ITAT Raipur Quashes Section 148A(b) Notice for Denying Seven Clear Days

Ashok Khubchandani Vs DCIT (ITAT Raipur)

Section 148A(b) Requires Clear Seven Days: Short Notice Invalidates Reassessment, Fresh Hearing Directed

The Legal Principle

The Raipur Tribunal held that a notice under section 148A(b) issued on 16 March 2023, requiring a response on or before 23 March 2023, did not comply with the statutory minimum opportunity requirement.

It quashed the notice and held that all subsequent proceedings were non-est. However, following the jurisdictional High Court’s approach, it also directed the Assessing Officer to provide a proper opportunity of hearing and decide the matter afresh in accordance with law.

The result must therefore be stated accurately: the existing reassessment proceedings failed, but the Tribunal directed fresh consideration rather than finally deciding the alleged on-money payment.

Background of the Dispute

The assessee was engaged in the construction business and had filed his return for AY 2019–20 on 31 October 2019, declaring income of ₹4,25,14,760.

A survey under section 133A was conducted in the case of Rajkumar Nanjiani. The Department alleged that the impounded material showed that the assessee and his wife, Mona Khubchandani, had purchased three immovable properties and paid ₹6,22,44,600 in cash over and above the registered consideration.

Reassessment proceedings were initiated against the assessee. The Assessing Officer proposed to tax his alleged 50% share of ₹3,11,22,300 as unexplained investment under section 69 read with section 115BBE.

The assessee denied making the cash payments and disputed the evidence relied upon.

Seller’s Admission and Denial of Cross-Examination

The Assessing Officer relied on the seller’s statement that he had received the cash and had surrendered the amount as undisclosed income.

The assessee requested an opportunity to cross-examine Rajkumar Nanjiani. The Assessing Officer declined, relying on the seller’s admission and taking the position that a right of hearing did not invariably include cross-examination.

A video-conference hearing was provided to the assessee’s representative. During that hearing, counsel alternatively submitted that, if the cash-payment allegation was not accepted as denied, only 50% of the alleged amount could be considered because the properties were jointly registered with the assessee’s wife.

After verifying the joint registration, the Assessing Officer added ₹3,11,22,300 in the assessee’s hands.

The alternative submission concerning allocation was not an admission that the alleged cash had actually been paid.

CIT(A) Sustained the Assessment

The CIT(A) rejected the assessee’s objections concerning reopening, approval, evidentiary reliability and natural justice.

It considered the impounded documents and survey statement mutually supportive and held that the addition did not rest solely on the statement.

The CIT(A) also rejected the cross-examination objection, reasoning that documentary evidence supported the allegation and that specific prejudice had not been established.

Before the Tribunal, however, the decisive challenge concerned an earlier procedural requirement: the time allowed to respond to the section 148A(b) notice.

Seven-Day Difference Was Not Clear Seven-Day Opportunity

The notice was issued on 16 March 2023, with compliance required on or before 23 March 2023.

The assessee argued that section 148A(b) required a period of not less than seven days. His submission was that both the issuance date and the compliance date had to be excluded when calculating clear days.

On that computation, only 17 to 22 March—six intervening days—were available.

The Revenue maintained that the interval from 16 to 23 March amounted to seven days and that the notice was valid.

The Tribunal rejected the Revenue’s position and held that the notice was not in accordance with law.

Raipur Precedents and Jurisdictional High Court Followed

The Tribunal referred to its decisions in DCIT v. Avani Ferro Alloys Pvt. Ltd., ITA Nos. 88 to 91/RPR/2025, dated 6 August 2026, and Atal Agrawal v. ITO, ITA No. 231/RPR/2026, dated 3 September 2026.

It also followed the Chhattisgarh High Court’s decision in MM Wonder Park Pvt. Ltd., WPT Nos. 72 of 2023 and 172 of 2022.

The High Court had quashed the defective notices while directing the Assessing Officer to provide a proper hearing and decide afresh. The Tribunal adopted that course.

Existing Proceedings Quashed; Merits Remained Undecided

The section 148A(b) notice was quashed, and the Tribunal declared the subsequent proceedings non-est.

The Assessing Officer was directed to afford a proper opportunity and reconsider the matter in accordance with law. The remaining grounds became academic and were not adjudicated.

Thus, the Tribunal did not decide whether the alleged cash payment occurred, whether the seller’s evidence was sufficient or whether cross-examination was indispensable on these particular facts.

Author’s Comments

A statutory response period is part of the opportunity to defend, not a drafting formality. Where the law prescribes a minimum period, a calendar-date difference cannot casually substitute for the opportunity required.

Equally, this ruling should not be described as substantive deletion of the on-money allegation. It invalidates the existing proceedings and requires the statutory process to be undertaken properly.

The direction to decide afresh also does not dispense with other legal requirements. Any further action must remain in accordance with law, including the applicable jurisdictional and limitation conditions.

The taxpayer succeeded on the notice defect; the underlying property-payment controversy remains open.

Cases Discussed

• Atal Agrawal Vs ITO (ITAT Raipur)– ITA No. 231/RPR/2026; Order dated 03/09/2026.  The Tribunal applied the earlier Raipur Bench decision concerning the statutory response period under Section 148A(b).
• DCIT Vs Avani Ferro Alloys Pvt. Ltd. (ITAT Raipur)– ITA Nos. 88 to 91/RPR/2025; Order dated 06/08/2026.  Considered the validity of reassessment proceedings and the requirements governing notices.
• MM Wonder Park Pvt. Ltd. (Chhattisgarh High Court)– WPT Nos. 72 of 2023 and 172 of 2022.  The jurisdictional High Court had quashed defective Section 148A(b) and Section 148 notices while directing the Assessing Officer to provide a proper hearing and decide the matter afresh.
• Bhagirath Aggarwal Vs CIT (Delhi High Court)– (2013) 351 ITR 143. Referred to in the assessment order. The Assessing Officer relied upon this judgment while considering the evidentiary significance of the seller’s statement.
• State of Jammu & Kashmir Vs Bakshi Gulam Mohd. (Supreme Court)– AIR 1967 SC 122. Referred to in the assessment order. Relied upon by the Assessing Officer concerning the circumstances in which cross-examination is necessary.
• Nath International Sales Vs Union of India (Delhi High Court)– AIR 1992 Delhi 295. Referred to in the assessment order. Cited concerning the right of hearing and cross-examination.

FULL TEXT OF THE ORIGINAL ORDER OF ITAT RAIPUR

This appeal for Assessment Year (‘AY’) 2019-20 filed by the assessee is directed against the order dated 18.03.2026 of Commissioner of Income Tax (Appeals), [‘CIT(A)’], National Faceless Appeal Centre (NFAC), Delhi, passed under section 250 of the Income Tax Act, 1961 (‘Act’).

2. Vide, eight effective grounds of appeal, the appellant assessee has raised following issues as under:

(i) Non providing of clear seven days’ compliance time vide notice under section 148A(b) of the Act.

(ii) Validity of notice under section 148 of the Act.

(iii) Validity of approval granted under section 151 of the Act.

(iv) Validity of the order under section 148A(d) of the Act.

(v) Illegality of reopened assessment order.

(vi) Taxability of Rs.3,11,22,300/- under section 69 of the Act.

(vii) Violation of principles of natural justice.

3. The relevant facts giving rise to this appeal are that the assessee is engaged in the business of constructions. He filed his Income Tax Return (‘ITR’) of the relevant year on 31.10.2019 declaring income of Rs.4,25,14,760/-. Based on the incriminating information found during the course survey proceedings under section 133A of the Act carried on Shi Rajkumar Nanjiani, the assessee’s case was reopened under section 148 of the Act. The impounded incriminating materials from the survey proceedings under section 133A of the Act carried on Shri Rajkumar Nanjiani revealed that the assessee along with his wife; Smt. Mona Khubchandani had purchased three immovable properties from Shri Rajkumar Nanjiani after making payments aggregating to Rs.6,22,44,600/- was paid in cash over & above the values shown in registered sale deeds (para 1 and 2 of the assessment order). During the course of reassessment proceedings, the Ld. Assessing Officer (‘AO’) show-caused the assessee to explain why not the unaccounted/unexplained investment of Rs.3,11,22,300/- (50% of on-money of Rs.6,22,44,600/- paid by the assessee along with his wife; Smt. Mona Khubchandani) be taxed under section 69 r.w.s. 115BBE of the Act. The scanned copies of incriminating material had been incorporated in the assessment order. The explanation offered by the assessee, during the course of the assessment proceedings was not found satisfactory by the Ld. AO; therefore, he taxed the sum of Rs.3,11,22,300/- under section 69 r.w.s. 115BBE of the Act as under:

“Assessee, in his reply to show cause notice also objected for the proposed addition on the basis of statement recorded u/s. 131 of the Income Tax Act. Assessee also quoted several Judicial judgement favouring assessee’s claim. However, the claim of the assessee that on the basis of statement recorded during the course of survey u/s. 133A from Sri. Rajkumar Nanjiani additions should not be made is not accepted as Sri. Rajkumar Nanjiani has admitted in the statement recorded u/s. 133A of the Income Tax that he has received cash of Rs.6,22,44,600/- from the assessee during the financial year 2018-19 towards sale of properties and has surrendered this difference amount received in cash as his undisclosed income for the financial year 2018-19. Hence, the statement recorded from Sri. Rajkumar Nanjiani during the course of survey u/s. 133A is holds good unless proved to be incorrect as held by Hon’ble Delhi High Court in the case of Bhagirath Aggarwal Vs CIT (351 ITR 143).

As Sri. Rajkumar Nanjiani has admitted in the statement recorded u/s. 133A of the Income Tax that he has received cash of Rs.6,22,44,600/- from the assessee during the financial year 2018-19 towards sale of properties, this statement holds good unless proved to be incorrect as held by Hon’ble Delhi High Court in the case of Bhagirath Aggarwal Vs CIT (351 ITR 143).

In the reply filed by the assessee in response to Show cause notice, assessee has requested to provide an opportunity of cross examination of Sri. Rajkumar Nanjiani. However, the request of the assessee is not entertained as Sri. Rajkumar Nanjiani has already admitted in the statement recorded u/s. 133A of the Income Tax that he has received cash of Rs.6,22,44,600/- from the assessee during the financial year 2018-19 towards sale of properties. Further, this stand is also supported by judgment of the Hon’ble Supreme Court as held in the case of State of J&K Vs. Bakshi Gulam Mohd. AIR 1967 (SC) 122 and in the case of Nath International Sales Vs. UOI AIR 1992 Del 295 that the right of hearing does not right to cross-examine. The right to cross examine must depend upon the include circumstances of each case and also on the statue concerned.

In the reply filed by the assessee in response to Show cause notice, assessee has also requested to provide an opportunity of personal hearing through video conferencing. Considering the assessee’s request, an opportunity of being heard through video conferencing has been given vide Notice dated 01.03.2024 fixing the date for hearing through video conferencing on 06.03.2024.

Accordingly, on 06.03.2024, assessee’s authorized representative has appeared through video conferencing and explained assessee’s stand on the issues raised in the show cause notice.

During the course of hearing through video conferencing, assessee’s authorized representative also stated that all the captioned Immovable property purchased by the assessee during the year under consideration are registered jointly in the name of assessee as well as his wife Smt. Mona Khubchandani, Further, A.R. of the assessee stated that in case the assessee’s claim that he has not paid any cash component to Sri. Rajkumar Nanjiani in respect of immovable property purchased during the year consideration in not accepted, then additions of only 50% of the alleged cash component of Rs.6,22,44,600/-be considered for proposed additions to the total income of the assessee.

In view of the assessee’s above request, the registered documents in respect of captioned properties purchased by the assessee from Sri. Rajkumar Nanjiani during the year under consideration has been verified. On verification of the same, it is noticed that all the 3 captioned properties purchased by the assessee from Sri. Rajkumar Nanjiani during the year under consideration are registered jointly in the names of assessee and his wife Smt. Mona Khubchandani.

Considering the above, the assessee’s request that only 50% of the alleged cash payments of Rs.6,22,44,600/- be considered for additions in case assessee’s claim that he has not paid any cash in respect of purchase of immovable property from Sri. Rajkumar Nanjiani during the year under consideration is accepted.

Subject to the above, though assessee denying for having paid the cash of Rs. Rs.6,22,44,600/- in respect of purchase of properties over and above the registered value as mentioned above to Srl. Rajkumar Nanjiani, for the reasons mentioned above and also as Sri. Rajkumar Nanjiani has admitted in the statement recorded u/s. 133A of the Income Tax that he has received cash of Rs.6,22,44,600/- from the assessee during the financial year 2018-19 towards sale of properties and has surrendered this difference amount received in cash as his undisclosed income for the financial year 2018-19, the entire cash of Rs.6,22,44,600/- paid by assessee to Sri. Rajkumar Nanjiani towards purchase of property during the financial year 2018-19 relevant to Assessment Year 2019-20 over and above the registration value is stands unexplained and considered as unexplained investments.

However, Considering the assessee’s request that only 50% of the alleged cash payments of Rs.6,22,44,600/- be considered for additions in case assessee’s claim that he has not paid any cash in respect of purchase of immovable property from Sri. Rajkumar Nanjiani during the year under consideration, 50% of the cash amount paid by the assessee to Sri. Rajkumar Nanjiani in respect of properties purchased during the F.Y. 2018-19, an amount of Rs.3,11,22,300/- is considered as assessee’s share of cash payment made towards purchase of property and same is added to total income of the assessee as unexplained investments u/s. 69 r.w.s. 115BBE of the Income Tax Act”

4. Aggrieved with the reassessment order, the assessee filed appeal before the Ld. CIT(A), who dismissed the appeal as under:

“4.1 The appellant’s given written submissions and grounds of appeal have been carefully perused. Vide ground 1 of this appeal, the appellant contended that notice u/s 148 was issued by the Jurisdictional Assessing Officer instead of through the faceless automated system, in violation of CBDT Notification dated 29.03.2022, rendering the proceedings void ab initio. In this regard it is stated that the contention of the appellant is not acceptable as the proceedings were ultimately conducted under the faceless regime as mandated u/s 144B. The issuance of notice u/s 148, even if assumed to have procedural deviation, does not vitiate the proceedings unless such deviation goes to the root of jurisdiction and causes demonstrable prejudice. The Hon’ble Courts have consistently held that procedural irregularities which do not affect substantive rights do not invalidate assessment proceedings. Further, the appellant has participated in the proceedings and filed submissions from time to time, thereby acquiescing to the jurisdiction. Hence, in view of Sections 292B and 292BB and the doctrine of substantial compliance, the reassessment proceedings cannot be invalidated on such technical ground. Thus, this ground of appeal is dismissed.

4.2 Vide ground 2 of this appeal, the appellant argued that approval u/s 151 was granted mechanically, evidenced by inconsistency in quantum of alleged escaped Income, indicating non-application of mind. On perusal of the records, it is observed that the competent authority has recorded satisfaction regarding escapement of Income. The discrepancy in figures is not material enough to invalidate the approval process. Approval u/s 151 is an administrative safeguard and not a quasi-judicial determination requiring elaborate reasoning. Further it is settled law that adequacy of reasons or minor inconsistencies cannot be grounds for invalidating sanction unless there is complete absence of application of mind, which is not the case here. Thus, this ground of appeal is dismissed,

4.3 Vide ground 3 of this appeal, the appellant contended that addition is solely based on statement recorded u/s 133A and impounded loose papers, which do not constitute reliable evidence. In this regard it is stated that the contention is not tenable as the impounded documents contain detailed transaction entries reflecting consideration higher than the registered value. The statement recorded during survey corroborates the entries in such documents. The documents were recovered from the premises of the counter-party and have direct nexus with the transaction involving the appellant. Loose papers, when supported by surrounding circumstances and statements, acquire evidentiary value and cannot be summarily disregarded. Thus, this ground of appeal is dismissed.

4.4 Vide ground 4 of this appeal, the appellant alleged violation of natural justice due to denial of cross-examination of Shri Rajkumar Nanjiani. This ground is not sustainable as it is observed that the addition is not solely based on the statement but also on documentary evidence. Cross-examination is required only where the statement is the sole basis of addition. The appellant has not demonstrated specific prejudice caused due to non-grant of cross-examination. Moreover, the appellant had adequate opportunity to rebut the material relied upon by the AO. Thus, this ground of appeal is dismissed.

4.5 Vide ground 5 of this appeal, the appellant denied any cash payment and submitted that no evidence exists to support addition u/s 69. In this regard on perusal of the records, it is observed that the documentary evidence indicates cash component in property transactions. The appellant has failed to furnish any credible explanation or supporting evidence to rebut such findings. Mere denial without substantiation cannot discharge the onus cast upon the appellant u/s 69. Therefore, the addition made by the AO is justified. Thus, this ground of appeal is dismissed.”

5. Before us, Shri Praveen Khandelwal, CA, Ld. Authorized Representative (AR) of the assessee, drawing our attention to the notice issued under section 148A(b) of the Act, submitted that the Ld. AO had not provided ‘clear seven days’ time for compliance; therefore, the consequential proceedings thereafter were illegal and void ab initio. Vide notice under section 148A(b) of the Act issued on 16.03.2023, the Ld. AO called response on or before 23.03.2023. Thus, the said notice under section 148A(b) of the Act issued on 16.03.2023 did not provide a clear seven days’ time mandatorily required under section 148A(b) of the Act. He submitted that the statutory mandate requires a period of ‘not less than seven days’ to be provided to the assessee for compliance. He further submitted that in computing this period, the date of issuance and the date of compliance had to be excluded. Consequently, the jurisdictional notice is rendered void and all subsequent proceedings emanating from it were ‘nullity and non-est in the eyes of law’, contended the Ld. AR.

6. On the other hand, the Ld. CIT-DR vehemently defended the impugned order by submitting that the Ld. AO had issued notice under section 148A(b) of the Act issued on 16.03.2023 for compliance on or before 23.03.2022. Thus, a period of 7 days had been provided by the Ld. AO. Therefore, the arguments advanced by the Ld. AR were liable to be rejected and the notice issued should be held valid.

7. We have heard both parties and have perused the material available on the record. For the sake of clarity, notice under section 148A(b) is reproduced as under:

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
INCOME TAX DEPARTMENT
OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX
CIRCLE (1)1, RAIPUR

–

Notice under clause(b) of section 148A of the Income-tax Act, 1961

Sir/Madam/Ms,

Whereas I have information which suggests that income chargeable to tax for the Assessment Year 2019-20 has escaped assessment within the meaning of section 147 of the Income-tax Act, 1961. The details of the information/ enquiry conducted on which reliance is being placed, along with supporting documents, are enclosed with this notice.

2. You are required to show-cause as to why, in view of the details contained in enclosures mentioned in point number 1 above, a notice section 148 of the Income tax Act, 1961 should not be issued.

3. You may submit your reply to this notice, along with supporting documents (if any) on or before 23/03/2023 electronically at www.incometax.gov.in.

TAPAN KUMAR CHATTERJEE
CIRCLE 1(1), RAIPUR

8. We find that similar issue has been dealt with by this Bench in favour of the assessee and against Revenue recently in the case of DCIT-1(1), Raipur Vs. Avani Ferro Alloys Pvt. Ltd in ITA Nos.88 to 91/RPR/2025, dated 06.08.2026 and in the case of Atal Agrawal vs. ITO-1, Raigarh, ITA No.231/RPR/2026, dated 03.09.2026. The Hon’ble Chhattisgarh High Court in the case of MM Wonder Park Pvt. Ltd. (WPT No. 72 of 2023 and WPT No. 172 of 2022), after quashing the notice issued under section 148A(b) of the Act and notice issued under section 148 of the Act, directed the Assessing Officer to afford proper opportunity of hearing to the assessee and thereafter to decide the matter afresh in accordance with the law. Respectfully following the decisions mentioned in this para, we, accordingly, hold that the notice issued by the Ld. AO on 16.03.2023 under section 148A(b) of the Act is not in accordance with law. Therefore, the said notice under section 148A(b) of the Act is not only quashed but we also direct the Assessing Officer to afford proper opportunity of hearing to the assessee and thereafter to decide the matter afresh in accordance with the law and in view of the decision of Hon’ble Chhattisgarh High Court in the case of MM Wonder Park Pvt. Ltd. (supra). Since the said notice under section 148A(b) of the Act is quashed; therefore, all other subsequent proceedings thereafter are non-est. Other grounds become academic only; hence, they are not being adjudicated here.

9. In the result, appeal of the assesse is allowed.

Order pronounced in the open court on 09/10/2026.