Lakshmi Reddy Boyilla Vs Assessment Unit (Karnataka High Court)
148A notice giving less than 7 days is void: Karnataka HC quashes reassessment, penalties & demands
Karnataka High Court, in allowed writ petition & quashed the entire reassessment proceedings for AY 2018-19, including notices u/s 148A(b), order u/s 148A(d), notice u/s 148, assessment order u/s 147 r/w 144 & 144B, consequential demand notices & penalty proceedings u/s 272A(1)(d) & 270A. Court held that notice u/s 148A(b) dated 17-03-2022 granted only six days’ time, which is less than the mandatory minimum of seven days prescribed in section 148A(b). Relying on Division Bench judgment in Venkatala Iyyappa Rajanna & Supreme Court decisions in Union of India vs Rajeev Bansal, Deepak Steel & Power Ltd. & R.K. Build Creations (P) Ltd., Court held that such short-time notice vitiates the entire reassessment. Once the foundational notice is invalid, all subsequent proceedings including assessment, penalties & demands cannot survive. However, liberty was reserved to the Revenue to initiate fresh proceedings in accordance with law, subject to all defences available to assessee
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
Sri E I Sanmati, learned counsel accepts notice for respondents.
2. In this petition, the petitioner seeks the following reliefs:
“Wherefore it is prayed that this Hon’ble Court be pleased to:
1. Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the Show-cause notice under section 144 of the Act dated 17.11.2023 issued by the Respondent No.1 for the assessment year 2018-19 bearing DIN No.ITBA/AST/F/144(SCN) (F)/202324/1058037264(1) and copy of the same is referred as Annexure ‘A1’.
II. Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the Show-cause notice dated 26.12.2023 issued by the Respondent No.1 for the assessment year 2018-19 bearing DIN No. ITBA/AST/F/144 (SCN)/202324/1059045622(1) and copy of the same is referred as Annexure ‘A2’.
iii. Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the Assessment order dated 23.01.2024 passed by the Respondent No.1 for the assessment year 2018-19 under section 147 read with section 144 read with section 144B of the Act bearing DIN No. ITBA/AST/S/147/2023-24/1060008980(1) and copy of the same is referred as Annexure ‘A3’.
iv. Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the Computation sheet dated 23.01.2024 issued by the Respondent No.1 for the assessment year 2018-19 bearing DIN & Document Number ITBA/AST/S/183/2023-24/1060008994(1) and copy of the same is referred as Annexure ‘A4’.
v. Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the Demand notice dated 23.01.2024 issued by the Respondent No.1 for the assessment year 2018-19 under section 156 of the Act bearing DIN & Notice No. ITBA/AST/S/156/2023-24/1060009161(1) and copy of the same is referred as Annexure ‘A5’.
vii. Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the Show-cause notice dated 04.10.2023 issued by the Respondent No.1 for the assessment year 2018-19 under section 274 read with section 272A(1) (d) of the Act bearing DIN No. ITBA/PNL/S/272A(1)(d)_FL/2023-24/1056771896(1) and copy of the same is referred as Annexure ‘A6’.
vii. Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the Penalty order dated 26.04.2024 passed by the Respondent No.1 for the assessment year 2018-19 under section 272A(1) (d) of the Act bearing DIN No. ITBA/PNL/F/272A(1)(d)/2024-25/1064400710(1) and copy of the same is referred as Annexure ‘A7’.
viii. Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the Computation sheet dated 26.04.2024 issued by the Respondent No.1 for the assessment year 2018-19 bearing DIN & Order Number ITBA/PNL/S/272A(1)(d)_FL/202324/1056771896(1) and copy of the same is referred as Annexure ‘A8’.
ix. Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the Demand notice dated 26.04.2024 issued by the Respondent No.1 for the assessment year 2018-19 under section 156 of the Act bearing DIN & Notice No. ITBA/PNL/S/156/2024-25/1064396497(1) and copy of the same is referred as Annexure ‘A9’.
x. Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the Show-cause notice dated 23.01.2024 issued by the Respondent No.1 for the assessment year 2018-19 under section 274 read with section 270A of the Act bearing DIN No. ITBA/PNL/S/270A/202324/1060009071(1) and copy of the same is referred as Annexure ‘A10’.
xi. Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the Penalty order dated 24.07.2024 passed by the Respondent No.1 for the assessment year 2018-19 under section 272A(1)(d) of the Act bearing DIN No. ITBA/PNL/F/270A/2024- 25/1066972221(1) and copy of the same is referred as Annexure ‘A11’.
xii. Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the Computation sheet dated 24.07.2024 issued by the Respondent No.1 for the assessment year 2018-19 bearing DIN & Order Number ITBA/PNL/S/270A/202324/1060009071(1) and copy of the same is referred as Annexure ‘A12’.
xiii. Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the Demand notice dated 24.07.2024 issued by the Respondent No.1 for the assessment year 2018-19 under section 156 of the Act bearing DIN & Notice No. ITBA/PNL/S/156/2024-25/1066967475(1) and copy of the same is referred as Annexure ‘A13’.
xiv. Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the Notice issued under section 148A(b) of the Act dated 16.03.2023 issued by the Respondent No.2 for the assessment year 2018-19 bearing DIN & Notice No. ITBA/AST/F/148A(SCN)/2021-22/1040883457(1) and copy of the same is referred as Annexure ‘B1’.
xv. Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the Order passed under section 148A(d) of the Act dated 31.03.2022 by the Respondent No.2 for the assessment year 2018-19 bearing DIN No. ITBA/AST/F/148A/2021-22/1042264746(1) and copy of the same is referred as Annexure ‘B2’.
xvi. Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the Notice dated 01.04.2022 issued under section 148 of the Act bearing DIN & Notice No. ITBA/AST/S/148_1/2022-23/1042432093(1) issued by the Respondent No.2 for the assessment year 2018-19 and copy of the same is referred as Annexure ‘B3’.
xvii. And pass such other orders as this Hon’ble Court deems fit and proper in the interest of justice and equity.”
3. A perusal of the material on record will indicate that the respondent issued a notice under Section 148 A(b) of the Income Tax Act, dated 17.03.2022 calling upon the petitioner to file his reply on or before 23.03.2022 which is less than the period of seven days as held by the Division Bench of this Court in the case of The Income Tax Officer and others vs. Venkatala Iyyappa Rajanna (W.A. no.612/2025 DD 05.08.2025), wherein it is held as under:
“ORAL JUDGMENT
(PER: HON’BLE MR. VIBHU BAKHRU, CHIEF JUSTICE)
1. The Revenue has filed the present appeal impugning an order dated 04.06.2024 passed by the learned Single Judge of this Court in Writ Petition No. 12618 of 2024 [T-IT] captioned Venkatala Iyyappa Rajanna Vs. The Income Tax Officer and others [NC:2024 KHC:19107].
2. The respondent [Assessee] had filed the said petition, inter alia, impugning a notice dated 20.03.2022 issued under Section 148A (b) of the Income Tax Act, 1961 [Act] for the assessment year [AY] 2015-16 on the ground that the said notice did not provide sufficient time for the Assessee to file a response to show cause calling upon him to show cause why it was not a fit case for issuance of a notice under Section 148 of the Act.
3. The learned Single Judge has found merit in the aforesaid contention and accordingly, set aside the impugned notice as well as the notice dated 31.03.2022 issued under Section 148A (d) of the Act and further reassessment proceedings that were initiated pursuant to the said notice.
4. Before proceeding further, it would be relevant to refer to Section 148A of the Act, as was in force at the material time. The same is set out as below:
“148A. Conducting inquiry, providing opportunity before issue of notice under section 148.
The Assessing Officer shall, before issuing any notice under section 148,—
(a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;
(b) 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 and 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);
(c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);
(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires:
Provided that the provisions of this section shall not apply in a case where,—
(a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or
(b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or
(c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, 2[relate to, the assessee; or
(d) the Assessing Officer has received any information under the scheme notified under section 135A pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.]
5. It is clear from the plain reading of Clause (b) of Section 148A of the Act, that a notice under Section 148A(b) of the Act is required to provide an opportunity to the assessee to respond to the information which may suggests that the assessee’s income has escaped assessment. The minimum period of such notice is stipulated as “not less than seven days”. In the present case, the impugned notice was issued on 20.03.2022 and the Assessee was called upon to furnish a reply on or before 25.03.2022. Indisputably, the impugned notice did not comply with the requirement of providing a minimum period of seven days to respond to the said notice.
6. The impugned notice is contrary to law as rightly pointed out by the learned Single Judge.
7. In addition to the above, it is also relevant to note that the impugned notice was issued in respect of AY 2015-2016. Pursuant to the impugned notice, an order dated 31.03.2022 was passed under Section 148(d) of the Act, holding that it was a fit case for issuance of notice under Section 148 of the Act. The question, whether such notices issued in respect of the Assessment Year, 2015-2016 were sustainable was a subject matter of observation by the Supreme Court of India, in Union of India V. Rajiv Bansal1. During the said proceedings, it was readily conceded by the Revenue that all such notices issued on or after 01.04.2021 in respect of Assessment Year 2015-2016 were liable to be dropped. Paragraph 19 (e) and 19 (f) of the said decision are reproduced below:
“e. The Finance Act 2021 substituted the old regime for re-assessment with a new regime. The first proviso to Section 149 does not expressly bar the application of TOLA. Section 3 of TOLA applies to the entire Income-tax Act, including Sections 149 and 151 of the new regime. Once the first proviso to Section 149(1)(b) is read with TOLA, then all the notices issued between 1 April 2021 and 30 June 2021 pertaining to assessment years 2013-14, 2014-15, 2015-16, 2016-17, and 2017-18 will be within the period of limitation as explained in the tabulation below:
