ORDER
R.K. Bali, A.M.
These three appeals relating to Shri Mohmed Rafiqbhai Ghoghabon, M/s Appollo Hotel, Bhavnagar and Shri Mohmed Nadeem involved common points and are therefore disposed of by a common order for the sake of convenience.
2. All the three appeals are first appeals directed against separate orders (it. 19-3-1998, passed by the Assistant Commissioner, Inv. Cir. 1, Bhavnagar under section 158BD read with section 158BC of the Income Tax Act, 1961.
3. Briefly the facts are that all the three assessees along with Smt. Mumtazbanu Mohmed Rafiqbhai Ghoghabori were regularly assessed to income-tax by the Income Tax Officer, Ward-5, Bhavnagar. There was a survey conducted by the officers of the IT department on 2-8-199 at the business premises of Smt. Mumtazbanu Ghoghabori-Proprietor of Manali Restaurant and Hotel White Rose. Smt. Mumtazbanu Ghoghabori is a wife of Shri Mohmed Rafiqbhai Ghoghabori who holds general power of attorney for doing business on behalf of Smt. Mumtazbanu Ghoghabori, M/s Apollo Hotel, Bhavnagar is a registered partnership, firm comprising of 8 members which include Shri Mohmed Rafiqbhai Ghoghabori and his relations. Mohd. Nadeem Ghoghabori is son of Sint. Murntazbanu Ghoghabori.
4. The survey proceedings in the case of Smt. Mumtazbanu continued till late hours m the evening of 3-8-1995, and thereafter these were converted into search action under section 132 at 11.30 p.m. on the basis of a warrant of search issued in the name of Smt. Murntazbanu, by the learned Commissioner, Rajkot . The search was subsequently concluded on 4-8-1995 at 11 A.M. All the materials noticed and inventorised at the time of survey which included papers/documents relating to Smt. Murntazbanu, Shri Mohmed Refiqbhai, Shri Mohmed Nadeem, M/s Appollo Hotel, Manila Restaurant and Hotel White Rose which were inventorised at the time of survey were subsequently seized.
5. The block assessment in the case of Smt. Mumtazbanu was completed by the assessing officer Shri R.B. Rande, Assistant Commissioner Cir. 1, Bhavnagar on 29-8-1996 under section 158BC(c) of the Income Tax Act, 1961, although no formal order was passed by the Commissioner transferring the jurisdiction of Smt. Mumtazbanu from Income Tax Officer, Ward-5, Bhavnagar to Assistant Commissioner, Cir. 1, Bhavnagar. However, it appears that the assessee (Smt. Mumtazbanu) has not objected to the notice under section 158BC issued by Shri P.B. Rande, Assistant Commissioner, Cir. 1, Bhavnagar within the time prescribed by sub-section (3) of section 124 and co-operated in the finalisation of assessment and as such she would be deemed to have waived her objection and the order passed by Shri R.B. Rande, Assistant Commissioner Cir. 1, Bhavnagar would have been valid and effective if it was otherwise in accordance with the provisions of the Income Tax Act, i.e., if it has been passed consequent to a valid search authorised by the Commissioner, Rajkot . However, vide our order of even date in the case of Smt. Mumtazbanu Glioghabori in IT(SS)A No. 4055/Ahd/96 (reported as Smt. Mumtazbanu M, Rafiqbhai v. Assistant Commissioner (2000) 67 TTJ (Ahd) 202), we have held that the search in the case of Mumtazbanu was not legally valid as the learned CIT, Raikot has not recorded his satisfaction for issuing warrant under section 132 and consequently the assessment framed by the assessing officer under section 158BC pursuant to an illegal search was invalid.
6. While forwarding the draft order under section 158BC to the Commissioner, Rajkot for us approval under section 158BC, Shri R.B. Rande, Assistant Commissioner, Cir, 1, Bhavnagar vide his letter dated 5-8-1996 bearing No. AC/Inv. Cir. 1/Block Assessment/96-97 ill para-b mentioned as under ..
“As mentioned in the office note certain books of account and loose papers seized in this case are pertaining to the other parties. Notice under section 158BC of the Act is being issued in those cases as per the provisions of section 158BC of the Act.”
Thereafter Shri R.B. Rande, Assistant Commissioner, Cir. 1, Bhavnagar issued notices dated 29-8-1996, under section 158BC read with section 158BD in the cases of all the three assessees which were duly served on these three assessees on 30-8-1996.
7. By letter dated 14-9-1996, the assessees disputed the jurisdiction of the Assistant Commissioner, Cir. 1, Bhavnagar to proceed against the assessees and also sought copy of the satisfaction note/reasons under section 158BD. Thereafter the Assistant Commissioner, Cir. 1, Bhavnagar vide his letter dated 18-3-1997 addressed to M/s Apollo Hotel & Mohmed Rafiqbhai, Mohd. Nadeem cancelled the notices issued under section 158BC read with section 158BD dated 29-8-, 1996 and fresh notices were again issued on 18-3-1997, in respect of M/s Apollo Hotel and Shri Rafiqbhai respectively. In respect of Shri Mohmed Nadeem fresh notice under section 158BC read with section 168BD was issued on 14-10-1997. The assessee vide letter dated 22-3-1997, challenged the assumption of jurisdiction of Assistant Commissioner, Cir 1, Bliavnagar in terms of sections 120 to 124 of the Act.
The Assistant Commissioner, Cir, 1, Bhavnagar vide letter dated 3-4-1997, informed the assessee that in view of the order passed by the Commissioner under section 127 he has validly assumed the jurisdiction stating that the copy of the order has already been received by the assessee Shri Mohmed Rafiqbhai and M/s Apollo Hotel whereas in fact that claim of the assessee is that no order under section 127 passed by the Commissioner, Rajkot was ever served on the assessee. In the meanwhile, the Income Tax Officer, Ward -b, Bhavnagar with whom M/s. Apollo Hotel was assessed prior to the alleged transfer under section 127 by the CIT, issued a notice under section 148 dated 2-4-1997 for assessment year 1991-92 after taking prior approval/satisfaction of the Commissioner, Rajkot. Thereafter there is a protracted exchange of letters between the Assistant Commissioner, Cir. 1, Bhavnagar and the assessee wherein the assessee has been challenging the jurisdiction of the Assistant Commissioner, Cir. 1, Bhavnagar and the assessing officer was requiring him explain the various papers found during the search of Smt. Mumtazbanu which related to these three assessees. Ultimately the assessing officer after rejecting the assessee’s contention of being assessed by the Assistant Commissioner, Cir. 1, Bhavnagar, completed the assessments in the cases of all the three assessees under section 158BC read with section 158BD on 19-3-1998, at an undisclosed income of Rs. 6,65,520 , Rs. 90,84,170 and Rs. 5,00,000 in the cases of Shri Mohmed Rafiqbhai, M/s Apollo Hotel and Shri Mohmed Nadeern respectively.
8. During the course of assessment proceedings all the three assessees have pleaded that even in terms of section 158BD read with section 158BE(2), the proceedings in the cases of three assessees have become time-barred on 31-8-1997, as the notices under section 158BD were served on the assessees on 30-8-1996. The assessing officer however, in all the three cases held that the earlier notices dated 29-8-1996 issued under section 158BC read with section 158BD which were served on the assessees on 30-8-1996 were ab initio void as at the relevant time the Assistant Commissioner, Cir. 1, Bhavnagar was not having valid jurisdiction and he got valid jurisdiction only when the case of M/s Apollo Hotel and Shri Mohmed Rafiqbhai was transferred by the Commissioner, Rajkot from Income Tax Officer, Ward-5, Bhavnagar to Assistant Commissioner, Cir 1. Bhavnagar vide order dated 28-2-1997 which was made effective from 10-3-1997. Accordingly the assessing officer held that the cases of the three assessees have not become time-barred as pleaded by the assessees during the course of assessment proceedings. It is, however, pertinent to note that the case of Shri Mohmed Nadeem was transferred to Assistant Commissioner, Cir. 1, Bhavnagar by the Commissioner, Rajkot under section 127 vide order dated 25-9-1997, which made effective from 26-9-1997.
9. Aggrieved with the orders of the assessing officer passed in all the three cases, the assessees have filed these appeals and have taken the following common grounds :
(1) On the facts and circumstances of the case and in law, the learned Assistant Commissioner had no jurisdiction on several accounts to proceed with the block assessment under section 158BD of the Act.
(2) On the facts and circumstances of the case and in law and without prejudice to the ground No. 1 supra, even if the learned Assistant Commissioner would have had a valid jurisdiction to proceed with the proceedings for block assessment, such block assessment has become barred by statutory limitation under s 158BE of the Act.
(3) Without prejudice to the above grounds, on the facts and circumstances of the case and in law, the entire proceedings for the block assessment from their very inception are in violation of the principles of natural justice and for this reason also, such proceedings as well as the resultant block assessment order are invalid, illegal, null and void and so also altogether destitute of any legal force whatsoever.
(4) Without prejudice to the above grounds, on the facts and circumstances of the case and in law, the various additions made to the total income of the assessee as per the block assessment order have no basis, reason, evidence or material to support these additions or any part thereof.
(5) Your appellant reserves its right to add, to amend, to alter or to modify any of the above ground and to pursue any other or further ground, as may be., required.
10. The learned authorised representative of the assessees has challenged the assessments framed by the assessing officer being without jurisdiction and alternatively that even if the jurisdiction was validly assumed under section 158BD, the assessments have become time-barred by 31-8-1997 as the notices under section 158BC read with section 158BD dated 29-8-1996, were served on the three assessees on 30-8-1996 and as such the assessments framed by the assessing officer in all the three cases on 19-3-1998, were time-barred.
10.1. It was submitted that the survey which was carried out in the case of Smt. Mumtazbanu proprietor of Manila Restaurant on 2-8-1995 was converted into a search on 3-8-1995 was itself illegal as no new materials were found during the search which were not known to the IT department and were discovered by them during the survey and consequently if the search in the case of Smt. Mumtazbanu was illegal, then the corresponding assessments in the cases of these three assessees allegedly made under section 158BC read with section 158BD on 19-3-1998 were also invalid.
10.2. Alternatively it was submitted that even assuming that the search in the case of Srnt. Mumtazbanu was a valid search and certain materials/documents pertaining to these three assessees were found in that search a reference to which was made by the assessing officer in his letter dated 5-8-1996 forwarding the draft order in the case of Smt. Mumtazbanu wherein the satisfaction of the assessing officer was recorded that material pertaining to these three assessees was discovered consequent to the search, notices under section 158BD were issued on 29-8-1996 and were duly served on the assessees on 30-8-1996 and consequently the assessments in the cases of the assessees are required to be made by 31-8-1997, which was not done and consequently the impugned orders passed by the assessing officer on 19-3-1998, were barred by limitation in view of section 158BE of the Act. It was submitted that although the assessees did object to the jurisdiction assumed by the Assistant Commissioner, Cir. 1, Bhavnagar while issuing the notices under section 158BD and the Assistant Commissioner, Cir. 1, Bhavnagar subsequently vide letter dated 18-3-1997, cancelled the notices dated 29-8-1996 issued under section 158BC read with section 158BD; yet it will not save the limitation which commenced in terms of section 158BE(2) when the notice under section 158BD was served because there is no provision in the Act for the service of a second notice under section 158BD. It was submitted that the moot question which is required to be decided by the Tribunal is :
(i) Whether the notice issued under section 158BC read with section 158BD dated 29-8-1996 which was served on the assessees on 30-8-1996, will become nonexistent by letter dated 18-3-1997, written by the assessing officer cancelling the same when the relevant section speaks of completion of assessment within one year of service of the notice under this chapter.
(ii) Whether the order of the Commissioner for transferring the jurisdiction from Income Tax Officer, Ward-5, Bhavnagar to Assistant Commissioner Circle-1, Bhavriagar will ratify the jurisdiction which was exercised by the same Assistant Commissioner; or :
The limitation will be counted from the issue and service of second notice under section 158BD.
It was submitted by the learned authorised representative of the assessee that in his humble opinion the limitation will start from the service of first notice under section 158BC read with section 158BD and not from the service of second notice because it is riot a case of total lack of jurisdiction. It was submitted that had there been no objection to the jurisdiction well in time, then the assessees could not have, objected to it subsequently as provided in section 124. It was submitted that the application of the provisions of section 124 is conditional and as such optional in the sense that if by his own discretion the assessee does not challenge the erroneously assumed jurisdiction, then the jurisdiction assumed will remain valid. It was submitted that when the objection was taken by the assessee before the assessing officer, the assessing officer has sought order from the Commissioner which is apparent from the letter dated 18-3-1997 written by the assessing officer to the assessee and it is surprising that even though the objection was taken in September, 1996, it took six months for the Commissioner to pass transfer order. It was submitted that the transfer order,’ were never received by the assessees even though it has been supposed to be received by the assessee. It was submitted that even though the transfer order is dated 28-2-1997 transferring the jurisdiction from Income Tax Officer, Ward-5, Bhavnagar to Assistant Commissioner, Cir. 1, Bhavnagar; yet the Income Tax Officer, Ward-5, Bhavnagar issued notices dt, 2-4-1997, under section 148 and that too after obtaining the. necessary satisfaction of the Commissioner, Rajkot . It was submitted that in view of the above fact it is very pertinent to adjudicate as to what will be the fate of the first notice issued under section 158BD/158BC by the same officer to whom the jurisdiction is vested by subsequent order when the objection was taken by 1 ‘ h e assessee. It was submitted that section 158BE(2)(a) prescribes the period of limitation as one year from the end of the month in which the notice under this chapter was served on such other person where search was initiated after 30-6-1995 but before 1-1-1997. It was pleaded that the section speaks of service of notice under this chapter and there is no provision for issue of second notice. ExpIn. 1 lays down contingencies, the period spent in respect of which, is required to be excluded but it does not say that the period taken by the Commissioner to transfer the case is required to be excluded. It was submitted that by the order of the Commissioner under section 127, the proceedings already started by the Assistant Commissioner, Cir. 1, Bhavnagar under section 158BD stand corrected/regularised and the officer will have the jurisdiction to continue the proceedings from the stage at which the irregularity/illegality has occurred. Accordingly it was submitted that the A0 was required to pass the orders in all the three cases before 31-8-1997, which was not done and as such the assessments have become time-barred and the orders passed by the assessing officer on 19-3-1998 are required to be held as time-barred and should be cancelled.
10.3. Reliance was placed on the decision of the Gujarat High Court in the case of P. V. Joshi v. CIT 1977 CTR (Guj) 683 : (1978) 113 ITR 22 (Guj) at p. 31 the decision of the Hon’ble Supreme court in the case of Guduthur Brothers v. n,0 (1960) 40 ITR 298 (SC) and the decision of the Tribunal Third Member in the case of Asstt CIT v. Shravan Mahipat Hedau (HUF) (1997) 58 TTJ (Mag)(7’1/1) 771 . (1997) 62 ITD (Mag)(TM) 70.
11. The learned departmental Representative supported the orders passed by the assessing officer and pleaded that the initial notices under section 158BD, dated 29-8-1996, issued by the assessing officer were ab initio void as the assessing officer who was Assistant Commissioner, Cir, 1 Bhavnagar was not having jurisdiction over the cases of these three assessee who were being assessed by the Income Tax Officer, Ward-5, Bhavnagar and this fact was known to the assessees who challenged the same by a letter dated 14-9-1999. It was pleaded that thereafter the cases of the assessees were transferred by the Commissioner, Rajkot under section 127 to the Assistant Commissioner, Cir 1, Bhavnagar and accordingly the assessing officer vide letter dated 18-3-1997 rightly cancelled the earlier notices issued under section 158BD and issued fresh notices dated 18-3-1997, from which the jurisdiction was validly assumed by the Assistant Commissioner, Cir. 1, Bhavnagar. It was submitted that the notice dated 2-4-1997, under section 148 issued by the Income Tax Officer, Ward-5, Bhavnagar in the case of M/s Apollo Hotel was issued inadvertently on the basis of audit objection and no action was taken pursuant to that notice. Accordingly it was pleaded that the assessments having been framed within one year of the issue of second notices under section 158BC read with section 158BD were quite in time and were rightly made by the assessing officer within the time-limit prescribed under section 158BE(2).
12. We have considered the rival submissions and have also gone through the orders passed by the assessing officer. Vide our order of even date in the case of Smt Mumtazbanu in ITA No. 4055/Ahd/96, we have held that the block assessment framed in the case of Smt. Mumtazbanu was bad in law as the search authorised by the Commissioner, Rajkot was invalid being not in accordance with the provisions of section 132 as no proper reasons appear to have been recorded by the Commissioner before authorising the search as the same were not produced before u,” although specifically asked for. Accordingly, the present assessments framed under section 158BC read with section 158BD which are also consequent to the search carried out in the case of Smt. Mumtazbanu, are also held to be bad in law having been framed consequent to an invalid search.
12.1. Since elaborate arguments were advanced by both the parties, on the assumption that even if the search in the case of Smt. Mumtazbanu was valid, yet the assessments framed in the cases of these three assessees were time barred as the first notice under section 158BD was served on the assessees on 30-8-1996, and since the assessment orders were passed on 19-3-1998, these were time-barred in terms of section 158BE(2), we proceed to adjudicate on this issue. The pointed question for adjudication before us in view of the facts discussed in paras above, is to decided
(i) Whether the earlier notices issued by the assessing officer under section 158BD read with section 158BC which were served on the assessee on 30-8-1996 could become non existent when the relevant section dealing with the limitation speaks of completion of assessment within one year of service of notice under this chapter,
(n) Whether. the order of the Commissioner transferring the jurisdiction from Income Tax Officer, Ward-5, Bhavnagar to Asstt CIT, Cir. 1, Bhavnagar will ratify the jurisdiction which was exercised by the same Assistant Commissioner,. or
The limitation will be counted from the issue and service of second notice unders.158BD.
12.2. Block assessments under Chapter XIV-B have to be framed by an assessing officer who necessarily has to be of the rank of Assistant Commissioner and an Income Tax Officer cannot frame the assessment. The Assistant Commissioner, Cir. 1, Bhavnagar was one of the authorised officers who conducted the search in the case of Smt. Mumtazbanu and to whom the papers pertaining to Smt. Mumtazbanu as well as these three assessees, were handed over by Shri K.K. Kanwat/Shri L.R. Meena, Dy. DIT Bhavnagar and Addl. DIT, Bhavnagar who were in-charge of survey/search party. Thereafter Shri R.B. Rande, Assistant Commissioner, Cir. 1, Bhavnagar took up the proceedings in the case of Smt. Mumtazbanu although no valid order transferring the case of Smt. Mumtazbanu from Income Tax Officer, Ward-5, Bhavnagar to Asstt CIT, Cir. 1, Bhavnagar was passed by the Commissioner, Rajkot under section 127, However, since the assessee (Smt. Murritazbanu) never objected to the issue, of notice under section 158BC issued by Shri R.B. Rande, Assistant Commissioner, Cir. 1, Bhavnagar within the time prescribed under section 124(3), she is deemed to have waived the objection and the assessment framed by Shri R.B. Rande, Assistant Commissioner, Cir 1, Bhavnagar on 29-8-1996, would have been valid if we have not held the search carried out by the department as invalid on account of non-recording of satisfaction by the Commissioner as required under section 132. The provisions contained in ,~ 127 regarding the allocation of functions between the various officers of the department are machinery provisions. These do not affect the inherent jurisdiction and an assessee has no vested right to be assessed by a particular, TO/assessing officer. In the instant case before us there was no lack of inherent jurisdiction by the Assistant Commissioner, Cir. 1, Bhavnagar and had the assessees not objected to the same within the time provided under section 124(3), then the jurisdiction assumed would have remained valid. By passing the order under section 127 the Commissioner, Rajkot has regularised the jurisdiction of Assistant Commissioner, Cir. 1, Bhavnagar to whom the papers/documents etc. found from the search were handed over in view of the satisfaction recorded by the assessing officer assessing Smt. Mumtazbanu and as such the limitation prescribed under section 158BE(2) will apply from the service of the first notice issued under section 158BC read with section 158BD because the section does not Speak of a second notice under section 158BD. In this contention it will be useful to refer to the observation of the Gujarat High Court in the case of Khandubhai Vasanji Desai v. Dy. CIT (1998) 150 CTR (Guj) 577: (1999) 236 ITR 73 (Guj) wherein assessee challenged the validity of the provisions of section 158BD. At p. 97 of the report the Hon’ble High Court has observed as under :
“The assessing officer, once he reaches the requisite satisfaction, is bound to act swiftly to proceed against, such other person as soon as may be in reasonable time. The speed and despatch with which he should act is writ large on the connected provisions of section 132(9A) of the Act under which the authorised officer who no jurisdiction over the person referred to in cl. (a), (b) or (c) or sub-section (1) of s 132 has to hand over the books of account, documents and assets seized by the Income Tax Officer having jurisdiction over such person within 15 days of such seizure and the assessing officer is required to serve a notice to such person under section 158BC requiring him to furnish a return in the prescribed Form No. 2B and to complete the block. assessment in one year from the end of the month in which the last authorisation for search or requisition was executed. Thus, the apprehension that a notice can be issued under section 158BD read with 158BC by the assessing officer in the case of such “other person”, at any time is ill-founded. There is no lifting of the initiation period for making the assessment order which is one year and the starting point of limitation in cases falling under section 158BD by the very nature of things can be fixed only after the assessing officer is satisfied that any undisclosed income belongs to such other person and in cases where the assessing officer is different after the relevant material is transmitted to him …….
(Emphasis here italicised in print, supplied)
In the case before us, the assessing officer being the same, the limitation will start with the service of notices under section 158BC read with section 158BD on 30-8-1996.
12.3. Even otherwise there appears to be something wrong with the functioning of the office of the Commissioner, Rajkot at the relevant time. Even if we accept the argument of the learned departmental Representative that the Commissioner, Rajkot actually transferred the cases of M/s Apollo Hotel and Shri Mohmed Rafiqbhai on 28-2-1997, making the order operative from 10-3-1997, (a photo copy of that order under section 127 has been filed by the learned departmental Representative before us) yet it is strange that the same Commissioner gives approval to the Income Tax Officer, Ward-5, Bhavnagar for issuing a notice under section 148 on 14-3-1997, and that notice is issued on 2-4-1997 by the Income Tax Officer, Ward-5, Bhavnagar, when the jurisdiction according to the order under section 127, has already stood transferred to the Assistant Commissioner, Cir. 1, Bhavnagar from Income Tax Officer, Ward-5, Bhavnagar, which of these two orders gives the correct state- of- affairs is difficult to state. The matter with regard to limitation in the cases of all these three assessees has to be considered from the concept of nullity vis-a-vis irregularity/illegality. The Hon’ble Gujarat High Court in the case of P.V. Doshi v. CIT (supra.) at p. 31 has observed as under :
The settled distinction between invalidity and nullity is now well brought out in the decision in Dhirendra Kath Gorai v. Sudhir Chandra Ghosh, AIR 1964 SC 1300, 1304, where their Lordships had gone into this material question as to whether the act in breach of the mandatory provision is per force a nullity. The passage in Macnamaron Nullities and Irregularities, referred to in Ashutosh Sikdar v. Bihan Lal Kirtana (1907) 35 Cal 61 (FB), at p. 72, was in terms relied upon as under
“.. on hard and fast line can be drawn between a nullity and an irregularity, but this much is clear, that an irregularity is a deviation from a rule of law which does not take away the foundation or authority for the proceeding, or apply to its whole operation whereas a nullity is proceeding that is taken without any foundation for it, or is so essentially defective as to be of no avail or effect whatever, or is void and incapable of being validated. ”
Thereafter, their Lordships pointed out that whether a provision fell under one category or the other was not easy of discernment, as in the ultimate analysis, it depended upon the nature, scope and object of the particular provision. Their Lordships in terms approved a workable test laid down by Justice Coleridge in Holines v. Russel (1841) 9 Dowl 487 as under :
“10. It is difficult sometimes to distinguish between irregularity and a nullity’. but the safest rule to determine what is an irregularity and what is a nullity is to see whether the party can give the objection., if he can waive it, it amounts to an irregularity; if he can not, it is a nullity.”
In the light of the above principle enunciated by the Hon’ble Supreme court it will be seen that the case of the assessee was a case of supervening irregularity which occurred when the notice was issued on 29-8-1996 and it stood challenged when the objection was made by the assessees, and the same stood corrected when the jurisdiction of the Assistant Commissioner, Cir.. 1, Bhavnagar was acknowledged by the Commissioner, Rajkot vide his transfer order dated 28-2-1997 as stated by the assessing officer in the assessment order. The validation or the correction of the irregularity/illegality of the earlier notices issued under section 158BC read with s 158BD will not extend the period of limitation as provided in section 158BE(2) of the Act. The order passed by the Commissioner under section 127 cannot be a starting point for computing limitation under section 158BE(2) particularly when the notice was issued earlier and the section speaks of one year from the end of the month in which the notice under this chapter was served. The section does not speak of 11 notices” and hence CIT’s order of transfer cannot be a basis for extending the limitation when the notice was already issued by the same assessing officer (Assistant Commissioner, Cir. 1, Bhavnagar) before transfer order and who was holding the jurisdiction of Smt. Mumtazbanu’s case where search was made and the cases under consideration are inter-connected with the search case. In this connection it will be useful to refer to the decision of the Hon’ble Supreme court in the case of Guduthur Brothers (supra) where it has been held as under :
“Held, that as the Appellate Assistant Commissioner pointed out only to an illegality which vitiated the proceedings after they were lawfully initiated, the notice issued under section 28(1)(a) did not cease to be operative and it was open to the Income Tax Officer to take up the matter at the point at which the illegality supervened and to correct his proceedings. The notice under section 28(1)(a) having remained still to be disposed of the proceedings started after the order passed by the Appellate Assistant Commissioner could be described as during the course of the assessment proceedings, because the action would relate back to the time when the first notice was issued. The Income Tax Officer had jurisdiction to continue the proceedings from the stage at which the illegality had occurred.”
12.4. Therefore, taking into consideration the totality of the facts and circumstances of the case, we hold that the first notice issued under section 158BC read with section 158BD was served by the assessing officer on 30-8-1996 whose holding the jurisdiction was subsequently regularised by the Commissioner, Rajkot by passing the order under section 127 and hence the assessing officer was required to complete the assessment within the limitation period prescribed under section 158BE(2) which expired on 31-8-1997. Since the impugned orders have been passed on 19-3-1998, they are barred by limitation, they are hereby quashed.
12.5 Although elaborate arguments were advanced by both the parties relating to the quantum of additions made, we do not think it proper to adjudicate the issue on merits of the additions as we have cancelled the assessments framed by the assessing officer on the basis of the invalidity of the search and seizure proceedings in the case of Smt. Mumtazbanu as well as on the question of limitation as provided under section 158BE(2).
13. In the result, the appeals are allowed.