LAL CHAND AGARWAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(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:

(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 :