D.G. Karnik, J.

Mentioned at 2.30 p.m. At the request of Mr. Alok Sharma, learned Assistant Solicitor General, the order passed in the morning dismissing the appeal in default is recalled and the matter is restored to file.

2. Taken up for hearing on admission forthwith.

3. The question of law that is urged before us for the admission of the appeal is Whether the Income Tax Appellate Tribunal (For short Tribunal) erred in holding that the assessment made by the Assessing Officer in pursuance of a notice issued under section 148 of the Income Tax Act (For short "the I.T. Act") was null and void inasmuch as the notice was issued citing one reason and the order of assessment was made on another reason?

4. The respondent (hereinafter will be referred to as Assessee) filed a return of his income for the assessment year 2004-05 declaring a loss of Rs.19,91,742/-. The return was processed under section 143(1) of the I.T. Act, accepting the returned income. Subsequently, on 29th April 2005, the Assistant Commissioner of Income Tax, Circle-3 (for short ACIT) issued a notice under section 148 of the I.T. Act proposing to reopen the assessment on the ground that income by way of capital gain on sell of assets had escaped assessment. In pursuance of the notice, the Assessee filed a fresh return on 30th May 2005 declaring Nil income Mr. Sharma, learned Assistant Solicitor General appearing for the Revenue states that the Assessee subsequently filed a revised return declaring a loss of Rs.7,36,178/-. However, he is unable to furnish the details of the subsequent return allegedly filed by the Assessee. We are, however, not concerned with the revised return as revised return does not appear to have been processed and the proceedings appear to have continued on the return filed by the Assessee on 30th May 2005 in pursuance of the notice issued under section 148 of the I.T. Act.

5. During the relevant financial year, the Assessee had earned a short term capital gain of Rs.63,52,369/-and had incurred a business loss of Rs.7,36,178/-. He had also brought forward an accumulated loss of Rs.65,76,264/-. The Assessee set off the short term capital gain of Rs.63,52,369/-firstly against the current year's business loss of Rs.7,36,178/-and set off the balance of the short term capital gain against the brought forward losses of the previous year. According to the Assessing Officer the Assessee was entitled to set off short term capital gain against the current year's business loss under section 71 but was not entitled to set off the short term capital gain against the brought forward loss of the previous year under section 72 of the I.T. Act. He accordingly allowed the claim of the Assessee only for the set off of business loss of Rs.7,36,178/-under section 71 of the I.T. Act and treated the remaining short term capital gain of Rs.56,16,191/as income of the Assessee. He did not allow the Assessee to set off this short term capital gain of Rs.56,16,191/-against the brought forward loss of the previous year in view of section 72 of the I.T. Act. On Appeal, the CIT (Appeals) confirmed the order of the Assessing Officer.

6. Aggrieved by the decision of the Assessing Officer and CIT (Appeals), the Assessee approached the Tribunal. Before the Tribunal, the Assessee sought to raise a grievance regarding validity of the notice issued under Section 148 of the I.T. Act proposing to reopen the assessment and the further continuation of the proceedings before the Assessing Officer in pursuance of the said notice. The Tribunal allowed the ground to be raised, though it was not raised earlier. The Tribunal held the notice to be bad in law and further held that the assessment proceedings initiated and completed in pursuance of the notice dated 29th April 2005 issued under Section 148 of the I.T. Act were void and consequently quashed the proceedings. The Tribunal held that the reason mentioned in the notice issued under section 148 of the I.T. Act was : "Income