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TMI Blog2005 (3) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... king and only security guards were present. Thus, service had been effected upon the security guard who was not authorized to receive notice on behalf of the assessee-company. Neither the process serving officer nor the concerned ITO has recorded any satisfaction about the service of this notice. Thus, the provisions of s. 282 of the IT Act, referred, we are of the view that notice has not been properly served upon the assessee. It may be pointed out that service of valid notice is a prerequisite condition for initiating proceedings u/s 147. In the case of CIT Vs. Mintu Kalita [ 2001 (2) TMI 39 - GAUHATI HIGH COURT] , the Hon ble Gujarat High Court has held that service of notice prescribed by s. 148 of the IT Act for the purpose of initiating proceedings for reassessment is not a mere procedural requirement; it is a condition precedent to the initiation of the proceedings for assessment u/s 147 of the IT Act. Thus, the first plea raised by the assessee deserves to be accepted. Jurisdiction of the AO in issuing the notice u/s 148 - The learned counsel also pointed out that even the AO was not confident with his jurisdiction over the matter and, therefore, he wrote letter dt.28th Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. CIT, Company Circle 3(2), New Delhi, showing "Nil" income. The company started setting up a factory at Sikendrabad (UP) for the manufacture of plastic molded items. The construction/installation of the company was completed in March, 1996. The company commenced trading w.e.f. 1st Oct., 1994, the return for asst. yr. 199495 was filed by the company with ITO, Ward 1, Bulandshahar, on 30th Nov., 1994. The ITO, Bulandshahar, enquired from the assessee about the filing of the return with him, as according to him, jurisdiction did not lie with him. In reply to the query of the ITO, it was submitted on behalf of the assessee that at the extraordinary meeting held on 21st Aug., 1993, the company had passed a resolution to shift its registered office from Delhi to its plant at Sikandrabad to manage the affairs of the company and, therefore, the company was in the processing of completing other required formalities of the Companies Act to shift its office from Delhi to Sikendrabad and due to this reason the company had filed return for asst. yr. 1994-95 with ITO, Bulandshahar. The ITO, Bulandshahar, after being satisfied with the reply of the assessee processed the return for as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee by observing as under: "On the one hand the assessee-company has challenged the jurisdiction of the AO, Bulandshahar, for issuing notice under s. 148 and, on the other hand, in contradiction of its challenging the jurisdiction of the AO Bulandshahar, the assessee-company has applied to the company that the AO, Bulandshahar, has no jurisdiction to issue notice under s. 148 of the IT Act, 1961, is not correct. Under these circumstances and keeping in view the fact that the assessment is going to be time-bared on 31st March, 2001, the undersigned has no option but to make the assessment to the best of his judgment under s. 144." 14. The findings of the AO were challenged by the assessee before the learned CIT(A). In this regard the assessee had submitted a detailed reply before the learned CIT(A) which is dt. 12th Nov., 2001, and the copy of which is available at pp. 28 to 39. of the paper book. In this written reply the assessee had challenged the validity of the notice issued under s. 148 by taking the following specific pleas: "8. Thereafter, ITO, Bulandshahar, has alleged to have issued notices under s. 148 for the asst. yrs. 1995-96 and 1996-97 on 11th Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t justified in relying upon the proceedings initiated by the ITO. Bulandshahar, for asst. yr. 1995-96 under s. 148. 18. For challenging the jurisdiction of ITO, Bulandshahar, in issuing notice under s. 148 following specific plea was also taken: "(b) The ITO, Bulandshahar, did not have any jurisdiction over the case. Further, the ITO, Bulandshahar, did not have any jurisdiction over the case. The conduct of ITO itself proves the case of the appellant. The ITO, Bulandshahar issued notice under s. 148 for asst. yrs. 1995-96 and 1996-97. The appellant appeared before the AO and filed letter dt. 16th Feb., 2001, at page No. 65 along, with assessment order for asst. yr. 1996-97 passed by Asstt. CIT. Company Circle 3(2), New Delhi. under s. 143(3) of the Act. After going through the assessment proceeding for asst. yr. 1996-97, the AO himself dropped the proceedings for asst. yr. 1996-97 and transferred the reassessment proceedings pertaining to asst. yr. 1995-96 to Asstt. CIT, New Delhi, suo motu as he was fully satisfied about the jurisdiction over the case. Had the ITO. Bulandshahar, jurisdiction over the case, he should have decided the case himself. Since, he did not have jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee never informed the ITO, Bulandshahar, regarding filing of returns in Delhi and ITO, Bulandshahar, noticed that income had escaped assessment only in response to return filed under s. 148, the assessee itself filed the return for the asst. yr. 1995-96 with ITO, Bulandshahar. Moreover, it continued to file other documents such as application for certificate under s. 230A(1) and it was informed to the ITO, Bulandshahar, about the resolution of the company vide letter dt. 7th April. 1995, regarding shifting the registered office at Delhi. It has been held by the Supreme Court in S. Narayanappa & Ors. vs. CIT (1967) 63 ITR 219 (SC) that the reasons to believe must be in good faith and must be based on rational consideration. As pointed out by the Supreme Court in ITO vs. Ramnarayan Bhojnagarwala 1976 CTR (SC) 59 : (1976) 103 ITR 797 (SC), the existence of reasonable belief is the sine qua non for the initiation of reassessment proceedings-ITO vs. Ramnarayana Bhojnagarwala. What is necessary is that the AO should have formed an honest belief upon the materials to reasonably support such belief. The belief must be based on reasons which are relevant and material. Such a belief ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is for asst. yr. 1996-97, was issued by the Dy. CIT, Circle Bulandshahar. Similarly, notice was also issued by the AO of Bulandshahar for asst. yr. 1995-96 on 19th Feb., 2001. A copy of this notice is available at p. 14H of the paper book. On going through the paper book it is found that various notices, copies of which are available at pp. 14A to 14H of the paper book, were sent atNew Delhiaddress and not at Bulandshahar address. It may also be pointed out that no dispute has been raised by the assessee against notice issued at Delhi address of the assessee-company. According to the assessee, the notice was not sent to the head office of the company but to the factory which was closed and, therefore, it cannot be said that the notice was addressed to the principal officer of the company at its head office. The other contention of the learned counsel was that the notice was not served upon any director of the company or any person authorized by the company to receive the same. These arguments of the assessee also find force. On perusal of the notice it is found that the notice was received by Shri Ajay Pratap Singh on 18th Dec., 1998. The service was effected by the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was served with proper notices. 28. In view of the above, the first plea raised by the assessee deserves to be accepted. 29. On the second plea, the learned counsel for the assessee submitted that the AO did not have jurisdiction over the case to issue notice. By taking this plea, the assessee has challenged the jurisdiction of the AO of Bulandshahar in issuing the notice under s. 148. Shri Rakesh Gupta, learned counsel for the assessee pointed out that the assessee was filing returns at Delhi for earlier assessment years and the assessments were also completed by the concerned ITO of Delhi. In this regard he has invited our attention to the assessment order made for asst. yr. 1993-94 and also to the assessment order made for subsequent assessment years. The learned counsel also pointed out that even the AO was not confident with his jurisdiction over the matter and, therefore, he wrote letter dt. 28th March, 1995, asking the assessee to explain why the return had been filed with the ITO Ward-1, Bulandshahar, without any application for transfer of jurisdiction and without any order under s. 127 of the IT Act for the change of jurisdiction. 30. The third plea is that the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X
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