2025 (8) TMI 1723 - HC - Income Tax

Section 148A(b) notice invalid for failing to allow seven-day response; resulting Section 148(d) order unsustainable, reassessment dropped

HC held the Section 148A(b) notice invalid for failing to afford the statutory minimum seven-day response period; the subsequent Section 148(d) order was ... Reopening of assessment u/s 147 - requirement of providing a minimum period of seven days to respond to the said notice - scope of Taxation and other laws (Relaxation and Amendment of certain provisions) Act, 2020 (TOLA) application - provisions of the new reassessment law introduced by the Finance Act, 2021 - HELD THAT:- It is clear from the plain reading of Clause (b) of Section 148A of the Act, that a notice u/s 148A(b) of the Act is required to provide an opportunity to the assessee to respond to the information which may suggests that the assessee’s income has escaped assessment. The minimum period of such notice is stipulated as 'not less than seven days'. In the present case, the impugned notice was issued on 20.03.2022 and the Assessee was called upon to furnish a reply on or before 25.03.2022. Indisputably, the impugned notice did not comply with the requirement of providing a minimum period of seven days to respond to the said notice. The impugned notice is contrary to law as rightly pointed out by the learned Single Judge. Impugned notice was issued in respect of AY 2015-2016. Pursuant to the impugned notice, an order dated 31.03.2022 was passed under Section 148(d) of the Act, holding that it was a fit case for issuance of notice under Section 148 of the Act. The question, whether such notices issued in respect of the Assessment Year, 2015- 2016 were sustainable was a subject matter of observation by the Supreme Court of India, in Union of India V. Rajiv Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] During the said proceedings, it was readily conceded by the Revenue that all such notices issued on or after 01.04.2021 in respect of Assessment Year 2015- 2016 were liable to be dropped. In view of the concession made by the Revenue in Rajeev Bansal (supra), the reassessment proceedings in the present case would also require to be dropped. ISSUES PRESENTED AND CONSIDERED 1. Whether a notice issued under Section 148A(b) of the Income Tax Act that gives the assessee less than the statutory minimum period of seven days to file a reply is valid. 2. Whether reassessment proceedings initiated for the assessment year 2015-16 pursuant to notices issued on or after 1 April 2021 are sustainable in view of the concessions and decisions of the higher courts interpreting the effect of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) on limitation. 3. Whether the combined effect of judicial decisions and concessions by Revenue requiring dropping of reassessment notices for AY 2015-16 issued on or after 1 April 2021 binds the present proceedings. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of Section 148A(b) show-cause notice where time given is less than seven days Legal framework: Clause (b) of Section 148A requires that the assessee be served with a notice to show cause within such time as may be specified in the notice, being not less than seven days and not exceeding thirty days from the date on which the notice is issued (subject to extension on application). The Assessing Officer must provide that opportunity before issuing a notice under Section 148. Precedent treatment: The Court treated the statutory minimum seven-day period as mandatory and governed by plain statutory language; no conflicting authority was relied upon that permits shorter notice than the statutory minimum. Interpretation and reasoning: The Court applied a plain-language interpretation of Clause (b) and held that the minimum duration of seven days is a substantive statutory requirement meant to ensure a meaningful opportunity of hearing before the Assessing Officer decides to proceed under Section 148. A notice issued on 20.03.2022 calling for a reply by 25.03.2022 gave less than seven days and therefore failed to comply with the statutory mandate. Ratio vs. Obiter: Ratio - The statutory minimum of seven days in Section 148A(b) is mandatory; non-compliance renders the notice invalid. Obiter - No broader statement was made about the scope of permissible extensions or exceptional circumstances overcoming the minimum period. Conclusions: The impugned Section 148A(b) notice that did not afford at least seven days to file a reply is contrary to law and was correctly set aside by the Single Judge; consequential notices and reassessment steps based on that non-compliant notice cannot be sustained. Issue 2 - Sustainability of reassessment proceedings for AY 2015-16 where notices were issued on or after 1 April 2021 in light of TOLA and judicial concessions Legal framework: The Finance Act 2021 introduced a new regime for reassessment; TOLA and transitional provisions affect the period of limitation for completion of proceedings. The interplay between the substituted provisions and TOLA determines whether notices issued in a certain window could lawfully lead to completed reassessment within the extended/treated limitation period. Precedent treatment: The Court relied on authoritative higher court observations and concessions that, for AY 2015-16, notices issued on or after 1 April 2021 would not fall for completion within the period prescribed under TOLA and therefore must be dropped. Subsequent Supreme Court orders applying the concession to related matters were followed. Interpretation and reasoning: The Court accepted the concession recorded in higher court decisions that for AY 2015-16 all notices issued on or after 1 April 2021 would have to be dropped because they did not fall for completion during the period TOLA prescribed. The Court noted later Supreme Court applications of that concession and observed that Revenue likewise accepted applicability in the present matter. Given that acceptance, reassessment proceedings for AY 2015-16 initiated by notices dated on/after 1 April 2021 are not sustainable. Ratio vs. Obiter: Ratio - Where the Revenue has correctly conceded (and higher courts have applied the concession) that notices for AY 2015-16 issued on or after 1 April 2021 cannot be completed within TOLA-prescribed periods, such notices must be dropped and reassessment proceedings cannot be sustained. Obiter - No extensive re-examination of TOLA's legislative text beyond its application to the facts was undertaken. Conclusions: Reassessment proceedings for AY 2015-16 initiated pursuant to notices issued on or after 1 April 2021 must be dropped in view of the concession and higher court decisions interpreting the operation of TOLA on the limitation for completion of reassessments. Issue 3 - Binding effect of higher-court concessions and subsequent decisions on present proceedings Legal framework: Decisions and concessions in higher courts on legal questions of limitation and applicability of transitional provisions are binding on lower courts as authoritative guidance; a concession in a decision that is accepted and applied by the Supreme Court in later matters carries dispositive weight for similar factual-legal matrices. Precedent treatment: The Court relied on (a) the higher court decision recording Revenue's concession concerning AY 2015-16 and TOLA; (b) subsequent Supreme Court decisions and orders that applied that concession to other petitions; and (c) dismissal of special leave petitions in light of that concession. The Court treated these authorities as determinative. Interpretation and reasoning: The Court observed that the Revenue's concession in an earlier apex-court decision as to the non-sustainability of notices for AY 2015-16 issued on/after 1 April 2021 was accepted in later Supreme Court orders and applied by other High Courts. The learned counsel for Revenue in the present appeal acknowledged the applicability of those authorities. Given identical legal question and similar factual timing, the concession and follow-up decisions bind the outcome here. Ratio vs. Obiter: Ratio - Where higher-court concessions concerning limitation and transitional application are applicable to materially identical circumstances, they are binding and require dropping of reassessment notices, unless distinguishable facts are shown. Obiter - The Court did not explore exceptions to the binding effect of concessions beyond noting absence of any distinguishing features. Conclusions: The concession and subsequent higher-court rulings are applicable and dispositive; therefore reassessment proceedings in the present matter must be dropped and the appeal dismissed for want of grounds to interfere with the lower court's order. Cross-references and Outcome Interrelation: Issues 1 and 2 operate cumulatively - the statutory invalidity of the Section 148A(b) notice (Issue 1) and the higher-court concession/application of TOLA regarding AY 2015-16 notices issued on/after 1 April 2021 (Issue 2) independently and jointly justify setting aside the impugned proceedings. Final conclusion: The Court affirmed the Single Judge's order setting aside the impugned Section 148A(b) notice (for non-compliance with the seven-day minimum) and directed that reassessment proceedings in respect of AY 2015-16 initiated by notices on or after 1 April 2021 be dropped in view of controlling higher-court concessions and decisions; the appeal was dismissed and related interim applications disposed of.