RAMANUJAM J.

The following question has been referred to us under s. 256(1) of the I.T. Act, 1961 (hereinafter referred to as "the Act"), for our opinion at the instance of the assessee

"Whether the notice dated March 25, 1967, issued under section 148 was validly served on the assessee ?" *

The assessee-firm consisting of five partners, (1) Shri P. Kandaswamy Pillai, (2) Shri C. Palani Velayutham Pillai, (3) Shri P. Alagam Perumal, (4) Shri S. Marimuthu, and (5) Shri S. Somasundaram Pillai, was constituted with effect from May 25, 1957, for carrying on the business of film distribution. Clause (iv) of the partnership deed provided that Shri Kandaswami Pillai should manage the affairs of the partnership as its managing partner

The firm was assessed for the first time for the assessment year 1959-60 on a total income of Rs. 73, 935. As against the said assessment, the assessee preferred an appeal. In that appeal, the AAC directed the deletion of Rs. 72, 500 on the ground that the said amount has to be considered as income from undisclosed sources for the assessment year 1958-59 and not for the assessment year 1959-60

As a result of the said appellate order, the ITO initiated action under s. 147(b) of the Act for the assessment year 1958-59 after obtaining the sanction of the CIT, by issuing a notice dated March 25, 1967, under s. 148 of the Act to the assessee intimating that he had reason to believe that income chargeable to tax for the said assessment year had escaped assessment and requiring the assessee to file a return of income within 30 days from the date of the receipt thereof. The said notice was served by the notice-server of the department on March 27, 1967, on one Balakrishna Pillai who acknowledged the same describing himself as the manager of the firm. On April 26, 1967, the said Balakrishna Pillai wrote to the ITO stating that the managing partner who had gone to Madras had not returned and that it would take some more weeks for him to return, and praying for time for filing the return of income till May 31, 1967. But as the return of income was not filed by the assessee by May 31, 1967, the ITO issued a notice to the assessee under s. 142(1) of the Act requiring him to produce the accounts relating to the assessment year on or before December 15, 1967. Since there was no response to this notice either, the ITO by his order dated October 14, 1968, completed the assessment under s. 144 determining the total income at Rs. 69, 000 for the assessment year 1958-59Aggrieved by the said assessment, the assessee filed an appeal to the AAC contending that the assessment was illegal as the notice under s. 148 was served on a person not authorised to receive the same. The assessee also filed an application to the ITO under s. 146 praying for setting aside the assessment made under s. 144 on the ground that the notice had not been served on any person duly authorised to receive it on its behalf, that as at the material time the business carried on by the firm was being wound up, the services of Balakrishna Pillai, the manager, had been terminated, and that at the time of the service of notice under s. 148 on Balakrishna Pillai, the managing partner was bedridden and, therefore, he was unable to file the return in time. The ITO, however, rejected the application filed under s. 146 holding that the assessee has not shown any sufficient cause for not filing the return in time. The assessee filed an appeal against that order to the AAC

The AAC heard both the above appeals and ultimately allowed the assessee's appeal filed against the order of the ITO passed under s. 146, on the ground that the illness of the managing partner was sufficient cause for the assessee not complying with the notice. By reason of this order the appeal preferred by the assessee against the assessment under s. 144 was held infructuous

The assessee then preferred an appeal to the Tribunal against the order of the AAC holding the appeal against the a