2023 (12) TMI 1185 - HC - Income Tax

Validity of reopening of assessment u/s 147 - Shorter period to reply notice - it is the contention of the petitioner that the notice issued under Section 148 A (b) dated 23.03.2022 by post was received by the petitioner only on 28.03.2022 i.e. one day, prior to the time fixed for filing reply/objection and therefore, according to the petitioner, in terms of the said provision, notice granting 7 days' time has not been provided - HELD THAT - Unable to accept the contention of respondent, for, the terms ' Notice has been Issued'' attains finality only when the notice has been issued/served on the assessee. In the present case, though the show cause notice calling forth petitioner's reply within 29.03.2022 was dated 23.03.2022, unfortunately, the said notice was received by the petitioner/assessee only on 28.03.2022. Therefore, from 28.03.2022, the period of 7 days has to be reckoned, whereas, in the present case, the respondent has not considered the said aspect and proceeded to pass orders by stating that the petitioner failed to respond to the notice dated 23.03.2022 and hence, the proposals contained in the show cause notice dated 23.03.2023 is confirmed. Therefore, as rightly pointed out by petitioner, the impugned order suffers from violation of principles of natural justice, since it blatantly violates the provisions of Section 148 (b), AO has to give time not less than seven days but not more than 30 days to the assessee for furnishing his explanation and further, the respondent, despite knowing fully well that the notice served on the petitioner by post was received by him only 28.03.2022, ought to have granted further time, in terms of Section 148 (b) of the Act of not exceeding 30 days, and waited for the petitioner's reply and before passing the impugned order, heard the petitioner and in the absence of same having been failed to be done by the respondent, not only the impugned Notice dated 23.03.2022 has to be quashed and entire proceedings, initiated in furtherance of the same are also to be quashed. Therefore, the contention of respondent that notice served on the petitioner through e-portal on 23.03.2022, and the same has to be deemed to be sufficient service and the period of 7 days has to be reckoned from such date of issuance has to be brushed aside, since, in terms of Section 282 (1) notice can be served only by adopting the mode of service by post or such other courier service and notice sent by adopting the mode of service by e-mail or e-portal and the same can be considered and adopted in addition to the service effected by physical mode. This Court is of the view that the show cause notice issued u/s 148 A (b) is not sustainable. So far as the sustainability of the impugned order on the limitation aspect is concerned, since the petitioner/assessee has taken steps to file returns by showing the source of income and the manner of utilization of sale proceeds of agricultural land, as the said issue pertains to the AY 2015-16, obviously, the period of limitation for the said assessment year has come to an end even for service of notice u/s 148A of the Act on 31st March, 2021, this Court is of the view that the impugned proceedings are not sustainable on limitation aspect as well, inasmuch, as the Department failed to take appropriate action at the appropriate time within the limitation period of six years, which is not directory in nature but mandatory, and the respondent-Department having failed to do so, they cannot, all of sudden, on one fine day, attack the petitioner/assessee. This Court would like observe herein that the Income Tax Department cannot always have the sword of Damocle's dangling over an assessee all the time. Accordingly, this Writ Petition is allowed, the impugned order dated 23.03.2022 is quashed

Summary

Issues Involved:
1. Validity of the notice under Section 148 A (b) on grounds of limitation.
2. Violation of principles of natural justice in serving the notice.
3. Sustainability of the impugned order on the limitation aspect.

Summary:

1. Validity of the Notice under Section 148 A (b) on Grounds of Limitation:
The petitioner challenged the notice dated 23.03.2022 issued under Section 148 A (b) of the Income Tax Act, 1961, contending it was beyond the period of limitation. The court noted that the period of limitation for the assessment year 2015-16 ended on 31st March 2021. Thus, the impugned proceedings were not sustainable on the limitation aspect, as the Department failed to take appropriate action within the six-year period, which is mandatory.

2. Violation of Principles of Natural Justice in Serving the Notice:
The petitioner argued that the notice dated 23.03.2022 was received only on 28.03.2022, providing insufficient time to respond. The court observed that Section 148 A (b) requires a minimum of seven days for the assessee to furnish an explanation. The respondent's contention that the notice served through the e-portal on 23.03.2022 was sufficient was rejected. The court held that service of notice by post or courier is mandatory, and additional electronic service cannot replace it. Consequently, the notice dated 23.03.2022 was quashed for violating the principles of natural justice.

3. Sustainability of the Impugned Order on the Limitation Aspect:
The court reiterated that the limitation period for the assessment year 2015-16 had expired, making the impugned proceedings unsustainable. The court emphasized that the Income Tax Department cannot indefinitely hold an assessee accountable without timely action.

Conclusion:
The Writ Petition was allowed, quashing the impugned notice dated 23.03.2022 and all consequential proceedings. The court noted that if the petitioner still holds the deposited amount, the respondent-Department may proceed in accordance with law for subsequent years if permissible. No costs were awarded, and connected Miscellaneous Petitions were closed.