The Income Tax Appellate Tribunal, Kolkata Bench, has set aside reassessment proceedings against Bankura Police Employees Co-op. Credit Society Ltd. after finding that notices issued under Section 148A(b) of the Income-tax Act, 1961 failed to comply with mandatory procedural safeguards. The Tribunal held that notices granting less than seven days for compliance and unsigned notices are legally invalid, rendering subsequent reassessment orders unsustainable. This decision underscores the importance of strict adherence to statutory timelines and formalities in tax reassessment proceedings.
Background & Facts
The Genesis of the Case
The assessee, Bankura Police Employees Co-op. Credit Society Ltd., did not file income tax returns for Assessment Years (AY) 2018-19 and 2019-20. The Assessing Officer (AO) initiated reassessment proceedings based on information from the Income Tax Department's Insight Portal indicating substantial cash transactions in the assessee's bank account at IDBI Bank, Bankura branch.
Key Facts
- The assessee is a cooperative credit society registered under the Cooperative Societies Act, 1912, with its registered office at Ward-3(1), Bankura Police Line, Bankura, West Bengal.
- The AO issued notices under Section 148A(b) dated 21.03.2022 for AY 2018-19 and 23.03.2023 for AY 2019-20, calling upon the assessee to submit supporting documents.
- For AY 2018-19, the notice required compliance by 22.03.2023, granting only two days for response.
- For AY 2019-20, the notice under Section 148 was issued without any digital or manual signature.
- The assessee did not file any return of income for the impugned assessment years.
Procedural History
- 21.03.2022: AO issued notice under Section 148A(b) for AY 2018-19.
- 23.03.2023: AO issued notice under Section 148 for AY 2019-20.
- 19.03.2024: AO framed assessment under Section 147/144/144B for AY 2019-20.
- 13.02.2026: Learned CIT(A), NFAC, dismissed the assessee's appeals.
- 09.07.2026: Appeals heard by Kolkata ITAT.
- 16.07.2026: Tribunal pronounced the order allowing both appeals.
The Parties' Positions
- Assessee's Contention: The assessee argued that the notices under Section 148A(b) and Section 148 were invalid due to non-compliance with statutory timelines and absence of signatures, rendering all subsequent proceedings illegal.
- Revenue's Stand: The Revenue defended the validity of the notices and the reassessment orders, relying on the orders of the lower authorities.
Relief Sought
The assessee sought quashing of the notices issued under Section 148A(b) and Section 148, setting aside the reassessment orders dated 19.03.2024, and remission of the matter back to the AO for fresh adjudication in accordance with law.
The Legal Issue
The central question was whether notices issued under Section 148A(b) of the Income-tax Act, 1961 must comply with the mandatory seven-day compliance period and whether unsigned notices under Section 148 are legally valid.
Arguments Presented
For the Appellant (Assessee)
- The assessee relied on the decision of the Co-ordinate Bench in Ekta Merchants Pvt. Ltd. v. ITO (ITA No.2651/Kol/2025, dated 05.03.2026), which held that notices granting less than seven days for compliance are invalid.
- The assessee also cited judgments of the Hon'ble Karnataka High Court in Panjos Builders P Ltd. v. ITO (WP No. 23572 of 2023, dated 08.01.2024), ITAT Bangalore in E Ashwath Narayan v. ITO (ITA No. 1920/Bang/2024, dated 17.04.2025), and Kolkata ITAT in Blackstone Overseas Pvt. Ltd. v. ITO (ITA No. 2026/Kol/2025, dated 18.12.2025), all affirming the seven-day compliance requirement.
- For the unsigned notice under Section 148, the assessee relied on M/s Jagmag Merchantiles Pvt. Ltd. v. ITO (ITA Nos.708 & 709/Kol/2025, dated 14.01.2026), which followed the Hon'ble Bombay High Court's decision in Prakash Krishnavtar Bhardwaj v. ITO [(2023) 451 ITR 27 (Bom.)].
For the Respondent (Revenue)
- The Revenue supported the orders of the lower authorities, contending that the notices were valid and the reassessment proceedings were lawfully conducted.
The Court's Analysis
The Tribunal examined the procedural requirements under Section 148A(b) and Section 148 of the Income-tax Act, 1961.
"A perusal of the notice revealed that the AO has granted only two days' time to file reply against show cause notice, which in our opinion is not in accordance with the provisions of section 148A(b) of the Act, which prescribed period not less than 7 days and accordingly the said notice is bad in law."
The Tribunal observed that the statutory scheme under Section 148A mandates a minimum compliance period of seven days for responding to show-cause notices. The failure to adhere to this timeline vitiates the notice and all subsequent proceedings emanating therefrom.
"We find that admittedly the notice u/s 148A(b), dated 21.03.2022 was issued by the AO calling upon the assessee to file reply with supporting documents on 22.03.2023. A perusal of the notice revealed that the AO has granted only two days' time to file reply against show cause notice, which in our opinion is not in accordance with the provisions of section 148A(b) of the Act, which prescribed period not less than 7 days."
Additionally, the Tribunal addressed the issue of unsigned notices under Section 148, holding that:
"It is apparent from the above that the notice issued u/s 148 of the Act has not been signed by the ld. AO either digitally or manually and therefore, the unsigned notice is bad in law."
The Tribunal relied on the decision in Prakash Krishnavtar Bhardwaj v. ITO [(2023) 451 ITR 27 (Bom.)], which held that an unsigned notice under Section 148 is invalid and lacks jurisdiction. The Tribunal also cited CIT v. Aparna Agency (P.) Ltd. [(2004) 139 TAXMAN 132 (CAL.)], which emphasized that the service of a valid notice is a condition precedent to the assumption of jurisdiction by the AO.
The Tribunal concluded that the assessee's case was squarely covered by the decisions of the Co-ordinate Bench and various High Courts, and accordingly, the notices and reassessment orders were quashed.
The Verdict
Both appeals filed by the assessee were allowed. The Tribunal:
- Quashed the notice issued under Section 148A(b) dated 21.03.2022 for AY 2018-19 due to non-compliance with the seven-day compliance period.
- Quashed the notice issued under Section 148 dated 23.03.2023 for AY 2019-20 due to absence of signature.
- Set aside the reassessment order dated 19.03.2024 framed under Section 147/144/144B for AY 2019-20.
What This Means For Similar Cases
Strict Adherence to Statutory Timelines Is Non-Negotiable
- Section 148A(b) mandates a minimum compliance period of seven days for responding to show-cause notices. Notices granting less than seven days are invalid and render subsequent proceedings unsustainable.
- Practitioners must ensure that notices comply with statutory timelines to avoid jurisdictional challenges.
Unsigned Notices Under Section 148 Are Invalid
- Notices issued under Section 148 must be signed, either digitally or manually. Unsigned notices are legally invalid and cannot confer jurisdiction upon the AO.
- The absence of a signature on a notice under Section 148 is a jurisdictional defect that vitiates the entire reassessment proceedings.
Procedural Safeguards in Reassessment Proceedings
- The decision reinforces the principle that procedural compliance is not merely directory but mandatory in reassessment proceedings.
- Taxpayers and practitioners should scrutinize notices for compliance with statutory formalities, including timelines and signatures, to challenge invalid reassessment proceedings effectively.
