Reopening untenable as no nexus between material and belief of AO of escapement of income

Bhavi Leasing & Finance Ltd. Vs ITO (ITAT Ahmedabad)

ITAT Ahmedabad held that reopening of assessment unsustainable in absence of nexus between material coming to the knowledge of the AO And formation of his belief of escapement of income.

Facts-

Reopening of the assessee’s case and reassessment done under section 147 has been challenged on various grounds. Before us, the ld.counsel for the assessee primarily challenged reopening for the following reasons:

i) Reasons did not reveal any escapement of income in the case of the assessee;

ii) No addition was made of the income which the AO had formed a belief of having escaped the assessment, on the contrary addition made related to another issue.

iii) Jurisdictional notice u/s. 148 of the Act was issued by AO who did not have jurisdiction over the assessee and was also not served on the assessee at all.

Conclusion-

It is trite law that that there has to be live link or close nexus between material coming to the knowledge of the AO and formation of his belief of escapement of income. In the absence of the same jurisdiction to reopen the case of assesses cannot be assumed under law. Therefore, we concur with the ld.counsel for the assessee that there being no nexus between the information in the possession of the AO and the formation of belief of escapment of income of the assessee, the jurisdiction assumed by the AO to reopen the case of the assessee and assess its income under section 147 of the Act was in gross violation of law. The assessment so framed under Section 147 of the Act is held to be non-est and void for this reason alone.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

The present appeal has been filed by the assessee against the order passed by the Commissioner of Income Tax (Appeals)-I, Vadodara (in short referred to as CIT(A)), dated 22.03.2017 passed under section 250(6) of the Income Tax Act, 1961 (“the Act” for short) pertaining to Assessment Year 2006-07.

2. Ground No.1 to 7 raised by the assessee are legal grounds challenging validity of the assessment framed in the present case under section 147 of the Act on various grounds. These grounds read as under:

“1. That the learned CIT(A)-1, Baroda has erred both in law and on the facts in holding reopening of assessment and additions of Rs.78,00,000/- made by learned A.O. as valid in law even though no independent and prima facie investigation of information received.

2. That the learned CIT(A) has failed to appreciate the facts that the assessment order passed U/s 143(3) r.w.s. 147 by learned A.O. is null and void and without jurisdiction.

3. Whether on the facts and in the circumstances of the case and in law the learned CIT(A) is justified in holding that the notice issued U/s 148 dated 25.3.2013 and served by affixture on the next day ?

4. That the proceedings U/s 147 initiated by learned A.O. on the basis of information received from search cases and assessment made U/s 143(3) r.w.s. 147 by learned A.O. and confirmed by CIT(A) is not in accordance with the provisions of the Act which deserves to be cancelled.

5. That the assessment order was passed on the basis of informations received from third party and appellant has specifically asked for an opportunity to corss examination of parties on the basis whose statement, reopening of assessment was made U/s 143(3) r.w.s. 147 is in gross violation of natural justice, hence assessment be held as illegal bad in law and void.

6. That the learned A.O. who has issued notice U/s 148 by recording reasons has not personally verified the facts and merely relied on the vague information, proceedings U/s 147 initiated is not valid in law and assessment order deserves to be cancelled.

7. That the reasons recorded shows that the Pradip Overseas Group has introduced unaccounted income and the said company has failed to prove the genuineness of credits, in such circumstances additions is to be made in the hand of Pradip Group Companies and not in the hand of the appellant which deserves to be deleted.”

3. As is evident from the above, reopening of the assessee’s case and reassessment done under section 147 has been challenged on various grounds. Before us, the ld.counsel for the assessee primarily challenged reopening for the following reasons:

i) Reasons did not reveal any escapement of income in the case of the assessee;

ii) No addition was made of the income which the AO had formed a belief of having escaped the assessment, on the contrary addition made related to another issue.

iii) Jurisdictional notice under section 148 of the Act was issued by AO who did not have jurisdiction over the assessee and was also not served on the assessee at all;

4. We shall first deal with the contention of the assessee relating to reasons recorded. In this regard our attention was drawn to PB Pg.No.34, which was the copy of the reasons recorded. The contents of the same are reproduced hereinunder:

“Reasons for Reopening of Assessment u/s 147 of the I.T. Act.

As per letter No AGIT/Ccl(4)/ POL Group/Passing of inf/2012-13 dtd 11.03.13 received from the ACIT, CC 1(4), Ahmedabad, a search action U/s 132 of the IT Act was carried out the case of Pradip Overseas Group including Pradip Overseas Ltd. (Formerly known as Chetan Textiles Ltd). Pradip Enterprises Ltd. And Pradip Petrofils Pvt. Ltd. on 21.09.2010 and subsequent dates. During the course of search proceedings, it was found that the assessee group introduced its unaccounted income in the form of share capital/premium through various shell companies. In his statements recorded u/s 132(4) of the IT Act, Shri Pradipkumar J. Karia, main person of Pradip Overseas group admitted introduction of unaccounted income in the form of share capital/premium.

From the records available, it is seen that the aforesaid assessee has subscribed shares of following companies of Pradip Overseas Group as under:-

3. As discussed above Shri Pradip Kumar J. Karla, in his statement recorded u/s. 132(4) of IT Act, has admitted on record that introduction of unaccounted income by the assessee in above two companies in the form of share application and premium money. Since the assessee has subscribed to the shares at huge premium and the aforesaid two complains have failed to prove the genuineness of the above credits received from the assessee, income to the extent of Rs 30,00,000 has escaped assessment within the meaning of section 147 of IT Act

I am, therefore, satisfied that this fit case for issue of Notice u/s 148 of IT Act . Issue Notice u/s 148 of IT Act.

5. Referring to the same, the ld.counsel for the assessee contended that while information in the possession of the AO was regarding unaccounted money of Pradip Overseas Ltd. (POL) group having been introduced in the said companies by way of share capital issued at premium and the assessee was one of the companies which had invested in these companies, on the basis of this information the AO had formed belief that income of the assessee had escaped assessment. He pointed out that the information related to unaccounted income of POL group which was routed into it through investment by way of share capital using shell companies for the purpose. The assessee being investor, as per the information with the AO, it was only a shell company used to route unaccounted income of POL group back into it. The income definitely was not that of the assessee but POL group. He contended therefore that there was no live nexus between the information with the AO and formation of belief of escapement of income.

6. The ld.DR however argued that the reasons were sufficient. He referred to the findings of the Ld.CIT(A) while dismissing this argument of the assessee at para 4.9 of his order as under:

“4.9. The next contention of the appellant is that the AO has not independently recorded any satisfaction that the income had escaped assessment and hence, the reopening of the assessment is bad. In this respect, it is seen that as per the reasons recorded for reopening of the assessment, there was a search u/s 132 of the IT Act in the case of Pradip Overseas Group on 21.09.2010 by the Investigation Wing, Ahmedabad. During the course of search & seizure proceedings, Shri Pradip Kumar J Karla, in his statement recorded u/s 132(4) of the IT Act, admitted that he had introduced unaccounted income through Bhavi Leasing & Finance Pvt. Ltd. in two companies belonging to his group. The total amount so introduced was Rs.30 lakhs. Now, under similar circumstances, the Hon’ble Supreme Court of India in its decision in the case of Lovely Exports Pvt. Ltd. (2008) 216 CTR 195 (SC) has held that if the share application money is received by the assessee company from alleged bogus share holders whose names are given to the AO, then the department is free to proceed for reopening of individual assessment of such bogus share holders in accordance with law. Thus, the reopening made in the current assessment is correct as per the ratio laid down by the Apex Court in this decision. Hence, the appellant’s objections to the reasons recorded for reopening are not acceptable.”

7. We have heard both the parties, perused the contents of the reasons recorded carefully and also gone through the findings of the Ld.CIT(A).We find merit in the contention of the ld.counsel for the assessee that there was no live nexus between the information with the AO and formation of belief of escapement of income of the assessee by the AO. As has been pointed out by the ld.counsel for the assessee, and is evident from para-1 of the reasons recorded reproduced above, the information which the AO had was regarding unaccounted income of Pradeep Overseas group being introduced back into it by way of investment by shell companies in the share capital of the group companies at premium. The assessee, before us, as per the information with the AO, is an investor in the Pradeep Overseas group of companies having subscribed to share capital of two companies of POL group. Surely, there was no information regarding unaccounted income of the assessee with the AO but on the contrary the information related to unaccounted income of POL group. On the basis of this information the AO could not have possibly formed any belief of escapement of income of the assessee.

8. It is trite law that that there has to be live link or close nexus between material coming to the knowledge of the AO and formation of his belief of escapement of income. In the absence of the same jurisdiction to reopen the case of assesses cannot be assumed under law. Therefore, we concur with the ld.counsel for the assessee that there being no nexus between the information in the possession of the AO and the formation of belief of escapment of income of the assessee, the jurisdiction assumed by the AO to reopen the case of the assessee and assess its income under section 147 of the Act was in gross violation of law.The assessment so framed under Section 147 of the Act is held to be non-est and void for this reason alone.

The decision of the Hon’ble apex court in the case of Lovely Exports (supra), which has been relied upon by the Ld.CIT(A) while dismissing this plea of the assessee cannot be said to be laying down a blanket proposition to the effect that the department is free to reopen assessments of bogus shareholders in all cases where addition u/s 68 is contemplated in the hands of the assessee receiving the share capital , as understood by the Ld.CIT(A). The primary onus to prove that the share capital was not the undisclosed income of the assessee but in fact belonged to the persons who had invested, rests on the assessee. It is only in such circumstance that the investors in share capital can be proceeded against, applying the ratio laid down by the apex court in Lovely Exports(supra). The Hon’ble Punjab and Haryana High Court dealt so with the implication of the judgement of the Hon’ble Apex Court in the case of Lovely exports, while dealing with the issue that where genuineness of share capital received is not established whether addition u/s 68 is to be made in the hands of the recipient or investor of share capital. The Hon’ble High court held so in the case of Power Drugs Ltd. CIT (2011)245 CTR 0623(P& H). The AO in the present case being possessed with only the information of unaccounted income of Pradeep overseas group being routed back by way of investment in share capital of the group companies by shell companies, the preliminary onus cast on the Pradeep overseas group company, to prove that it was not their unaccounted money so introduced, is surely not discharged. The AO’s act of reopening the cases of the investors of share capital in Pradeep overseas group companies therefore, solely on the basis of this information is premature and not justified even considering the judgement of the Hon’ble apex court in the case of Lovely Exports (supra).

9. Taking up the next argument raised by the ld.counsel for the assessee that the assessment framed under section 147 of the Act was not sustainable in law for the reason that no addition had been made relating to the income which had escaped assessment as per the reasons recorded by the AO. In this regard, he pointed out that though as per the reasons recorded, the amount of Rs.30 lakhs invested by the assessee by way of share capital in two companies of POL group was the income of the assessee which had escaped the assessment, in the assessment framed under section 147 of the Act, no addition was made on this count and the addition made related to the share capital introduced in the assessee-company amounting to Rs.78 lakhs. The ld.counsel for the assessee drew our attention to para-19 of the assessment order wherein he pointed out that even the AO has noted the fact as under:

“19. It is pertinent to mention that though the assessment was re-opened based on the belief that the investments worth Rs 30,00,000/- made by the assessee had been made out of unaccounted income not brought to tax, the assessee has been unable to prove the source of the entire new capital of Rs 78,00,000/- introduced into its books of accounts during the year under consideration. In view of the afore mentioned facts, circumstances and evidences placed on record, The amount of share capital shown to have been received by the assessee is nothing but the own unaccounted income of the assessee.. Therefore the amount of Rs 78,00,000/- deserves to be and is hereby added to the total income of the assessee under section 68 of the income tax act. Penalty proceedings under section 271(1) (c) are hereby initiated for concealment of income.”

10. The ld.DR though fairly agreed with his contention of the assessee, however, he relied on the finding of the ld.CIT(A) on this issue at para 4.12 to 4.13 as under:

“4.12 The next contention of the appellant is that the assessment had been reopened on account of alleged introduction of unaccounted money of Rs.30 lakhs in two companies of Pradip Overseas Group. But, no such addition had been made in the assessment order. On the contrary, the addition made, is of the share capital of Rs.78 lakhs received by the appellant company during the FY 2005-06. Thus, it has been claimed that since, the addition is on different footing, hence, the reassessment order is bad in law.

4.12.1 In this respect, it is seen that the appellant had submitted before the AO that the amount of Rs.30 lakhs invested in companies of Pradip Overseas group was from its own bank account and the investments are appearing in balance sheet filed along with the return of income and the same has also been recorded in its books of account. It also submitted complete narration of amounts received and deposited in the bank account before the e AO. On perusal of the same and the details submitted by the appellant, the AO found that several persons had made investment in the share capital of the appellant company which had been deposited in the bank account. Out of such deposits only, the investments of Rs.30 lakhs in companies of Pradip Overseas Group had been made. Hence, the AO enquired into the genuineness of such share application money received by the appellant in its books of account. It may also be mentioned here that as per the original return of income, the appellant had not shown any income for the AY 2006-07. On enquiry made, the AO found that the bank account had been opened on 01.03.2006 by depositing cash of Rs.1,000/-. Within one month the appellant company had received an amount of Rs.78 lakhs from persons listed in paragraph 15 of the assessment order. Out of such persons, in respect of Ninaram Prajapati, Kheta Ram Himaji Patel and Rajaram Prajapati, it was reported by their jurisdictional AO that they were not available at the addresses given against their name. Further, the appellant did not furnish any confirmation from the investors. Thus, the identities of persons were also not furnished.

4.12.2 Further, the AO found that the appellant could provide copies of the return of income in respect of six persons. But, even in respect of these persons, the income reflected in their returns was very nominal and hence, there capacity of making investment to such share application money could not be established. Thus, the AO held that the identity and creditworthiness of the share applicants could not be established by the assessee. Accordingly, the AO treated the entire amount of Rs.78 lakhs as unaccounted income of the appellant being unexplained cash credit. Since, the investments of Rs. 30 lakhs on account of which the assessment had been reopened, is made out of this amount of Rs.78 lakhs only, hence, there was no need for separate addition of Rs.30 lakhs to be made in the assessment order and accordingly, the AO has not made any such separate addition. Thus, the AO has made the addition of amount for which the assessment; was reopened and also of further amounts of undisclosed income .discovered by the AO during the course of the assessment proceedings. Hence, the additions made by the AO are well within the provisions of Explanation 3 to section 147 of the IT Act, 1961. Accordingly, such contentions of the appellant are also rejected.

4.13. Now, during the course of the appellate proceedings also, the appellant has not provided any evidences in respect of identity and creditworthiness of the persons who allegedly made investment in its share capital. In the absence of evidence regarding their identity and creditworthiness as also the genuineness of such transactions, the addition made by the AO is correct and is accordingly, upheld.

11. We have heard the rival contentions. The challenge to the validity of the assessment framed u/s 147 of the Act is on the ground that no addition has been made of the income which the AO had reason to believe had escaped assessment., but of some other income.

12. This argument of the assessee we find is of no consequence. The reason being that we have held above that there was no belief of escapement of income of the assessee by the AO. In the absence of any such belief there can be no possibility of making any addition on account of the same. And therefore there is no scope for the situation arising that the AO did not make any addition on the income believed to have escaped assessment, but of some other income. This argument of the assessee therefore, we hold, merits no consideration.

13. The Ld.CIT(A)’s findings on the issue dismissing the assesses contention in this regard proceeds on his findings that the AO’s formation of belief of escapement of income of the assessee was well founded. According to the Ld.CIT(A) the amount found to be invested by the assessee in Pradeep Overseas group of Rs. 30 lacs, was rightly believed by the AO to be representing his unaccounted income. And proceeding there from he held that when further investigation regarding the source of investment of Rs.30 lacs was made by the AO, it was revealed that the assessee had issued share capital of Rs. 78 lacs. The assessee thereafter on inquiry of the genuiness of the source of this Rs. 78 lacs was unable to prove the same and accordingly this amount of Rs.78 lacs was added to the income of the assessee. The Ld.CIT(A) therefore held that this addition made by the AO was the origin of and formed part and parcel of the income which the AO believed had escaped assessment. He accordingly rejected the argument of the assessee that the reopening was resorted to for a different income while addition ultimately was not made of the same but some other income.

14. But since we have rejected the basic premise of the Ld.CIT(A), on which he has dismissed this argument of the assessee, that the AO’s belief of escapement of income was well founded, the findings of the Ld.CIT(A) are also of no relevance.

15. We shall now deal with the contention raised by the Ld.Counsel for the assessee challenging the validity of the order passed u/s 147 of the Act on account of issuance of the jurisdictional notice under section148 of the Act by the AO who did not have jurisdiction on the assessee.

16. The background of the facts of the issue, as were pointed out before us, was that the assessee was earlier assessed in Baroda, having its registered office at 13, Paradise Complex, Baroda. On 21.1.2008 it had intimated the Department of change of its registered office to Ahmedabad seeking transfer of jurisdiction to Ahmedabad; that subsequently on 25.3.2013 notice under section 148 was issued at the Ahmedabad address and served by affixture at its Baroda address. The Department has added further facts to it stating that two notices at Ahmedabad address were served to the address of the directors of the assessee-company. One of which was returned with the remark “not known” and other with remark “refused”. All documents to prove the above facts were placed before us in the paper book, pointing out to us :

• the letter of the assessee to the department seeking transfer of its jurisdiction was placed before us at paper book Pg No.38 to 41;
• notice issued under section 148 by affixture at the Baroda address was placed before us PB Pg. No.35.
• As for the service of notice on the directors of the assessee-company, the same was pointed out to us from the order of the AO disposing of the objection in this regard raised by the assessee before the AO and copy of the order disposing of the objection by the AO was placed at PB Pg.No.70 to 75.

17. In the background of these facts, the contentions of the assessee vis-à-vis non-jurisdictional AO issuing notice under section 148 of the Act, was that while the assessee had intimated the department and had requested the change of its jurisdiction to Ahmedabad, where it had subsequently filed its return of income and was assessed also after intimation in 2008, the notice was issued by the ITO in Baroda.

18. As counter to the above contentions of the Ld.Counsel for the assessee, the Ld.DR drew or attention to the order of the AO disposing off the assessee’s objection to the reopening of the case u/s 148 of the Act in this regard placed before us at P.B 70-75. He first drew our attention to the facts noted by him in the order regarding the service of notice u/s 148 as under:

“The assessee company e-filed its return of income Baroda for the assessment year 2006-07 on 21.01.2008 declaring total income at Rs. NIL. The same was processed under section 143(1) on 24.03.2009. On verification of the return filed by the assessee on ITD it was found that though the assessee has shown share capital of Rs. 83,00,000/- and investments of Rs 78,00,000/- there was no income offered to tax. It is pertinent to mention that a search u/s 132 of the I. T. Act was carried out in the case of Pradip Overseas group on 21.09.2010 by the investigation wing Ahmedabad. During the course of search proceedings Shri Pradip Kumar J Karla, in his statement recorded u/s 132(4); of the I T Act admitted that he had introduced unaccounted income through Bhavi Leasing & Finance Pvt. Ltd in the following two companies in the form of share application and premium money, to the extent mentioned against each company

1 Rs. 10,00,000/- in 25000 shares of Pradip Overseas Ltd. formerly known as Chetan Textiles.

2 Rs 20,00,000/- in 80000 shares of Pradip Enterprise Ltd.

3. Subsequently the assessment was re-opened by issue of notice u/s 148 of the IT Act on 25/03/2013, after recording the reasons for re-opening and obtaining due approval from the Additional C I T Range 1 Baroda. The notices were sent by speed post to the address mentioned on the return and as per PAN data.. From the ITD another address at 36/3 Sindhi Commercial Market Kalupur Ahmedabad was also found and notice u/s 148 was dispatched to this address also. However all the notices were returned unserved by the postal authorities. Simultaneously the ward inspector and notice server were deputed to locate the whereabouts of the assessee at Baroda, but the efforts yielded no results. Hence on 26.3.2013 the notice was served by affixture at the last known address at Baroda, by the ward inspector in the presence of the following two witnesses(panchas)

• • Mr Dinesh N Solanki
  • Mr Anil N Solanki

All the notices despatched to the Ahmedabad addresses were returned unsaved by the postal authorities with the comments “not Known” and “refused.

Thereafter again attempts were made to find out about the addresses of the past and present doctors of the company. Information was gathered and notice under section 142(1) dated 07 01.2014 was issued and dispatched to ail the addresses of the company and its directors as follows:

Most of the notices were returned unserved. No acknowledgement was received in respect of notice served to the address of the company at 36/3 Sindhi Commercial Market Kalupur. Therefore, efforts were made to trace out the jurisdiction of the Directors and it was found that Mr Ninaram Prajapati was filing his return in ward 12(3) Ahmedabad and Mr Rajaram Prajapati was filing his return in ward 11(4) Ahmedabad. Hence a commission under section 131(d) of the I.T.Act was issued vide letter dated 10.02.2014, to the Assessing Officer of these wards requesting them to serve a summons on these directors and obtain information regarding the whereabouts of the company and other relevant information. On 14.03.2014 a report was received from the Assessing Officers to whom commission was issued stating that the directors Mr Ninaram Prajapati and Mr Rajaram Prajapntt could not be found at the given address. Inquiries made by their ward inspectors revealed that no such persons existed and no company by the name of Bhavi Leasing & Finance Pvt. Ltd. presently existed there.

Meanwhile in the first week of March a telephone call was received from one Mr. Vasudev Upadhyay CA from Ahmedabad inquiring whether ex parte order had been reused, or whether lie still had the opportunity to submit his case. He was informed that he could furnish any details in support of the case by 10.03.2014. On the stipulated date Shri Upadhyay attended furnished an authority letter as well as response to the notice under section 142(1) the gist of which is as follows :-

The assesses claimed to have received the notices on 11.01.2014 and stated that the registered office of the company was shifted to Ahmedabad on 20/06/2006 at present address of 36/3 Sindhi Comm Market since 05/04/2013. A request for transfer if case record from Baroda to Ahmedabad had been submitted on 23.01.2008 and presently the company is being assessed with ITO Ward 1(1) Ahmedabad. The assesses further stated that since the case related to A.Y 2006-07, to took some time to collect the relevant information, hence there was no question of not co­operation on its /part. The assessee furnished hard copy of return of income, statement of computation of income, copy of audit report and Balance Sheet, bank statement The assessee also claimed to have invested Rs 30 Lakhs in the Pradip Overseas group out of its own funds received from different parties the names of which were highlighted in the bank statement furnished.”

19. He thereafter countered the contention of the Ld.Counsel for the assessee, vis a vis non jurisdictional AO issuing notice u/s 148 of the Act, pointing out from the order disposing objection that jurisdiction was assumed by the AO on the basis of the information contained in PAN data base which the assessee had not changed; that it was the duty of the assessee to get information changed in PAN data base and accordingly intimating the Department of its change of registered office by way of a letter did not suffice. Therefore, the ITO Baroda was the correct jurisdictional officer in the present case based on the PAN data of the assessee. He drew our attention to para 2 of the order of the AO’s order disposing the assesses objection in this regard as under:

“2. The second objection is that the undersigned has no jurisdiction to initiate proceedings. The assesses claims that a letter dated 23.01.2008 addressed to the A.O. was submitted for transfer of case record to ITO Ward 1(3) Ahmedabad. The assessee also slated that the last return for A.y. 2006-07 was filed at Baroda and thereafter all the returns have been filed in the office of ITO Ward 1(1) Ahmedabad. Hence it is the assessee’s contention that the notice u/s 148 has been issued without jurisdiction and its vaoid ab initio.

The objection of the assessee, is baseless. The assesses has not bothered to pursue and ensure change of address in the PAN data of the department. The PAN of the company has been in the jurisdiction of ITO ward 1(1) Baroda all these years. In fact this file was received on transfer from ITO ward 1(1) Ahmedabad, on 20.03.2013 because the Assessing officer has rightly observed that since PAN is with undersigned, jurisdiction to take any action also lies with the undersigned. Beyond writing a single letter the assesses has not bothered to pursue the issue of transfer of case records either with the AO at Ahmedabad or before ITO 1(1) Baroda. Hence now when proceedings u/s 148 have been initiated the assesses is objecting to the jurisdiction on 26.03.2014; at the eleventh hour. Knowing very well that it is not possible to get the PAN transferred afford due opportunity etc as the limitation for assessment will expire on 31.03.2014. By the assessee’s own admission, it had received the notice ON 11.01.2014. The assessee did not raise this objection when it had more than 11 weeks to get the case transferred, when it would have been possible for the undersigned to accede to its request for transfer. Now the same cannot be done even if the undersigned wants to for fear that the limitation for finalization may expire pausing a loss to revenue.”

20. We have heard the rival contentions. We do not find any merit in the assesses challenge to the validity of the reopening in the present case u/s 147 of the Act on the ground of notice u/s 148 issued for assuming jurisdiction to frame assessment u/s 147 of the Act was issued by AO who did not have jurisdiction over the assessee.

21. The undisputed facts are that till the impugned assessment year, i.e. A.Y 2006-07, the returns were being filed by the assessee to ITO, Ward-1 Baroda. The PAN of the assessee also lies with the same ITO and has remained unchanged. The notice u/s 148 of the Act was issued by this same AO, i.e. ITO Ward -1, Baroda. It is also a fact on record that return for the impugned year was e-filed.

22. The Hon’ble apex court, in the case of PCIT vs. I-VEN Interactive Limited in CA No.8132 of 2019 dated 18-10-2019 has categorically held that PAN database is relevant for deciding the address where notice is to be served by the department, more particularly in the e module scheme of filing returns where notices are issued under automated system which pick up address from the PAN database. The Hon’ble apex court was dealing with the issue of non service of notice challenging the validity of the assessment framed in the said case ,wherein noting the fact that notice was served at PAN address which had remained unchanged, the Hon’ble court upheld the service of notice to be valid at para 7 of the order as under:

“7.Now so far as the observations made by the High Court while concurring with the view of the learned Tribunal that merely by filing of return of income with the new address, it shall be enough for the assessee to discharge its legal responsibility for observing proper procedural steps as per the Companies Act and the Income Tax Act is concerned, we are of the opinion that mere mentioning of the new address in the return of income without specifically intimating the Assessing Officer with respect to change of address and without getting the PAN database changed, is not enough and sufficient. In