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TMI Blog2006 (9) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Holding that the claim of the assessee of Rs. 12.17 lakhs was revenue expenditure as against capital expenditure as held by the AO, especially ignoring the decision in the case of Shree Digvijay Cement Co. Ltd. vs. CIT (1982) 26 CTR (Guj) 184 : (1982) 138 ITR 45 (Guj), CIT vs. Vummidi Bangaru Chetty & Company 168 ITR 453 (sic). 4. In allowing deduction under s. 80-I to the assessee without deducting carry forward losses without properly appreciating the facts of the case, ignoring the provision of s. 80B(5) and especially ignoring the decision in the case of Cambay Electric Supply Industrial Co. Ltd. vs. CIT 1978 CTR (SC) 50 : (1978) 113 ITR 84 (SC) and CIT vs. Canara Workshops (P) Ltd. (1986) 58 CTR (SC) 108 : (1986) 161 ITR 320 (SC)." 3. In the cross-objection of the assessee, the following effective grounds have been raised: "1. The learned CIT(A) was justified in holding that reopening of assessment was not proper. 2. The learned CIT(A) was justified in holding that reopening of assessment at the instance of audit party is not permissible under the law and is against the judicial pronouncement. 3. The learned CIT(A) was justified in holding that there was no servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before CIT(A). Jabalpur. The CIT(A) directed to allow deduction under s. 80-I on gross income vide his order dt. 7th Feb., 1995. (2) On perusal of record shows that the assessee company has debited in P&L a/c at Rs. 12.17 lakhs on account of expenditure of issue of right shares. This expenditure is not allowable being of capital nature. Further it has also been noticed that the positive income of Rs. 8,85,59,094/- was offered from Unit IT on which deduction under s. 80HH at Rs. 1,77,11,819/- and s. 80-I at Rs. 2,21,39,774/- totalling Rs. 3,98,51,597/- was allowed without reducing earlier years, losses amounting to Rs. .... This resulted in excess allowance of deduction under ss. 80HH and 80-I at Rs. 1,75,44,375/- (Rs. 77,97,500/- + Rs. 97,46,875/-) with short levy of tax Rs. 90,79,214/-. 6. The AO, therefore, concluded that the income had been underassessed to the tune of Rs. 1,87,61,375/- (Rs. 12,17,000/- + Rs. 1,75,44,375/-) within the meaning of s. 147(a) of the IT Act. It was argued by the representative of the assessee that no notice under s. 148 was ever served upon the assessee and, therefore, the entire proceedings and the assessment completed under s. 147 was ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt but of the assessee who failed to trace out the notice under s. 148 from its record." 8. From the above, it appears that the AO did not try to bring out on record as to on whom and when the notice was effectively served. It was only the presumption of the AO that since the notice was issued, it must have been received by the assessee. However, it was not a correct legal position. It was the onus of the AO to bring out in the assessment order as to whom and when the notice was effectively served upon the assessee. Even in his parawise comments dt. 8th Aug., 2002 the AO has only commented that the notice under s. 148 was sent to the assessee on 23rd Oct., 2000 by registered post, but it is silent so far as its service upon the assessee is concerned. Even .the acknowledgement card of the Postal Department is not available to verify as to whom this notice was served or who was the person who received this notice on behalf of the assessee company. Learned CIT(A) thus opined that apparently under the circumstances, it cannot be said that there was any effective service of notice under s. 148, and, therefore, it renders, consequentially, the entire assessment to be bad in law. 9. Aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... properly addressing, pre-paying and posting by registered post, a letter containing the document and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post." 12. Since the expression by post implies service by registered post so sending notice by registered post is valid service and s. 27 of General Clauses Act, 1897, creates rebuttable presumption that service shall be deemed to be effective by properly addressing, posting by registered post at the time at which the letter would be ordinarily delivered. The presumption can be rebutted by stating on oath that the notice was never tendered as held by Hon'ble Supreme Court in the case of R.K. Vashisth vs. Union of India (1993) Supp (1) SCC 431. In this case the assessee has not disputed the address given in the notice and otherwise also it is a case of a company which has magnitude of crores of turnover every year and has not disputed the address of registered office as given in the notice and nowhere it has challenged as wrong address and the assessee has also not stated on oath that notice has not been received by it. Therefore, since the presump ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly. 15. Since order of authorities below is set aside on this legal issue, therefore, other grounds raised and agitated in the appeal of the Revenue and cross-objection of the assessee are not being discussed or considered. 16. As a result, the appeal and cross-objection of the assessee are disposed of accordingly. P.K. BANSAL, A.M.: 16th March, 2006 17. After going through the proposed order and having discussion with my learned Brother, it is not possible for me to agree with the proposed order drafted by him in ITA No. 288/Jab/2002 and in CO No. 6/Jab/2003. Accordingly, I decided to write a separate order. Although my learned Brother has stated the brief facts of the case but in my opinion it is necessary to lay down the facts at the cost of repetition and to decide the issues involved in these appeals. 18. The brief facts of the case as gathered from the order of the AO and the CIT(A) are that the assessee a public limited company claimed the deduction of right issue expenses and also claimed deduction under s. 80-I as per the computation given in the computation of total income. The assessment was completed under s. 143(3) on 23rd Nov., 1994 on a total income of Rs. 8,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. It is therefore. requested that permission to issue notice under s. 148 of the IT Act be accorded." 22. When the case was selected for scrutiny and notice under s. 142(1) was issued, the assessee vide letter dt. 11th Jan., 2002 stated that it had not received notice under s. 148 and therefore requested for allowing the inspection, the AO gave a copy of the notice under s. 148 dt. 23rd Oct., 2000 to the assessee. The AO took the view that the notice was sent to the assessee on 23rd Oct., 2000 by registered post, therefore, the assessee should have traced out the notice from its record. The assessee also stated that the action under s. 147 was barred by limitation as no action under s. 147 can be taken after the expiry of four years from the end of the relevant assessment year unless income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of assessee to disclose fully and truly all material facts necessary for assessment. The notice under s. 142 was not served before 31st March, 2001 and the AO disclosed the reasons for reopening the assessment on 17th Jan., 2002. It was also submitted that in this particular case the expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice under s. 148 was sent to the assessee on 23rd Oct., 2000 by registered post, but it is silent so far as its service upon the assessee is concerned. Even the acknowledgement card of the Postal Department is not available to verify as to whom this notice was served or who was the person who received this notice on behalf of the assessee company. Apparently under the circumstances, it cannot be said that there was any effective service of notice under s. 148 and, therefore, it renders, consequently, the entire assessment to be bad in law." 7. The relevant observations in respect of time barring of the assessment are given as under: "This is a case where the deductions under ss. 80HH and 80-I were allowed and similarly expenditure claimed on account of issue of right shares was also allowed after having examined the issues in detail and after discussing the same at length. This meant that there was proper application of mind by the AO and he was conscious of the fact when he was allowing such deductions. As a matter of fact the CIT(A) vide her Order No. J/Dy. CIT (Asstt.)/136/1994-95 dt. 7th Feb., 1995 had directed the AO to allow relief under s. 80-I independently of ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order. The assessee also filed the cross-objection by taking the effective grounds as are produced in para 3 by learned Brother in his proposed order. 26. Ground Nos. 1 and 2 relate to the validity of the reopening of the assessment as well as the validity of the service of the notice on the assessee. First, I would like to deal with the issue of the service of the notice. Learned Departmental Representative in this regard contended that the CIT(A) has ignored the decision of Delhi High Court in the case of R.L. Narang vs. CIT (1982) 136 ITR 108 (Del). The notice was sent through registered post after prepayment of the postal charges and address as given in the notice, this has not been challenged. Therefore, the presumption would be that the notice has been properly served. This is the case of the limited company having turnover in crores and having established registered office at the place mentioned in the notice. Therefore it cannot be held that there was no proper service on the assessee. Assessee has also not filed the affidavit in this regard. The CIT(A) therefore was not correct in law in holding that there was no proper service of notice on the assessee. The learned Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected must be given effective opportunity of hearing so that they can meet the requirement of the notice issued. Merely issuing the notice will not be sufficient for meeting the natural rule of law. Therefore, I am of the opinion that the service is imbued with the issue of the notice. The proceedings cannot be said to have been validly initiated unless and until the notice is served to the parties or handed over to the communicating agency so that it becomes difficult for the person who has issued it to withdraw it. I am of the opinion that the onus is on the party who required serving the notice to prove that the notice was served. There is a clear finding given by the CIT(A) that the AO did not try to bring out on record as to on whom and when the notice was effectively served. It was only the presumption of the AO that since the notice was issued it must have been received by the assessee. It was the onus of the AO to bring out in the assessment order as to whom and when the notice was effectively served. Even in his parawise comment dt. 8th Aug., 2002 the AO has only commented that the notice under s. 148 was sent to the assessee on 23rd Oct., 2000 by registered post but it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t denying service is not material." 30. If we look at the facts of this case to appreciate the controversy involved in this case I am of the view that this case supports the finding given by the CIT(A). The facts of this case are that the AO issued show-cause notice on the assessee on 31st Jan., 1969 which was said to have been served on 3rd Feb., 1969 for showing cause why the penalty under s. 140A(3) be not imposed. Subsequently reminder was issued on 2nd April, 1969 under certificate of posting. On 12th June, 1969 the ex parte order under s. 140A(3) was passed by the AO. Before the first appellate authority, the assessee contended that no notice was served or received by the assessee. The AAC found that though the notice dt. 31st Jan., 1969 had been served through process server on someone signing for the assessee, there was nothing on record to indicate the identity of the person on whom the said notice was alleged to have been served on 3rd Feb., 1969. The AO did not point out whether these persons were employees or Authorised Representatives of the assessee or the person who had received such notice in the past acting for the assessee. The AAC, therefore, took the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly on the basis of the computation statement filed by the assessee. It is a case where there was failure on the part of the assessee to disclose fully and truly all material facts. Therefore, the assessment could have been reopened beyond the period of 4 years. Hence, the order of the CIT(A) must be reversed. At the most the matter may be restored to the file of the AO with the direction that the AO should dispose of the objections raised by the assessee by passing a speaking order in view of the clear-cut law laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. ITO & Ors. (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC). 33. Learned Authorised Representative relied on the order of the CIT(A) and reiterated the submissions made before the CIT(A). It was contended that the notice issued under s. 148 was invalid. The proviso to s. 147 was clearly applicable in the case of the assessee. The assessment could not have been reopened after the expiry of 4 years from the end of the relevant assessment year because there was no failure on the part of the assessee to make return under s. 139 or in response to the notice issued under s. 142(1). The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Singh Ju Deo vs. WTO (1997) 141 CTR (MP) 228 : (2000) 242 ITR 229 (MP). Our attention was drawn towards the reasons recorded by the AO. Reliance was placed on the following cases as well as the case law relied before the CIT(A): (i) Calcutta Discount Co. Ltd. vs. ITO (1961) 41 ITR 191 (SC); (ii) ITO vs. Lakhmani Mewaldas 1976 CTR (SC) 220 : (1976) 103 ITR 437 (SC); (iii) CIT vs. Hindustan Metal Works (1993) 112 CTR (All) 193 : (1993) 69 Taxman 269 (All); (iv) Parshuram Pottery Works Co. Ltd. vs. ITO 1977 CTR (SC) 32 : (1977) 106 ITR 1 (SC); (v) Indian Oil Corporation vs. ITO (1986) 58 CTR (SC) 83 : (1986) 159 ITR 956 (SC); (vi) Raymond Woollen Mills Ltd. vs. ITO (1994) 207 ITR 929 (Bom); (vii) Avani Corporation vs. ITO (1999) 155 CTR (Guj) 548 : (1999) 238 ITR 407 (Guj); (viii) Meghdoot Leminart (P) Ltd. vs. Rajiv Sinha or his Successor in office of the Dy. CIT (1999) 155 CTR (Guj) 386 : (1999) 238 ITR 918 (Guj); (ix) S. Sreeramachandra Murthy & Anr. vs. Dy. CIT (2000) 159 CTR (AP) 436 : (2000) 243 ITR 427 (AP); (x) Marudhar Hotels (P) Ltd. vs. Dy. CIT (2003) 181 CTR (Raj) 253 : (2003) 259 ITR 509 (Raj); (xi) Bawa Abhai Singh vs. Dy. CIT (2001) 168 CTR (Del) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as stipulated under s. 147 for the initiation of the proceedings are not satisfied was also taken. The issue that on the same basis the proceedings were taken by the CIT under s. 263 was also taken. All these objections of the assessee were related to the validity of the proceedings initiated under s. 147. The AO has disposed of all of these contentions in the impugned order rejecting all the pleas of the assessee and held that the proceedings under s. 147 have been legally initiated. 36. I have also gone through the judgment of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. ITO & Ors. In this case the validity of notice under s. 148 and subsequent notice of hearing issued under s. 143(2) were challenged by (way) of writ before the Delhi High Court. Hon'ble High Court dismissed the writ petition on the ground that the assessee could take up his objections against the notice in regular appeal. When the matter went before the Hon'ble Supreme Court, Hon'ble Supreme Court while confirming the order of Hon'ble High Court has held as under: "We see no justifiable reason to interfere with the order under challenge. However, we clarify that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Hon'ble Supreme Court in two of the assessment years, the assessments were completed and the details were filed before the CIT(A). Hon'ble Supreme Court has not directed the CIT(A) to restore the order of these two assessment years to the file of the AO and directed the CIT(A) for these two assessment years to dispose of the objections of the assessee regarding the validity of the issuance of the notice under s. 147. From these directions of the Hon'ble Supreme Court to the CIT(A) where the matters were in appeals, I am of the view that if the objections relating to the issuance of the notice and the validity of the proceedings have been raised by the assessee in appellate proceedings before us, this Tribunal is bound to dispose of these objections. Otherwise also, I am of the view that restoring the matter to the file of the AO on the basis of the facts as are available on record of this case when the AO has already disposed of all these objections of the assessee in the assessment order, it would not serve any purpose if we restore the matter again to the AO with the direction that the AO should dispose of the objections of the assessee by passing a separate spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 2. The expenses incurred on the issue of right shares are duly debited to the P&L a/c. From para 2 of the so-called notice issued by the CIT while initiating the proceedings under s. 263 it is apparently clear that the assessee had made full disclosure in respect of expenses claimed on the right issue as well as the deduction claimed under s. 80-I of the IT Act. Thus, I am of the firm view that the assessee has made the full disclosure of the relevant facts, after going through the entire materials on record and the orders of the Departmental authorities. 39. In the case of CIT vs. A.R. Enterprises (P) Ltd. (2002) 255 ITR 121 (Raj), the Hon'ble Rajasthan High Court has explained the meaning of expression "material facts" by observing as under: "The expression 'material facts' refers only to the primary facts. There is no duty cast on the assessee to indicate or draw the attention of the AO to what factual or legal or other inferences can be drawn from the primary facts. Relying on the decision of the apex Court in Calcutta Discount Co. Ltd.'s case (1961) 41 ITR 191 (SC), the apex Court in a later decision, viz., Associated Stone Industries (Kotak) Ltd.'s c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year by reason of the failure on the part of the assessee to make a return under s. 139 or in response to a notice issued under sub-s. (1) of s. 142 or s. 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year." 44. In view of the aforesaid specific provision under s. 147 there cannot be two opinions that in case the assessment has been completed under s. 143(3), no action can be taken under s. 147 after the expiry of four years from the end of the relevant assessment year unless the income chargeable to tax has escaped for such assessment year due to the failure on the part of the assessee to disclose fully and truly all the material facts necessary for his assessment or failure to file the return under s. 139 or notice issued under s. 142(1). This is an uncontroversial fact. In this case the original assessment has been completed under s. 143(3), therefore there is no failure on the part of the assessee to make the return under s. 139 or in response to notice under s. 142(1). I have already held in the preceding para that on the facts of the case there was no failure on the part of the assessee to disclose fully and truly al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued within 4 years from the end of the assessment year in respect of which the AO has issued notice under s. 148 in view of the specific limitation provided in the proviso to s. 147 as the assessee had not failed to disclose all the material facts relating to the assessment year fully and truly. I am of the view that when the notice issued under s. 147 itself is barred by limitation, the proceedings initiated are void ab initio. If any assessment is framed in consequence of the illegally initiated proceedings, the assessment so framed is non est in eyes of law and is bound to be cancelled. I accordingly, quash the order passed by the AO as being void and illegal. 47. Since the order of the AO stands quashed on legal grounds, the other grounds raised on merit in the appeal and in the cross-objection are not being discussed or considered. 48. In the result the appeal of the Revenue and the cross-objection filed by the assessee are disposed of accordingly. G.D. AGRAWAL, VICE PRESIDENT 27th July, 2006 49. Since there was a difference of opinion between the learned Members constituting the Division Bench with regard to the following issues, I was nominated as Third Member by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so agreed that the basic dispute raised in this Revenue's appeal is against finding of the CIT(A) holding the reopening of assessment under s. 147 of the Act to be bad in law. The learned AM has upheld the order of the CIT(A) while the learned JM has set aside the matter back to the file of the AO. Therefore, the question as proposed by the assessee correctly brings out the controversy in the conflicting orders of the learned Members. 52. In view of the above submissions of both the parties, I replace question Nos. 2 and 3 by the following question and it is numbered as question No. 2: "2. Whether on the facts and in the circumstances of the case, the Hon'ble JM was justified in setting aside the matter back to the file of the AO for readjudication as per the decision of the Supreme Court in GKN Driveshafts (India) Ltd. vs. ITO & Ors. (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC) or the Hon'ble AM was justified in holding that as there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment, the reopening of assessment beyond the period of four years was contrary to the proviso to s. 147?" R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipt issued by the postal authorities. The learned Departmental Representative stated that the notice was issued by the office of Jt. CIT (Asstt.), Spl. Range, Jabalpur. Now the case is being assessed by Asstt. CIT, Circle Satna. Moreover, the post of Jt. CIT (Asstt.), Spl. Range, Jabalpur has been abolished and, therefore, the dispatch register or the receipt for the posting of the notice by registered post could not be found out. He, however, produced the copy of the notice issued under s. 148 and pointed out that in the notice at the top RPAD is mentioned while at the bottom 'issued on 23rd Oct., 2000' is mentioned. Therefore, it should be presumed that the notice was issued by RPAD on 23rd Oct., 2000. 56. I have carefully considered the submissions of both the parties and perused the material placed before me. Secs. 147, 148 and 149 of the Act read as under: "147. If the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of ss. 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under s. 139. (2) The AO shall, before issuing any notice under this section, record his reasons for doing so. 149. (1) No notice. under s. 148 shall be issued for the relevant assessment year,- (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under cl. (b); (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year. Explanation.-In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Expln. 2 of s. 147 shall apply as they apply for the purposes of that section. (2) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s relied upon the decision of Hon'ble Delhi High Court in the case of R.L. Narang vs. CIT. I find that in this case the dispute was with regard to service of notice upon the assessee under s. 140A(3). Their Lordships accepted the assessee's contention that the notice was not properly served upon the assessee. The relevant observation in this regard reads as under: "6. Coming to the next question of service by post, the provisions of s. 27 of the General Clauses Act, 1897, are relevant. Sec. 27 provides that where any Central Act or regulation authorises or requires any document to be served by post, then, unless a different intention is drawn, the service shall be deemed to be effected properly if a correctly addressed and stamped letter containing the document is dispatched by registered post; and unless the contrary is proved, such a letter would be deemed to have been delivered in the ordinary course of post The IT Act is a Central Act and s. 282 provides for service by post As such the provisions of s. 27 of the General Clauses Act, 1897, are applicable. From perusing s. 27 of the General Clauses Act, it is apparent that in order to presume service having been effecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der: "M/s Vindhya Telelink Ltd., Udyog Vihar, Rewa (MP)" Thus, in the notice under s. 148 in the address of the assessee "Udyog Vihar" is missing. Therefore, it cannot be said that the notice was correctly addressed. Moreover, no evidence is furnished for the properly stamping of the envelope and also despatch of the said envelope. I also find that during the course of assessment proceedings, the assessee vide its letter dt. 11th Jan., 2002 has stated that it had not received notice under s. 148. However, the AO without bringing any evidence on record about the service of the notice on the assessee put the blame upon the assessee and observed as under in the assessment order: "As per record the notice under s. 148 was sent to the assessee on 23rd Oct., 2000 by registered post. As per the contention of the assessee as per its record notice under s. 148 was not received to it. It is, therefore, the matter of maintenance of the record of the assessee company and it should have traced out the notice from its own record. Since the notice was issued to the assessee it must have been received by it which should have been traced out by it and compliance to it should have been made. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e service of the notice upon the assessee and for the detailed reasons in para 8 to para 11 of this order. I answer the question in negative and hold that the notice was not properly served upon the assessee. 63. Regarding question No. 2, it is submitted by the learned Departmental Representative that as per the decision of Hon'ble apex Court in the case of GKN Driveshafts (India) Ltd. vs. ITO (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC), the AO should pass a speaking order disposing of the assessee's objection against the issuance of notice for reopening of assessment, Since the AO has not passed any speaking order before proceeding with the assessment proceedings, the learned JM has rightly set aside the assessment and restored the matter back to AO. With regard to the merit of the validity of reopening of assessment, he stated that the AO should have reason to believe that the income has escaped assessment. The belief must be reasonable and the Court cannot examine the sufficiency of the reason. In support of this contention, he relied upon the decision of Hon'ble apex Court in the case of Raymond Woollen Mills Ltd. vs. ITO (1999) 152 CTR (SC) 418 : (1999) 236 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss deduction than what was claimed by the assessee. During the course of assessment proceedings, when the copy of reasons recorded for reopening of assessment was supplied to the assessee, the assessee has raised the objection against the reopening of assessment. The AO recorded his finding in p. 5 as well as p. 7 of the assessment order and arrived at the conclusion that the reopening of assessment under s. 147 is valid. As the AO has already disposed of the assessee's objection and arrived at the conclusion that the reopening of assessment under s. 147 is valid, no useful purpose would be served by sending the matter back to the file of the AO again for the purpose of deciding the validity of reopening of assessment. He, therefore, submitted that the Tribunal should consider and decide the validity of the reopening of assessment. He also relied upon the decision of Hon'ble Bombay High Court in the case of Caprihans India Ltd. vs. Tarun Seem, Dy. CIT (2003) 185 CTR (Bom) 157 : (2004) 266 ITR 566 (Bom), wherein the Hon'ble Bombay High Court has held that it is not necessary that each and every case should go back to the file of the AO for adjudicating the validity of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the reopening of assessment under s. 147. 66. The Hon'ble apex Court in the case of GKN Driveshafts (India) Ltd. held as under: "When a notice under s. 148 of the IT Act, 1961, is issued, the proper course of action for the noticee is to file the return and, if he so desires, to seek reasons for issuing the notices. The AO is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the AO is bound to dispose of the same by passing a speaking order." Relying upon the decision, it is contended by the learned Departmental Representative that the learned JM has rightly sent back the matter to the file of the AO to dispose of the assessee's objection by passing a speaking order. However, I find that Hon'ble Bombay High Court has considered the decision of Hon'ble apex Court in the case of GKN Driveshafts (India) Ltd. in the case of Caprihans India Ltd vs. Tarun Seem, Dy. CIT, wherein it has been held as under: "It is true that the assessee should have filed its return pursuant to the notice under s. 148 and, on that basis, the assessee should have sought reasons for issuing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght of the ratio laid down by the Hon'ble apex Court as well as Mumbai High Court. In the case of GKN Driveshafts (India) Ltd., the Hon'ble apex Court has held that after the issue of notice, the assessee should first file the return of income and thereafter seek reasons for issuance of the notice. On receipt of reasons the assessee is entitled to file objection to the issuance of notice and thereafter the AO is bound to dispose of the same by passing a speaking order. In the case under consideration before me, I find that on the request of the assessee the AO has communicated the reasons recorded to thee assessee on 24th Jan., 2002 The assessee has furnished its objection vide letter dt. 14th Feb., 2002. The AO has considered the assessee's objection and has concluded that the conditions laid down for reopening of assessment were duly satisfied and, therefore, the initiation of proceeding under s. 147 was correct. Thus, the AO has already disposed of the assessee's objection and has come to the conclusion that initiation of proceedings under s. 147 was correct. In the above circumstances, no useful purpose would be served by setting aside the matter again to the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56,810/- and deduction under s. 80-I was allowed after reducing the amount of deduction under s. 80HH of the IT Act. The assessee preferred an appeal before CIT(A), Jabalpur. The CIT(A) directed to allow deduction under s. 80-I on gross income vide order dt. 7th Feb., 1995. 2. On perusal of record shows that the assessee company has debited in P&L a/c at Rs. 12.17 lakhs on account of expenditure of issue of right shares. This expenditure is not allowable being of capital nature. Further it has also been noticed that the positive income of Rs. 8,85,59,094/- was offered from Unit II on which deduction under s. 80HH at Rs. 1,77,11,819/- and s. 80-I at Rs. 2,21,39,774/- totalling Rs. 3,98,51,597/- was allowed without reducing earlier years' losses amounting to Rs. 3,89,87,498. This resulted in excess allowance of deduction under ss. 80HH and 80-I at Rs. 1,75,44,375/- (Rs. 77,97,500/- + Rs. 97,46,875/-) with short levy of tax Rs. 90,79,214/-. 3. I have thus reason to believe that the income has been underassessed to the tune of Rs. 1,87,61,375/- (Rs. 12,17,000/- + Rs. 1,75,44,375/-) within the meaning of s. 147(c) of the Act. It is, therefore, requested that permission to issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egular Bench for announcing the majority view. DINESH K. AGARWAL, J.M.: 22nd Sept., 2006 71. On a difference of opinion between the Members who originally heard the appeal and the cross-objection, the following three questions were referred for the opinion of the Hon'ble Third Member: "1. Whether sending notice under s. 148 of the IT Act through registered post can be held to have been properly served in the absence of acknowledgement slip having been placed on record by the AO or specific denial on oath of service of such notice by the assessee or not? 2. Whether without disposing of objection of the assessee filed against the issuance of notice under s. 148 by the AO, the matter requires to be set aside on his file for disposing of such objection and then to proceed to make reassessment in view of decision of Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. ITO & Ors. or not? 3. Whether in the absence of non-disposal of objection admitted to have been filed before AO against notice under s. 148, the Tribunal can decide such objection while disposing of the appeal or not?" 72. The Hon'ble Vice President, Sri G.D. Agrawal sitting as Third ..... X X X X Extracts X X X X X X X X Extracts X X X X
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