Maa Sharda Endeavor Private Limited Vs ACIT/DCIT (ITAT Ranchi)
Seven Clear Days Missing: Reassessment and Revision Lose Their Foundation
Cases Discussed:
- Satish Kumar Vs PCIT, W.P. No. 2640/2023, dated 28.08.2023 (Jharkhand High Court) — Followed. The jurisdictional High Court held that minimum seven clear days must be given to respond to a notice under section 148A(b).
- Agarwal Metcom Private Limited Vs ACIT/DCIT, ITA No. 246/RAN/2026, dated 29.07.2026 (ITAT Ranchi) — Followed. Invalid section 148A(b) notice rendered the reassessment invalid and consequential section 263 revision unsustainable.
- National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 383 (SC) — Relied upon for admitting the additional ground involving a purely legal issue. viewOrder-14
An Invalid Notice Cannot Support Subsequent Proceedings
The Ranchi Bench of the Income Tax Appellate Tribunal allowed an appeal against a section 263 revision order after finding that the underlying reassessment proceedings originated from an invalid notice under section 148A(b).
The notice was issued on 22 March 2022, requiring a response on or before 29 March 2022. Following the jurisdictional High Court’s decision in Satish Kumar v. PCIT, the Tribunal held that this did not provide the required seven clear days.
It quashed the notice and treated the proceedings taken thereafter as void. The assessee thus succeeded by challenging the legal foundation of the reassessment that the PCIT had sought to revise.
Allegations of Transactions Without Movement of Goods
The proceedings arose from information suggesting that the assessee had entered into sales and purchases without actual movement of goods.
The order refers to information concerning transactions with Ganpati Steel Traders and Rudra Enterprises, along with GST-related information involving other entities allegedly engaged in paper transactions. viewOrder-14
On the basis of this information, the AO initiated proceedings under section 148A(b), followed by a notice under section 148.
The assessee filed a return in response and complied with notices issued during the proceedings. Ultimately, the AO completed the reassessment by accepting the returned income without making an addition. viewOrder-14
The allegations formed the background to the reopening. Their correctness was not adjudicated by the Tribunal in this appeal.
PCIT Considered the Verification Inadequate
The PCIT examined the reassessment and concluded that the AO had accepted the assessee’s explanation without further verification.
By an order dated 31 March 2026, the PCIT held the assessment erroneous and prejudicial to the interests of the Revenue within the meaning of section 263.
He set aside the assessment and directed the AO to conduct detailed verification of the issues identified in the revision order, after giving the assessee an opportunity of hearing. viewOrder-14
The assessee challenged this action, contending that the AO had already examined the relevant issues and that the necessary documents had been furnished. It also objected to the manner in which the revision proceedings and its submissions had been dealt with.
An Additional Ground Changed the Course of the Appeal
Before the Tribunal, the assessee raised an additional legal ground: the reassessment itself was invalid, and therefore the section 263 order founded on it could not survive.
The objection concerned the response period in the original section 148A(b) notice. The assessee relied on Satish Kumar v. PCIT, W.P. No. 2640/2023, judgment dated 28 August 2023, for the requirement of seven clear days. viewOrder-14
The Revenue opposed admission of this ground because the assessee had not raised it before the departmental authorities.
The Tribunal rejected that objection. Relying on National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC), it admitted the ground as a purely legal issue.
Thus, the appeal against revision became the occasion for examining whether the underlying reassessment had a valid jurisdictional foundation.
Seven Calendar Dates Were Not Seven Clear Days
The Tribunal examined the notice dated 22 March 2022, which required the assessee to submit its response and supporting documents electronically by 29 March 2022.
It held that the required seven clear days had not been granted. The point was not merely that the two dates appeared a week apart; the statutory opportunity had to satisfy the clear-day requirement applied by the jurisdictional High Court.
The Bench also followed Agarwal Metcom Private Limited v. ACIT/DCIT, ITA No. 246/RAN/2026, order dated 29 July 2026.
In that case, the coordinate Bench had held that failure to provide the requisite response period rendered the reassessment invalid. Consequently, revision proceedings initiated under section 263 on that invalid assessment also became unsustainable. viewOrder-14
The Defect Carried Through to the Revision
Applying these authorities, the Tribunal declared the section 148A(b) notice invalid and quashed it.
It further held that the entire proceedings taken thereafter were void in law. This removed the foundation of the reassessment and, consequently, the revision challenged before it. viewOrder-14
The appeal was allowed. The Tribunal did not resolve the competing contentions about whether the AO’s enquiries into the alleged transactions were adequate.
Author’s Comments
The ruling illustrates a useful distinction between an erroneous assessment and an assessment lacking a valid legal foundation. Before examining whether the AO should have conducted further enquiry, the Tribunal first addressed whether the reassessment proceedings were validly initiated.
It also demonstrates the practical value of scrutinising the original notice even in an appeal directed against a later section 263 order. A defect at the beginning may affect the proceedings that follow.
The additional-ground ruling is equally relevant. The Tribunal permitted the jurisdictional issue to be raised despite the Revenue’s objection that it was being taken for the first time.
However, the decision should be understood within its facts: the specific response window failed the seven-clear-days requirement applied through binding jurisdictional precedent. The Tribunal did not find that the alleged transactions were genuine or that the AO’s verification was sufficient.
The revision failed because the proceedings beneath it were invalid-not because the disputed transactions received approval on merits.
FULL TEXT OF THE ORDER OF ITAT RANCHI
1. This appeal by the assessee is directed against the order of the ld. PCIT (Central), Patna at Ranchi [in short, the ld. PCIT] dated 31/03/2026 for the Assessment Year (AY) 2018-19, wherein the assessee has raised following grounds of appeal:
“1. Whether, a scrutiny assessment under Section 143(3) is passed, followed by reassessment proceedings under Section 147 (read with Section 148), and the Assessing Officer (AO) specifically examines issues but makes no additions in the final reassessment order, the revision under Section 263 is not sustainable in the eyes of law and fit to be quashed?
2. Whether, the assessee has submitted all the required documents in assessment proceeding and in also the proceeding u/s 263 of the Act. The revision proceeding under Section 263 is considered invalid if the show-cause notice (SCN) fails to specify the exact documents or inquiries required. Without mentioning the failure part of assessee and without considering the submission made by the assessee the proceeding u/s 263 is not sustainable in the eyes of law and fit to be quashed.
3. Whether, the Ld. PCIT failed to discuss and dispose all the grounds raised by the assessee in the order u/s 263. Without disposing all the grounds, it is violation of principle of natural justice?
4. That the assessee craves to raise any other ground/s at the time of hearing of the appeal.”
2. Facts of the case, in brief, are that this case was selected for scrutiny on the specific information received by the Assessing Officer that the assessee has booked bogus sales and purchases from M/s Ganpati Steel Traders without any actual movement of goods during the assessment year under consideration. The Assessing Officer also noted that M/s Ganpati Steel Traders has sold materials to the assessee during the F.Y. 2017-18. The assessee has also booked bogus sale and purchase materials to M/s Rudra Enterprises without any actual movement of goods during the F.Y. 2017-18. The Assessing Officer also noted that as per information passed by the GST Department, M/s Divine Alloys & Power Company Ltd. indulged in purchase and sale only on paper without actual movement of Goods. The beneficiary person have issued sale bill to M/s Divine Alloys & Power Company Ltd. but actually sold the goods to some other person, which is undisclosed. They indulged in the Transaction to suppress the gross profit as per their wish. The Assessing Officer also observed that as per information uploaded through Insight Portal it is found that M/s Mideast Intergrated Steels Limited has made a sale of Rs.467.40 Crores while purchase during the year is only Rs.257.87 Crores. The difference of Rs.209.53 crores between sales and purchase for the year and become not shown in his ITR. From the above facts it is clear that M/s Midest Intergranted steels Limited has taken fake purchase and further provided it to other buyers who has taken purchase from M/s Midest steels Limited. The Assessing Officer, therefore, on the basis of the said information received, issued notice under Section 148A(b) of the Income Tax Act, 1961 (in short, the Act) to determine the actual concealment of tax during the assessment year under consideration. Accordingly, notice under Section 148 of the Act was issued to the assessee. The assessee company filed its return of income in response to the notice issued under Section 148 of the Act and thereafter made necessary compliance to the notices issued by the Assessing Officer from time to time. The Assessing Officer, after providing several opportunities to the assessee, finally passed assessment order by accepting the income tax return filed by the assessee.
3. The order of the Assessing Officer, however, was set aside by the ld. PCIT, Central, Patna vide its order dated 31/03/2026 on the ground that the Assessing Officer had accepted the contention of the assessee without making any further verification and therefore, the impugned assessment order was erroneous in so far as it is prejudicial to the interests of the revenue within the meaning of Section 263 and directed the Assessing Officer to make a fresh assessment after conducting detailed verification of the issue raised and highlighted in the order of the ld. PCIT under Section 263 of the Act after giving the assessee sufficient opportunity of being heard.
4. Aggrieved by the order of the ld. PCIT, the assessee has filed the present appeal before this Tribunal.
5. Before this Tribunal, the assessee has raised additional grounds as under:
“1. That on the facts and in the circumstances of the case and in law, assessment order passed u/s 147 r.w.s 144 dated 31.03.2024 is itself void and as such, the impugned order u/s 263 passed on such invalid order has no legs to stand before law, hence liable to be quashed.
2. That on the facts and in the circumstances of the case and in law, for that the original assessment order passed U/s 147 dated 31/03/2024 is contended to be avoid to the extent that the 148 proceedings was initiated vide notice dated 22/03/2022 U/s 148A(b) compliance to which was sought for on or before 29/03/2022, whereas, as per the provisions of law, the clear period of not less than 7 days should be allowed in the show cause notice period. Reliance on this legal issue is placed upon the decision of Hon’ble Jurisdictional High Court in the case of Satish Kumar Vs PCIT in WP 2640/2023 dated 28/08/2023. As such, the notice issued U/s 148A(b) dated 22/03/2022 was bad in law and proceedings initiated thereby is fit to be quashed.”
6. In the additional grounds of appeal raised, the assessee has submitted that the original assessment order in this case was passed under Section 147 dated 31/03/2024 is void in the eyes of law on the ground that the proceedings under Section 148 of the Act was initiated vide notice dated 22/03/2022 under Section 148A(b) of the Act, the compliance of which was sought for on or before 29/03/2022 whereas as per the provisions of law, the clear period of not less than seven days should be allowed in the show cause notice period. Reliance on this legal issue is placed upon on the decision of the Hon’ble Jurisdictional High Court in the case of Satish Kumar Vs PCIT in WP No. 2640/2023 dated 28/08/2023, as such notice issued under Section 148A(b) dated 22/03/2022 was bad in law and the proceedings initiated thereby is fit to be quashed.
7. The ld. CIT-Departmental Representative raised objection on the ground that this issue was never taken up before any revenue authority and this additional ground has been raised before this Bench for the first time and therefore, the same should not be entertained and admitted.
8. We have considered the rival submissions and after given due consideration of the Hon’ble Supreme Court’s decision in the case of NTPC Vs CIT (1998) 229 ITR 383 (SC), we admit the additional ground which is purely legal and can be raised at any point of proceedings. We have also gone through the decision of the Hon’ble Jurisdictional High court in the case of Satish Kumar Vs PCIT dated 28/08/2023 (supra). The Hon’ble High Court in the said decision has decided that minimum seven clear days be given to respond to the notice issued under Section 148A(b) of the Act which was duly followed by the Coordinate Bench of this Tribunal in the case of Agarwal Metcom Private Limited vs ACIT/DCIT in ITA No. 246/Ran/2026 order dated 29/07/2026 which reads as follows:
“8. We have considered the rival submissions. A perusal of the facts in the present case clearly shows that the notice issued under Section 148A(b) of the Act dated 22/03/2022 in respect of the reassessment proceedings itself is invalid in so far as the requisite seven days time has not been granted to the assessee. This being so, the original reassessment order passed under Section 147 read with section 143(3) dated 31/03/2024 itself is found to be invalid. This is the order which has been treated as erroneous and prejudicial to the interest of revenue. As the said reassessment order dated 31/03/2024 is found to be invalid obviously the consequential revisionary proceedings initiated by the ld. PCIT on such invalid order would become invalid. This being so, on this ground, the order passed by the ld. PCIT under Section 263 of the Act is quashed as being invalid. As we have quashed the order passed under Section 263 of the Act on account of the invalidity of the reassessment order passed under Section 147 read with section 143(3) of the Act dated 31/03/2024, we are not going into the other issues raised by the assessee.”
9. In the present case, it is found that the notice under Section 148A(b) of the Act was issued on 22/03/2022 and the assessee was asked to submit its response with supporting documents (if any) on the above mentioned issues electronically in ‘e-proceedings’ facility through your account in e-filing portal at your convenience on or before 29/03/2022. Thus, it is found that clear seven days has not been given to the assessee while issuing notice under Section 148A(b) of the Act, therefore, in view of the Hon’ble Jurisdictional High Court’s decision in the case of Satish Kumar Vs PCIT (supra), this notice is not a valid notice in the eyes of law. In view of the above facts and circumstances, this impugned notice under Section 148A(b) dated 22/03/2022 is found to be invalid and we quash the same. Therefore, the entire proceedings taken thereafter is also treated as void in the eyes of law.
10. In the result, this appeal of the assessee stands allowed.
Order pronounced in open court on 30/09/2026.
