Bhupatbhai Rangildas Lakhwala Vs ITO (Gujarat High Court)
Summary: The Gujarat High Court allowed two connected writ petitions challenging reassessment proceedings because the Assessing Officer had failed to provide the minimum seven-day period prescribed under Section 148A(b) of the Income Tax Act, 1961. Referring to the facts of Special Civil Application No. 13380 of 2022, the Court recorded that the petitioner had filed his return for AY 2018-19 on 06.10.2018, declaring income of Rs.13,14,220/-. The return was processed under Section 143(1) and accepted without scrutiny under Section 143(2). A subsequent notice dated 19.03.2022 required a response by 24.03.2022, allowing only five days. The Assessing Officer sought to justify the shorter period on the ground that the petitioner had suffered no prejudice.
The Court rejected that contention, holding that violation of the statutory requirement was itself prejudicial to the taxpayer and could not be justified by asserting an absence of prejudice. Consequently, the Court quashed the impugned notices under Section 148 and orders under Section 148A(d), dated 31.03.2022, in both petitions. It remanded the matters to the respondent to comply with Section 148A(b) and pass fresh orders after following due procedure of law. The exercise was directed to be completed within 12 weeks from receipt of a copy of the order. Rule was made absolute to that extent, without costs.
FULL TEXT OF THE ORDER OF GUJARAT HIGH COURT
1. This Court while issuing the notice vide order dated 18.07.2022 had specifically recorded the submissions of learned advocate Mr.Manish J. Shah appearing for the petitioner contending that the provisions of Section 148A(b) of the Income Tax Act, 1961 (for short ‘the Act’), which mandates the Assessing Officer to give a minimum time period of 07 (seven) days to the assessee to furnish the reply, has been violated. After the issuance of the impugned notice the respondent Assessing Officer has filed reply dated 11.02.2023 dealing with the aforesaid contentions.
2. We find from the affidavit-in-reply that the Assessing Officer has admitted that the petitioner has specifically denied that the time limit of 07 (seven) days is not violated, however, since the petitioner was not prejudiced in any manner the impugned notice can be said to be legal and valid.
3. In light of the aforesaid undisputed facts, we are of the opinion that the impugned order dated 31.03.2022 passed under section 148A(d) of the Act as well as the notice under Section 148 of the Act dated 31.03.2022 are required to be quashed and set aside in the captioned writ petitions.
4. For the sake of brevity, the facts are being referred to from the record of Special Civil Application No.13380 of 2022. The facts leading to the present writ petition is that the petitioner filed his return of income under Section 139(1) of the Act on 06.10.2018 declaring total income of Rs.13,14,220/-. The return was processed under Section 143(1) of the Act and thereafter, accepted as such without conducting scrutiny assessment by issuing notice under Section 143(2) of the Act. After almost a period of three years from the end of the assessment year, the petitioner was issued a notice under Section 148A(b) of the Act dated 19.03.2022 suggesting that the income chargeable to tax for the Assessment Year 2018-19 has escaped assessment. The time limit as mentioned in the said notice to respond to such notice has been specified as 24.03.2022, thus, unquestionably the petitioner has been asked to respond to the notice within a period of five days.
5. We may at this stage refer to the provisions of Section 148A(b) of the Act, which read thus:
“148A. 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, with the prior approval of specified authority, 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:”
6. Thus, on a bare reading of the aforesaid provision clarify that the Assessing Officer has to give a minimum period of seven days to the assessee-taxpayer to furnish the reply in response to the notice. The respondent-Assessing Officer has made a vain attempt to convince this Court for justifying his action of offering a period less than seven days as mandated by the Statute by contending that the same is not prejudicial to the assessee-taxpayer. It is tried that the violation of the statutory provision in the first instance cannot be justified on the ground that it has not caused any prejudice to the interest of the assessee-taxpayer, since the violation of the statutory provision itself is prejudicial to the interests of the assessee-taxpayer.
7. Hence, in view of the undisputed fact that the Assessing Officer did not follow the mandatory period of 07 (seven) days, thereby enabling the petitioner-assessee to file its reply, the petitions succeed and are accordingly allowed. The impugned notices and orders dated 31.03.2022 in both the petitions are hereby quashed and set aside, and the matters are remanded to the respondent to comply with the provisions of Section 148A(b) of the Act and pass a fresh order after following due procedure of law.
8. Such exercise shall be completed within 12 (twelve) weeks from the date of receipt of copy of this order.
9. Rule is made absolute to the aforesaid extent with no order as to costs.
Registry to place a copy of this order in the connected matter.
