Tarun Agarwala, J. - (1.) FOR the asst. yr. 1998 -99, the appellant filed his return of income declaring an income of Rs. 2,46,100. It transpires that the assessing authority received information from the Addl. Director of IT (Investigation), Agra that one M/s. Ashok Gupta & Company, Delhi, had provided bogus entries of sale proceeds of shares and that one of the beneficiaries is the appellant. Based on this information, the assessing authority issued a notice dt. 24th March, 2005 under s. 148 of the IT, 1961 (hereinafter referred to as the Act) proposing to reinitiate reassessment proceedings. This notice sent by the process server was returned unserved on 26th March, 2005. Thereafter, the assessing authority recorded reasons to believe on 28th March, 2005 to the effect that an amount of Rs. 7,78,675 has been shown as bogus sale proceeds, which had escaped assessment for the asst. yr. 1998 -99. Based on this reasons to believe so recorded, a notice dt. 28th March, 2005 was issued under s. 148 of the Act after taking appropriate approval from the Addl. CIT. This notice dt. 28th March, 2005 was sent by a process server and also by speed post, which came back undelivered with the remark that the appellant was not available and had gone out for medical treatment. Thereafter, another notice purporting to be a fresh notice dt. 17th June, 2005 was again issued under s. 148 of the Act, which was received by the appellant on 29th June, 2005. The appellant appeared before the assessing authority and submitted that the original return filed on 3rd Oct., 1998 be treated as the return filed in compliance of the notice under s. 148 of the Act. The appellant also objected to the initiation of the proceedings contending that the notice dt. 17th June, 2005 was barred by time and that no fresh assessment could be framed under s. 147/148 of the Act. The assessing authority rejected the objection raised by the appellant and made an assessment order adding a sum of Rs. 7,78,675 on the total income and directed the appellant to pay the demand of tax and interest. The assessing authority held that where the notice was issued within the period of limitation but served upon the assessee beyond such period, the assessment was valid.
(2.) AGGRIEVED by the reassessment order, the appellant preferred an appeal before the CIT(A) questioning the veracity and validity of the initiation of proceedings under s. 148 of the Act. The CIT(A), after considering the matter, allowed the appeal and quashed the assessment order holding that the entire reassessment proceedings were carried out by the assessing authority after assuming jurisdiction on the basis of the second notice dt. 17th June, 2005. The CIT(A) held that the notice dt. 17th June, 2005 was barred by limitation and was invalid. Aggrieved by the order of the appellate authority, the Department preferred a second appeal before the Tribunal. There was a difference of opinion between the Members of the Tribunal. The JM concurred with the view of the CIT(A) and quashed the assessment proceedings while the AM disagreed with the appellate order and upheld the assessment proceedings. On account of the difference of opinion, the matter was referred to a Third Member. The Third Member concurred with the view of the AM and quashed the appellate order and allowed the appeal of the Department holding that a valid notice was issued on 28th March, 2005, on the basis of which reassessment proceedings were validly conducted. The assessee, being aggrieved by the order of the Tribunal, has filed the present appeal under s. 260A of the Act of 1961 framing the following substantial questions of law: "(a) Whether, the Tribunal, Agra has erred in law, in the facts and circumstances of the case in upholding the reassessment proceedings on the basis of notice under s. 148 dt. 28th March, 2005, which admittedly remained un -served on the appellant while the entire proceedings were carried out by assuming jurisdiction on the basis of notice under section dt. 17th June, 2005, which admittedly was issued beyond the period of limitation? (b) Whether, the Tribunal, Agra has erred in law in not noticing the effect of issue of second notice dt. 17th June, 2005 which tantamount to waiver of earlier notice dt. 28th March, 2005 and hence no assessment could be framed on the basis of unserved notice under s. 148 dt. 28th March, 2005 - In this background, we have heard Sri Rahul Agarwal, the learned counsel for the appellant and Sri Dhananjay Awasthi, the learned counsel for the Department.
(3.) BEFORE proceeding further it would be essential to consider a few provisions relating to the procedure for making a reassessment. For facility, the provisions of ss. 147, 148, 149 and 151 as it existed at the relevant moment of time are extracted hereunder : "147. Income escaping assessment. -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 ss. 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 ss. 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub -s. (3) of s. 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 s. 139 or in response to a notice issued under sub -s. (1) of s. 142 or s. 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 under assessed; 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. Issue of notice where income has escaped assessment. - -(1) Before making the assessment, reassessment or recomputation under s. 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 s. 139. (2) The AO shall, before issuing any notice under this section, record his reasons for doing so. 149. Time -limit for notice. - -(1) No notice under section shall be issued for the relevant assessment year, - - (a) in a case where an assessment under sub -s. (3) of s. 143 or s. 147 has been made for such assessment year, - - (i) if four years have elapsed from the end of the relevant assessment year, unless the case falls under cl. (ii) or cl. (iii); (ii) if four years, but not more than seven 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 fifty thousand rupees or more for that year; (iii) if seven years, but not more than ten 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 rupees one lakh or more for that year; (b) in any other case, - - (i) if four years, but more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped 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; (ii) if four years, but not more than seven 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 rupees twenty -five thousand or more for that year; (iii) if seven years, but not more than ten 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 rupees fifty thousand 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 to s. 147 shall apply as they apply for the purposes of that section. (2) The provisions of sub -s. (1) as to the issue of notice shall be subject to the provisions of s. 151. (3) If the person on whom a notice under s. 148 is to be served is a person treated as the agent of a non -resident under s. 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. 151. Sanction for issue of notice. - -(1) In a case where an assessment under sub -s. (3) of s. 143 or s. 147 has been made for the relevant assessment year, no notice shall be issued under s. 148 by an AO, who is below the rank of Asstt. CIT or Dy. CIT, unless the Jt. CIT is satisfied on the reasons recorded by such AO that it is a fit case for the issue of such notice : Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief CIT or CIT is satisfied, on the reasons recorded by the AO aforesaid, that it is a fit case for the issue of such notice." (2) In a case other than a case falling under sub -s. (1), no notice shall be issued under s. 148 by an AO, who is below the rank of Jt. CIT, after the expiry of four years from the end of the relevant assessment year, unless the Jt. CIT is satisfied, on the reasons recorded by such AO, that it is a fit case for the issue of such notice.";