring him to furnish a return of his income. Section 149 provides the time limit within which the notice under Section 148 can be issued. Thus, as per Section 148, the service of notice upon the assessee is a condition precedent to the validity of any reassessment under Section 147 of the Act. The burden is upon the AO to prove that the notice was duly served upon the assessee after issuing the same within the prescribed period under Section 149. In the case under consideration before me, the notice under Section 148 was issued on 23rd Oct., 2000. However, except mentioning RPAD at the top of the notice, no other evidence is brought on record by the Revenue about the service of the notice upon the assessee. When the notice is issued by RPAD, the postal authorities would return the acknowledgement of serving the notice upon the assessee to the sender of the notice, i.e. AO. Apart from this, whenever any Dak is sent by RPAD, the postal authorities give the receipt for receiving such Dak. The Revenue is unable to produce either the acknowledgement of the service of the notice upon the assessee or even the receipt issued by the postal authorities proving the sending of the notice by RPAD. The learned Departmental Representative was also asked to produce the despatch register wherein the sending of the notice to the assessee is recorded. However, he expressed his inability to do so on the ground that the notice was issued by Jt. CIT (Asstt.), Spl. Range, Jabalpur which post is now abolished and, therefore, such register is not traceable. The learned Departmental Representative has relied upon the decision of Hon'ble Delhi High Court in the case of R.L. Narang v. CIT (supra). I find that in this case the dispute was with regard to service of notice upon the assessee under Section 140A(3). Their Lordships accepted the assessee's contention that the notice was not properly served upon the assessee. The relevant observation in this regard reads as under:

6. Coming to the next question of service by post, the provisions of Section 27 of the General Clauses Act, 1897, are relevant. Section 27 provides that where any Central Act or regulation authorises or requires any document to be served by post, then, unless a different intention is drawn, the service shall be deemed to be effected properly if a correctly addressed and stamped letter containing the document is dispatched by registered post; and unless the contrary is proved, such a letter would be deemed to have been delivered in the ordinary course of post. The IT Act is a Central Act and Section 282 provides for service by post. As such the provisions of Section 27 of the General Clauses Act, 1897, are applicable. From perusing Section 27 of the General Clauses Act, it is apparent that in order to presume service having been effected, the document or letter should be sent by registered post.

7. In the present cases, as noticed above, the reminders were issued under certificate of posting and not by registered post. It would, therefore, appear to us that there is nothing on the record to indicate that proper and valid service was, in fact, effected nor can any presumption be drawn. We also feel that not much importance can be attached to the non-filing of an affidavit by the assessees as the AAC accepted their version without an affidavit. Once their statement with regard to non-service had been accepted by the AAC and no affidavit had been asked for thereafter at the stage of the Tribunal, we think that the lack of an affidavit is not material.

8. We are, therefore, of the opinion that the assessees were not given the requisite hearing to which they were entitled. In the result, both the questions are answered in the negative and in favour of the assessees. The assessees will be entitled to costs. Counsel's fee Rs. 200 in one set.

10. In the above case, notice was not sent by registered post, but was issued under certificate of posting and, therefore, the Hon'ble High Court held that there was nothing on record to indicate the proper and valid service of the notice. However, their Lordships observed about applicability of Section 27 of the General Clauses Act and held that the service of the notice shall be deemed to be effected properly if a correctly addressed and stamped letter containing the document is despatched by the registered post. Thus, the Revenue has to prove that (i) the envelope was correctly addressed; (ii) it was stamped; and (iii) it was despatched by registered post. In the case before me, the Revenue has not brought any evidence with regard to above ingredients which would amount to deemed service of notice under Section 27 of the General Clauses Act. Only evidence furnished before me is the copy of the notice issued under Section 148, the address thereupon reads as under:

M/s Vindhya Tele Links (P) Ltd., Rewa.

Whether this address is full and correct address is doubtful because Rewa is a District place and no address of the office of the company is mentioned in this notice. In the memo of appeal filed by the Revenue, at col. No. 11 which provides the address to which the notice may be sent to the respondent, the Revenue has given the address of the assessee as under:

M/s Vindhya Telelink Ltd., Udyog Vihar, Rewa (MP) Thus, in the notice under Section 148 in the address of the assessee "Udyog Vihar" is missing. Therefore, it cannot be said that the notice was correctly addressed. Moreover, no evidence is furnished for the properly stamping of the envelope and also despatch of the said envelope. I also find that during the course of assessment proceedings, the assessee vide its letter dt. 11th Jan., 2002 has stated that it had not received notice under Section 148. However, the AO without bringing any evidence on record about the service of the notice on the assessee put the blame upon the assessee and observed as under in the assessment order:

As per record the notice under Section 148 was sent to the assessee on 23rd Oct., 2000 by registered post. As per the contention of the assessee as per its record notice under Section 148 was not received to it. It is, therefore, the matter of maintenance of the record of the assessee company and it should have traced out the notice from its own record. Since the notice was issued to the assessee it must have been received by it which should have been traced out by it and compliance to it should have been made. It is, therefore, clear that it was not mistake of the Department but of the assessee who failed to trace out the notice under Section 148 from its record.

11. I am unable to concur with the above finding of the AO. As I have already held earlier that the onus is upon the Revenue to prove the service of the notice upon the assessee, therefore, once the assessee has claimed that the notice was not served upon it, the burden was upon the AO to prove how the notice was served on the assessee. Merely saying that the notice was issued and it must have been received by the assessee, the onus cannot be said to have been discharged.

12. The learned Departmental Representative has also argued that the copy of the notice was supplied to the assessee during the assessment proceedings and the same should be considered as due service of the notice to the assessee. I am unable to accept this submission of the learned Departmental Representative. The service of the notice under Section 148 is a precondition for assuming the jurisdiction for reassessment under Section 147. Therefore, the service of the copy of the notice during reassessment proceeding cannot be said to be valid service of the notice, because it should be served before initiation of such reassessment proceeding. In view of the above, I hold that the notice under Section 148 was not properly served upon the assessee.

13. Before answering the question No. 1, in my opinion, question No. 1 also needs modification because the question presupposes that the notice was sent by registered post which is factually not correct. I also found that the learned AM also at p. 9 of his order has recorded that "Even the proof of sending the notice through registered post AD was not filed before the Tribunal so as to prove that the notice was sent through registered post at the address of the assessee company." Thus, there was difference amongst the learned Members even with regard to the factual finding of the sending of the notice by registered post. Therefore, the question with the presumption that the notice was sent by RPAD does not bring out the correct factual finding reached by both the learned Members. Accordingly, I modify question No. 1 as under:

Whether, on the facts and in the circumstances of the case, notice under Section 148 was properly served upon the assessee ?

14. I have already discussed the rival contentions with regard to the service of the notice upon the assessee and for the detailed reasons in para 8 to para 11 of this order, I answer the question in negative and hold that the notice was not properly served upon the assessee.

15. Regarding question No. 2, it is submitted by the learned Departmental Representative that as per the decision of Hon'ble apex Court in the case of GKN Driveshafts (India) Ltd. v. ITO (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC), the AO should pass a speaking order disposing of the assessee's objection against the issuance of notice for reopening of assessment. Since the AO has not passed any speaking order before proceeding with the assessment proceedings, the learned JM has rightly set aside the assessment and restored the matter back to AO. With regard to the merit of the validity of reopening of assessment, he stated that the AO should have reason to believe that the income has escaped assessment. The belief must be reasonable and the Court cannot examine the sufficiency of the reason. In support of this contention, he relied upon the decision of Hon'ble apex Court in the case of Raymond Woollen Mills Ltd. v. ITO . He stated that the AO has recorded the reason stating his satisfaction for escapement of income. He is not supposed to write the basis of his reason and whether there is any failure on the part of the assessee to disclose fully and truly all material facts. He further stated that the assessee has not accounted for the earlier years' losses. Thereby the excess deduction under Section 80-I was claimed by the assessee. The assessee has failed to disclose brought forward losses in the earlier years. It is the primary duty of the assessee to disclose all material facts in the return of income. Whether such fact is in the knowledge of the Department or not is immaterial. Mere production of books of account or documents is not sufficient. The onus is upon the assessee to disclose fully and truly all material facts. It is immaterial whether the AO at the time of original assessment could have found such facts. In support of this contention, he has relied upon the following decisions:

(i) Sri Krishna (P) Ltd. v. ITO ;

(ii) Calcutta Discount Co. Ltd. v. ITO ;

(iii) Indian Oil Corporation v. ITO ;

(iv) Parashuram Pottery Works Co. Ltd. v. ITO ;

(v) ITO v. Lakhmani Mewaldas ;

(vi) Indo-Aden Salt Mfg. & Trading Co. (P) Ltd. v. CIT ;

(vii) CIT v. Major Tikka Khushwant Singh ;

(viii) R.K. Upadhyaya v. Shanabhai P. Patel ;

(ix) CIT v. Miss Eather P. Carvalho ;

(x) Phool Chand Bajrang Lal v. ITO ;

(xi) Zohar Siraj Lokhandwala v. M.C. Kamat, Asstt. CIT .

In view of the above, it is submitted by the learned Departmental Representative that the reopening of assessment was valid and the same should be upheld.

16. The learned Counsel for the assessee, on the other hand, stated that the assessee is manufacturing insulated cable. In the original assessment the AO has considered the issue of computation of deduction under Section 80-I and, in fact, he allowed less deduction than what was claimed by the assessee. During the course of assessment proceedings, when the copy of reasons recorded for reopening of assessment was supplied to the assessee, the assessee has raised the objection against the reopening of assessment. The AO recorded his finding in p. 5 as well as p. 7 of the assessment order and arrived at the conclusion that the reopening of assessment under Section 147 is valid. As the AO has already disposed of the assessee's objection and arrived at the conclusion that the reopening of assessment under Section 147 is valid, no useful purpose would be served by sending the matter back to the file of the AO again for the purpose of deciding the validity of reopening of assessment. He, therefore, submitted that the Tribunal should consider and decide the validity of the reopening of assessment. He also relied upon the decision of Hon'ble Bombay High Court in the case of Caprihans India Ltd. v. Tarun Seem, Dy. CIT , wherein the Hon'ble Bombay High Court has held that it is not necessary that each and every case should go back to the file of the AO for adjudicating the validity of the reopening of assessment. To the same effect he also relied upon the decisions of Hon'ble Bombay High Court in the cases of Ajanta Pharma Ltd. v. Asstt. CIT and also Grindwell Nortan Ltd. v. Jagdish Prasad Jangid, Asstt. CIT .

16.1 On the merits of the validity of the reopening of assessment, the learned Counsel stated that the loss was determined by the AO in the earlier years and, therefore, the figure of the loss is on the record of the Department and not on the assessee. When a fact is already on record of the Department, it cannot be said that the assessee has failed to disclose such fact. The assessee is required to disclose the primary fact which is in the knowledge of the assessee. Moreover, the AO in the reasons recorded for reopening of assessment has nowhere recorded the finding that there is failure on the part of the assessee to disclose fully and truly all material facts. That the assessment was reopened after 4 years from the end of relevant assessment year. Therefore, as per provisions of Section 147, unless there is failure on the part of the assessee to disclose fully and truly all material facts, the assessment cannot be reopened. Since there is no failure on the part of the assessee to disclose fully and truly all material facts, the learned AM was fully justified in holding that the reopening of assessment was not valid. His order should be upheld.

17. I have carefully considered the arguments of both the sides and perused the material placed before me. The first issue to be decided is whether the AO has considered and decided the assessee's objection against the validity of the reopening of assessment. I find that at p. 5 of the assessment order the AO has recorded the following finding:

As regards legality of initiation of proceedings is concerned the action under Section 147 can be initiated even after expiry of four years subject to the conditions laid down in Sections 149 and 151 of the IT Act. Since the conditions laid down in these sections were satisfied the initiation of proceedings under Section 147 was correct.

At p. 7 of the assessment order, again he reiterated that the assessee's contention against the initiation of the proceedings under s.147 is not accepted. Thus, the AO has disposed of the assessee's objection against the reopening of assessment under Section 147.

18. The Hon'ble apex Court in the case of GKN Driveshafts (India) Ltd. (supra) held as under:

When a notice under Section 148 of the IT Act, 1961, is issued, the proper course of action for the noticee is to file the return and, if he so desires, to seek reasons for issuing the notices. The AO is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the AO is bound to dispose of the same by passing a speaking order.

Relying upon the decision, it is contended by the learned Departmental Representative that the learned JM has rightly sent back the matter to the file of the AO to dispose of the assessee's objection by passing a speaking order. However, I find that Hon'ble Bombay High Court has considered the decision of Hon'ble apex Court in the case of GKN Driveshafts (India) Ltd. (supra) in the case of Caprihans India Ltd. v. Tarun Seem, Dy. CIT (supra), wherein it has been held as under:

It is true that the assessee should have filed its return pursuant to the notice under Section 148 and, on that basis, the assessee should have sought reasons for issuing such notice. That was not done. This petition would have been rejected on this ground-GKN Driveshafts (India) Ltd. v. ITO (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC) followed.

However, in the peculiar facts and circumstances of this case, the Court is not inclined to dismiss the petition in limine because the reasons now disclosed by the AO, on the face of it, show that there is nothing in the reasons to indicate failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Admittedly, the period of four years has expired. Further, even the reasons do not disclose a finding viz. that the petitioner had failed to disclose fully and truly all material facts necessary for assessment. In fact, the reasons show that from the case record itself certain conclusions are sought to be drawn. Hence, the Court is not inclined to dismiss the petition in limine.

18.1 Similar view is taken in the case of Ajanta Pharma Ltd. v. Asstt. CIT (supra), wherein it has been held as under:

The decision of the apex Court in GKN's case (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC) nowhere lays down the law to the effect that the party is totally debarred from approaching this Court under Article 226 of the Constitution of India when an exercise of powers by the authority under Section 148 ex facie appears to be without jurisdiction. Undoubtedly, whether such an exercise is with or without jurisdiction will have to be revealed from the notice and reasons on the face thereof. At the same time, it is also well-settled that mere availability of an alternative relief can be no bar for exercise of a writ jurisdiction when the authorities seek to assume jurisdiction which they do not possess or act in totally arbitrary manner. The decision in GKN's case (supra) certainly reminds the assessee that when a notice under Section 148 is issued, the proper course of action is to file a reply with his objections including those in relation to the absence of jurisdiction. However, it does not lay down the law to the effect that when such an objection is in relation to absence of jurisdiction and the same is revealed ox facie or apparent on the face of a notice or reasons in support thereof, the assessee has compulsorily to invite an order from the AO in relation to the absence of jurisdiction.

19. Let us examine the facts of the assessee's case in the light of the ratio laid down by the Hon'ble apex Court as well as Mumbai High Court. In the case of GKN Driveshafts (India) Ltd. (supra), the Hon'ble apex Court has held that after the issue of notice, the assessee should first file the return of income and thereafter seek reasons for issuance of the notice. On receipt of reasons the assessee is entitled to file objection to the issuance of notice and thereafter the AO is bound to dispose of the same by passing a speaking order. In the case under consideration before me, I find that on the request of the assessee the AO has communicated the reasons recorded to the assessee on 24th Jan., 2002. The assessee has furnished its objection vide letter dt. 14th Feb., 2002. The AO has considered the assessee's objection and has concluded that the conditions laid down for reopening of assessment were duly satisfied and, therefore, the initiation of proceeding under Section 147 was correct. Thus, the AO has already disposed of the assessee's objection and has come to the conclusion that initiation of proceedings under Section 147 was correct. In the above circumstances, no useful purpose would be served by setting aside the matter again to the file of the AO. Moreover, in the cases of Caprihans India Ltd. v. Tarun Seem, Dy. CIT (supra) and Ajanta Pharma Ltd. v. Asstt. CIT (supra), the Bombay High Court after considering the decision of Hon'ble apex Court in the case of GKN Driveshafts (India) Ltd. (supra) arrived at the conclusion that the Court can examine the validity of the reopening of assessment and it is not compulsory in each and every case that the assessee should compulsorily get an order from the AO in relation to the validity of reopening of assessment. The ratio of the above decision would be squarely applicable in respect of the jurisdiction of the Tribunal also. When all the relevant facts are before the Tribunal, it can examine the validity of the reopening of assessment and it is not compulsory to set aside the matter back to the AO. In any case, in the case under consideration before me, the assessee has already raised objection before the AO and the AO has already given his finding that the reopening of assessment is valid. Therefore, in my opinion, the Tribunal should decide the validity of the reopening of assessment rather than sending the matter back to the file of the AO.

20. Coming to the validity of the reopening of assessment, I find that as per proviso to Section 147, where original assessment was completed under Section 143(3), no action for the reopening of assessment can be taken after the expiry of 4 years from the end of relevant assessment year unless any income chargeable to tax has escaped assessment by the reason of failure on the part of the assessee to make a return of income or to disclose fully and truly all material facts necessary for his assessment. Admittedly, in this case, the original assessment was completed under Section 143(3) and 4 years have expired from the end of relevant assessment year. It is also admitted position that there was no failure on the part of the assessee to furnish the return of income under Section 139. Therefore, the assessment can be reopened only if there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. The AO has recorded the reasons for reopening of assessment, which are given at p. 3 of his order and it is reproduced below for ready reference:

The reasons recorded under Section 148(2) were as under:

1. Original assessment was completed under Section 143(3) on 23rd Nov., 1994 at an income of Rs. 8,24,56,810 and deduction under Section 80-I was allowed after reducing the amount of deduction under Section 80HH of the IT Act. The assessee preferred an appeal before CIT(A), Jabalpur. The CIT(A) directed to allow deduction under Section 80-I on gross income vide order dt. 7th Feb., 1995.

2. On perusal of record shows that the assessee company has debited in P&L a/c at Rs. 12.17 lakhs on account of expenditure of issue of right shares. This expenditure is not allowable being of capital nature. Further it has also been noticed that the positive income of Rs. 8,85,59,094 was offered from Unit II on which deduction under Section 80HH at Rs. 1,77,11,819 and Section 80-I at Rs. 2,21,39,774 totalling Rs. 3,98,51,597 was allowed without reducing earlier years' losses amounting to Rs. 3,89,87,498. This resulted in excess allowance of deduction under Sections 80HH and 80-I at Rs. 1,75,44,375 (Rs. 77,97,500 + Rs. 97,46,875) with short levy of tax Rs. 90,79,214.

3. I have thus reason to believe that the income has been underassessed to the tune of Rs. 1,87,61,375 (Rs. 12,17,000 + Rs. 1,75,44,375) within the meaning of Section 147(c) of the Act. It is, therefore, requested that permission to issue notice under Section 148 of the IT Act be accorded.

21. From the above reasons recorded, it is evident that the AO has nowhere stated that there was any failure on the part of the assessee to furnish any material fact which is necessary for the assessment. On the other hand, the AO himself has recorded the finding that on perusal of the record facts were noticed, on the basis of which he formed the belief that there was escapement of income. Thus, the facts are already on the record of the Revenue. Therefore, it cannot be said that there was failure on the part of the assessee. It is vehemently contended by the learned Departmental Representative that the assessee has failed to disclose the figure of loss of earlier year which is required to be set off against the income of the industrial undertaking. I am unable to agree with this submission of learned Departmental Representative. The loss is determined by the AO in the preceding year. It is very well on the record of the Department. Therefore, the question of disclosing the same by the assessee does not arise. The assessee is supposed to disclose the facts which are in the special knowledge of the assessee. However, when the loss is determined by the AO, the question of disclosing the same by the assessee in its return of income does not arise. The learned Departmental Representative has relied upon several decisions to support his contention that there was failure on the part of the assessee to disclose fully and truly all material facts. I have gone through those decisions and found that facts in all those cases were quite distinguishable than the facts in the assessee's case and, therefore, they are not applicable to the case under consideration before me. Moreover, whether the assessee has failed to disclose all material facts or not would depend on the facts of each case. After considering the facts in the assessee's case, I find that there was no failure on the part of the assessee to disclose any material facts which were necessary for the purpose of its assessment. Accordingly, with regard to question No. 2, I agree with the finding of the learned AM that there was no failure on the part of the assessee to disclose fully and truly all material facts and, therefore, reopening of assessment after 4 years from the end of relevant assessment year was not valid.

22. The matter will now go to the regular Bench for announcing the majority view.

Dinesh K. Agarwal, J.M. 22th Sept., 2006

1. On a difference of opinion between the Members who originally heard the appeal and the cross-objection, the following three questions were referred for the opinion of the Hon'ble Third Member:

1. Whether sending notice under Section 148 of the IT Act through registered post can be held to have been properly served in the absence of acknowledgement slip having been placed on record by the AO or specific denial on oath of service of such notice by the assessee or not ?

2. Whether without disposing of objection of the assessee filed against the issuance of notice under Section 148 by the AO, the matter requires to be set aside on his file for disposing of such objection and then to proceed to make reassessment in view of decision of Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. ITO & Ors. or not ?

3. Whether in the absence of non-disposal of objection admitted to have been filed before AO against notice under Section 148, the Tribunal can decide such objection while disposing of the appeal or not ?

2. The Hon'ble Vice President, Sri G.D. Agrawal sitting as Third Member, by his opinion dt. 27th July, 2006 has modified the question No. 1 vide para 13 of his order as under:

Whether, on the facts and in the circumstances of the case, notice under Section 148 was properly served upon the assessee ?

He also modified vide para 4 of his order the question Nos. 2 and 3 by following question numbered as question No. 2:

Whether on the facts and in the circumstances of the case, the Hon'ble JM was justified in setting aside the matter back to the file of the AO for readjudication as per the decision of the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO & Ors. (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC) or the Hon'ble AM was justified in holding that as there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment, the reopening of assessment beyond the period of four years was contrary to the proviso to Section 147 ?

3. The Hon'ble Third Member vide para 14 of his order has answered question No. 1 as under:

I have already discussed the rival contentions with regard to the service of the notice upon the assessee and for the detailed reasons in para 8 to para 11 of this order, I answer the question in negative and hold that the notice was not properly served upon the assessee.

The question No. 2 was answered by him vide penultimate para as under:

...Accordingly, with regard to question No. 2, I agree with the finding of the learned AM that there was no failure on the part of the assessee to disclose fully and truly all material facts and, therefore, reopening of assessment after 4 years from the end of relevant assessment year was not valid.

4. Therefore, in accordance with the majority view, the issues stand decided in favour of the assessee. Accordingly, the appeal filed by the Revenue stands dismissed and the cross-objection filed by the assessee is rejected being infructuous.

Legal Document View

Unlock Advanced Research with PRISMAI

Income Tax Appellate Tribunal - Jabalpur

Assistant Commissioner Of Income Tax vs Vindhya Telelinks Ltd. on 22 September, 2006

Equivalent citations: (2007)107TTJ(JAB)149