Reassessment Notice issued without following section 148A Provision is invalid

lipped from: https://taxguru.in/income-tax/reassessment-notice-issued-following-section-148a-provision-invalid.html

Nambiar Balakrishnan Narendran Vs ITO (Kerala High Court)

The petitioner has approached this Court being aggrieved by the fact that proceedings were taken against him under Section 148 of the Income Tax Act, 1961 (‘the Act’ for short) without following the procedure contemplated by the provisions of Section 148A of the Act. It is the case of the petitioner that after amendment to the provisions of Income Tax Act in the year 2021 [by the Finance Act of 2021] before reassessment proceedings are initiated under Section 148 of the Act, it was incumbent on the officer to serve a show cause notice as contemplated by Section 148A of the Act. It was also pointed out that a minimum of seven days is to be given to the petitioner to reply to the same. The learned counsel for the petitioner submits that the notice under Section 148A of the Act was not actually served on the petitioner prior to the issuance of notice under Section 148 of the Act and the notice under Section 148A of the Act was subsequently served by messenger. It is submitted that the petitioner did not get any time to respond to the notice under Section 148A of the Act and therefore, the proceedings initiated against the petitioner under Section 148 of the Act are incompetent and contrary to law.

HC held that it is clear that there is no record to suggest that the procedure contemplated u/s 148A of the Act were followed before issuing notice under Section 148 of the Act, this writ petition is allowed. Exts.P1 and P4 are quashed without prejudice to the right of the Department to initiate fresh proceedings in accordance with law.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

The petitioner has approached this Court being aggrieved by the fact that proceedings were taken against him under Section 148 of the Income Tax Act, 1961 (‘the Act’ for short) without following the procedure contemplated by the provisions of Section 148A of the Act. It is the case of the petitioner that after amendment to the provisions of Income Tax Act in the year 2021 [by the Finance Act of 2021] before reassessment proceedings are initiated under Section 148 of the Act, it was incumbent on the officer to serve a show cause notice as contemplated by Section 148A of the Act. It was also pointed out that a minimum of seven days is to be given to the petitioner to reply to the same. The learned counsel for the petitioner submits that the notice under Section 148A of the Act was not actually served on the petitioner prior to the issuance of notice under Section 148 of the Act and the notice under Section 148A of the Act was subsequently served by messenger. It is submitted that the petitioner did not get any time to respond to the notice under Section 148A of the Act and therefore, the proceedings initiated against the petitioner under Section 148 of the Act are incompetent and contrary to law.

2. The learned Standing Counsel appearing for the respondent Department refers to the counter affidavit filed by the 1st respondent in this case where in paragraph 7 it is stated as follows:

”However, in view of the contention of the petitioner regarding the correctness of the information relied by the Revenue as referred to in para.6 above, it is prayed that the Revenue may kindly be permitted to issue a fresh notice u/s 148A to verify the above facts and take further steps in this matter as provided under law.”

In response to the averment to the petitioner that the notice under Section 148A of the Act was never served on the petitioner before the issuance of notice under Section 148 of the Act, it is stated in paragraph 5 of the counter affidavit as under:

“In response to the above averments of the petitioner, this deponent submits as under. Notice u/s 148 A(b) was issued on 18.03.2022 allowing time upto 24.03.2022 to the assessee to respond to the notice. This means that including the date of issue of the notice, 7 days time was allowed to the assessee to respond to the notice. Therefore the contention raised in this regard by the petitioner is not correct. However, as per the details available in the system, delivery of notice u/s 148 A(b) issued on 18.03.2022 is not verifiable and therefore electronic delivery of notice cannot be proved. Though a hard copy of the notice was also sent by post, it was returned undelivered”

It is in these circumstances, that the 1st respondent has stated that the Department may be permitted to issue fresh notice under Section 148A of the Act and continue with the proceedings in due compliance with the law.

3. The learned counsel for the petitioner states that this Court may not grant any permission to the respondent Department to continue with the fresh proceedings contemplated and the fresh proceedings may be permitted only if they are authorized by law. Since it is clear that there is no record to suggest that the procedure contemplated u/s 148A of the Act were followed before issuing notice under Section 148 of the Act, this writ petition is allowed. Exts.P1 and P4 are quashed without prejudice to the right of the Department to initiate fresh proceedings in accordance with law.

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