Breach of Mandatory Time Limits of Seven Days u/s 148A(b) and Three Months u/s 148 Invalidates Reassessment: ITAT [Read Order]

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) quashed a reassessment order. It was held that providing only three days to respond to a notice under Section 148A(b), as against the statutory minimum of seven days, and only thirty days to file a return under Section 148, as against the mandatory three-month period, invalidates reassessment proceedings.

Blackstone Overseas Pvt. Ltd. (assessee) filed its return of income for AY 2016-17 initially on September 15, 2016, declaring a total income of ₹32,43,430. The case was indicated under the Risk Management Strategy formulated by the CBDT based on allegations of bogus purchases totaling ₹54,94,151 from alleged shell companies.

During the reopening proceedings, the Assessing Officer (AO) issued a notice under Section 148A(b) of the Act on April 25, 2023. The assessee pointed out that this notice provided only three days to comply, violating the mandatory requirement of "not less than seven days" stated in Section 148A(b) of the Income Tax Act.

The AO subsequently issued a notice under Section 148 on May 3, 2023, requiring the assessee to file return of income within 30 days. The assessee challenged the notice and argued it failed to provide the mandatory three month period required under the law for such compliance.

Despite these objections, the AO proceeded to frame the assessment. Aggrieved by the AO’s assessment, the assessee filed an appeal before the commissioner of Income Tax (appeals) [CIT(A)]. The CIT(A) confirmed the AO's order.

Aggrieved by the CIT(A)’s order, the assessee filed an appeal before the ITAT. The assessee argued that when the law prescribes a minimum time for compliance, any notice providing lesser time was invalid.

The assessee placed heavy reliance on the decision of the Karnataka High Court in the case of Panjos Builders (P.) Ltd. vs. ITO, which held that notices prescribing a period lesser than the minimum seven days were invalid.

The two-member bench comprising Rajesh Kumar (Accountant Member) and Pradip Kumar Choubey (Judicial Member) observed that it is an undisputed fact that the notice provided only three days for the Section 148A(b) response and only thirty days for the Section 148 compliance.

The bench held that the mandatory time requirement was not a mere formality but a statutory right afforded to the assessee to ensure a fair opportunity of being heard. It further noted that failure to comply with these mandatory requirements rendered the notice itself invalid, and also held that any assessment framed thereafter was also unsustainable in law.

The tribunal set aside the previous orders and quashed both the notice issued under Section 148 and the assessment framed by the AO. The appeal of the assessee for was allowed.

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