Commissioner of Income Tax vs Rameshwar Prasad and Co.

B.P. Jeevan Reddy, C.J.—u/s 256(2) of the Income Tax Act, 1961, the following question has been referred by the Income Tax Appellate Tribunal :

"Whether, on the facts and in the circumstances of the case, the notice u/s 148 of the Act, dated September 10, 1971, and served on October 23, 1971, was valid and operative ?"

With respect to the assessment year 1965-66, the Income Tax Officer proposed to reopen the assessment. He issued notice u/s 148 on September 10, 1971. It was actually served on October 23, 1971. Between these two dates, the case was transferred from the Income Tax Officer who issued the notice to another Income Tax Officer. One of the questions urged before the Tribunal and which is the only question now relevant before us was whether the order of transfer is valid. In short, the argument of the assessee was that a proceeding u/s 148 can be said to have commenced in law only when the notice there under is served upon the assessee ; mere issuance of notice does not amount to initiation of the case. On the other hand, the Department''s case was that once a notice u/s 148 is issued, the case is commenced and transfer of such a case is permissible u/s 127. The Tribunal held in favour of the assessee and declared the entire reassessment proceedings taken by the transferee-income tax Officer as illegal and invalid on the ground that, the very transfer was without jurisdiction.

We find that the conclusion of the Tribunal cannot be sustained in view of the decision of the Supreme Court in R.K. Upadhyaya Vs. Shanabhai P. Patel, . In this decision, the Supreme Court has pointed out the distinction between the position obtaining under the Act of 1922 and the position obtaining under the present Act in this behalf. After pointing out the language of Section 149 and Section 148, the Supreme Court held that the proceeding under Sections 147 and 148 commence the moment a notice u/s 148 is issued. This was held so even for the purpose of the limitation prescribed in Section 149. It was also observed that the service of notice contemplated by Section 148 is merely a condition precedent for making a valid assessment but it cannot be said that the proceedings commence on the date of service only. Following the said decision, it must be held that once the notice was issued on September 10, 1071, there was a "case" which could be transferred u/s 137 of the Act. The Tribunal was in error in holding that the "case" does not come into existence, legally speaking, until and unless the notice u/s 148 is served upon the assessee.

For the above reasons, the question referred is answered in the affirmative, i.e., in favour of the Revenue and against the assessee. No costs.