ORDER
U.B.S. Bedi, Judicial Member
1. These are two appeals of the revenue directed against the combined order of CIT(A)-XII, New Delhi dated 5-10-1990 relating to assessment years 1984-85 and 1986-87 in the case of same assessee. These are being disposed off by a consolidated order as facts and points at issue are identical.
2. Facts are like this that original assessment for both the assessment years under appeal were completed under section 143(1). Subsequently, the Assessing Officer reopened these assessments on the basis of certain information and discrepancies coming into here possession and found during the course of assessment proceedings for the assessment year 1987-88. These proceedings were initiated by issuance of notices under section 148 on 27-5-1988 by invoking provisions of section 147(a) of the Income-tax Act. No returns were filed in response to these notices issued under section 148 of the Income-tax Act by the assessee and rather the assessee challenged the service of these notices issued under section 148, Taking this fact into consideration that notice under section 148 dated 27-5-1988 for both these years were not admitted to have been served upon the assessee, therefore, subsequently, on 1-9-1989, Assessing Officer issued fresh notices under section 148 again for each of the two assessment years after obtaining necessary approval from the competent authority. The assessments for both these years were completed on 28-2-1990 after giving due opportunity to the assessee and the assessee aggrieved by these assessments had filed appeal before the CIT(A) and challenged legal aspect of issuance of second notice under section 148 during the pendency of re-assessment proceedings in pursuance of first notice dated 27-5-1988. Besides this it challenged assessment of merits also and following pleas were raised :
1. Assessment orders by ITO are illegal and bad in law, and same should be quashed.
2. Re-opening of assessment is without application of mind, arbitrary and illegal, therefore, should be quashed.
3. Addition made by Assessing Officer are based on surmises and conjectures.
4. Additions made in respect of bogus purchase are against the facts and circumstances of the case.
5. Additions on account of commission have been made without any proper basis.
6. For assessment year 1984-85 disallowance under section 80G has been wrongly made while for the assessment year 1986-87 cash credits is added without proper basis.
7. For the assessment year 1984-85 addition under section 43B of Rs. 626 has been wrongly made and for the assessment year 1986-87 addition on account of interest paid on cash credits is not on a proper footing.
8. Interest under section 215 for both the years and interest under section 139(8) for the assessment year 1986-87 has been charged without any speaking order.
3. The learned CIT(A) while considering the arguments and submissions made by the assessee’s counsel has thoroughly discussed each and every point as made by the assessee’s representative in his order at paras 3,4,5 & 6 and concluded his findings in paras 7 & 8 of his order whereby order of assessments in each of these two years were annulled by observing as under :
“I have discussed the file at great length with the learned counsel for the appellant as well as the present Assessing Officer and the Assessing Officer who had completed the assessment at the relevant time. In my view the assessments completed by the Assessing Officer on 28-2-1990 for each of the two years cannot be sustained as on the date of issue of notices on 1-9-1989 proceedings under section 148 had already been pending on account of issue of notice on 27-5-1988 and subsequent issue of notices under sections 143(2) and 142(1). At no stage of time till 31-8-1989 the Assessing Officer communicated to the appellant or wrote in the order sheet that the proceedings under section 148 and also other proceedings under sections 142(1) and 143(2) were dropped as being illegal on account of non service of notices under section 148. In my view, it would have been proper for the Assessing Officer to drop the proceedings before the issue of notice on 1-9-1989 and the fact that the proceedings have not been closed is also clear from the letter dated 31-8-1989 sent by the CIT Delhi-VII, New Delhi to the Assessing Officer well as the appellant and requesting the appellant to cooperate with the Assessing Officer in completion of the proceedings pending on 31-8-1989. I have also gone through the reasons recorded by the ITO on 1-9-1989 before the issue of a notice under section 148 and find that there is no definite material for coming to the conclusion that income had escaped assessment. The reasons recorded are merely on certain surmises and conjectures.
In view of the above discussion, I would hold that the assessments completed for each of the two years namely, 1984-85 and 1986-87 are illegal and, therefore, these are annulled. Since the assessments are being annulled, therefore, it is not considered necessary to go into the merits of other grounds from S. Nos. 4 to 8 as given in the grounds of appeal.”
4. Department aggrieved by this order of learned first appellate authority challenged the same and raised following two common grounds :
“On the facts and in the circumstances of the case, the ld. CIT(A) has erred in law and on facts in annulling the assessment on the ground that on the date of issue of notice under section 148 on 1-9-1989, earlier proceedings under section 148 were pending. The ld. CIT(A) has not appreciated the fact that the assessee had itself admitted that notice under section 148 issued originally on 27-5-1988 had not been received by it.
On the facts and in the circumstances of the case, the ld. CIT(A) has erred in law and on facts in holding that before issue of notice under section 148 there was no definite material with the Assessing Officer to come to a conclusion that income had escaped assessment.”
5. The learned DR while relying upon the basis and reasoning as given by Assessing Officer in her order of assessment for each of the two years has further pleaded that order of annullment passed by CIT(A) is neither a valid nor a legal order. No basis or reasoning whatsoever has been given by the first appellate authority. While relying upon (sic) 139 ITR 418, (sic) 148 ITR 669 and (sic) 21 ITD 312, it was submitted for setting aside the order of CIT(A). The learned DR further submitted that approval was obtained from the competent authority before issuance of first notice as well as second notice. Since assessee had himself denied having received the first notice, second notice for both the assessment years were issued after complying with all necessary formalities and same were served and assessment was completed thereafter. Prior to issue of these notices Assessing Officer recorded reasons in details for such initiation of proceedings under section 147(a). Necessary approval has also been obtained prior to issue of these notices. Assessee’s plea regarding issue of second notice during the pendency of first notice is of no consequence as assessee, has himself denied service of first notice. All the authorities cited by assessee’s representative in appeal proceedings before the first appellate authority are relevant for preposition where proceedings consequent upon service of first notice are pending but in the instant case factual position is entirely different. From the order of ld. CIT(A) it is quite apparent that he is simply swayed by the arguments of the assessee and there is no proper application of mind. While passing order, learned CIT(A) has mentioned that Assessing Officer while recording the reasons before issue of notice under section 148, there is no definite material for coming to the conclusion that income has escaped assessment. He further opined that reasons recorded are merely on suspicion, surmises and conjectures and in this respect it is submitted that learned first appellate authority could only look whether reasons were recorded or not. So far as its sufficiency is concerned, he had no jurisdiction, whatsoever to challenge the same. Therefore, his order is not valid on this count and is liable to be set aside. It was thus pleaded for setting aside order of CIT(A) and restoration of the order of Assessing Officer.
6. Learned counsel for the assessee while relying upon basis and reasoning as given by ld. CIT(A) pleaded for confirmation of his order. It was submitted that re-opening has been done purely on suspicion and there was no proper material or basis on which ITO could have believed that income had escaped assessment. The learned counsel for the assessee has also pointed out various inaccuracies and contradictions in the proceedings for each of the two years. For example, in the order sheet entry for assessment year 1984-85, the Assessing Officer has stated on 1-9-1989 that “Notices under section 148 issued and served” but in fact these notices were served on 7-9-1989. Therefore, the order sheet entry dated 1-9-1989 mentioning the services of the notice is an inaccurate proceeding noted in the order sheet. While recording the reasons for re-opening the assessment on 1-9-1989 for the assessment year 1984-85 the Assessing Officer wrote that the assessee had challenged the validity of service of notice under section 148 issued earlier on 27-5-1988 and also stated that no return had been filed in response to the said notice. It was also pointed out by the counsel that prior to issue of second notice under section 148 on 1-9-1989 the Assessing Officer had issued notices under sections 142(1) and 143(2). It was also submitted that these notices were sent at the residence of the learned counsel for the assessee which was refused by him. It was further stated by learned counsel for the assessee that letter dated 31-7-1989 to the CIT, Delhi-VII, offering to surrender a reasonable amount in order to avoid harassment and multiplicity of litigation and said letter of assessee was disposed of by CIT, Delhi-VII, New Delhi vide letter dated 31st August, 1989 and copies of this letter are filed in the paper book of the assessee. In the said letter CIT, Delhi-VII, New Delhi had requested the assessee to cooperate with the ITO and file the evidences asked for by the Assessing Officer as well as produce the books of account for those two years in order to enable the ITO to complete the proceedings as early as possible. Learned counsel for the assessee has specifically drawn attention to this request of CIT, Delhi-VII, New Delhi in letter dated 31-8-1989 which according to assessee meant that proceedings for assessment years 1984-85 and 1986-87 were pending on the date of writing of letter i.e. 31-8-1989. In view of these facts, it was emphasised by the learned counsel for the assessee that when correspondence were going on between the assessee and the Commissioner and assessee was requested to cooperate with the ITO to complete the assessment proceedings then how the Assessing Officer issued the second notice on 1-9-1989. It was pleaded that no second notice under section 148 could be issued during the pendency of already initiated proceedings under the same provision. Since proceedings were pending on account of earlier notices dated 27-5-1988, issuance and service of second notice under same provision vitiates the reassessment proceedings. To support this preposition assessee’s counsel relied upon CIT v. MP. Davis [1986] 27 Taxman 59 (Kar.). Assessee’s counsel relied upon other authorities as contained in para 19 of written submissions filed before first appellate authority and stated that income cannot be said to have escaped assessment within the meaning of section 147 if assessment proceedings in respect of income are still pending and have not terminated in the shape of a final order. It was also stated that since Assessing Officer had not dropped the assessment proceedings before issue of notices on 1-9-1989, re-assessment based on subsequent notices are not valid. Relying upon these authorities and submissions as made above, it was pleaded that issuance and service of notice dated 1-9-1989 are illegal and bad in law. Assessee’s counsel further stated that fishing and roving enquiries ase not permitted before arriving at a conclusion that income chargeable to tax has escaped assessment and in this context assessee’s counsel stated that statement of Shri Gokal Dev recorded on 12-2-1990 was at the back of the assessee and no opportunity of cross-examination of the said person was permitted to the assessee. Assessee’s counsel relied upon decision of the Punjab and Haryana High Court as reported in 180 ITR 390 (sic) wherein re-assessments were cancelled by Tribunal and this action of the Tribunal was upheld by High Court on the ground that both the grounds on which re-assessment notices were issued were not found to exist. It was thus strongly pleaded that while dealing with the appeal of the assessee, learned CIT(A) has very elaborately examined and discussed each and every point in respect of the case and after considering case laws as cited and other documentary evidence as placed on record has rightly annulled the assessment and for the same reasons assessee prays for confirmation of his order.
7. To counter the arguments of assessee’s counsel, learned DR submitted that since service of notice under section 148 is a condition precedent, Assessing Officer was well within his authority to have issued fresh notices when assessee has himself denied service of first notice dated 27-5-1988. It was also stated that any number of notices under section 148 be issued within the limitation period prescribed. Learned DR also relied upon the provisions of section 292B of the Act which validates the action of the Assessing Officer under facts and circumstances and it was emphasised that since no assessment proceedings were pending in the assessee’s case on 1-9-1990, therefore, the basis for issue of notices under section 148 on 1-9-1990 are valid. Reliance was also placed on Tribunal’s Delhi Bench decision in the case of Smt. Adarsh Kaur reported in 2 ITD 312 (TM) and it was strongly pleaded for setting aside of order of Assessing Officer and restoration of order of CIT(A).
8. We have heard rival submissions, perused the record, and gone through the orders of authorities below, case laws as cited and the documents filed by both the sides to which our attention was drawn. The main issue here is regarding validity of second notices dated 1-9-1989 issued and served after denial of service of first notices dated 28-5-1988 by the assessee. The assessee has tried to establish that during the currency of proceedings on the basis of first notice Assessing Officer could not validly issue second notice without formally dropping the proceedings as initiated by issuance of first notice and Department’s stand is that since service of first notice has been denied by the assessee, Assessing Officer was well within its right to issue second notice and by serving the same, it could validly make the re-assessment. After having given thoughtful consideration, we are of the view that mere issuance of notice will not amount to pendency of assessment proceedings until or unless it is established that same has properly been served upon the assessee. Here, admittedly, first notice under section 148, in each of these cases has not been served upon the assessee and this specific denial of service of first notice by the assessee itself has prompted the Assessing Officer to record reasons afresh to obtain approval of competent authority as provided under law and to issue fresh notice dated 1-9-1989. Therefore, in our view, first notice under section 148 in each of the years, dated 28-5-1998 is held to have not been served and no proceedings can be said to be pending at the time of issuance and service of second notice under section 148 dated 1-9-1989 in each of these years. Our view is supported by Hon’ble Supreme Court’s judgment in the case of CWT v. Kundan Lal Behari Lal [1975] 99 ITR 581 wherein it has been held that issue means service and expression “issued” takes in the entire process of sending notices as well as service thereon. The said word used in section 34(1) of the Act itself was interpreted by Courts to mean served. The judgment of Supreme Court is reproduced hereunder :
“The order of the court was delivered by
Jaganmohan Reddy, J. – We have heard the learned Additional Solicitor-General who assails the judgment of the High Court and prays that special leave be granted. We, however, do not consider the point arising out of the judgment requires examination, but as it affects a large number of cases, we have been invited to give our reasons for dismissing the petition. Accordingly, we do so.
The main question on which the High Court decided and which is the only question urged before us for admitting the petition is that the word “issued” occurring in section 18(2A) of the Wealth-tax Act means “served”. This decision is well supported not only by the decision of the High Court but also of this court. In Banarasi Devi v. Income-tax Officer, Calcutta, this court observed that the expression “issued” and “served” are used as inter-changeable terms and in the legislative practice of our country they are something used to convey the same idea. Accordingly, it was held that the word “issued” was not used in the narrow sense of “sent” but that the said expression had received, before the Indian Income-tax (Amendment) Act, 1959 a clear judicial interpretation. Subba Rao, J., as he then was, dealing with the purpose which the word “issue” was intended to serve, after referring to Sri Niwas v. Income-tax Officer cited in the judgment under attack and a Bombay decision, observed at page 108, “the intention would be effectuated if the wider meaning is given to the expression “issued”. The dictionary meaning of the expression “issued” takes in the entire process of sending notices as well as service thereof. The said word used in section 34(1) of the Act itself was interpreted by courts to mean ‘served’.”
9. Relying upon this Supreme Court decision our Tribunal ‘E’ Bench, Delhi in the case of ITO v. Smt. Adarsh Kaur 2 ITD 312 (sic) has held as under whose facts were similar :
“It is well settled that service of notice under section 148 for purposes of commencing reassessment proceedings is not a mere procedural requirement but a condition precedent to the initiation of such proceedings. The ITO had given a categorical finding in his order under section 146 that the notice issued earlier had not been served on the assessee. Immediately thereafter, he had recorded the reasons afresh for reopening the assessment proceedings. Such a conduct on the part of the ITO would amount to termination of the earlier proceedings, especially when it could not be disputed that, having not served the notices, no valid assessment could have been made under the earlier proceedings. The contention that the earlier proceedings could not also be treated as void, illegal or non est without adjudication by an authority competent to do so could not be accepted. The test to find out as to whether the proceedings for reassessment are pending or not is to ascertain whether the ITO had assumed valid jurisdiction to make reassessment, which, in fact, the ITO had, in this case, since no assessments were pending on the date of initiation of reassessment proceedings. The AAC was thus not justified in annulling the impugned assessments.”
10. Therefore, in view of facts and circumstances, we are of the view that notice under section 148 dated 1-9-1989 was validly issued by the Assessing Officer and proceeding concluded on the basis of these notices are proper and valid. Since ld. CIT(A) could not go into the sufficiency or adequacy of reasons which stood duly recorded after going through these reasons as produced before us, we are of the considered opinion that Assessing Officer could reasonably form belief for initiation of reassessment proceedings, therefore, he was not justified in annulling the assessment first on the ground that proceedings on the basis of earlier notices issued on 27-5-1988 were pending and secondly on the ground that reasons recorded by the Assessing Officer for initiating of re-assessment proceedings were not proper and valid. As the order of CIT(A) which is found to be not valid and proper, is hereby set aside and so far as these two issues are concerned, these are decided in favour of the revenue against the assessee. As regards various case laws cited by the assessee, we are of the view that those all the cases are not relevant to the facts of the case and are distinguishable, as such, not being discussed in detail here, though properly considered before coming to the conclusion drawn herein above. Since order of ld. CIT(A) has been set aside, we restore the matter back to his file and direct him to decide other grounds raised on merits after due opportunity to the assessee.
11. With these directions, the appeals of the revenue are treated to have been accepted for statistical purposes and matter stands restored back as directed above.