Facts of the Case

The petitioner, a co-operative thrift and credit society, challenged the validity of: Notice dated 22 March 2022 issued under Section 148A(b),

  • Order dated 06 April 2022 under Section 148A(d), and
  • Notice dated 07 April 2022 under Section 148.

The reassessment proceedings were initiated on the ground that the petitioner had deposited cash amounting to ₹92,11,800 in its bank account without filing an income tax return.

The petitioner responded within the stipulated time explaining that:

  • The cash deposits were received from its members,
  • Proper receipts were issued,
  • KYC of members was conducted, and
  • Books of accounts were audited and maintained properly.

However, the Assessing Officer rejected the reply stating that the petitioner failed to furnish the list of members who contributed the cash.

Issues Involved

  1. Whether providing only three days’ time to respond to a notice under Section 148A(b) violates the statutory requirement of “not less than seven days”?
  2. Whether reassessment proceedings are valid when adequate opportunity of being heard is not granted?
  3. Whether such procedural violation causes prejudice to the assessee?

Petitioner’s Arguments

  • The petitioner was granted only three days to respond, which is contrary to the statutory mandate of minimum seven days under Section 148A(b).
  • Due to insufficient time, the petitioner could not furnish the detailed list of members.
  • All transactions were legitimate, recorded, and supported by audited accounts and KYC compliance.
  • The violation of mandatory procedure resulted in serious prejudice to the petitioner.

Respondent’s Arguments

  • The petitioner had filed a reply within the time stipulated in the notice.
  • No request for extension of time was made by the petitioner.
  • Therefore, no prejudice was caused.

 

Court’s Findings / Judgment

The Delhi High Court held that:

  • Section 148A(b) mandates granting a minimum of seven days to the assessee for filing a reply.
  • Providing only three days is a clear violation of statutory requirement.
  • Although the petitioner responded, the inadequate time prevented submission of complete details.
  • Such procedural lapse resulted in grave prejudice to the petitioner.

Final Order

  • The order dated 06 April 2022 under Section 148A(d) and notice under Section 148 were quashed.
  • The revenue is at liberty to take fresh steps in accordance with law.

Important Clarification

  • The requirement of granting minimum seven days under Section 148A(b) is mandatory and not directory.
  • Any reassessment proceedings initiated without complying with this procedural safeguard are liable to be set aside.
  • Even if the assessee responds, inadequate time leading to incomplete response amounts to violation of natural justice.

Sections Involved

  • Section 148A(b), Income Tax Act, 1961
  • Section 148A(d), Income Tax Act, 1961
  • Section 148, Income Tax Act, 1961 

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:1861-DB/MMH12052022CW73852022_172315.pdf

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