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Facts
The assessee, an individual, sold an immovable property and incurred a capital gain. The AO initiated reassessment proceedings under section 148A, issuing a notice u/s 148A(b) but granting only four days for response, violating the statutory minimum of seven days. The assessee did not respond, leading to an order u/s 148A(d) and notice u/s 148. The assessee later filed a return and claimed deductions, but the AO did not accept the cost of acquisition and the deduction u/s 54F.
Held
The Tribunal held that the notice issued u/s 148A(b) was illegal because the AO failed to provide the statutory minimum period of 7 days for the assessee to respond. Consequently, all subsequent proceedings, including the order u/s 148A(d) and the assessment order, were also rendered invalid.
Key Issues
Whether the reassessment proceedings initiated under Section 148A are invalid due to the AO failing to provide the statutory minimum notice period of 7 days to the assessee? Whether the assessee is eligible for deduction u/s 54F?
Sections Cited
148A, 148A(b), 148A(d), 148, 147, 54F, 143(2), 142(1), 194IA, 151A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI, VICE – & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 10/10/2025 in respect of the A.Y. 2016-17 and raised the following grounds: “
1. The Impugned Order is null and void and liable to be quashed.
2. The Learned Commissioner (Appeals) erred in not considering the record including the responses filed before the Assessing Officer, the grounds raised initially in Form 35 and additional grounds raised during the course of the appellate proceeding
3. Without prejudice, the Learned Commissioner (Appeals) erred in simply brushing. aside &Responses dated 10109/2025 and 0611012025, in which additional legal grounds were raised by the Appellant, thereby causing prejudice to the Appellant.
4. Without prejudice, the Learned Commissioner (Appeals) erred in not considering that the Reassessment Proceeding is null and void, as the Assessing Officer, while reopening the case by passing Order u/s148A(d) dated 28/03/2023, took entire sale consideration to be income chargeable to tax, without considering the cost of acquisition, which, it' considered, would have resulted in income likely to escape assessment far below sum of Rs.50 Lakhs, which would make reopening after three years after AY 2016-17 void.
5. Without prejudice, the Learned Commissioner (Appeals) also erred in not considering that the Order tils.148A(d) dated 28/03/2023 and Notice u/s.148 dated 31/03/2023 were issued by the Income Tax Officer, Ward 4(1)(2). Bangalore, being the Jurisdictional Assessing Officer, thereby violating Section 151A and Faceless Reassessment Scheme 6. Without prejudice, the Learned Commissioner (Appeals) also erred in not considering the detailed responses and evidences filed before the Assessing Officer, justifying the claim of indexed costs of acquisition and improvement and exemption u/s. 54F. And for other reasons and grounds that may be adduced later, it is humbly prayed that this appeal may be admitted, adjudicated on merit and justice be rendered.”
The brief facts of the case are that the assessee is an individual and he has not filed his return of income. Based on the information that the assessee had sold an immovable property on 25/02/2016 in which the TDS u/s. 194IA has been deducted, the AO had concluded that there is a capital gain. Notice u/s. 148A(b) was issued on 18/03/2023 but the assessee had not responded to the said notice and therefore an order u/s. 148A(d) was passed on 28/03/2023. Simultaneously, notice u/s. 148 was also issued on 31/03/2023. Thereafter the assessee furnished his return of income on 29/09/2023. Then notice u/s. 143(2) as well as u/s. 142(1) were issued for which the assessee had filed some explanations and also claimed deduction
Page 3 of u/s. 54F of the Act. The assessee had sought for the refund of the TDS amount in view of the explanations offered by him. The AO not satisfied with the objections, had computed the long term capital gains and brought the same to tax. The AO had not accepted the rate adopted by the assessee at Rs. 50/- per sq.ft. for determining the cost of acquisition. The AO considered the fact that the said agricultural lands were converted into non-agricultural lands for residential purposes and therefore not accepted the rate at Rs. 50/- per sq.ft. Similarly, the AO had not accepted the claim of deduction u/s. 54F of the Act. As against the said order, the assessee filed an appeal before the Ld.CIT(A) with a delay of 12 days. The assessee also filed an additional ground on 06/10/2025 raising the legal plea that the AO had not granted minimum of 7 days time to reply to the notice issued u/s. 148A(b) of the Act and therefore the entire proceedings are bad in law. The said additional ground was uploaded on 06/10/2025. In the grounds of appeal, the assessee had also relied on the judgment of the Hon’ble Jurisdictional High Court reported in (2025) 178 taxman.com 410 (Karnataka) in the case of ITO vs. Venkatal Iyyappa Rajanna. The Ld.CIT(A) after condoning the delay in filing the appeal had dismissed the appeal on the ground that the assessee had not filed his written submissions despite various notices.
3. As against the order of the Ld.CIT(A), the present appeal has been filed by the assessee before this Tribunal.
4. At the time of hearing, the Ld.AR submitted that the order of the AO is void since the AO had failed to give the minimum statutory period for filing the objections to the notice issued u/s. 148A(b) of the Act and therefore the order is bad in law. The Ld.AR further submitted that the AO had erred in taking the entire sale consideration as income chargeable to tax without granting the deduction for the cost of acquisition, etc. The Ld.AR further submitted that if the entire sale consideration is taken up for consideration, it would exceed the limit of Rs. 50 Lakhs and therefore the notice issued without obtaining the approval from the appropriate authority is bad in law. The Ld.AR also submitted that the deduction claimed u/s. 54F is in order.
Page 4 of The Ld AR also filed a paper book enclosing the 148A(b) notice, acknowledgement for filing the addl. Legal ground and judgements of the jurisdictional High Court and prayed to allow the appeal.
The Ld.DR relied on the orders of the lower authorities and submitted that the assessee had not responded to the various notices issued by the Ld.CIT(A) and therefore the order of the lower authorities are to be sustained.
We have heard the arguments of both sides and perused the materials available on record.
Even though the assessee had raised several grounds on merits, we are inclined to examine the legal plea raised by the assessee as the first issue. On going through the CIT(A) order, we found that the same is not made after considering the various documents placed by the assessee but the same was disposed of for not filing the relevant records. Since we are going to take up the legal issue as the first issue, we have decided to consider the appeal on merits, if necessary. In the legal ground raised by the assessee, the assessee had submitted the copy of the notice issued u/s. 148A(b) of the Act which was issued on 18/03/2023. In the said notice, the AO had given time to the assessee to submit his reply along with supporting documents on or before 22/03/2023. It means that the AO had given only four days time to file the reply to the said notice.
At this juncture, it is beneficial to refer the section 148A, to appreciate the legal ground raised by the assessee. Section 148A(a) directs the AO to conduct any enquiry with the prior approval of the specified authority before issuing any notice u/s. 148. Section 148(b) mandates that the AO has to grant an opportunity of being heard to the assessee by serving a notice to show cause within such time, being not less than 7 days but not exceeding 30 days from the date on which such notice is issued. Thereafter the AO has to consider the said reply and pass an order u/s. 148A(d) of the Act
Page 5 of within one month from the end of the month in which time allowed to furnish a reply as per clause (b) expires.
As seen from the scheme of the section, the AO has to first conduct an enquiry and thereafter provide an opportunity of being heard to the assessee by giving not less than 7days time. In the present case, as seen from the copy of the notice dated 18/03/2023 furnished by the assessee, the AO had granted time upto 22/03/2023 for filing the reply along with documents. Practically the AO had granted only four days time to the assessee to file their reply to the notice issued u/s. 148A(b) of the Act. The four days time granted by the AO is against section 148A(b) of the Act in which the provision mandates that the AO has to give minimum 7 days and maximum 30 days time to file the objections or documents. The AO had not followed the mandatory directions granted u/s. 148A(b) of the Act.
We have also considered the judgments of the Hon’ble Jurisdictional High Court relied on by the assessee. In the Division Bench judgment of the Hon’ble Jurisdictional High Court reported in (2025) 178 taxmann.com 410 (Karnataka) in the case of ITO vs. Venkatal Iyyappa Rajanna, wherein the Hon’ble High Court had held that the notice issued u/s. 148A(b) without complying with the requirement of providing a minimum period of 7 days to respond is contrary to law. A Learned Single Judge of the Hon’ble Jurisdictional High Court had followed the above said Division Bench order cited supra, in W.P. No. 16325/2025 (T-IT) dated 04/09/2025. When the Hon’ble Jurisdictional High Court had concluded that the notice issued u/s. 148A(b) is bad in law because of not granting the minimum period of 7 days to file the objections to the said notice, therefore we are following the said judgment and held that the 148A(b) notice dated 18/03/2023 issued by the AO is liable to be treated as an illegal one. When the notice u/s. 148A(b) is treated as an illegal one, the subsequent proceedings made u/s. 148A(d), notice issued u/s. 148 and the assessment order passed u/s. 147 are all liable to be set aside. Since we are accepting the legal ground raised by the assessee and allowed the appeal of the assessee, we are not adjudicating the other grounds raised by the assessee on merits.
We, therefore set aside the assessment order dated 19/03/2024 as well as the appeal order dated 10/10/2025 as not validly made under the provisions of the Act.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 27th February, 2026.