Assessment notice quashed for giving only 5 days to respond under section 148A(d) violating natural justice principles

ITAT Raipur quashed the AO's order under section 148A(d) and notice under section 148, finding that the 5-day period given to the assessee to file explanation was unreasonably short and violated principles of natural justice. Following precedent from M Wonder Park Private Limited case where 7 days was deemed insufficient, the tribunal restored the matter to AO with directions to provide proper opportunity of hearing as mandated under section 148A(b) before deciding afresh. Appeal allowed for statistical purposes.

---

---

1. ISSUES PRESENTED and CONSIDERED

The judgment addresses the following core legal issues:

a) Whether the assessment order passed under Section 147 read with Section 144B of the Income Tax Act, 1961, is void due to procedural irregularities, specifically the non-adherence to Section 148A(b) regarding the time allowed for response to the show-cause notice.

b) The legality of the notice issued under Section 148 by the "Jurisdictional Assessing Officer" instead of the "Faceless Assessing Officer," in violation of Notification No. 18/2022.

c) The validity of the addition made under Section 69A of the Income Tax Act concerning unexplained cash deposits.

d) The procedural fairness of the ex-parte order passed by the CIT (Appeals) without providing the assessee a sufficient opportunity to be heard.

2. ISSUE-WISE DETAILED ANALYSIS

Issue a: Procedural Irregularities under Section 148A(b)

Relevant Legal Framework and Precedents: Section 148A(b) mandates that a notice to show cause must provide the assessee with a minimum of seven days to respond. The case of MM Wonder Park Private Limited vs. Union of India & Others, where the Chhattisgarh High Court quashed a similar order due to insufficient response time, serves as a precedent.

Court's Interpretation and Reasoning: The court observed that the notice issued to the assessee allowed only five days for a response, thereby violating the statutory requirement of a minimum of seven days. This procedural lapse was deemed a violation of natural justice.

Key Evidence and Findings: The notice dated 20.03.2022 provided only five days for response, contrary to the statutory requirement.

Application of Law to Facts: The court applied the precedent from the Chhattisgarh High Court, finding the notice and subsequent order to be procedurally flawed.

Treatment of Competing Arguments: The assessee's argument about insufficient time was upheld, while the Department's reliance on procedural adherence was dismissed.

Conclusions: The court quashed the order under Section 148A(d) and the notice under Section 148, directing a fresh assessment with proper opportunity for the assessee to respond.

Issue b: Legality of Notice Issued by Jurisdictional Assessing Officer

Relevant Legal Framework and Precedents: Notification No. 18/2022 mandates that notices should be issued by the "Faceless Assessing Officer."

Court's Interpretation and Reasoning: The court did not explicitly rule on this issue, as the case was remanded for fresh consideration, leaving this point open for future adjudication.

Key Evidence and Findings: The notice was issued by the Jurisdictional Assessing Officer, contrary to the notification.

Application of Law to Facts: The issue remains unresolved pending further proceedings.

Treatment of Competing Arguments: The court deferred this issue for future consideration.

Conclusions: The issue is left open for determination in subsequent proceedings.

Issue c: Validity of Addition under Section 69A

Relevant Legal Framework and Precedents: Section 69A deals with unexplained money, requiring the assessee to substantiate the source of cash deposits.

Court's Interpretation and Reasoning: The court did not directly address this issue due to the procedural remand but noted the lack of evidence provided by the assessee to the Assessing Officer.

Key Evidence and Findings: The assessee failed to provide a satisfactory explanation for the cash deposits.

Application of Law to Facts: The court left the substantive issue open for reconsideration after procedural compliance.

Treatment of Competing Arguments: The court refrained from adjudicating this issue until procedural matters are resolved.

Conclusions: The issue is reserved for future proceedings.

Issue d: Procedural Fairness of Ex-Parte Order

Relevant Legal Framework and Precedents: Principles of natural justice require adequate opportunity to be heard before an ex-parte decision.

Court's Interpretation and Reasoning: The court acknowledged the procedural shortcomings in the ex-parte order but focused on the remand for fresh proceedings.

Key Evidence and Findings: The assessee did not participate in the proceedings, leading to an ex-parte decision.

Application of Law to Facts: The court emphasized the need for procedural fairness in future proceedings.

Treatment of Competing Arguments: The court did not delve deeply into this issue, given the remand for procedural compliance.

Conclusions: The procedural fairness issue is to be addressed in subsequent proceedings.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The time granted to the Petitioner/assessee to submit reply to the said notice appears to be unreasonable short and the Petitioner/assessee cannot be blamed for not being able to file the reply within such a short period. Thus, it appears that there is a violation of principle of natural justice."

Core Principles Established: Adherence to procedural requirements under Section 148A(b) is mandatory, and non-compliance renders the assessment order void.

Final Determinations on Each Issue: The court quashed the assessment order and notice due to procedural non-compliance and remanded the case for fresh proceedings, leaving substantive issues open for future determination.

The judgment underscores the importance of procedural compliance in tax assessments, particularly regarding adequate notice and opportunity for response, thereby reinforcing the principles of natural justice.

---