Proper service of notice under Section 148 of the Income Tax Act, 1961 is essential for the validity of re-assessment proceedings.

V. B. GUPTA, J.

( 1 ) THE present appeal under Section 260 A of the Income Tax Act, 1961 ( for short as 'act') has been filed by the Revenue against the impugned order dated 31st March, 2006 passed by the Income Tax Appellate Tribunal ( for short as 'tribunal' ) in ITA No. 2019/del/2004 for the assessment year 1985-1986 vide which the appeal of the Assessee was allowed.

( 2 ) THE brief facts of the case are that the Assessee filed a return declaring loss of Rs. 47,493/- on 29th March, 1996, which was accepted by an order under Section 143 (3) of the Act dated 16th January, 1998.

( 3 ) AN information was received from Deputy Director (Investigation), gurgaon that during the investigation proceedings in the case of Raj Kumar bhatia, statement of Shri M. Goenka, Proprietor of M/s. M. Goenka and Company was recorded under Section 131 of the Act on 28. 01. 2000. In his statement, Shri m. Goenka stated that he used to issue bogus bills of sale and purchase of the shares. He further stated that the transaction of sale of shares of M/s Ashoka commercial Pvt. Ltd. made by the present Assessee was a bogus one. On the basis of this information, the Assessing Officer issued notice under Section 148 of the Act after taking approval from the Commissioner of Income Tax. This notice was sent through Inspector along with notice server. Inspector found that the factory was closed up to 31st March, 2002 due to Holi festival holidays as per the information by the security guard.

( 4 ) THE security guard refused to receive the notice and ultimately the notice was served by affixation. A notice dated 28 March, 2002 was also sent by registered post on 28th March, 2002 but same remained un-complied with.

( 5 ) SUBSEQUENTLY, notice under Section 143 (2) of the Act dated 4th June, 2002 was sent in response to which Chartered Accountant of the assessee company appeared and raised the point that the action under Section 148 of the Act could not be initiated after 31st March, 2000.

( 6 ) THE Assessing Officer informed the Assessee that notice under Section 148 of the Act dated 28th March, 2002 was served by registered post as well as by affixture and he was also shown the Inspector's report and the proof of registered post. After satisfying with the proof, the Chartered Accountant of the Assessee company participated in the proceeding.

( 7 ) AFTER due opportunities, the Assessing Officer framed the assessment at an income of Rs. 38,43,937/ -.

( 8 ) AGGRIEVED by this order, Assessee filed an appeal before the commissioner of Income Tax (Appeal) before whom the Assessee did not press the ground regarding service of the notice and therefore it was stated as withdrawn. Commissioner of Income Tax (Apeal) dismissed the appeal filed by the Assessee on merits.

( 9 ) AGGRIEVED against the order of the Commissioner of Income Tax (Appeals), the Assessee filed an appeal before the Tribunal on various grounds. However, during the hearing, the Assessee took an additional ground of appeal that the entire re-assessment proceedings culminating in the order dated 30th january, 2003 was bad in law as no notice under Section 148 of the Act had at all been served upon the Assessee prior to the commencement or completion of the re-assessment proceedings.

( 10 ) THE Tribunal held that no proper service of notice issued under section 148 of the Act was effected by the Assessing Officer on the Assessee and therefore the re-assessment proceedings, resulting into the order dated 30th january, 2003 are bad in law and accordingly it quashed the order passed by assessing Officer under Section 147 of the Act.

( 11 ) IT has been argued by the learned counsel for the Revenue that in the present case notice under Section 148 of the Act was sent to the Assessee by registered post on 30th March, 2002 and the receipt of the sending the notice by registered post has been placed on record. Further, as per Order V Rule 17 of the Code of Civil Procedure, it was a valid affixture as th