Himangshu Mahato Vanijya Pvt. Ltd. Vs PCIT (ITAT Ranchi)
The Income Tax Appellate Tribunal, Ranchi Bench, allowed the appeal filed by Himangshu Mahato Vanijya Pvt. Ltd. against the revisionary order dated 30 January 2024 passed by the Principal Commissioner of Income Tax, Dhanbad, under Section 263 of the Income Tax Act, 1961, for Assessment Year 2018-19. The Tribunal held that the notice issued under Section 148A(b) was invalid because the assessee had not been granted seven clear days to submit its response. The Tribunal allowed the appeal on this jurisdictional ground without examining the merits of the revision proceedings.
The assessee company had been struck off the Register of Companies because of non-operation of business. It subsequently approached the National Company Law Tribunal, Kolkata Bench, under Section 252(3) of the Companies Act, 2013, and obtained an order restoring its name on 3 May 2021. Following restoration, the assessee filed its income tax return on 27 October 2022 in response to a notice under Section 148, declaring income of ₹11,55,740. The case was selected for scrutiny concerning mutual fund investments of ₹1 crore and interest receipts of ₹86,42,130. After issuing notices under Sections 143(2) and 142(1) and examining the documents furnished, the Assessing Officer accepted the returned income.
Subsequently, the PCIT invoked Section 263, observing that the Assessing Officer had not adequately verified the source of investments and interest income. The PCIT noted that fixed deposits increased from ₹12,58,97,878 in AY 2017-18 to ₹15,99,64,720 in AY 2018-19, whereas interest income declined from ₹1,02,04,535 to ₹86,50,836. Considering these matters insufficiently examined, the PCIT directed a fresh assessment after necessary enquiries and verification. The assessee challenged the revision, maintaining that the relevant documents had already been examined during assessment proceedings.
During the hearing, the assessee raised a jurisdictional objection concerning the notice under Section 148A(b), issued on 15 March 2022 and requiring compliance by 22 March 2022. The assessee contended that the statutory response period had to provide seven clear days, excluding both the date of issuance and the date fixed for compliance. Accordingly, only six clear days had been available. Reliance was placed on Satish Kumar Vs PCIT, decided by the jurisdictional High Court on 28 August 2023, and Imran Ahmed, decided by ITAT Ranchi on 18 December 2024. The Departmental Representative acknowledged that only six clear days had been provided when calculated in accordance with the jurisdictional High Court’s interpretation.
The Tribunal agreed with the assessee and followed the decisions in Satish Kumar and Imran Ahmed. It held that the notice issued under Section 148A(b) was invalid and unsustainable in law because the mandatory response period had not been provided. The Tribunal expressly declined to examine the merits of the dispute under Section 263 and allowed the assessee’s appeal. The order was pronounced on 20 February 2025.
Cases Discussed
- Satish Kumar Vs PCIT, WP No. 2640/2023, dated 28.08.2023 (Jharkhand High Court) – Relied upon for the requirement of seven clear days to respond to a notice under Section 148A(b).
- Imran Ahmed, ITA No. 357/Ran/2024, dated 18.12.2024 (ITAT Ranchi) – Followed for holding that a notice granting fewer than seven clear days to respond is invalid and consequential proceedings cannot survive.
FULL TEXT OF THE ORDER OF ITAT RANCHI
1.This appeal by the assessee is directed against the order of the learned Principal Commissioner of Income Tax, Dhanbad, [in short, the ld. PCIT] dated 30/01/2024 passed under Section 263 of the Income Tax Act, 1961 (in short, the Act) for the Assessment Year (AY) 2018-19 by raising following grounds of appeal:
“1. For that the grounds of appear hereto are without prejudice to each other.
2.1 For that in the facts and circumstances of the case the learned. PCIT is not justified for not taking cognizance in the order passed of the learned Assessing Officer after considering all the document filed by the appellant company.
2.2 For that in the facts and in the circumstances of the case, the learned. PCIT failed to understand that whatever interest earned by the appellant company is out of fixed deposit from Nationalized bank and the interest earned is duly reflected in Form 26AS as well as the TDS deducted is also reflected.
2.3 For that in the facts and the circumstances of the case the learned PCIT failed to understand that this case has been selected for scrutiny under CASS and the reason for scrutiny has been mentioned during the course of selection. The reason for selection was 1 Crore fresh deposit in MF and Rs. 8650836/- interest earned during the year which the Assessing Officer has verified and finally accepted the contention of the appellant company.
2.4 For that in the facts and circumstances of the case learned PCIT should appreciate that the learned. Assessing Officer has asked the question on the grounds of selection of case in Computer Assisted Scrutiny Selection (CASS).
2.5 For that in the facts and circumstances of the case there was no such direction in the selection regarding trade payable shown by the appellant company.
2.6 For that in the facts and circumstances of the case the learned PCIT is not justified regarding the payment of interest to the lenders which is supported by sufficient document. The appellant company has submitted ledger copy, TDS return, acknowledgement and bank account of the lenders during the course of 263 proceeding before the PCIT but without considering all those document set aside for fresh adjudication and cancelled the order passed u/s 147 read with section 143(3) of the Income Tax Act, 1961 dated 27/03/2023.
2.7 For that in any view of the matter, the learned PCIT passed the order for fresh adjudication u/s 263 of the Income Tax Act 1961 is arbitrary, unjustified, void ab initio and bad in law in any case the order passed by the learned PCIT is fit to be quashed.
3. For that the appellant reserves its right to file detail submission at the time of hearing.
4. For that the appellant craves leave to urge add or alter any other ground at the time of hearing.”
2. Facts of the case in brief are that the appellant company has filed its return of income on 27/10/2022 disclosing an income of ₹ 11,55,740/- in response to notice under Section 148 of the Act. The name of the said company was struck off from register of company due to non-operation of business and thereafter the appellant company filed an application before the National Company Law Tribunal (NCLT), Kolkata Bench, Kolkata under Section 252(3) of the Companies A`ct, 2013 for restoration of the company in the Registrar of Company and accordingly, the Hon’ble NCLT has passed an order for restoration of the company on 03/05/2021.
3. That the appellant company could not file its return of income in due time as provided under Section 139 of the Act due to its name being struck off from the Registrar of the Company. After restoration of the same as mentioned above, notice under Section 148 of the Act was issued to the appellant for filing its return of income, in response to that, the appellant company filed its return of income accordingly.
4. That after filing return of income, the case of assessee company was selected for scrutiny to verify the investment in Mutual Fund (MF) to the tune of ₹ 1.00 crore and interest received to the tune of ₹ 86,42,130/-, the source of which could not be explained by the appellant company as no return was filed under Section 139(1) of the Act because of aforesaid reasons.
5. That statutory notices under Section 143(2) and 142(1) of the Act were issued and the appellant company made necessary compliance. During the course of assessment proceedings, the appellant company has submitted all the relevant documents which was requisitioned by the Assessing Officer and were duly verified by him. The Assessing Officer finally, accepted the returned income as declared by the appellant company.
6. That a notice under Section 263 of the Act was issued to the appellant company by the ld. PCIT on the ground that the Assessing Officer has not verified the source of investment and interest received thereon. The ld. PCIT in his order under Section 263 of the Act has mentioned that the appellant company’s fixed deposit was increased from ₹ 12,58,97,878/- in A.Y. 2017-18 to ₹ 15,99,64,720/- and the interest income was decreased from ₹ 1,02,04,535/- in A.Y. 2017-18 to ₹ 86,50,836/- in A.Y. 2018-19 which was never verified by the Assessing Officer during the course of assessment proceedings and nor any explanation was sought from the appellant company. The ld. PCIT, Dhanbad, therefore, invoked jurisdiction under Section 263 of the Act and directed the Assessing Officer to make a fresh assessment after affording appellant company a reasonable opportunity of being heard and after conducting necessary enquiry and verification on the issues mentioned above. Aggrieved by the order of ld. PCIT passed under Section 263 of the Act, the appellant company has preferred appeal before this Tribunal and raised various grounds of appeal as per the appeal memo.
7. During the course of hearing before us, the appellant company has raised a legal issue that a notice under Section 148A(b) of the Act dated 15/03/2022 was issued to the assessee, compliance of which was sought for on or before 22/03/2022. As per the provisions of law, the compliance period in the notice issued under Section 148A(b) of the Act, a clear seven days has to be given to the assessee for making compliance excluding the date of notice and the date of compliance. The appellant’s counsel placed reliance on the decision of the Hon’ble Jurisdictional High Court of Ranchi in the case of Satish Kumar Vs PCIT in WP No. 2640/2023 dated 28/08/2023 which was subsequently followed by the ITAT in the case of Imran Ahmed in ITA No. 357/Ran/2024 dated 18/12/2024 wherein the Hon’ble Tribunal by following the decision of Hon’ble High Court has held as under:
“6. Considering the aforesaid judgment as per the notice issued to the assessee U/s 148A of the Act, the assessee gets only five clear days for response i.e. excluding the date of issuance of the notice and the date on which response is sought for. This is therefore violative of the mandate as prescribed in the Act and also as per the principle laid down by the Hon’ble High Court (supra). Therefore, on this score alone, the notice U/s 148A(b) of the Act is hereby quashed and set aside and all the subsequent proceedings becomes a nullity and non-est in the eyes of law.” As such, the ld. AR of the assessee submitted that the notice issued u/s 148A(b) of the Act be treated as invalid.
8. The learned Departmental Representative (ld. CIT-DR), on the other hand, though, justified the validity of the notice issued under Section 148A(b) of the Act, he fairly conceded that in view of decision of Hon’ble Jurisdictional High Court on this issue where seven clear days have to be given to the appellant company excluding the date of issuance of notice and date of compliance. However, in the present case, only six clear days have been given to the assessee.
9 .We have considered the rival submissions of both the parties and we are in agreement with the submission made by the ld. AR of the assessee that seven clear days have not been given to the appellant company in this case and thus, following the decision of Hon’ble Jurisdictional High Court (supra) and also the ITAT Ranchi Bench decision in the case of Imran Ahmed (supra), the notice issued under Section 148A(b) of the Act is treated as invalid and not sustainable in the eyes of law. Needless to say that we are not going into the merit of the case. We hold it accordingly.
10.In the result, this appeal of assessee is allowed.
Order announced in open court on 20th February, 2025.
