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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’ NEW DELHI
Before: SH.C.M.GARG, & SH.L.P.SAHU
ORDER
PER C.M.GARG, JM
This appeal by the assessee has been filed against the order of the CIT(A)-XI dated 28.01.2013 passed in the first appeal No.243/2010-11 for AY. 2003-04.
2. Both the parties agreed that the legal grounds of the assessee challenging the validity of the initiation of reassessment proceedings and issuance of notice u/s 147/148 of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short], may kindly be heard firstly, which read as under: “1. That while framing the assessment order and sustaining the same, the authorities below have grossly erred and were wholly unjustified in the facts and circumstances of the case and in law in ignoring the fact that the mandatory notice under section 148 was never served upon the appellant company at any time in terms of the provisions of section 148 of the Act in the manner as required and stipulated by the Statute and therefore, the assessment order so passed deserves to be quashed.
That while framing the assessment order and sustaining the same, the authorities below have grossly erred both on facts and in law in ignoring the fact that the mandatory requirement of recording the reasons in terms of the provisions of section 148(2) were not complied with and therefore, the order so passed deserves to be quashed.
3. That in any case and without prejudice to the above, the authorities below, while framing the assessment order and sustaining the same, have grossly erred both on facts and in law in ignoring the fact that the objections raised by the appellant company against the initiation of proceedings and assumption of jurisdiction u/s 147 of the Act were never disposed off and therefore, the order so passed deserves to be quashed.
4. That learned Commissioner of Income Tax (Appeals) - XI, New Delhi, while sustaining the assessment order, has grossly erred and was wholly unjustified in not providing the appellant company an effective opportunity of being heard at any time after calling for the remand report from the AO, and thus the appellate order was passed in quite derogation of principles of natural justice and equity.
5. That in any case and without prejudice to the above, the authorities below have grossly erred and were wholly unjustified both on facts and in law in making and sustaining the addition to the tune of Rs.40700000/- to the total income of the appellant company u/s 68 of the Act as unexplained cash credit ignoring and overlooking the fact that neither any adverse material was supplied by the Director of Income Tax (Inv-I), New Delhi nor the same was in possession of the learned AO at any time before or after initiation of the proceedings u/s 147 of the Act and nor the same was ever confronted to the appellant company and thus, the onus to prove the alleged escapement in the hands of the appellant company was never discharged.
6. That in any case and without prejudice to the above, the authorities below have grossly erred and were wholly unjustified both on facts and in law in making and sustaining the addition to the tune of Rs. 814000/- to the total income of the appellant company u/s 69C of the Act as unexplained expenditure on account of alleged commission allegedly paid for arranging the alleged
accommodation entries. 7. That in any case and without prejudice to the above, the basis and premises as adopted by the authorities below while passing the orders were not well founded and borne out by the facts put on record but they were misconceived, perverse, arbitrary, unjustified, unwarranted and uncalled for in the facts and circumstances of the case and in law.”
Ground No. 1
We have heard the rival submissions and have carefully perused the relevant material on record, inter alia, the two paper books filed by the assessee spread over 332 pages and 88 Pages alongwith written synopsis containing 12 pages placed on record of the Tribunal and respectfully noted the ratio of the relevant decisions cited at bar during the arguments of the issues.
The ld. Counsel of the assessee mainly reiterated the submissions of the assessee placed in the written synopsis and also drew our attention to the ratio of the decisions and orders of the Hon'ble jurisdictional High Court of Delhi and Hon'ble Supreme Court to support the legal grounds of the assessee. The ld. AR first of all pointed out that notice u/s 148 of the Act was not served upon the assessee as it was issued at the wrong address i.e. 601, Sidharth 96, Nehru Place, New Delhi and the same remained unserved due to self speaking reason that was issued to the wrong address. The ld. AR further submitted that non service of notice u/s 148 of the Act which was containing wrong address cannot be held as valid issuance and service of notice on the assessee. The ld. AR further pointed out that the A.O just to fill the gap, substituted the service of notice by affixture on the same wrong address, without any prior effort to get notice served through procedure laid down u/s 283(1)(a) of the Act and the affixture of notice at the premises of wrong address itself having incurable defects.
Elaborating the facts of issuance and affixture of notice to the wrong address, the ld counsel pointed out that the address mentioned in the notice was valid till 1.3.2001 and the address in the record of the department was A- 58/4, Sainik Farms, Meharauli, New Delhi which is clearly discernible from the copies of Income tax return filed by the assessee from A.Ys 2003-04 to 2008-09, copies of the same have been placed at assessee’s paper book [APB] pages 285 to 294. The ld. AR further contended that the change of address of the assessee company was also immediately informed to the Registrar of Companies [ROC] and copy of the corresponding letters have been placed at pages 278 to 284 of the APB. The ld. AR further vehemently contended that the various notices received from the Income tax department from 22.3.2004 and 6.10.2009 clearly shows that the change of address of the assessee was very well within the notice of the department and the A.O and some of the notices were issued by the same A.O, who issued the impugned notice u/s 148 of the Act on 22.3.2010, placed at page 51 of the APB. The ld. AR again pointed out that the impugned notice was not issued in the name of the principal officer, which makes the notice bad in law and there is no mention of sanction by the competent authority u/s 151 of the Act, which is again an incurable defects per mandate of section 151 of the Act, which goes to vitiate the impugned notice as well as all the consequent reassessment proceedings.
The ld counsel further pointed out that before the A.O, this issue was raised at very initial stage during assessment proceedings through letter dated 23.11.2010 placed at page 90 of the APB, which clearly states the reason why the A.O was requested to provide evidence and date of service of notice issued to the assessee with certified copies thereof. The ld. Counsel further explained that the A.O vide letter dated 1.12.2010 placed at APB 91, issued to the correct Sainik Farm address, provided true copy of the notice, the approval of the ld. CIT, copy of notice affixture report and details of impugned transactions and the amount of income escaping assessment as per reasons recorded for initiation of reassessment proceedings and notice u/s 148 of the Act. The ld. counsel strenuously contended that the preliminary objection of the assessee vide letter dated 21.12.2010 was disposed of by the A.O vide order dated 22.12.2010 which was never served upon the assessee till completion of assessment. The ld. Counsel further drew our attention and submitted that the ld. CIT(A) has discussed the submissions of the assessee at page 6 of the impugned first appellate order and specific legal ground was raised regarding non service of notice vide Ground no. 3 noted by the ld. CIT(A) at page 4 of the impugned order.
The ld. Counsel pointed out that the ld. CIT(A) has adjudicated the above grounds raised against the assessee on the legal proposition that requirement of law is that notice should be issued and not served relying the ratio of the decision of the Hon'ble Delhi High Court in the case of Mayawati Vs. CIT & Ors reported at 321 ITR 349 [Del]. Placing reliance on the decision of the Hon'ble jurisdictional High Court of Delhi in the case of CIT Vs. Chetan Gupta reported at 382 ITR 613 [Del] and CIT Vs. Hotline International P. Ltd reported at 296 ITR 333 [Delhi, the ld counsel submitted that the Hon'ble High Court in the case of Chetan Gupta [supra] has overruled the proposition laid down in the case of Mayawati [supra] as recorded by the ld. CIT(A), by holding that proper service of notice is jurisdictional requirement and the same cannot be dispensed with. The ld counsel vehemently pointed out that issuance in the name of the company instead of the name of the principal officer of a company, that too, to the wrong address, makes the notice bad in law as per the ratio of the decision of the Calcutta High Court in the case of Rama Devi Agrawal Vs. CIT reported at 117 ITR 256 [Calcutta] and the decision of the Hon'ble Allahabad High Court in the case of Madan Lal Agrawal Vs. CIT reported at 144 ITR 745 [All].
Placing reliance on the decision of the ITAT, Mumbai Bench in the case of GTL limited VS. ACIT reported at 37 ITR [Trib] 376 [Mum], the ld. AR submitted that non mentioning of the sanction of the competent authority u/s 151 of the Act vitiate entire reassessment proceedings u/s 147/148 of the Act. Finally, the ld. AR submitted that on the issue of non service of notice, impugned reassessment proceedings notice u/s 148 of the Act and consequent order passed u/s 143(3) r.w.s 147 of the Act may kindly he held as bad in law void ab initio and consequently the same may kindly be quashed.
9. The ld. AR placing reliance on the decision of the order of the ITAT Delhi Bench in the case of Comeran Licensing Financial Company Vs. ITO in dated 14.8.2014 submitted that non application of mind by the A.O at the time of issuance of notice u/s 148 of the Act vitiates the notice as well as all subsequent reassessment proceedings. The ld. AR also placed reliance on the decision of the Hon'ble Jurisdictional High Court of Delhi in the case of CIT Vs. Suren International Pvt. Ltd reported at 357 ITR 24 [Del] and submitted that non application of mind to the material which has been taken as basis for initiation of reassessment proceedings u/s 147 of the Act and issuance of notice u/s 148 of the Act vitiates the proceedings and non application of mind is fatal to the case of the Revenue.
10. Apropos Ground No. 2, the ld. AR submitted that the reasons dated 22.3.2010 available at page 50 of the APB is subsequent to the requisition of approval dated 17.3.2010 and this fact proved beyond doubt that the reasons might have been recorded after sanction u/s 151 of the Act has been received. The ld. AR further pointed out that moreover, the observations in the reasons itself manifest the fact that satisfaction of the Additional CIT has been obtained on 22.3.201 which further proves beyond doubt the question that the reasons have been recorded on 22.3.2010 after approval has been obtained on 17.3.2010. The ld counsel vehemently pointed out that the provisions of section 151 of the Act requires satisfaction of the appropriate authority on the reasons recorded which presupposes that the reasons to be recorded prior to sanction u/s 151 of the Act which is lacking in this case.
11. The ld. AR placing reliance on various decisions of Hon'ble Supreme Court and Hon'ble High Court including the decision in the case of Chhugamal Rajpal Vs. S.P. Chalia & Ors 79 ITR 603 [SC] and decision of the Hon'ble jurisdictional High Court in the case of Signature Hotels P. Ltd Vs. ITO 338 IYR 51 [Del], CIT Vs. Insecticides India Ltd 357 ITR 330 [Del], PCIT Vs. G & G Pharma India P. Ltd Vs. ITO dated 8.10.2015 Comero Leasing and Finance Pvt Ltd Vs. ITO ITA No. 4281/Del/2010, CIT Vs. Kamdhenu Steels 248 CTR 33 [Del], CIT Vs. Suren International Pvt. Ltd 357 ITR 24 [Del] and L.R. Gupta & Ors Vs. UOI 194 ITR 32 [Del] which was relied in the subsequent decision in the case of United Electrical [P] Co. Ltd Vs. CIT 258 ITR 317 [Del] submitted that when there is no discussion in the reasons about return of income, nature of accommodation entries, multiplicity of entries, absence of material on support of DDI, INV & Info and then the A.O reached satisfaction that there was accommodation entries which makes the reasons highly ambiguous, vague which has to be held as recorded with application of mind by the A.O. Therefore, all the proceedings including the notice u/s 148 of the Act and consequent reassessment order framed u/s 143(3)/147 of the Act deserve to be quashed.
12. On the issue of approval u/s 151 of the Act without reasons and lack of application of mind by approving authority placing reliance on the decision in the case of United Electrical Company [supra], the Hon'ble High Court of Delhi in the cases of Central India Electrical Supply Co. Ltd. Vs. ITO reported at 51 DTR 51 [Delhi] rendered by the Hon'ble jurisdictional High Court and the decision of Hon'ble Bombay High Court in the case of German Remedies Ltd Vs. DCIT 287 ITR 494 [Bom] the ld. AR submitted that mechanical approval u/s 151 of the Act by the authorities without application of mind and without even considering the reasons recorded for initiation of reassessment proceedings, which were not in existence at the time of providing approval, vitiate the entire proceedings and in this situation, it has to be held that approval has been given in a mechanical, casual and routine manner without application of mind and even without seeing the reasons recorded subsequent to approval which leads to quashing of entire reassessment proceedings, notice u/s 148 of the Act and the consequent reassessment order passed in pursuance thereto u/s 143(3) of the Act.
13. Replying to the above, the ld. CIT DR submitted that on the report of the INV Wing, reassessment proceedings u/s 147/148 of the Act can be made validly. The ld. CIT-DR further submitted that if there is some defect in the service of notice or service by affixture, then the provisions of section 292BB of the Act is applicable as defect is curable in nature. The ld. CIT-DR submitted that objection regarding non service of notice has been considered by the ld. CIT(A) and the same has been found as baseless. On the issue of change of address, the CIT-DR submitted that the A.O issued notice to the address which was placed by the assessee itself on the record of the Revenue and change of address was not timely and immediately intimated to the A.O and it was also not modified and included in the Database of the department by the assessee. Therefore, the assessee cannot allege that the notice has been affixed or issued to the non-existent and wrong address. The CIT-DR explaining the requirement of affixture of notice submitted that since the date 31.3.2010 was the last date for framing reassessment, therefore, the notice through speed post and affixture was simultaneously issued to the assessee and which has been issued and served on the assessee as per the requirement of provisions of the Act and thus this allegation of non service of notice on the basis of affixture and issuance of notice to correct and non-existent address cannot be alleged against the A.O.
14. Placing rejoinder to the above submissions of the Revenue, the ld. AR submitted that the assessee is regularly filing returns of income since last 20 years and the address of the assessee was changed four times during this long period of two decades. The ld. AR vehemently pointed out that the non service of notice u/s 148 of the Act which was issued and affixed on the wrong address leads to a clear adverse inference that no notice u/s 148 of the Act has been served upon the assessee as per the requirement u/s 283(1)(a) of the Act which is an incurable defect and on this legal ground the reassessment proceedings and consequent order should be quashed.
The ld. AR lastly pointed out that service of notice through affixture on the wrong address without efforts to serve the notice under the ordinary procedure is also a fruitless effort of the A.O and in absence of any such exercise the service of notice is bad in law as per the ratio of the order of the ITAT Mumbai dated 9.9.2014 in the case of Sanjay Badani Vs. DCIT passed in ITA No. 5221-5222/Mum
On careful consideration of above rival submissions, we note that the notice u/s 148 of the Act was issued by the A.O to the address at 601, Nehru Place, New Delhi [assessee’s paper book page 51] and the same remained unserved due to the address being issued to the wrong and incorrect address. From the copies of the Income-tax return available at pages 285 to 294 of the APB, from A.Ys 2003-04 to 2008-09 shows that the latest address of the appellant company as per the record of the department was A-58/4, Sainik Farms, Mehrauli Road, New Delhi and this fact again gets support from the intimation given by the assessee to the Registrar of Companies available at page 281 of the APB wherein the assessee, on 3.7.2001 informed the ROC regarding change of address of Registered Office from Nehru Place, New Delhi to Sainik Farm, New Delhi in 2001 i.e. well before the issuance of notice u/s 148 of the Act which was issued on 22.3.2010. We further observe that from the copies of the notice issued by the same A.O u/s 143(2) of the Act for A.Y 2002-03 on 6.10.2009, 10.9.2009 and 24.7.2009 available at pages 296 to 298 of the APB have been issued to the new address at Sainik Farm which again fortify the fact that the new address changed we.f. 3.7.2001 [as per ROC intimation] was known to the A.O well before the issuance of notice u/s 148 of the Act on 22.3.2010. Further, we also observe that from the copy of letter of the A.O dated 18.12.2008 issued to the assessee on the Sainik Farm address requiring the appellant to furnish self assessment tax challan for A.Y 2006-07 to 2008-09 further shows that the new address of Sainik Farm was known to the A.O before issuance of notice u/s 148 of the Act. Copy of this letter is available at pages 300 of the APB. Furthermore, from the copy of the rectification order dated 24.5.2006 passed by the ITO, Ward-8(3), New Delhi u/s 154/250/143(3) for A.Y 2001-02 [PB pages 301 and 302] also shows that the address of the Sainik Farm was known to the A.O before issuance of impugned notice.
Last but not the least, from the copy of the assessment order dated 22.3.2004 for A.Y 2001-02 available at APB 304-309 it is clearly observed that new address of the Sainik Farm was known to the department and thus we decline to accept the contention of the ld. DR that the assessee is habitual of changing its address frequently and change of address from Nehru Place to Sainik Farm, New Delhi was not intimated to the department by the assessee as per the due procedure and requirement of the Act.
In view of the above discussion, we clearly observe that the address of the appellant assessee on the date of issuance of notice on 22.3.2010 was A- 58/4, Sainik Farm, Mehrauli Road, New Delhi as per records of the A.O and there is no material on record to suggest that new address of “Sainik Farm” on which the notice u/s 148 of the Act was issued was not intimated to the A.O by the assessee and thus, we are unable to agree with the contention of the ld. DR that the address of the Nehru Place, New Delhi as mentioned in the impugned notice u/s 148 of the Act dated 22.3.2010 was a correct address at the time of issuance of notice by the A.O.
At this juncture, we respectfully take cognizance of the decision of the Hon'ble High Court of Delhi CIT Vs. Chetan Gupta reported at 382 ITR 613 [Del] wherein their Lordship has emphasized the significance of service of notice u/s 148 of the Act on the appellant provided that notice issued within the prescribed time as per the provisions of the Act and their Lordships also held that issuance of notice to the correct address is also mandate of section 148 of the Act which cannot be dispensed with and in case address is not correct then requirement of the Act is violated and such violation vitiates the entire reassessment proceedings as well as reassessment order. We further observe that the ratio laid down in the case of Mayawati [supra] as relied upon by the ld. DR does not lay down the proposition that the issuance of notice at wrong address could satisfy the requirement of mandate of section 148 of the Act and on careful reading of the said judgment, in our humble opinion, this judgment merely confirms the position of law that notice need to be issued within the prescribed time although the service thereof may take place subsequently.
In the present case, notice issued by the A.O on 21.3.2010 to the Nehru Place address is contrary to law as the new address of Sainik Farm have been given to the A.O by the assessee as per the record of the A.O. Therefore, issue of notice to wrong address does not comply with the requirement of section 282(1)(a) of the Act which requires issuance of notice and service thereof by post on the last known address of the assessee by the A.O. In this regard, we respectfully take cognizance of the ratio of the decision of the Hon'ble Supreme Court in the case of N. Narayan Chetty Vs ITO reported at 35 ITR388 [Supreme Court] wherein their Lordships speaking for the Hon'ble Apex Court held that if there is no valid notice issued within the limitation period, reassessment is bad in law. In the present case, as we have already held that notice issued by the AO to the old Nehru Place address, despite the fact that new address of Sainik Farm was properly intimated by the assessee to the A.O and which was used by the A.O for issuing subsequent notice and framing assessment and rectification orders was not correct address of the assessee on 22.3.2010 and on that date the address of the assessee was Sainik Farm and thus the issuance of notice to the wrong and incorrect address cannot be held as valid issuance and service of notice by post on the assessee. Thus, on this ground we hold that non service of notice u/s 148 issued to the wrong address is incurable defect which makes the notice as well as the consequent reassessment order vitiated and bad in law.
The next legal contention raised by the ld. AR is that notice u/s 148 of the Act has been in the name of the company although the same needs to be issued in the name of Principal Officer or Director or Managing Director of the noticee company and such defect makes the notice bad in law. For this proposition, the ld. AR has placed reliance on the judgment of the Hon'ble Calcutta High Court in the case of Rama Devi Agarwal Vs. CIT 117 ITR 256, 264- 65 [Cal] and the decision of the Hon'ble Allahabad High Court in the case of Madan Lal Agarwal Vs. CIT reported at 144 ITR 745 [Allahabad] and submitted that copy of notice placed at APB page 51 clearly shows that notice has been issued in the name of the company and there is no mention of the name of the Principal Officer or Director or Managing Director of the noticee company. On this contention, the ld. DR replied that where the name of the company is mentioned which is a legal entity and not in physical existence, then it is expected from the Principal Officer or Director or Managing Director of the notice company to comply with the notice and non mentioned of the Principal Officer or Director or Managing Director of the notice company does not make any difference.
On careful consideration of the above submissions, at the very outset, from the copy of the impugned notice available at APB page 51, it is vivid that notice has been issued in the name of the company only and there is no mention of the Principal Officer or Director or Managing Director of the notice company and as per ratio of the decision of the Hon'ble Calcutta High Court in the case of Rama Devi [supra] and decision of the Hon'ble Allahabad High Court in the case of Madan Lal Agarwal [supra] wherein it has been held that notice u/s 148 issued in the name of the company although the same needs to be issued in the name of the Principal Officer or Director or Managing Director of the notice company then such defect makes the notice bad in law. In the present case, the ratio of this decision is clearly applicable in favour of the assessee as notice has been issued in the name of the assessee company only without addressing to the Principal Officer or Director or Managing Director of the notice company.
Before we part with the adjudication of Ground No. 1, we may also find it appropriate to decide the contention of the ld. AR regarding service of notice by affixture. However, the ld. AR has raised so many allegations against the service of notice by affixture viz. (i) service by affixture has been done merely to fill the gap in the valid service of notice (ii) before ordering affixture of notice, the A.O had not used “all due and reasonable diligence” as per procedure of order v Rule 17 of Code of Civil Procedure; (iii) affixture on the wrong address (iv) affixture report without any independent witness who can identify the premises/office of the assessee. Admittedly and undisputedly, notice by post and notice by affixture have been issued on the same date i.e. 22.3.2010 on the address of Nehru Place which was not correct address at the time of issuance of notice. Therefore, affixture on the wrong address without any independent evidence and without any due diligence by serving officer getting the notice served in the ordinary course cannot be held as valid service of notice as per the provisions of order v of Rule 17 of Code of Civil Procedure.
At this juncture, it is relevant to take respectful cognizance of the decision of the ITAT Mumbai Bench dated 9.9.2014 in the case of Shri Sanjay Badani [supra] wherein it was held thus:
“11. During the course of hearing, the Bench specifically asked the learned AR with regard to the requirements of Section 292BB introduced w.e.f. 1-4-2008 with retrospective effect. In reply, learned AR contended that as per proviso to Section 292 BB, where the assessee has raised objection regarding issue of notice before the completion of such assessment or reassessment, the provisions contained u/s.292BB will not be applied. We found that provisions of Section 292BB was introduced w.e.f. 1-4-2008 relevant to A.Y. 2008- 09 under consideration, according to which, where an assessee has appeared in any proceeding or co- operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner. We found that in the case, assessee has filed his objection before the AO and such objection has also been noted by the AO in his assessment order to the effect that assessee has objected non service of notice u/s.143(2) during the course of assessment proceedings itself. Thus, participation of assessee in the assessment proceedings will not disentitle the assessee his right to object to the service of notice u/s.143(2) of the I.T. Act, 1961.
After going through the assessment records, we found that notice issued u/s.143(2) dated 17-7-2012 returned unserved by postal authorities. Thereafter notice was affixed by the Inspector on 28-7- 2012. For such service by fixture the Inspector has given his report vide letter dated 27-7-2012 which reads as under :-
“In connection with the subject matter it is brought to your kind notice that the undersigned visited the assessee’s premises at 23/24, Vora CHS ltd., Plot No.52, U.B.Lane, Ghatkopar(E), Mumbai-400 077 on 27.07.2012 to serve the notice u/s.143(2) for A.Y.2008-09 in the case of Shri Sanjay Badani bearing PAN AABPB 9926B. However, on reaching the said premises it was found that the said premises was locked. Therefore, the said notice was served on the assessee by affixture by me on 27.07.2012.” Here we have to examine as to whether service of notice by affixture was proper in terms of provisions of Order V, Rule 17 to 20 of CPC. As per provisions of Section 282 of the I.T. Act, 1961, notice under the Act is to be served either by post or as if it is summoned under the Code of Civil Procedure. Notice dated 17-7-2012 has been claimed to have been served through affixture on 27-7-2012 as provided in Code of Civil Procedure. Here provisions of Order V Rules 17 to 20 of CPC are http://www.itatonline.org SA Nos.216 & 215/2014 & & 5222/14 10 relevant. After taking notice of above statutory provisions. their Lordships of Supreme Court in the case of CIT v. Ramendra Nath Ghosh [1971] 82 ITR 888, held (pgs 890 & 891) as under:
Admittedly, the assessees have not been personally served in these cases. Therefore, we have to see whether the alleged service by affixation was in accordance with law. It is necessary to mention that, according to the assessees, they had no place of business at all. They claim that they have closed their business long before the notices were issued. Hence, according to them, Mr. Neogi must have gone to a wrong place. This contention of the assessees has been accepted by the Appellate Bench of the High Court. Bearing these facts in mind, let us now proceed to consider the relevant provisions of law. Section 63(1) of the Act reads: “A notice or requisition under this 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 Code of Civil Procedure, 1908 (V of 1908).
Rule 17 of Order V of the Civil Procedure Code reads: “Where the defendant or his agent or such other person as aforesaid refuses to sign the acknowledgment, or where the serving officer, after using all due and reasonable diligence, cannot find the defendant, and there is no agent empowered to accept service of the summons on his behalf, nor any other person on whom service can be made, the serving officer shall affix a copy of the summons on the outer door or some other conspicuous part of the house in which the defendant ordinarily resides or carries on business or personally works for gain, and shall then return the original to the court from which it was issued, with a report endorsed thereon or annexed thereto stating that he has so affixed the copy, the circumstances under which he did so, and the name and address of the person (if any) by whom the house was identified and in whose presence the copy was affixed.” (emphasis applied) As seen earlier the contention of the assessees was that at the relevant time they had no place of business. The report of the serving officer does not mention the names and addresses of the person who identified the place of business of the assessees. That officer does not mention in his report nor in the affidavit filed by him that he personally knew the place of business of the assessees. Hence, the service of notice must be held to be not in accordance with the law. The possibility of his having gone to a wrong place cannot be ruled out. The High Court after going into the facts of the case very elaborately, after examining several witnesses, has come to the conclusion that the service made was not a proper service. Hence, it is not possible to hold that the assessees had been given a proper opportunity to put forward their case as required by Section 33B.”
As per sub-section (1) of section 282, the notice is to be served on the person named therein either by post or as if it was a summons issued by Court under the Code of Civil Procedure, 1908 (V of 1908). The relevant provision for effecting of service by different modes are contained in rules 17, 19 and 20 of Order V of CPC. Rules 17, 19 and 20 of Order Vof CPC lay down the procedure for service of summons/notice and, therefore, the procedure laid down therein cannot be surpassed because the intention of the legislature behind these provisions is that strict compliance of the procedure laid down therein has to be made. The expression after using all due and reasonable diligence' appearing in rule 17 has been considered in many cases and it has been held that unless a real and substantial effort has been made to find the defendant after proper enquiries, the Serving Officer cannot be deemed to have exercised 'due and reasonable diligence'. Before taking advantage of rule 17, he must make diligent search for the person to be served. He therefore, must take pain to find him and also to make mention of his efforts in the report. Another requirement of rule 17 is that the Serving Officer should state that he has affixed the copy of summons as per this rule. The circumstances under which he did so and the name and address of the person by whom the house or premises were identified and in premises the copy of the summon was affixed. These facts should also be verified by an affidavit of the Serving Officer.
The reason for taking all these precautions is that service by affixture is substituted service and since it is not direct or personal service upon the defendant, to bind him by such mode of service the mere formality of affixture is not sufficient. Since the service has to be done after making the necessary efforts, in order to establish the genuineness of such service, the Serving Officer is required to state his full action in the report and reliance can be placed on such report only when it sets out all the circumstances which are also duly verified by the witnesses in whose presence the affixture was done and thus the affidavit of the Serving Officer deposing such procedure adopted by him would also be essential. In the instant case, the whole thing had been done in one stroke. It was not known as to why and under which circumstances another entry for service of notice by affixture was made on 27-7-2012 when sufficient time was available through normal service till 30-9-2012. Nor there is any entry in the note-sheet by the AO directing the Inspector for service by affixture and had only recorded the fact that the notice was served by the affixture. It appears that the report of the Inspector was obtained without issuing any prior direction for such process or mode. However, the fact remained that Serving Officer had not set out reason for passing subsequent entry nor for adopting the mode for service by affixture and without stating the reasons for doing so, the adoption of the mode of substituted service could not be legally justified. Notice was served by affixture. The reasons for service through affixture has not been noted by the AO in the notesheet nor he has issued any direction for issuing notice through affixtures. The next entry of note sheet dated 28-7-2012 just indicates that letter was filed by the Inspector regarding service of notice by affixtures, dated 17-7-2012. Thus, on 17-7-2012, the first entry was made and without recording any apprehension about the delay by such mode second entry for affixation was made on 28-7- 2012 without showing justification for the same. Thus, it is clear that report of the Inspector was obtained without issuing any prior direction for such process or mode. Thus, the adoption of mode of substituted service was not legally justified. It is also clear from the Inspector’s report that there is no mention of name and address of the person who had identified the house of the assessee and in whose presence the notice u/s.143(2) was affixed. There is no evidence or indication in the report of Inspector that he had personal knowledge of the place of the business of the assessee and was, thus, in a position to identify the same.
Therefore, neither the procedure laid down under order V. rule 17 had been followed nor that laid down under order V rules 19 and 20 had been adhered to. Neither before taking recourse to service by affixture, the Assessing Officer or the concerned officer had recorded the findings to justify the service by this mode nor afterwards called for the affidavit or certificate of service by affixture from the Serving Officer. He had not certified that the service had been effected by adopting this course.”
In view of the above, from the notice of affixture report available at page 52 of the APB, there is no evidence or indication in the report of the Inspector that he had personal knowledge of the present place of business of the assessee and therefore, he was in a position to identity the same. From the affixture report, it is clearly discernible that no independent witness or person was present during the course of affixture who could be said a person who could identify the place of business of the assessee at the time of affixture of notice. Therefore, we hold that neither the procedure laid down under Order V. Rule 17 CPC had been followed nor that laid down under order V rules 19 and 20 had been adhered to. Neither before taking recourse to service by affixture, the Assessing Officer or the concerned officer had recorded the findings to justify the service by this mode nor afterwards called for the affidavit or certificate of service by affixture from the Serving Officer i.e. ITO and Process Server Shri Alam Singh. In view of the above, it is clear that there was no valid service of notice u/s 148 of the Act by way of affixture also.
Therefore, we hold that reassessment proceedings resulting into reassessment order dated 30.12.2010 are bad in law. Our conclusion also gets strong support from the decision of the jurisdictional High Court of Delhi in the case of Hotline International Private Limited 296 ITR 333 [Delhi. To sum up, we hold that the A.O issued notice u/s 148 of the Act in the ordinary course as well as affixture on the address of Nehru Place as well as by affixture on the address of Nehru Place on 22.3.2010 which was not the correct address at the time of issuance of notice and affixture of notice was also not made as per the relevant provisions of CPC. Therefore, we have no hesitation to hold that reassessment proceedings and consequent reassessment order are bad in law. Accordingly, Ground No. 1 of the assessee is allowed.
Ground No. 2
Apropos Ground No. 2, the ld. AR, besides reiterating the written synopsis/submissions, precisely submitted that while framing assessment order and sustaining the same, the A.O as well as the ld. CIT(A) have grossly erred on the facts and in law in ignoring the fact that mandatory requirement of recording reasons in terms of provisions of section 148(2) of the Act were not complied with and therefore, order so passed deserves to be quashed. The ld. AR submitted that the reasons were not recorded by the A.O before the issuance of notice u/s 148 of the Act which makes the consequential assessment order illegal being without jurisdiction and reasons recorded as provided are vague on certain non specific incoherent points. The ld. AR further submitted that the reasons dated 22.3.2010 [PB page 50] is subsequent to requisition of approval dated 17.3.2010 as this fact proves beyond doubt that reasons might have been recorded after sanction u/s 151 of the Act has been received. The ld. AR strenuously pointed out that the observations in the reasons itself record the fact that the satisfaction of the Additional CIT, Range VIII has been obtained on 22.3.2010 which further proves beyond doubt that the reasons have been recorded subsequent to requisition of the approval dated 17.3.2010. The ld. AR also pointed out that as per the provisions of section 151 of the Act, satisfaction of the appropriate authority on the reasons recorded is required for a valid approval which presupposes that the reasons need to be recorded prior to the recording of satisfaction u/s 151 of the Act which is lacking in the present case.
The ld. DR replying to the above, contended that notice has been issued on 22.3.2010 and approval of the ACIT Range VIII, has been obtained on the very same date. Therefore, it cannot be said that reasons are subsequent to the approval of requisition dated 17.3.2010. The ld. DR drew our attention towards page 93 and 94 of APB and submitted that the JCIT, Range VIII provided approval u/s 151 of the Act in the case of the assessee on 22.3.2010 and therefore, approval u/s 151 of the Act cannot be held as prior to the recording of reasons.
The ld. AR again pointed out that even on a careful reading of pages 48 and 49 of APB i.e. copy of proposal for approval of selection of case u/s 148/147 of the Act addressed to the ACIT it is discernible that whether the JCIT, Range VIII gave his approval thereon because on the first page right side the ITO, Ward VIII(3) himself noted that “Approval u/s 151 given in 33 cases. The ITO, Ward VIII(3) to acknowledge” and thereafter signature of the ITO Shri Piyush Sinha alongwith date 22.3.2010 is seen and thereafter his designation i.e. ITO, Ward VIII(3) is written on page 49 some signature have been put above the name of the ITO Piyush Sinha. However, from pages 93 and 94 we observe that the JCIT, Range -8 gave his approval on 22.3.2010. Be that as it may, we further observe that from the copy of the reasons available at page 50 of the APB we observe that the A.O recorded the following reasons for issuing notice u/s 148 of the Act on 22.3.2010: “Reasons for issuing notice u/s 148 of the I.T.Act.1961
An information from the Office of the DIT (lnv.)-1, New Delhi has been received that the assessee M/s Shri Balkishan Agarwal Glass Ind Ltd has received an accommodation entry of Rs. 2.67 crores Into its Bank account with HDFC Bank, N. Delhi during the financial year 2002-03 relevant to asstt.year 2003-04 so as to introduce its unaccounted money into its accounts.
In view of above facts, I have reason to believe that the income of Rs 2.67 crores has escaped assessment in the hands of the assessee in terms of section 147 of the I.T. Act for the assessment year 2003-04.
Issue notice u/s 148 of the I.T. Act.
Satisfaction of the Addl CIT, Range-8, N. Delhi, has been obtained on 22.3.2010 to issue notice u/s 148 of the I.T. Act, Income Tax Officer, Ward-8(3), N.Deihi.
From the above, it is clear that the A.O himself noted in the reasons that “satisfaction of the ACIT, Range VIII, New Delhi has been obtained on 22.3.2010 to issue notice u/s 148 of the Act” which makes it clear that approval/sanction of Joint CIT, Range VIII, New Delhi was obtained prior to recording of reasons and thus we have no hesitation to hold that the A.O recorded reasons subsequently and sanction/approval u/s 151 of the Act was obtained by the ITO prior to recording of reasons. Therefore, we are unable to understand that on which material and reasons the JCIT, Range VIII gave approval/sanction for issuance of notice u/s 148 of the Act and initiation of reassessment proceedings. Thus, we hold that sanction/approval u/s 151 of the Act was given by the sanctioning authority without seeing the reasons and record and without application of mind, in a mechanical manner, which also vitiates the reassessment proceedings and consequent reassessment order. Therefore, we hold that the same are bad in law and not sustainable. We order accordingly. Consequently, first limb of Ground No. 2 of the assessee is allowed and the impugned reassessment proceedings and order are quashed on this count.
Second limb of Ground No. 2 as taken in Ground No. 2 by the assessee is that he reasons recorded are vague, non-specific and without application of mind. The A.O has not assumed valid initiation of reassessment proceedings and thus the same has to be held as bad in law and unsustainable. The ld. AR reiterated written arguments/synopsis and precisely his arguments are as follows:
“. I None of the reasons make mention of the return of income filed by the assessee and the status of the assessment whereas the assessee has filed the Return of Income of Rs 19,64,220/- on 2nd December 2003. (PB 1) i. The reason does not deal with the basis on which the information from DDI (Inv)-l has been prepared and sent to the AO for taking action u/s 147 against the appellant. The basis could be search action / survey routine compilation of information. Nothing is mentioned in the reason. ii. What material was used to prepare the information which has triggered the action u/s 147. iii. In the reason dated 22.03.2010, the AO has not named the parties who have provided the accommodation entries to the appellant. The said reason could not be supported /supplemented by the additional a information in the form of the list of parties provided the reason at n page 274 is considered, the AO has just mentioned the information of I the DDI (Inv)-I there no satisfaction of the escapement of f income which is a prerequisite for valid reassessment proceeding u/s 147.
In none of the reasons, the nature of accommodation entries iv. obtained by the appellant is mentioned. The nature of accommodation entries are acceptance of share capital, unsecured loans, gifts, bogus purchase or bogus sales bogus expenses, gift or tax free profits of LTCG. The AO does not enlighten in the reasons how and in what manner the appellant has obtained accommodation from the parties concerned. v. The AO does not demonstrate as to how he was able to form his belief that the income of Rs 2.67 Crore escaped assessment. The reason does not indicate the independent application of mind by the AO to reach such a belief. vi. In the annexure at pages 95 to 99 it can be notice that there are 56 entries out of which 24 entries are repeated on various pages and as many as 18 entries are such which did not pertain to the appellant and there were only 14 entries with amount aggregating R 70 lacs out of Rs 2.67 Crore pertains to the appellant. Kindly refer to page 100 to 105 o the paper book where the data as per annexure has been analysed. The AO has verified the above fact by verifying fro varicose bank branches ( PB 53 to 88) vii. The Aggregate of the annexure is Rs 2,67,08,000/- where as the AO has taken 2,67,00,000/- so the amount in the reasons also does not match with annexure. viii. It appears from the reason recorded that there was no material before the AO except for the information from DDI lnv-1 New Delhi and in the absence of any material in support of any allegation in the information in question it is a case of total non application of mind by the A.O. ix. The approval u/s 151 is again without any application of mind as the approval seeking authority itself was deficient with the necessary information and in the reasons recorded.”
The ld. AR has placed reliance on the following decisions /orders to support the above precisely summarized contentions:
i. Chhugamal Rajpal Vs. S.P. Challia & ors 79 ITR 603 [SC] [Jud-Com 45-47 ii. Hindustan Lever & RB Wadekar 137 ITR 479 [Bom] [Jud-com 48-50] iii. Signature Hotels Pvt Ltd Vs. ITO 338 ITR 51 [Del] [Dud-Com 63-67] iv. CIT Vs. Insecticides India Ltd 357 ITR 330 [Del] [Jud-Com 68-70] v. Pr CIT Vs. G & G Pharma I Ltd ITA 545/2015 08.10.2015 [Jud-Com 71-72] vi. Comero Leasing & Finance Pvt Ltd Vs. ITO [Jud-Com 73] vii. CIT Vs. Kamadhenu Steels Alloys Ltd & ors 248 CTR 33 [Del] viii CIT Vs. Suren International P. Ltd 357 ITR 24 [Del] [Jud-Com 84-88] ix. LR Gupta & Ors Vs. UOI & Ors 194 ITR 32 [Del] x. United Electricals Co. Pvt. Ltd Vs. CIT 258 ITR 317 [Del] xi. German Remedies Ltd Vs. DCIT 287 ITR 494 [Bom] xii Central India Electric Supply Co. Ltd Vs. ITO 51 DTR 51 [Del] xiii PCIT Vs. N C Cables P Ltd dated 10.1.2017 [Del] 391 ITR 11 [Del]
The ld. DR, supporting the action of the A.O drew our attention towards copy of reasons available at page 50 of the APB and contended that the reasons must be read alongwith Annexure i.e. pages 95 to 99 of the APB which clearly reveals that the assessee was beneficiary of accommodation entries of Rs. 2.67 crores during A.Y 2003-04 so as to introduce its unaccounted money/income into its accounts and in view of the above fact the A.O had reason to believe that such income has escaped assessment.
Replying to the above, the ld. AR pointed out that the reasons are incoherent, vague and non communicative as the A.O has not named the parties who have provided accommodation entries to the assessee and the said reason could not be supported/supplemented by the additional information in the form of list of parties. The ld. AR also strenuously submitted that there is no mentioning of any list or Annexure to in the reasons recorded thus no extraneous supplementary material can be read or considered alongwith the reasons recorded.
He also contended that without prejudice to the above, even for the sake of arguments if it is presumed that the Annexure i.e. pages 95 to 99 of the APB are part of reasons recorded, then it is also clear that the same are not only vague but also has been recorded without application of mind in a mechanical manner as in the reasons the A.O has not named the parties who have provided accommodation entries to the assessee, nature of accommodation entries such as share capital, unsecured loans, gifts, bogus purchases/sales expenses etc. has not been mentioned, the manner in which entry has been taken has also not been mentioned and the A.O has not demonstrated as to show he is able to form his belief that the income of Rs. 2.67 crore escaped assessment. Thus, the reason does not indicate application of mind.
The ld. AR again took us through Annexure to reasons [APB pages 95 to 99] and submitted that there are 56 entries out of which 24 entries are repetitive, 18 entries did not pertain to assessee and only 14 entries with amount aggregating to 70 lakhs out of alleged 2.67 crores pertains to the assessee and these facts have also been analyzed by the A.O from copies of various bank accounts available at pages 53 to 58 of the APB. The ld. AR vehemently contended that on those facts as per ratio of the decision of Jurisdictional High Court in the case of CIT Vs. Suren International 357 ITR 24 [Delhi] invocation of reassessment proceedings u/s 147 of the Act, notice u/s 148 of the Act and consequent reassessment order deserve to be quashed.
On careful consideration of the above rival submissions, first of all from the copy of the reasons recorded [APB page 50] as reproduced above in para 28 of this order, it is clearly discernible that there is no mention regarding any Annexure or list or any other document thereto. In the reasons recorded on 22.3.2010, there is no mention of some important facts viz. (i) name of the parties who provided the accommodation entries to the assessee, (ii) the nature of accommodation entries, such as share application, unsecured loans, bogus purchases or sales etc, has not been mentioned, (iii) how and in what manner the assessee obtained accommodation from the alleged parties (iv) it is not demonstrated by the A.O that how he became able to form his belief that the income of Rs. 2.67 crore has escaped assessment for A.Y 2003-04 without even referring or seeing the relevant assessment records. These facts could not be controverted by the ld. DR.
From the said list/Annexure [APB pages 95 to 99] it is vivid that there are 56 entries out of which only 14 amounting to Rs. 70 lakhs pertains to assessee and out of remaining 42 entries 24 entries are repetition of identical entries and 18 entries are those which do pertain to the assessee. These facts have not been disputed and controverted by the ld. DR even on the specific query from the Bench. In the reasons [supra] the A.O stated that he has reason to believe that the income of the Rs. 2.67 crore has escaped assessment which clearly shows that the A.O recorded reasons without application of mind in a mechanical manner.
At this juncture, we respectfully take cognizance of the decision of the Hon'ble High Court of Delhi in the case of PCIT Vs. G & G Pharma India Ltd. Since reported at 384 ITR 47 [Del] wherein their Lordships speaking for the jurisdictional High Court and after referring to the earlier decision of the Hon'ble Supreme Court in the case of Phoolchand Bajrang lal 203 ITR 456 [SC] and decision in the cases of Haryana Acrylic Vs. CIT 308 ITR 38 [Del] held thus:
“9. The Court at the outset proposes to recapitulate the jurisdictional requirement for reopening of the assessment under Section 147/148 of the Act by referring to two decisions of the Supreme Court. In Chhugamal Rajpal v. SP Chaliha (1971) 79 ITR 603, the Supreme Court was dealing with a case where the AO had received certain communications from the Commissioner of Income Tax showing that the alleged creditors of the Assessee were “name-lenders and the transactions are bogus.” The AO came to the conclusion that there were reasons to believe that income of the Assessee had escaped assessment. The Supreme Court disagreed and observed that the AO “had not even come to a prima facie conclusion that the transactions to which he referred were not genuine transactions. He appeared to have had only a vague felling that they may be '“bogus transactions'." It was further explained by the Supreme Court that: “Before issuing a notice under S. 148, the ITO must have either reasons to believe that by reason of the omission or failure on the part of the assessee to make a return under S. 139 for any assessment year to the ITO or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year or alternatively notwithstanding that there has Page 5 of 8 been no omission or failure as mentioned above on the part of the assessee, the ITO has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. Unless the requirements of cl. (a) or cl. (b) of S. 147 are satisfied, the ITO has no jurisdiction to issue a notice under S. 148.” The Supreme Court concluded that it was not satisfied that the ITO had any material before him which could satisfy the requirements under Section 147 and therefore could not have issued notice under Section 148.
In ACIT v. Dhariya Construction Co.(2010)328 ITR 515 the Supreme Court in a short order held as under: “Having examined the record, we find that in this case, the Department sought reopening of the assessment based on the opinion given by the DVO. Opinion of the DVO per se is not an information for the purposes of reopening assessment under s. 147 of the IT Act, 1961. The AO has to apply his mind to the information, if any, collected and must form a belief thereon. In the circumstances, there is no merit in the civil appeal. The Department was not entitled to reopen the assessment.”
The above basic requirement of Sections 147/148 has been reiterated in numerous decisions of the Supreme Court and this Court. Recently, this Court rendered a decision dated 22nd September 2015 in ITA No. 356 of 2013 (Commissioner of Income Tax II v. Multiplex Trading and Industrial Co. Ltd.) where the assessment was sought to be reopened beyond the period of four years. This Court considered the decision of the Supreme
Court in Phool Chand Bajrang Lal v. Income-tax Officer (supra) as well as the decision of this Court in M/s Haryana Acrylic Manufacturing Co. (P) Ltd. v. CIT 308 ITR 38 (Del). The Court noted that a material Page 6 of 8 change had been brought about to Section 147 of the Act with effect from 1st April 1989 and observed: “29. It is at once seen that the Amendment in Section 147 of the Act brought about a material change in law w.e.f. 1st April, 1989. Section 147(a) as it stood prior to 1st April 1989 required the AO to have a reason to believe that (a) the income of the Assessee has escaped assessment and (b) that such escapement is by reason of omission or failure on the part of the Assessee to file a return or to disclose fully and truly all material facts necessary for his assessment for that year. After the Amendment, only one singular requirement is to be fulfilled under Section 147(a) and that is, that the AO has reason to believe that income of an Assessee has escaped assessment. However, the proviso to Section 147 of the Act provides a complete bar for reopening an assessment, which has been made under Section 143(3) of the Act, after the expiry of four years. However, this proscription is not applicable where the income of an Assessee has escaped assessment on account of failure on the part of the Assessee to make a return or to disclose fully and truly all material facts necessary for his assessment. Thus, in order to reopen an assessment which is beyond the period of four years from the end of the relevant assessment year, the condition that there has been a failure on the part of the Assessee to truly and fully disclose all material facts must be concluded with certain level of certainty. It is in the aforesaid context that this Court in M/s Haryana Acrylic Manufacturing Co. (P) Ltd. (supra) explained that the ratio of the decision in Phool Chand Bajrang Lal
(supra) may not be entirely applicable since the same was in respect of Section 147(a) as it existed prior to the amendment.”
In view of the above, we are incline to hold that the A.O, except stating the source of information and taking the total of Rs. 2.67 crore from the information of Investigation Wing has not even seen or referred to the assessment record of the assessee for A.Y 2003-04 and has not applied his mind to the so called list of alleged accommodation entries. This is a case of clear non application of mind by the A.O at the time of initiation of reassessment proceedings and recording of reasons on 22.3.2010. To sum up, in the instant appeal, the main contention of the assessee is that the A.O issued the notice u/s 148 of the Act mechanically simply on the basis of information alleged to have been received from the Investigation Wing without application of mind. On the basis of foregoing discussion, we are inclined to agree with the is contention of the ld. AR and at the cost of repetition, we again hold that as the ratio of various decisions of Hon'ble Supreme Court and Hon'ble High Court of Delhi including the decision in the case of M/s Haryana Acrylic [supra], Suren International [supra] and G & G Pharma [supra], in the present case, the reasons have been recorded by the A.O in a routine and mechanical manner and without application of mind which cannot be said to be a proper and sustainable belief with regard to escapement of income as per requirement of section 147/148 of the Act. Therefore, we hold that the initiation of reassessment and all consequential subsequent proceedings are not as per requirement of the provisions of the Act and hence the same are bad in law and thus the same cannot be held as sustainable and consequently, we quash the same. Accordingly, Ground No. 2 of the assessee is allowed on both the counts.
Ground No. 3
Apropos Ground No. 3 of the assessee, the ld. AR submitted that without prejudice to the legal objections/grounds Nos. 1 and 2 of the assessee, the authorities below, while framing reassessment order and upholding the same, have grossly erred on the facts and law ignoring a vital factual situation in favour of the assessee that the objections of the assessee against the initiation of reassessment proceedings and assumption of valid jurisdiction to pass reassessment order u/s 143(3) r.w.s 147 of the Act were not disposed of by the A.O by passing a speaking order. Therefore, consequently assessment order deserves to be quashed only on this ground.
The ld. DR replied that the A.O has while passing the reassessment order and the ld. CIT(A) while passing the impugned first appellate order properly considered and adjudicated the objections of the assessee. However, being specifically asked by the Bench, the ld. DR submitted that he A.O did adjudicate preliminary objections of the assessee vide dated 21.12.2010 [APB pages 107 to 263] to the assumption of valid jurisdiction for initiation of reassessment proceedings and issuance of notice u/s 147/148 of the Act by a speaking order dated 22.12.2010 [copy at APB page 263] as per ratio of the decision of Hon'ble Supreme Court in the case of GKN Driveshafts Vs. ITO 259 ITR 19 [Supreme Court].
On careful consideration of above, we decline to accept the contention and legal objection of the assessee as the A.O decided the legal objections of the assessee vide dated 21.12.2010 by passing a speaking order on 22.12.2010 as per ratio of decision of Hon'ble Supreme Court in the case of GKN Driveshafts [supra]. Thus, the legal objection of the assessee raised in ground No. 3 is jettisoned.
Since by the earlier part of this order we have allowed the legal ground Nos. 1 and 2 of the assessee and have held that initiation of reassessment proceedings and consequential reassessment order are not validly sustainable and the same are bad in law. Hence we are of the considered opinion that the other grounds of the assessee on merits become academic and infructuous and we are not adjudicating them as having become infructuous.
In the result, the appeal of the assessee is partly dismissed on Ground No. 3 and partly allowed on Ground Nos. 1 and 2. The order is pronounced in the open court on 11th April, 2017.