The Income Tax Appellate Tribunal, Amritsar, has reaffirmed that challenges to the validity of a notice under Section 148 of the Income Tax Act cannot be introduced for the first time before the tribunal if not raised before the lower authorities. The order underscores the necessity of procedural compliance and penalizes deliberate delay in tax litigation.
Background & Facts
The Dispute
The appellant, Sh. Abdul Aziz Dar, filed his income tax return for Assessment Year 2014-15 disclosing income of Rs. 2.47 lakhs. Subsequently, the Assessing Officer (AO) initiated reassessment proceedings under Section 147 read with Section 148, based on information from the ITBA portal indicating the purchase of immovable property worth Rs. 75.60 lakhs. The AO issued a notice under Section 148 on 18.05.2021, invoking the extended period under the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 (TOLA).
Key Facts
- The appellant disclosed income of Rs. 2.47 lakhs in his original return filed under Section 139
- The AO identified unexplained investments: Rs. 75.60 lakhs in immovable property, Rs. 77.98 lakhs in unexplained cash deposits, and Rs. 4.12 crores in unexplained bank credits
- The AO issued nine notices under Section 142(1), all of which remained unresponded to
- The assessment was completed ex parte on 11.05.2023, determining total income at Rs. 5.71 crores
- The appellant did not file any documents, submissions, or representations during the assessment proceedings
Procedural History
- 18.05.2021: Notice under Section 148 issued by AO
- 11.05.2023: Ex parte assessment order passed by AO under Section 147 read with Section 144
- 01.12.2023: First notice issued by CIT(A) for hearing
- 23.05.2024: Seventh and final hearing notice issued by CIT(A), with time extended till 03.06.2024
- 03.06.2024: No representation filed by appellant despite three prior adjournments
- 07.06.2024: CIT(A) dismissed appeal for non-appearance and non-submission of documents
- 08.08.2024: Appeal filed before ITAT Amritsar, two days belated
- 19.02.2026: Hearing held before ITAT Amritsar
- 06.04.2026: Judgment pronounced
The Parties' Positions
The appellant, through his CA, Bashir Ahmad Lone, raised no substantive arguments before the AO or CIT(A). Before the tribunal, he sought to introduce a new ground challenging the validity of the Section 148 notice dated 26.07.2022 on grounds of limitation, relying on Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70.
The Revenue, represented by CIT Sunil Kumar Yadav, objected to the introduction of this ground, noting it was never raised before the AO or CIT(A), was absent from Form 36, and the assessment order lacked the chronological sequence required to adjudicate the limitation issue.
Relief Sought
The appellant sought quashing of the assessment order on grounds of invalid notice under Section 148 and requested that the appeal be decided on merits. He also sought to introduce additional grounds not previously filed.
The Legal Issue
Can a challenge to the validity of a notice under Section 148 of the Income Tax Act, based on limitation, be raised for the first time before the Income Tax Appellate Tribunal without having been previously agitated before the Assessing Officer or the Commissioner (Appeals)?
Arguments Presented
For the Appellant
The appellant’s counsel contended that the notice issued on 26.07.2022 was barred by limitation under the interpretation of Section 148 laid down in Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70. He argued that the computation of the limitation period rendered the notice invalid and that the tribunal should adjudicate this legal issue despite its non-raising below. He relied on the principle of natural justice and claimed that the appellate authority had denied him opportunity to be heard.
For the Respondent
The Revenue contended that the appellant had deliberately avoided participation in proceedings before the AO and CIT(A), failing to respond to nine notices under Section 142(1) and seven hearing notices from CIT(A). The challenge to the notice’s validity was never raised in Form 36 or during the appellate hearing. The assessment order did not contain the date-wise sequence of events necessary to compute limitation, making adjudication impossible. The Revenue argued that the tribunal cannot entertain a new legal ground at the appellate stage when it was never ventilated below.
The Court's Analysis
The Tribunal observed that the appellant had not filed any documentary evidence, submitted no arguments on the merits of the additions, and failed to appear before the CIT(A) despite seven notices and three adjournments. The Tribunal noted that the appellant’s grievance of denial of hearing was factually incorrect, as multiple opportunities were granted and systematically ignored.
"The assessee has acted in a way that disrupts or abuses the legal process, by making incorrect and baseless allegations, against the Ld. first appellate authority alleging non allowability of hearing opportunities, remaining totally non-compliant before the AO to nine separate notices issued u/s 142(1)..."
The Tribunal held that the challenge to the limitation period of the Section 148 notice is a legal issue requiring a detailed examination of the sequence of events - including the date of original assessment, reopening reasons, and the applicability of TOLA - none of which were before the CIT(A). Since the appellant did not raise this issue before the CIT(A), and the assessment order did not contain the necessary chronological data, the tribunal could not adjudicate it in the first instance.
The Tribunal emphasized that appellate forums are not forums of first resort for legal arguments that could and should have been raised earlier. The introduction of a new ground at the appellate stage, especially one requiring factual reconstruction, is impermissible unless exceptional circumstances exist - which were absent here.
The Verdict
The appeal was allowed for statistical purposes only. The Tribunal remanded the matter to the CIT(A) for fresh adjudication on merits, directing the appellant to file all documentary evidence and fully cooperate in the proceedings. The Tribunal imposed a token cost of Rs. 10,000 on the appellant, payable to the Prime Minister’s National Relief Fund within fifteen days of communication of the order, with proof to be submitted to the Jurisdictional Assessing Officer.
What This Means For Similar Cases
Procedural Compliance Is Non-Negotiable
- Practitioners must raise all legal and factual challenges at the earliest available forum - failure to do so before the CIT(A) bars raising them before the Tribunal
- New grounds under Section 148 limitation, even if supported by recent judgments, cannot be introduced for the first time at the appellate stage
- Non-appearance and non-submission of documents will be construed as waiver of rights and may attract costs
Costs for Abuse of Process Are Now Explicit
- Tribunals may impose costs under Rule 34(4) for deliberate delay, baseless allegations, and procedural manipulation
- Costs are not limited to monetary penalties; they serve as a deterrent against tactical litigation
- The recipient of the cost (PMNRF) is a standard directive in such cases, reinforcing public interest in orderly tax administration
Documentary Evidence Must Precede Legal Arguments
- Legal challenges to notices under Section 148 require a clear timeline of events, which must be documented and submitted
- Without supporting records, even valid legal arguments cannot be entertained if they were not raised below
- Practitioners must ensure all relevant documents - including notices, replies, and correspondence - are compiled and filed at every stage
