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Issues Involved:
1. Validity of assessment proceedings under Section 147. 2. Validity of service of notice under Section 148. 3. Jurisdictional challenge under Section 124(3). Issue-wise Detailed Analysis: 1. Validity of assessment proceedings under Section 147: The Revenue challenged the relief granted by the CIT(A) by quashing the assessment proceedings under Section 147. The assessee filed a return of income declaring nil income, but the AO noted certain amounts that had escaped assessment and issued a notice under Section 148(1). The CIT(A) quashed the assessment proceedings on the grounds that the notice was not served personally on the assessee, rendering the proceedings under Section 148(1) invalid. The CIT(A) emphasized that the service of notice is foundational for the validity of further proceedings, citing several judicial pronouncements that support the necessity of proper notice service for jurisdictional validity. 2. Validity of service of notice under Section 148: The CIT(A) found no evidence of the notice under Section 148(1) being personally served on the assessee. The Revenue claimed the notice was sent through a courier, which was contested by the assessee. The Tribunal upheld the CIT(A)'s decision, stating that the Revenue must produce a copy of the acknowledgment of service. The Tribunal highlighted that Section 282 of the IT Act specifies the mode of service of notices, requiring either postal service with acknowledgment due or service as per the CPC. The Tribunal concluded that in the absence of proper evidence of service, the proceedings under Section 148(1) were invalid, referencing multiple judicial decisions that invalidated assessments due to improper service of notice. 3. Jurisdictional challenge under Section 124(3): The Revenue argued that the issue of jurisdiction should have been raised under Section 124(3) before the AO. The Tribunal rejected this argument, clarifying that jurisdiction under Section 124 pertains to territorial or specific assessee-based jurisdiction, while reassessment under Section 147 requires satisfaction of conditions under Section 148(1). The Tribunal stated that even if the AO has jurisdiction under Section 124/127, the reassessment cannot proceed without fulfilling the conditions of Section 148(1). The Tribunal concluded that the mix-up of jurisdiction under Sections 124/127 with the assumption of jurisdiction under Section 148(1) was unnecessary and rejected the Revenue's argument. Conclusion: The Tribunal dismissed the appeals filed by the Revenue for both assessment years 2003-04 and 2004-05, upholding the CIT(A)'s orders. The Tribunal also allowed the cross-objections filed by the assessee, supporting the CIT(A)'s decision. The key takeaway from the judgment is the critical importance of proper service of notice under Section 148 as a jurisdictional prerequisite for valid reassessment proceedings under Section 147.
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