2022 (7) TMI 600 - HC - Income Tax

Reopening of assessment u/s 147 - Notice issued u/s 148(A)(b) - Period of limitation - Mandatory timeline of minimum 'Seven days' - HELD THAT - After going through the aforesaid provision it is ample clear that a minimum time of seven days has to be granted to the assessee to file its reply to the show cause notice issued u/s 148 A(b) - The contention of the Revenue that though only three days time was given to the petitioner to file its reply but the order has been passed on seventh day as the Assessee did not file any reply, is not acceptable as the legislature has categorically stipulated mandatory timeline of minimum 'Seven days' and maximum 'Thirty days' to be given to the petitioner before the order u/s 148A(d) can be passed for reassessment proceeding. In the case at hand admittedly, the same has not been followed; as such the instant writ application is maintainable under the writ jurisdiction. It is pertinent to mention here that since the defect committed by the Revenue by giving less than seven days' time to the Assessee to reply to the Notice issued u/s 148(A)(b) of the Act, is a curable defect; as such, the Revenue, if the law so permits, can issue fresh letter to the Assessee in continuation to the Notice issued u/s 148(A)(b) of the Act by giving him at least seven days' time and not more than thirty days to file its show-cause reply and proceed in the matter. Consequently, the impugned order issued under Clause (d) of Section 148A impugned Notice issued under Section 148 for opening the reassessment proceeding for the Assessment Year 2018-19, is hereby, quashed and set aside.

Summary

Issues:
1. Quashing of order under Section 148A(d) of the Income Tax Act for Assessment Year 2018-19.
2. Quashing of reassessment proceeding for Assessment Year 2018-19.
3. Violation of timelines prescribed by Section 148A of the Act.
4. Prejudice caused to the petitioner due to lack of opportunity to respond to show cause notice.

Analysis:

Issue 1: Quashing of order under Section 148A(d)
The petitioner sought to quash the order under Section 148A(d) of the Income Tax Act for the Assessment Year 2018-19, alleging that the Assessing Officer erred in law by not following the prescribed timelines. The petitioner argued that the order was passed prematurely and without giving sufficient time for the petitioner to respond adequately. The High Court observed that the Assessing Officer had not adhered to the mandatory timeline requirements specified in Section 148A(b) of the Act, which necessitates a minimum of seven days for the assessee to file a reply to the show cause notice. As the petitioner was only given three days to respond, the court held that the order under Section 148A(d) was invalid and quashed it.

Issue 2: Quashing of reassessment proceeding
The petitioner also requested the quashing of the entire reassessment proceeding for the Assessment Year 2018-19, including the notice under Section 148A(b) and the subsequent notice under Section 148. The court found that since the initial show cause notice did not comply with the statutory requirement of providing a minimum of seven days for response, the subsequent actions taken by the Revenue were deemed illegal. Therefore, the court quashed the impugned notice under Section 148 and the reassessment proceeding for the said assessment year.

Issue 3: Violation of timelines
The central issue revolved around the violation of timelines prescribed by Section 148A of the Act. The petitioner contended that the Assessing Officer disregarded the statutory timelines, causing prejudice to the petitioner's rights. The court agreed with the petitioner's argument, emphasizing that the legislature mandates a minimum of seven days for the assessee to respond to a show cause notice under Section 148A(b). Since the petitioner was not granted the requisite time, the court held that the actions of the Revenue were in violation of the law.

Issue 4: Prejudice caused to the petitioner
The petitioner alleged that the lack of opportunity to file a proper response had prejudiced their case. The court noted that the petitioner was deprived of a fair chance to present their case and persuade the Revenue that there was no income escapement for the relevant assessment year. Due to the failure to comply with the prescribed timelines, the court concluded that the petitioner had suffered significant prejudice. Consequently, the court allowed the writ petition, quashed the impugned orders, and directed the Revenue to follow the statutory timelines for any future actions in the matter.