2024 (3) TMI 151 - HC - Income Tax

Reassessment notice and s.148A(d) order quashed: s.148A(b) notice served without seven days and approval premature

Ninaben Tusharbhai Shah Versus Income Tax Officer, Ward 5 (3) (1), Ahmedabad

HC held reassessment proceedings invalid and quashed the notice under s.148 and the order under s.148A(d). The AO failed to grant the mandatory minimum ... Validity of reassessment proceedings - shorter period to reply to notice given to assessee - HELD THAT:- AO is required to grant time to the assessee to submit the reply to the notice issued under the said provision of not less than seven days. Admittedly, in the facts of the case, no time was granted to the assessee by the AO to file reply and therefore, the notice issued u/s 148A(b) of the Act is not as per the provisions of the Act. Moreover, it also appears on the record that the PCIT has granted the approval to the issuance of notice under Section 148 of the Act prior to even digitally signing of the notice under Section 148A(b) of the Act as well as to the date of passing of the order u/s 148A(d) of the Act on 26th March, 2022. Therefore, on both counts, the notice u/s 148 of the Act is issued admittedly without jurisdiction and contrary to the provisions of the Act. Thus the impugned order passed u/s 148A(d) of the Act as well as the notice issued u/s 148 of the Act are liable to be quashed. Decided in favour of assessee. ISSUES PRESENTED AND CONSIDERED 1. Whether a notice under Section 148A(b) of the Income Tax Act is valid if it does not specify a time of not less than seven days for the assessee to respond. 2. Whether an order under Section 148A(d) and a subsequent notice under Section 148 can be validly issued where (a) no minimum seven-day response period was afforded under Section 148A(b) and (b) the prior approval for issuing the Section 148 notice was recorded before the Section 148A(b) notice was digitally signed or the Section 148A(d) order was passed. 3. Whether issuance of a notice under Section 148 is ultra vires or without jurisdiction when procedural preconditions under Section 148A are not complied with and prior approval is recorded prematurely. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of a Section 148A(b) notice that does not provide the statutory minimum seven-day period to the assessee to submit a reply. Legal framework: Section 148A(b) mandates that the assessee be provided an opportunity of being heard by serving a notice to show cause 'within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days' from the date of issuance of the notice (subject to extension). Precedent Treatment: No judicial authorities were relied upon or considered in the judgment; the Court proceeded on the statutory text and undisputed factual matrix. Interpretation and reasoning: The provision prescribes a mandatory minimum period of seven days for furnishing a reply to the show-cause notice. A notice that fails to specify such a period thereby deprives the assessee of the minimum statutory opportunity of being heard. The Court examined the record and found that the impugned Section 148A(b) notice did not grant any time to the assessee and was digitally signed later than the notice date, rendering the prescribed opportunity illusory. Ratio vs. Obiter: Ratio - compliance with the minimum seven-day period in Section 148A(b) is mandatory; a notice omitting that mandatory minimum is not in accordance with the statute. This holding is essential to the decision. Conclusions: The Section 148A(b) notice that did not provide the statutory minimum period is invalid for non-compliance with Section 148A(b). Issue 2: Validity of an order under Section 148A(d) passed shortly after a deficient Section 148A(b) notice and of a subsequent Section 148 notice issued after prior approval was recorded before the Section 148A(b) notice was signed or the Section 148A(d) order was passed. Legal framework: Section 148A(d) empowers the Assessing Officer to pass an order after considering the assessee's reply to the Section 148A(b) notice; issuance of a Section 148 notice requires prior approval as prescribed by the statute (and that the procedural steps under Section 148A be complied with before issuance). Precedent Treatment: No precedents were cited or distinguished; the Court relied on statutory sequencing and mandatory procedural requirements inherent in Sections 148A and 148. Interpretation and reasoning: The statutory scheme contemplates a sequence: (i) issuance of a valid Section 148A(b) show-cause notice specifying the minimum response time; (ii) receipt/consideration of the assessee's reply within that time (or extended time); (iii) passing of an order under Section 148A(d) only after consideration of the reply; and (iv) issuance of a Section 148 notice, if justified, after obtaining prior approval. In the present facts the order under Section 148A(d) was passed within two days of the Section 148A(b) notice and expressly recorded that the assessee had not filed a reply 'even after lapse of more than seven days,' which was factually inaccurate because no seven-day period was afforded. Further, approval for issuing the Section 148 notice was recorded on a date preceding the digital signing of the Section 148A(b) notice and the Section 148A(d) order, demonstrating that the prerequisite approval was obtained prematurely and that the statutory sequence was not followed. These defects show the Assessing Officer acted without jurisdiction and contrary to the statutory mandate. Ratio vs. Obiter: Ratio - an order under Section 148A(d) and a consequent Section 148 notice are invalid if issued without compliance with the mandatory procedural steps in Section 148A(b) (i.e., providing the minimum notice period and considering any reply) and if prior approval for a Section 148 notice is recorded before the required prior steps are completed. This legal proposition is central to the Court's disposal. Conclusions: The impugned order under Section 148A(d) and the subsequent Section 148 notice are vitiated by lack of jurisdiction and non-compliance with statutory procedural requirements and are liable to be quashed and set aside. Issue 3: Appropriate remedy and directions when Section 148A procedure is not complied with. Legal framework: Writ jurisdiction under Article 226 enables the Court to quash administrative or quasi-judicial actions that are ultra vires or taken in breach of statutory procedure and to grant appropriate relief. Precedent Treatment: Not invoked; the Court applied settled principles of statutory interpretation and the remedial power to quash actions taken without jurisdiction. Interpretation and reasoning: Where mandatory statutory safeguards designed to protect the assessee's right to be heard are not observed and where prior administrative approval is recorded prematurely, the appropriate remedial response is to quash the impugned order and notice. The Court found no dispute in the relevant facts and concluded that the defects were fundamental and not curable by remand without nullifying the acts already taken; accordingly, quashing was appropriate. Ratio vs. Obiter: Ratio - quashing is an appropriate remedy where an Assessing Officer issues a Section 148A(d) order and a Section 148 notice without complying with the mandatory procedural timelines and where prior approval for a Section 148 notice is recorded before the statutory preconditions are satisfied. Conclusions: The impugned Section 148A(d) order and the Section 148 notice are quashed and set aside. The Court made the rule absolute and allowed the petition, with no order as to costs. Cross-references For Issue 1 and Issue 2, see interconnected reasoning: failure to specify the statutory minimum period in the Section 148A(b) notice (Issue 1) directly undermines the validity of any subsequent Section 148A(d) order and the Section 148 notice (Issue 2), particularly where prior approval is recorded before completion of the Section 148A procedural stage.