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Issues involved: Interpretation of the validity of a notice under section 148 of the Income-tax Act, 1961 and the legality of transferring a case between Income-tax Officers.
Validity of Notice u/s 148: The Income-tax Officer issued a notice under section 148 on September 10, 1971, for the assessment year 1965-66, which was served on October 23, 1971. The question arose whether the notice was valid and operative. The Tribunal held that the transfer of the case between officers rendered the reassessment proceedings invalid as the transfer was without jurisdiction. However, the High Court, citing a Supreme Court decision, clarified that a case commences when a notice under section 148 is issued, not upon service to the assessee. The service of notice is a condition precedent for a valid assessment, but the proceedings start upon issuance of the notice. Therefore, the Tribunal's conclusion was deemed unsustainable, and the case could be transferred under section 127 of the Act once the notice was issued. Transfer of Case between Officers: The crux of the matter was whether the transfer of a case between Income-tax Officers was legally permissible. The Department argued that once a notice under section 148 is issued, the case commences, allowing for transfer under section 127. The Tribunal, however, ruled in favor of the assessee, declaring the transfer and subsequent reassessment proceedings as illegal due to lack of jurisdiction. The High Court, relying on a Supreme Court decision, emphasized that the initiation of a case occurs upon the issuance of the notice, not upon service to the assessee. Therefore, the Tribunal's stance that the case does not legally exist until the notice is served was deemed erroneous. In conclusion, the High Court answered the referred question in the affirmative, favoring the Revenue and rejecting the assessee's arguments. No costs were awarded in this matter.
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