'These four appeals, two field by assessee and other two field by department, are heard together and disposed of by this common order for sake of convenience. 2. Appeal No. 65 (Ctk.) of 1981 has been filed by assessee against order dated 8-12-1980 of Commissioner (Appeals) relating to assessment year 1975-76, previous year of which ended on 31-12-1974. assessee was partnership firm which was doing business as contractor till 1971 in which year it stopped business. However, certain disputes relating to assessee's claim for further payment from contractee in respect of work done by it from March 1961 to April 1964 was pending before arbitrator. T h i s dispute related to Sundaragarh contract. assessee followed mercantile system of accounting and adopted calendar year as its previous year. arbitrator gave award on 5-8-1972 for sum of Rs. 3,09,304. He did not award anything by way of interest on said amount up to date of award. However, he awarded interest at 6 per cent per annum if awarded amount was not paid to assessee within 60 days of date of award. This award was ratified by Court as required under Arbitration Act, 1940 on 3-5- 1974. Court awarded interest even for period prior to date of award. Government appealed to High Court against award of interest of period prior to date of award while assessee appealed to High Court seeking higher amount as award. High Court by their judgment dated 19- 11-1975 restored original award dated 5-8-1972 given by arbitrator. As per this award which thus became final by judgment of High Court on 19- 11-1975, assessee became entitled to payment of awarded amount plus interest as awarded by arbitrator for period of delay subsequent to date of award. This amount including aforesaid interest was received by assessee on 26-8-1976. Similarly, in respect of Berhampur award, arbitrator gave award on 31-8-1974 for sum of Rs. 11,089. Interest for delayed payment after award (was) amounted to Rs. 3,327. award was confirmed by Court on 3-7-1975 and assessee received same on 12-5-1976. 3. assessee did not file any return for assessment year 1975-76 which is under consideration. ITO took view that aforesaid award amounts together with interest thereon accrued to assessee during calendar year 1974 relevant to assessment year 1975-76. He started proceedings under section 147 of Income-tax Act, 1961 ('the Act'). Notice under section 148 of Act was issued on 5-11-1979. There is acknowledgment on file of ITO received from postal authorities showing that said notice under section 148 was served on 22-11-1979. ITO proceeded with assessment and in course of such proceedings, issued notice under section 141 and 142 of Act. In response to these notice, advocate of assessee appeared and objected to assessment proceedings. In letter dated 25-1-1980, learned advocate stated that though notices under section 148 have been issued for several years they are misconceived and invalid. However, ITO overruled above objections, and held that assessee was liable to tax for assessment year 1975-76 on aforesaid amounts. He made assessments on award amounts after deducting therefrom two sums, namely, intangible additions made during assessment year to which above award amounts related and estimated expenses in course of arbitration proceedings. Though he deducted these two amounts from amount awarded for Sundargarh work, he did not deduct similar intangible additions in respect of Berhampur award. In respect of both awards, he taxed interest relating to period subsequent to date of award in full. 4. assessee appealed to Commissioner (Appeals) and contended that action of ITO was not justified. Commissioner (Appeals) states in his order that assessee did not press ground relating to validity of assessment made under section 147. It was contended by assessee before him that award amounts were taxable in earlier assessment years in which work was executed and in respect of which work award amounts were given. Commissioner (Appeals) rejected this contention relying on decision in case of A. P. S. Cold Storage & Ice Factory v. CIT [1979] 119 ITR 709 (All). Next, it was contended by assessee that principle amount as well as interest was not taxable as income in view of decision in case of Govinda Chowdhury & Sons v. CIT [1977] 109 ITR 497 (Ori.). Commissioner (Appeals) accepted above contention, viz., that in view of aforesaid decision, no amount was taxable as income of assessee. Finally, assessee urged that status taken as unregistered firm by ITO was incorrect. This was rejected by Commissioner (Appeals) on ground that assessee never filed application praying for registration. In light of above findings, Commissioner (Appeals) determined income from Sundargarh award by starting from award amount of Rs. 3,09,304 (which did not include any interest) and deducting therefrom intangible addition made in assessment years in which work was executed, he estimated expenses incurred by assessee in course of arbitration proceedings. Thus, he arrived at income of Rs. 1,90,582. In respect of Berhampur contract, he found that intangible additions made in assessment year 1970-71 was more than amount of award money. Hence, he held that no portion of award of Rs. 11,089 was assessable. As has been stated earlier, Commissioner (Appeals) deleted interest for period subsequent to date of award in respect of both awards on ground that they did not constitute income of assessee on authority of decision of Govinda Choudhury & Sons' case (supra). 5. In this appeal filed by assessee before us three grounds have been taken. Firstly, it is urged by Shri L. P. Patnaik, learned representative for assessee that assessment as made under section 148 is arbitrary, capricious and illegal because no notice under section 148 was served on assessee at any time. He has filed affidavit dated 15-1-1985 sworn by Shri Uchhab Pradhan, partner of assessee-firm, stating that no notice under section 148 was ever served on assessee for or any of its partners. Shri G. P. Nanda, learned representative for department, on other hand, produced records of ITO and showed postal acknowledgment wherein service of notice has been effected on 22-11-1979. Shri L. P. Patnaik examined signature on said acknowledgment slip and stated that it was signed by person, viz., Purushottam Pradhan and that he was familiar with his signature as he was partner in another firm which was also doing business under name and style of P. Pradhan &Co. and it was also his client. He produced bunch of papers relating to P. Pradhan & Co. to show signature of P. Pradhan in those documents was exactly similar to one appearing on postal acknowledgment in file of ITO in case of assessee before us which was doing business in name and style of Pradhan Construction Co. It may be stated that address of both firms was Uditnagar, Rourkela. Shri L. P. Patnaik stated that postal authorities had served notice on wrong person and so, assessing ITO never acquired any valid jurisdiction to proceed against assessee before us. In this connection, he relied on decision in cases of Thangam Textiles v. First ITO [1973] 90 ITR 412 (Mad) and CIT v. Hyderabad Deccan Liquor Syndicate [1974] 95 ITR 130 (AP) wherein it has been held that proper service of notice under section 148 in accordance with law is condition precedent to validity of any assessment under section 147. Shri G. P. Nanda referred to letter dated 25-1-1980 written by Shri L. P. Patnaik and addressed to ITO wherein it has been stated that notices under section 148 have been issued to assessee. Shri Nanda urged that assessee was having knowledge of notice under section 148 when that letter was written. Shri Patnaik explained that assessee erroneously assumed that notice under section 148 must have been issued as notices under sections 142(1) and 143(2) of Act have been served on assessee even though assessee had filed no return for this year. said letter dated 25-1-1980 was written in response to notice under section 142(1) without verifying assessee's record as to whether notice under section 148 was served. He urged that validation of jurisdiction under section 147 goes to very root of matter and is legal issue and so, it could be taken at any time. Further, he vehemently urged that he did not give up this ground before Commissioner (Appeals). Shri G. P. Nanda did not produce anything from record of Commissioner (Appeals) to corroborate statement in order of Commissioner (Appeals) to effect that this ground was given up by assessee. Shri Patnaik urged that, without prejudice to earlier argument, he still urged this legal ground before us. Then, Shri G. P. Nanda contended that affidavit as well as bunch of papers containing alleged signature of Shri P. Pradhan might all be sent back to ITO for verification and comments. 6. We have considered contentions of both parties as well as facts on record. In our opinion, there is force in claim of Shri G. P. Nanda that affidavit and papers relating to P. Pradhan & Co. should be examined by ITO for purpose of verification and comments. Normally, we would have done so. But, for reasons which will be apparent in subsequent paragraphs, we do not do so because it may then amount only to exercise in futility. 7. second ground urged before us by Shri L. P. Patnaik was that no amount of award was taxable during assessment year 1975-76 which is under consideration. He urged that in his petition dated 25-1-1980 he has requested ITO to determine year of taxability of awarded amounts if they are taxable. ITO did not do so. According to him, award amount were taxable if at all, in years in which works were executed. On other hand, Shri G. P. Nanda pointed out to provisions of section 176(3A) of Act which state that where any business is discontinued in any year, any sum, received after discontinuance shall be deemed to be income of recipient and charged to tax accordingly in year of receipt, if such sum would have been included in total income of person who carried on business had such sum been received before such discontinuance. When this provision of law was pointed out by Shri G. P. Nanda, Shri L. P. Patnaik agreed with same and urged that amount was taxable in year of receipt but not in assessment year under consideration. Thus, we find that according to both parties before us, section 176(3A) applied to facts of case and award amount if at all taxable will be taxable only in year of receipt and not during assessment year under consideration because amount was not received during this year. We find that provisions of section 176(3A) clearly state that amount will be charged to tax in year of receipt if it is otherwise taxable. In this appeal we are not called upon to decide as to whether any portion or whole of amount received by assessee was taxable or not. All that has to be decided in this appeal is year in which taxability of amounts has to be considered. We agree with stand taken by both parties and hold that amount is not taxable during assessment year 1975-76 which is under consideration because amounts were not received during this year. Consequently, assessment made under section 148 for assessment year 1975-76 has to be cancelled. We hereby do so. It is for this reason that we refrain from sending affidavit and bunch of papers referred to above to ITO for his verification and comments. 8. last ground taken in this appeal states that status of unregistered firm taken by ITO was incorrect. As we have cancelled assessment itself, this ground has become infructuous and so, we reject same as such. 9. Appeal No. 84 (Ctk.) of 1981 has been filed by department against same order dated 8-12-1980 relating to assessment year 1975-76 Shri G. P. Nanda took us through only ground taken in this appeal which states that Commissioner (Appeals) erred in deleting interested of Rs. 41,506 from total income as determined by ITO. As we have cancelled assessment for this year, this ground has evidently become infructuous and so, we reject same as such. 10. IT Appeal No. 292 (Ctk.) of 1981 has been filed by department against order dated 22-7-1981 of AAC relating to assessment year 1977-78 previous year of which was calendar year 1976. ITO made assessment under section 143(3) on total income of Rs. 12,370 being interest at 6 per cent per annum on award amount of Rs. 3,09,304 for calendar year 1976. On appeal, AAC by his order dated 22-7-1981 cancelled assessment on ground that sum of Rs. 12,372 even though awarded as interest was not taxable as income because of decision in case of Govinda Choudhury & Sons (supra). Shri G. P. Nanda pointed out that Commissioner has, subsequently, passed order under section 263 of Act vacating aforesaid assessment order made by ITO on total income of Rs. 12,370. Consequently, said assessment order no longer exists in eye of law. Hence, it follows as consequence that order of AAC against said order of ITO also becomes non-existent in eye of law. We have also heard Shri L. P. Patnaik who agreed with above position. We also agree with t h e above position in law as stated by parties before us. As very assessment order which was foundation of appeal before us has been vacated by Commissioner under section 263 and as it no longer exists, present appeal filed by department has evidently become infructuous. Hence, we reject same as such. 11. IT Appeal No. 101 (Ctk.) of 1982 has been filed by assessee against order under section 263 dated nil relating to assessment year 1977-78. It may be stated in this connection that endorsement below order under section 263 passed by Commissioner made by ITO (judicial) forwarding copies to assessee, ITO, IAC, etc., give date. This forwarding memo typed below order of Commissioner passed under section 263 is captioned as Memo No. Adm. (ITO/263/90/80-81/48911/53, 218, dated 3rd March, 1981/19th Feb., 1981 in copy given to assessee and filed before us along with memorandum of appeal. Shri G. P. Nanda pointed out before us from correspondence between departmental representative and office of Commissioner as well as from original record of commissioner that order under section 263 was actually passed on 26-2- 1981. We have verified this matter from records as well as fact that copy of said order was received by ITO in March 1981 and we are satisfied that order under section 263 was indeed passed on 26-2-1981 though this date was not mentioned due to inadvertence at top of order as is usually done in such cases. 12. Shri L. P. Patnaik urged before us that order under section 263 passed by Commissioner was arbitrary and illegal. He pointed out that original assessment was made by ITO on 28-2-1980. assesse filed appeal against said order before AAC on 21-3-1980 though assessee received copy of order under section 263 on 24-2-1982. It has been passed on 26-2-1981 as was found by us from records. AAC disposed of appeal on 22-7-1981. He stated that his stand at time he took grounds in appeal was that order under section 263 was passed after disposal of appeal by AAC on 22-7-1981 and so, order under section 263 was illegal because of doctrine of merger. However, in view of present finding that order was actually passed on 26-2-1981, his contention before us was that order under section 263 was still illegal it was passed after assessee filed appeal before AAC on 21-3-1980. He urged that Commissioner had no jurisdiction to pass order under section 263 in respect of assessment order which has already become subject matter of respect of assessment order which has already become subject matter of appeal before first appellate authority. In support of this contention, he relied on decision in case of CIT v. Mandsaur Electric Supply Co. Ltd. [1983] 140 ITR 677 (MP) (FB). He also referred to decision; in case of Oil India Ltd. v. CIT [1982] 138 ITR 836 (Cal.) in support of his contention. His point was that once assessee files appeal, then Commissioner loses his jurisdiction to act under section 263 even before AAC passes appellate order. On other hand, Shri G. P. Nanda urged that proposition stated by Shri L. P. Patnaik is not tenable in view of decisions in cases of CIT v. R. S. Banwarilal [1983] 140 ITR 3 (MP) (FB), Oil India Ltd. (supra), CIT v. Eimco-K. C. P. Ltd. [1984] 147 ITR 603 (Mad). and Russell Properties (P.) Ltd. v. A. Chowdhury, Addl. CIT [1977] 109 ITR 229 (Cal.). 13. We have considered contentions of both parties as well as facts on record. In our opinion, ground taken by assessee is not tenable. We do not find any authority to support proposition propounded by Shri L. P. Patnaik that Commissioner loses his jurisdiction to act under section 263 of Act merely because appeal by assessee pending before AAC even though appellate authority has not yet passed his appellate order. In case of Mandsaur Electric Supply Co. Ltd. (supra) question as reframed by High Court appears at page 682. It states whether Commissioner has jurisdiction under section 263 to set aside order of assessment when order was subject matter in appeal preferred by assessee before AAC. We find from facts of case as narrated in said judgment that AAC had already passed his appellate order and that order of ITO had merged in said order of AAC (vide page 679). It is in this context that High Court held that Commissioner had no jurisdiction to set aside order of assessment acting under section 263 if assessment order was subject matter of appeal before AAC. That was not case where Commissioner passed his order under section 263 when appeal was pending. Actually that was case where appellate order had already been passed before Commissioner acted under section 263. This case is, therefore, of no help to assessee. Similarly, coming to second case relied on by Shri L. P. Patnaik, viz., Oil India Ltd.'s case (supra), we find that said case was also one in which appellate authority had already passed appellate order before Commissioner assumed jurisdiction under section 263. At page 838 of report, it is clearly stated that AAC disposed of appeal on 3-4-1974 and Commissioner proceeded under section 263 thereafter on 5-3-1975. This case is also of no help to assessee. On contrary, there is direct decision on issue raised in this appeal. In case of Eimco-K. C. P. Ltd. (supra) question arose for consideration was as to whether Commissioner could not act under section 263 when assessee's appeal is pending before AAC. following sentence appears: "... This direction, in revision, was made by Commissioner at time when assessee-company's appeal from assessment was even then pending." (p. 609) High Court answered question against assessee. They have observed thus: "... In these events, we do not see in what ways assessee's appeal can tie Commissioner's hand and foot from exercising his power." (p. 611) This case is authority for supporting proposition of Shri G. P. Nanda to effect that mere pending of appeal does not debar Commissioner to act under section 263. case of R. S. Banwarilal (supra) was also case of merger in sense that order under section 263 was passed after appellate order was passed. Similar is position in case of Russell Properties (P). Ltd. (supra). Hence, relying on only authority available on issue before us, viz., Eimco-K. C. P. Ltd.'s case (supra) we reject this ground. 14. next ground relating to applicability of section 176(3A) was not pressed before us and so, we reject same. 15. last ground in this appeal is based upon misconception that order under section 263 was passed after 22-7-1981 which, as we found earlier, was not fact. Hence, we do not find force even on this ground and so, we uphold order of Commissioner passed under section 263. 16. In result, first appeal being assessee's appeal for assessment year 1975-76 is allowed while remaining three appeals being departmental for assessment years 1975-76 and 1977-78 and assessee's appeal for assessment year 1977-78 are dismissed. *** PRADHAN CONSTRUCTION CO. v. INCOME TAX OFFICER