Assessment annulled due to notice issue, proceedings not validly initiated, jurisdiction not addressed.

The Tribunal annulled the assessment due to improper service of notice under Section 148, finding the proceedings under Section 147 were not validly initiated. The Tribunal did not address the jurisdiction issue regarding the Assistant Commissioner of Income Tax (ACIT) or the validity of the addition of Rs. 5,68,400 based on Sales Tax authorities' order, as the assessment was invalidated on procedural grounds.

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Issues Involved:
1. Jurisdiction of the Assistant Commissioner of Income Tax (ACIT), Investigation Circle, Faridabad, in initiating proceedings under Section 147/148 of the Income Tax Act.
2. Validity of the service of notice under Section 148 of the Income Tax Act.
3. Validity of the addition of Rs. 5,68,400 made on the basis of the Sales Tax (ST) authorities' order.

Issue-wise Detailed Analysis:

1. Jurisdiction of the ACIT, Investigation Circle, Faridabad:
The assessee challenged the jurisdiction of the ACIT, Investigation Circle, Faridabad, in initiating the proceedings under Section 147/148 of the Income Tax Act. The assessee's representative argued that the jurisdiction over the assessee's case lay with the Income Tax Officer (ITO), Ward-4, Faridabad, and not with the ACIT, Investigation Circle, Faridabad, as per the jurisdiction order dated 16th May, 1988. The jurisdiction over the assessee's case was transferred to the ITO, Ward-4, Faridabad, effective from 21st August, 1991. The reassessment proceedings initiated by the ACIT, Investigation Circle, Faridabad, on 5th March, 1993, were therefore without jurisdiction. The Tribunal noted that the assessee's case was transferred to the ITO, Ward-4, Faridabad, on 22nd/23rd December, 1994, and the assessment for the years 1989-90 and 1991-92 were shown as pending. However, the Tribunal did not find it necessary to adjudicate on this issue as the proceedings under Section 147 were held to be invalid due to improper service of notice.

2. Validity of the Service of Notice under Section 148:
The assessee argued that the notice under Section 148 was not properly served, as it was served on Shri Rajinder Singh, who was not a partner of the firm. The firm was dissolved in 1990-91, and the notice should have been served on the partners, Shri Kanhiya Lal and Shri Davinder Singh. The Tribunal examined the provisions of Sections 282 and 283 of the Income Tax Act, which prescribe the procedure for service of notice. The Tribunal noted that the notice was served on Rajinder Singh, who was neither a partner of the dissolved firm nor an authorized agent. The Tribunal held that the service of notice was not valid as it was not served on the partners of the dissolved firm. Consequently, the proceedings under Section 147 were quashed as they were not validly initiated.

3. Validity of the Addition of Rs. 5,68,400:
The assessee contended that the addition of Rs. 5,68,400 was made based on the order of the ST authorities without any independent inquiry by the Assessing Officer (AO). The ST authorities' order was set aside by the CST, Haryana, and the case was remanded for determination of excess stock. The Tribunal noted that the addition was made without any supporting evidence and merely based on the ST authorities' order, which was set aside. However, the Tribunal did not adjudicate on the merits of the addition as the proceedings under Section 147 were held to be invalid due to improper service of notice.

Conclusion:
The Tribunal annulled the assessment on the grounds that the proceedings under Section 147 were not validly initiated due to improper service of notice under Section 148. The Tribunal did not find it necessary to adjudicate on the issue of jurisdiction and the merits of the addition of Rs. 5,68,400.

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