The Income Tax Appellate Tribunal, Delhi Bench, has reinforced a critical procedural safeguard in income tax reassessment proceedings by quashing a reopening notice and consequent assessment for failure to grant the statutorily mandated seven-day reply period under Section 148A(b). This ruling affirms that procedural non-compliance, even in the absence of malafide intent, invalidates the entire reassessment process.
Background & Facts
The Dispute
The appellant, LION JEANS, was served with a notice under Section 148A(b) of the Income Tax Act, 1961 on 12.03.2022, requiring it to submit a reply by 17.03.2022. This provided only five days for compliance, falling short of the seven-day minimum prescribed by law. The notice was issued for the assessment year 2018-19, seeking to reopen the assessment under Section 147 on grounds of suspected income escape. The Assessing Officer subsequently passed an order under Section 148A(d) on 20.03.2022, issuing a notice under Section 148 for reopening. The assessment was completed on 15.06.2022, and a penalty was initiated under Section 271(1)(c) for concealment of income.
Key Facts
- The notice under Section 148A(b) was issued on 12.03.2022
- The reply deadline was fixed for 17.03.2022 - a period of five days
- The appellant submitted a reply on 16.03.2022, but contended it was unable to fully compile documents due to the compressed timeline
- The notice under Section 148 was issued on 20.03.2022
- The assessment order was passed on 15.06.2022
- The penalty notice was issued on 28.07.2022
- The Commissioner of Income Tax (Appeals) upheld both the reopening notice and the penalty
Procedural History
- 12.03.2022: Notice under Section 148A(b) issued with reply deadline of 17.03.2022
- 16.03.2022: Appellant filed reply, citing insufficient time
- 20.03.2022: Order under Section 148A(d) passed, issuing notice under Section 148
- 15.06.2022: Assessment completed under Section 147
- 28.07.2022: Penalty notice issued under Section 271(1)(c)
- 2022-23: Appeal filed before National Faceless Appeal Centre (NFAC)
- 2024: NFAC upheld the assessment and penalty
- 2025: Appeals filed before ITAT Delhi (ITA Nos. 5494 & 5495/Del/2025)
- 06.04.2026: Hearing held before ITAT Delhi
- 05.06.2026: Judgment pronounced
Relief Sought
The appellant sought quashing of the notice under Section 148A(b), the subsequent notice under Section 148, the assessment order dated 15.06.2022, and the penalty order. It further prayed for deletion of the penalty and restoration of the original assessment.
The Legal Issue
The central question was whether a notice issued under Section 148A(b) of the Income Tax Act, 1961, which grants less than seven days for reply, renders the subsequent notice under Section 148 and the resulting assessment void ab initio.
Arguments Presented
For the Appellant
The appellant’s representative, Shri S.B. Gupta, CA, relied on the binding precedent of the Delhi High Court in Shri Sai Cooperative Thrift and Credit Society Ltd. v. ITO [2022] 447 ITR 350 (Delhi), which held that the seven-day period under Section 148A(b) is mandatory and jurisdictional. It was argued that the five-day window violated the statutory mandate, prejudiced the assessee’s right to make a meaningful reply, and rendered the entire reassessment process invalid. The appellant further submitted that even though a reply was filed, the time constraint prevented full disclosure of documents, thereby undermining the fairness of the proceedings.
For the Respondent
The Revenue, represented by Ms. Harpreet Haur Hansra, Sr. DR, relied on the orders passed by the lower authorities. It contended that the assessee had filed a reply and therefore no prejudice was caused. It argued that technicalities should not override substantive justice and that the notice was issued in good faith. However, no alternative legal authority or statutory interpretation was cited to counter the Delhi HC precedent.
The Court's Analysis
The Tribunal undertook a detailed review of Section 148A(b), which mandates that the Assessing Officer shall give the assessee a reasonable opportunity to be heard before issuing a notice under Section 148. The provision does not specify the exact number of days, but the Delhi High Court in Sai Cooperative Society had interpreted this requirement as a minimum of seven days, holding that anything less violates the statutory intent and causes prejudice.
"A minimum time of seven days has to be granted to the assessee to file a reply to the show-cause notice issued under section 148A(b) of the Income Tax Act, 1961 before issuing an order under section 148A(d) for issue of notice under section 148 for reopening the assessment under section 147. Held, that there had been a violation of the mandatory time period stipulated under section 148A(b) and therefore, prejudice had been caused to the assessee. Though the assessee had responded to the show-cause notice, it could not provide all the relevant details and documents since the time of three days to respond to show-cause notice was inadequate. Consequently, the order dated April 6, 2022 passed under section 148A(d) and notice under section 148 were quashed."
The Tribunal explicitly followed this precedent, noting that the statutory requirement is not merely directory but mandatory. It emphasized that the purpose of Section 148A(b) is to ensure procedural fairness and prevent arbitrary reopening. The fact that the assessee responded within five days did not cure the defect, as the law prescribes a minimum period to enable adequate preparation. The Tribunal held that the violation of this mandatory timeline vitiates the entire chain of proceedings - from the notice under Section 148A(b) to the assessment under Section 148 and the consequential penalty.
The Verdict
The appellant succeeded on both appeals. The Tribunal allowed ITA No. 5494/Del/2025, quashing the notice under Section 148A(b) dated 12.03.2022, the notice under Section 148, and the assessment order dated 15.06.2022. It also allowed ITA No. 5495/Del/2025, deleting the penalty imposed under Section 271(1)(c). The Tribunal directed that the original assessment for AY 2018-19 shall stand restored, and no further proceedings under Section 147 shall be initiated on the same facts without compliance with the mandatory seven-day notice period.
What This Means For Similar Cases
Procedural Compliance Is Non-Negotiable
- Practitioners must now challenge any notice under Section 148A(b) that grants less than seven days for reply, regardless of whether the assessee responded
- The burden shifts to the Revenue to prove compliance with the statutory timeline - mere assertion of good faith is insufficient
- Any assessment based on a defective 148A(b) notice is void ab initio, even if the underlying income is unreported
Penalty Cannot Survive a Void Assessment
- Penalties under Section 271(1)(c) are consequential to the assessment
- If the assessment is quashed for procedural illegality, the penalty automatically falls
- Practitioners should not argue mitigation of penalty - the correct approach is to challenge the validity of the underlying notice
Precedent Binding Across Tribunals
- The Delhi HC’s ruling in Sai Cooperative Society is now binding on ITAT benches in Delhi
- Other benches may follow this reasoning, especially where similar facts arise
- Tax officers must revise internal protocols to ensure notices always grant a minimum of seven days
