Reassessment quashed for breaching mandatory seven-day reply under s.148A(b); annexure cannot cure defective notice issued

ITAT Kolkata held that the reassessment proceedings were invalid due to non-compliance with the mandatory time requirement under s.148A(b) of the IT Act. Although proper approval from CIT had been obtained, the notice issued under s.148A(b) granted the assessee less than seven days to respond. The Tribunal held that the annexure could not override or cure the defect in the primary notice. Relying on HC precedent, it declared the notice and all consequential assessment proceedings invalid and quashed them. The assessee's appeal was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether a notice issued under Section 148A(b) of the Income-tax Act, 1961, allowing less than the statutorily prescribed minimum period of seven days to respond, is invalid.

1.2 Whether an annexure to a Section 148A(b) notice, mentioning a longer response time, can cure the defect of insufficient time granted in the body of the notice itself.

1.3 Whether the invalidity of a Section 148A(b) notice vitiates and renders void the consequential assessment order.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of notice under Section 148A(b) granting less than seven days' time

Legal framework

2.1 The judgment reproduces and relies upon the text and judicial interpretation of Section 148A(b) of the Income-tax Act, 1961, which mandates that the show-cause notice must provide an opportunity of being heard "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 on which such notice is issued...".

2.2 The Court refers to and follows the decisions interpreting this provision, particularly:

(a) A decision of a High Court holding that if a notice under Section 148A(b) prescribes a period lesser than seven days as contemplated in the provision, such notice is vitiated, resulting in quashing not only of the notice but also of the subsequent order under Section 148A(d) and the notice under Section 148.

(b) Another High Court decision which, relying on the above, held that a notice prescribing a period less than the minimum seven days under Section 148A(b) is invalid and liable to be quashed along with consequential proceedings.

Interpretation and reasoning

2.3 The Court notes that the impugned notice under Section 148A(b) was issued on 16.03.2022 and required a response by 21.03.2022.

2.4 The Court finds as a matter of fact that the time given in the notice is less than seven days from the date of issue, contrary to the explicit language of Section 148A(b).

2.5 The Court treats the statutory minimum of "not less than seven days" as a mandatory requirement, in line with the High Court decisions quoted, which also refer to administrative guidelines specifying that a show-cause notice under Section 148A(b) must allow between seven to thirty days for reply.

2.6 The Court, respectfully following the cited High Court authority (particularly on the consequence of granting less than seven days' time), holds that non-compliance with the statutory minimum period renders the notice itself invalid.

Conclusions

2.7 The notice issued under Section 148A(b) is held to be invalid as it does not grant the assessee the mandatory minimum period of seven days from the date of issue to respond.

Issue 2: Effect of the annexure mentioning "within 07 days from date of receipt"

Interpretation and reasoning

2.8 The revenue contended that the annexure to the Section 148A(b) notice stated that the assessee was requested to furnish written submissions with supporting documents "within 07 days from the date of receipt of the communication", and therefore the assessee had more than seven days.

2.9 The Court examines this contention and notes that the annexure relates to the information in respect of which approval has been granted by the competent authority, and is not the primary show-cause notice itself under Section 148A(b).

2.10 The Court holds that the annexure cannot override, alter, or cure the defect in the primary notice. The critical document for compliance with Section 148A(b) is the notice itself, and it "clearly gives less than 07 days".

2.11 The Court therefore rejects the argument that the language of the annexure can be relied upon to validate an otherwise statutorily defective notice.

Conclusions

2.12 The annexure to the notice does not and cannot cure the non-compliance with Section 148A(b) arising from the insufficient time granted in the body of the notice. The invalidity of the notice remains.

Issue 3: Consequential validity of the assessment order

Interpretation and reasoning

2.13 Having held that the notice under Section 148A(b) is invalid, the Court considers the fate of the consequential assessment order.

2.14 Relying on the principle, as recognized in the cited High Court decisions, that when the foundational notice under Section 148A(b) is vitiated, all subsequent proceedings including orders passed in pursuance thereof are also vitiated, the Court treats the assessment order as having no valid legal basis.

Conclusions

2.15 The assessment order passed consequent to the invalid notice under Section 148A(b) is quashed as a necessary corollary.

2.16 The appeal of the assessee is allowed, and the consequential assessment does not survive.

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