S. Muralidhar, J.

1. This appeal by the Revenue is directed against the order dated 21st June 2013, passed by the Income Tax Appellate Tribunal (ITAT) in ITA No.1891/Del/2012 for the Assessment Year (AY) 2001-2002.

Question of law

2. Admit. The question of law framed for consideration is:

Whether the ITAT was correct in holding that since notice under Section 148 of the Income Tax Act (the Act) was not served on the Assessee in accordance with law, the re-assessment made consequent thereto was without jurisdiction and liable to be quashed?

Background facts

3. The Assessee, showing his address as “C/o Jagat Theatre, Chandigarh”, filed a return of income for AY 2001-2002 with the Income Tax Range-2, Chandigarh on 11th October, 2001 disclosing an income of Rs.6,47,425. The return was processed under Section 143(1) of the Act and an acknowledgement issued on 5th January, 2002.

4. Information was received from the Additional Director of Income Tax Investigation (ADIT) Unit (VI), New Delhi by letter dated 27th February, 2008, stating that the Assessee had been arrested on 17th May, 2007 in FIR No.5 dated 23rd March, 2007, Police Station Vigilance Bureau, Ludhiana pertaining to the Ludhiana City Centre Scam and a pen drive had been recovered from him. The print outs from the pen drive received by ADIT from the Punjab Vigilance Bureau were forwarded to the Assessing Officer (AO) in Chandigarh. A perusal of the print outs revealed that there were various entries in different names pertaining to Financial Year (FY) 2000-2001. The information when tabulated by the AO showed that there were credits of Rs.40,49,77,905 on which interest of Rs.7,35,49,141 had been paid. For the FY in question a sum of Rs. 84,86,363 had been paid as interest. The Assessee had failed to enclose a balance sheet with his return of income filed. Apart from salary income, the Assessee had disclosed income from house property on account of his half share in a property in Delhi and some interest income. The AO therefore concluded that the Assessee had not fully and truly disclosed all material facts for the AY in question. The AO noted that in a statement dated 24th September 2007, recorded by the ADIT (Inv.), Ludhiana, the Assessee denied knowledge of the names appearing in the pen drive although he failed to deny that the pen drive was recovered from his possession. The AO drew a presumption that the information in the pen drive found in his possession was true and that the primary onus to establish the identity, genuineness and creditworthiness of the creditors whose names appeared therein was on the Assessee. The AO accordingly concluded that he had reason to believe that the income for the AY in question had been under-assessed to the extent of the sums mentioned hereinbefore and had therefore escaped assessment within the meaning of Section 147(b) of the Act.

The re-assessment proceedings

5. On 28th March 2008, the Assistant Commissioner of Income Tax (ACIT) Circle 3, Chandigarh issued a notice under Section 148 of the Act. The notice was addressed to the Assessee but the address indicated therein was “C/o Kiran Cinema, Sector-22, Chandigarh.” It appears that the said notice was served upon one Mr. Ved Prakash, an Accountant at Kiran Cinema on that very date.

6. Subsequently the jurisdiction of the Assessee was transferred to the ACIT, Central Circle-5, New Delhi. On 28th November, 2008, another notice under Section 148 of the Act was issued to the Assessee by the ACIT, New Delhi and this time there were two addresses shown for him. The first was “C/o Kiran Cinema, Sector-22, Chandigarh” and the second “C/o Vipin Aggarwal & Associates, E-4, Defence Colony, New Delhi.”

7. In response to the above notice, on 12th December, 2008, Vipin Aggarwal & Associates addressed a letter to the ACIT inter alia stating as under:

“In this connection, it is to submit that the assessee has not received any notice u/s 148 dated 28.03.2008 requiring the assessee firm to