Reassessment under s.147 annulled as s.148A(b) notice invalid for not granting seven clear response days

ITAT Ranchi allowed the assessee's appeal, holding the reassessment proceedings invalid for non-compliance with mandatory procedural requirements under s.148A(b). The AO failed to grant "seven clear days" to respond to the show cause notice, thereby violating the statutory safeguard and principles of natural justice. Applying binding HC precedent on identical facts, the Tribunal quashed the notice issued under s.148A(b). Consequently, the reassessment order passed u/s 147 r.w.s. 144 was also set aside as without jurisdiction. The appeal was allowed in full, restoring the assessee's position prior to reopening.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Validity of notice issued under section 148A(b) when less than "seven clear days" are afforded to the assessee to respond.

1.2 Consequential validity of the reassessment order passed under section 147 read with section 144C where the foundational notice under section 148A(b) is invalid.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of notice issued under section 148A(b) when less than "seven clear days" are afforded to the assessee

Legal framework

2.1 The Court reproduced and relied upon section 148A(b), which mandates that an opportunity of being heard must be provided 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 on which such notice is issued...".

2.2 The Court referred to the interpretation of this provision by the jurisdictional High Court, which held that "minimum 7 days is required to be given to the Assessee for filing reply" and that such 7 days are to be calculated by "ignoring the date of issue and the last date of submission", i.e., seven clear days.

2.3 The Court noted that the jurisdictional High Court, in turn, relied on the principle laid down by the Supreme Court in relation to the phrase "not being less than one month", holding that when "not less than" a specified period is prescribed, both terminal days (the date of issuance and the last date for compliance) are to be excluded.

Interpretation and reasoning

2.4 The notice under section 148A(b) was issued on 14.03.2022, directing the assessee to submit its response on or before 21.03.2022.

2.5 Applying the principle that both the date of issuance of notice and the last date for submission of reply are to be excluded, the Court examined whether the assessee had been granted seven clear days for response.

2.6 The Court followed a Co-ordinate Bench decision which, on identical language and computation, held that if, after excluding both terminal days, the assessee is left with fewer than seven clear days to respond, the mandate of section 148A(b) is violated.

2.7 Relying on the jurisdictional High Court's construction of section 148A(b), the Court accepted that the statutory requirement is mandatory: the assessee must be afforded not less than seven clear days, and non-compliance renders the notice invalid.

Conclusions

2.8 The Court held that the assessee was not provided with the statutorily required seven clear days to respond to the notice under section 148A(b).

2.9 The notice issued under section 148A(b) was held to be in violation of the mandate of section 148A(b) and the binding interpretation of the jurisdictional High Court.

2.10 The notice under section 148A(b) was therefore quashed.

Issue 2: Consequential validity of reassessment order under section 147 read with section 144C based on invalid section 148A(b) notice

Interpretation and reasoning

2.11 The Court observed that initiation of reassessment proceedings under section 147 was predicated upon the impugned notice issued under section 148A(b).

2.12 Once the foundational notice under section 148A(b) is held invalid and quashed, all subsequent proceedings flowing from such notice, including the reassessment order, lose their legal substratum and cannot be sustained.

Conclusions

2.13 Consequent upon quashing of the notice under section 148A(b), the reassessment order passed under section 147 read with section 144C was held to be a nullity and was quashed.

2.14 The appeal was allowed on this jurisdictional ground alone.

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