Loading judgment…
Facts
The assessee appealed against an assessment order under Section 144, which upheld an addition of unexplained bank deposits under Section 69A. The primary challenge was to the validity of the reassessment proceedings initiated under Section 147/148, specifically alleging that the notice under Section 148A(b) provided only 6 days to respond, which is less than the statutory minimum of 7 days.
Held
The Tribunal found that the Assessing Officer's notice under Section 148A(b) was invalid for failing to provide the statutory minimum of 7 days for the assessee to furnish a reply, violating principles of natural justice. Citing a High Court precedent, the Tribunal quashed the subsequent order under Section 148A(d) and the Section 148 notice, remanding the matter back to the A.O. to provide a proper opportunity of hearing.
Key Issues
Whether reassessment proceedings initiated under Section 147/148 are valid if the Assessing Officer provides less than the statutory minimum seven days to the assessee to respond to the notice issued under Section 148A(b) of the Income Tax Act.
Sections Cited
144, 147, 148, 148A, 148A(a), 148A(b), 148A(d), 69A, 144B, 151A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
करदाताका"ितिनिध"/ : Shri GVN Hari, Advocate Assessee Represented by राज"का"ितिनिध"/ : Dr. Aparna Villuri, Sr. AR Department Represented by सुनवाईसमा"होनेकीितिथ/ : 22/09/2025 Date of Conclusion of Hearing घोषणा की तारीख/ : 30/09/2025 Date of Pronouncement ORDER PER RAVISH SOOD, JM:
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 16/01/2025, which in turn arises from the order passed by the Assessing Officer (for short “A.O.”) u/s 144 of the Income Tax Act, 1961 (for short “the Act”) dated 2 Gandem Nageswara Rao vs. ITO 0/01/2024 for A.Y. 2016-17. The assessee has assailed the impugned order on the following grounds of appeal before us:
1. The order of the Ld. CIT(A) is contrary to the facts and also the law appliable to the facts of the case.
2. The CIT(A) is not justified in deciding the appeal ex-parte.
3. Without prejudice to Grounds. No.2, the Ld. CIT(A) is not justified in sustaining the addition of Rs. 1,08,55,980/- made by the AO U/s. 69A of the Act towards unexplained deposits in the bank account.
4. Any other ground that may be urged at the time of appeal hearing.”
2. Further, the assessee has also raised the following additional grounds of appeal before us:
1. The notice dated 14/02/2023 issued U/s. 148A(b) is invalid inasmuch as the Assessing Officer gave only 06 days of time to the appellant, which is less than the stipulated period of 07 clear days and consequently the entire reassessment proceedings are liable to be quashed as void-ab-initio.
2. The notice issued U/s. 148 of the Act on 16/03/2023 by the jurisdictional Assessing Officer is invalid inasmuch as the same was in contravention of the scheme notified U/s. 151A of the Act.”
At the outset, we noticed that there is a delay of 46 days in filing the appeal before the Tribunal. In respect of belated filing of the appeal, the assessee has filed a petition for condonation of delay wherein it is mentioned that as the assessee suffered from severe back pain due to disc prolapse during the relevant period and was advised to take complete rest from 25/03/2025 to 10/05/2025, therefore, he was prevented from filing the appeal within the stipulated time. On a perusal of the reasons adduced by the assessee for belated filing of the appeal and the Medical Certificate produced before us, we are of the view that as there was a sufficient and reasonable cause that had prevented him from filing the appeal 3 Gandem Nageswara Rao vs. ITO within the prescribed time limit therefore, we hereby condone the same and proceed to adjudicate the case on merits.
Succinctly stated, the A.O observed that though the assessee during the subject year, had undertaken several financial transactions (cash deposits and time deposits) in his bank accounts held with Central Bank of India and Canara Bank, but had not filed his return of income, initiated proceedings u/s 147 of the Act. Notice under Section 148A(a) of the Act was issued to the assessee and he was called upon to explain his financial transactions during the subject year. However, we find that the assessee had failed to comply with the aforesaid notice. Thereafter, the A.O issued notice u/s 148A(b) of the Act, dated 14/02/2023, and called upon the assessee to explain as to why a notice u/s 148 of the Act may not be issued to him. As the assessee failed to file his reply to the aforesaid notice, therefore, the A.O passed an order u/s 148A(d) of the Act, dated 16.03.2023 and notice u/s 148 of the Act, dated 16.03.2023.
Thereafter, the A.O vide his order u/s 147 r.w.s 144B of the Act, dated 31/01/2024 determined the income of the assessee at Rs. 1,08,79,650/- after making two additions, viz. (i). addition u/s 69A of the unexplained money deposited during the subject year in bank accounts: Rs. 1,08,55,986/-; and (ii). addition of interest income: Rs. - 23,666/-.
4 Gandem Nageswara Rao vs. ITO 6. Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success. As the assessee had failed to participate in the proceedings before the CIT(A), therefore, he finding no infirmity in the view taken by the A.O upheld the addition made by him and dismissed the appeal.
We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions.
Shri GVN Hari, the Ld. Authorized Representative (for short ‘AR’) for the assessee, at the threshold of hearing has assailed the validity of the assessment that was framed by the A.O vide his order passed u/s. 147 r.w.s. 144 r.w.s 144B of the Act, dated 31/01/2024. Elaborating on his contention, the Ld. AR submitted that as the A.O had vide his notice issued u/s. 148A(b) of the Act, dated 14/02/2023 called upon the assessee to file his reply within a time period of 7 days as to why a notice u/s 148 of the Act may not be issued to him, therefore, the same not being as per the mandate of law cannot be sustained and is liable to be struck down on the said count itself. The Ld. AR in support of his aforesaid contention had taken us through the provision of Clause (b) of Section 148A of the Act, as per which, time 5 Gandem Nageswara Rao vs. ITO period being not less than 7 days but not exceeding 30 days from the date on which the notice is issued is to be allowed to the assessee to put forth an explanation that as to why notice u/s. 148 of the Act may not be issued on the basis of information collated by the A.O suggesting that the income of the assessee chargeable to tax had escaped assessment for the relevant year. The Ld. AR in support of his aforesaid contention had relied on the judgment of the Hon’ble High Court of Chhattisgarh in the case of MM Wonder Park Private Limited Vs. Union of India & Others., Writ Petition (T) No.172 of 2022, dated 17.06.2022.
Per contra, Dr. Aparna Villuri, Ld. Sr. Departmental Representative (for short ’DR’) relied on the orders of the lower authorities.
We have heard the learned authorized representatives of both the parties in the backdrop of the orders of the lower authorities. As the Ld. AR has assailed the validity of the assessment order passed by the AO u/s 147 r.w.s. 144 r.w.s 144B of the Act, dated 31/01/2024, inter alia, for the reason that the time period allowed by the AO u/s 148A(b) of the Act was not as per the mandate of law, therefore, we shall first deal with the same.
6 Gandem Nageswara Rao vs. ITO 11. As stated by the Ld. AR, and rightly so, section 148A(b) of the Act contemplates that the AO shall, before issuing any notice under section 148, provide an opportunity of being heard to the assessee, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a) of Section 148A. Admittedly, as per the mandate of Section 148A(b) of the Act, it is obligatory on the part of the A.O. to allow to the assessee a time period of not less than 7 days from the date on which such notice is issued to explain as to why based on the information shared with him a notice u/s.148 of the Act may not be issued to him. However, we find, that the A.O in the present case, vide notice u/s 148A(b) of the Act, dated 14/02/2023 (copy placed on record), had called upon the assessee to show cause on or before 21/02/2023 why a notice u/s 148 of the Act be not issued to him. Accordingly, the A.O., had called upon the assessee to put forth his 7 Gandem Nageswara Rao vs. ITO explanation within a time period of 7 days as to why a notice u/s 148 of the Act be not issued to him.
As stated by the Ld. AR, and rightly so, the notice u/s 148A(b) of the Act, dated 14/02/2023 is not found to be in conformity with the mandate of law. We find, that Hon’ble High Court of Chhattisgarh in the case of MM Wonder Park Private Limited vs. Union of India & Others, passed in Writ Petition (T) No.172/2022, dated 17.06.2022, had observed, that the A.O in the case before them had issued a show cause notice u/s 148A(b) of the Act giving just 7 days’ time to the assessee company/petitioner to file its reply. The Hon’ble High Court, observed that the time period of 7 days provided to the assessee company vide notice u/s 148A(b) of the Act was unreasonably short, and thus, violative of principles of natural justice. Accordingly, the Hon’ble High Court had quashed both the order passed by the A.O. u/s 148A(d) of the Act, dated 04.04.2022 and the notice u/s 148 of the Act, dated 05.04.2022, and set aside the matter to the file of the A.O. with a direction to decide the matter afresh in accordance with law after affording an opportunity of being heard to the assessee/petitioner. For the sake of clarity, the observations of Hon’ble High Court are culled out as under:
“5. I have heard Learned Counsel appearing for the parties and perused the above referred to documents/Annexures and other material available with due care.
8 Gandem Nageswara Rao vs. ITO 6. From perusal of the documents/Annexures, it appears that the order dated 4.4.2022 (Annexure P2) passed under Section 148A(d) of the Act has been passed with regard to a transaction which occurred in the financial year 2014-15 after serving a notice dated 25.3.2022 (Annexure P1) and giving a mere 7 days' time to the Petitioner/assessee to furnish a reply to the said notice. 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. Therefore, the prayer made on behalf of the Petitioner/assessee appears to be reasonable. Thus, the order dated 4.4.2022 (Annexure P2) passed under Section 148A(d) of the Act and the notice dated 5.4.2022 (Annexure P3) issued under Section 148 of the Act are quashed and the Respondents are directed to afford proper opportunity of hearing to the Petitioner/assessee and thereafter decide the matter afresh in accordance with law.
7. Accordingly, the instant writ petition is allowed” (emphasis supplied by us)
As the facts and issue involved in the present appeal before us, i.e., allowing of unreasonably short period of time by the A.O vide notice issued u/s 148A(b) of the Act, dated 14.02.2023, wherein the assessee was called upon to furnish his reply within a time period of 7 days, i.e., on or before 21.02.2023, remain the same as was there before the Hon’ble High Court in the case of MM Wonder Park Private Limited Vs. UOI (supra), therefore, we respectfully follow the same. We, thus, in terms of our aforesaid observations quash the order passed by the A.O. u/s 148A(d) of the Act, dated 16/03/2023 and also the notice issued u/s.148 of the Act, dated 16/03/2023, and restore the matter back to the file of the A.O. with a direction to afford a 9 Gandem Nageswara Rao vs. ITO proper opportunity of being heard to the assessee as per the mandate of section 148A(b) of the Act, and thereafter, decide the matter afresh in accordance with law. Thus, the Additional Ground of appeal No. 1 raised by the assessee is allowed for statistical purposes in terms of our aforesaid observations.
As we have set aside the matter to the file of the A.O. with a direction to re-decide the case after affording a reasonable opportunity of being heard to the assessee as required per the mandate of Section 148A(b) of the Act, therefore, we refrain from dealing with the other grounds of appeal based on which the validity of jurisdiction assumed by the A.O. for framing the assessment as well as the merits of the addition have been assailed by the Ld. A.R before us, which, thus, are left open.
Resultantly, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations.