Minimum 7 days time to furnish reply to notice u/s 148A(b) was not required in cases covered by search – ITAT
In a recent judgment, the ITAT Surat dismissed the jurisdictional challenge to the validity of notice u/s 148 on the ground of less than 7 days time allowed to reply notice u/s 148A(b). It was held that search cases are covered under proviso to section 148A of the Act, which clearly provides that provisions of section 148A of the Act shall not apply
ABCAUS Case Law Citation:
4466 (2025) (03) abcaus.in ITAT
In the instant case, the both Revenue and the assessee had challenged the order passed by the CIT(A) NFAC for AY 2021-22. All the appeals were clubbed and adjudicated by a common order.
The assessee was a partnership firm engaged in the business of real estate development and belonged to a Business Garg. A search and seizure action u/s 132 of the Act was carried out in case of the assessee. Additionally, a search and seizure operation u/s 132 of the Act was also carried out at the residence of one of the partner, where various diaries, documents and loose papers belonging to assessee were found and seized.
The AO issued notice u/s 148A(b) stating that as per the information available in his office, appellant had received cash towards unaccounted sale of industrial plots. The notice provided only four days time to submit objection. Thereafter, the AO passed order u/s 148A(d) on the very next day i.e. 5th day and issued notice u/s 148 of the Act on the same day.
The assessment was concluded by the Assessing Officer (AO) u/s 143 r.w.s. 147 making addition on account of cash received on sale of plots which was not entered into the regular books of account of the assessee.
Before the CIT(A) first time the assessee raised grounds stating that AO erred in passing order u/s 148A(d) without providing statutory time of 7 days mandated as per section 148A(b) of the Act. However, CIT(A) dismissed the ground stating that there is no requirement to conduct enquiry and provide opportunity u/s 148A of the Act before issue of notice u/s 148 in cases covered u/s 132 of the Act.
Before the Tribunal, the assessee relying on the judgment of the Gujarat High Court submitted that only 4 days were provided by the AO to furnish the reply in response to notice u/s 148A(b) of the Act. This is against clear provisions of section 148A(b), which requires time of not less than 7 days from the date on which the notice is issued. The AO had decided to follow procedure u/s 148A of the Act and has not invoked the proviso. The AO had apparently neither prepared the satisfaction note nor approval u/s 151 of the Act was obtained. Hence, condition mandated for invoking exception to section 148/148A of the Act had not been fulfilled.
On the other hand, the Revenue relied on the decision of Bombay High Court and submitted that the case of appellant is covered under the proviso to section 148A of the Act, which provides exception to application of provisions of section 148A of the Act in search and survey cases.
The Tribunal observed that section 148A as applicable to AY 2021-22 as stood before amendment by Finance Act (No. 2) of 2024 was also simultaneously inserted as part of series of amendments to reform the system of assessment or re-assessment or income escaping assessment and the assessment or search related cases. It provides that before issuance of notice u/s 148, the AO shall conduct inquiries, if required and provide an opportunity of being heard to the assessee. After considering reply of the assessee, the AO shall decide, by passing an order, where it a fit case for issue of notice u/s 148 and served a copy of such order along with the notice on the assessee. The AO shall before conducting any such inquiries or providing opportunity to the assessee or passing such order, obtain the approval of the specified authority. However, this procedure of inquiry, providing opportunity and passing order, before issuing notice u/s 148 of the Act, shall not be applicable in search or requisition cases.
The Tribunal further observed that it was clear that the case of the assessee was clearly covered by Explanation 2 of section 148 and proviso to section 148A of the Act. For purpose of section 148, the AO shall be deemed to have information, which suggests that income chargeable to tax has escaped assessment in case of assessee where the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted. As per proviso to section 148A of the Act, the provisions of section 148A shall not apply in a case where search is initiated u/s 132 of the Act on or after 01.04.2021. It shall also not apply where the AO is satisfied with prior approval of the PCIT or CIT that any books of account or documents seized in a search u/s 132 of the Act in case of any person on or after 01.04.2021 pertains or pertain to, or any information contained therein, relates to the assessee.
The Tribunal also observed that the case of the assessee was squarely covered by the proviso to section 148A of the Act. In the instant case case, search was conducted after 01.04.2021 and the impugned documents on basis of which addition have been made where found and seized from the premises covered during the search. Partners had also admitted in their statement recorded during the search that papers belong to the assessee. Therefore, the finding of the CIT(A) that there is no requirement to conduct inquiry and provide opportunity before issue of notice u/s 148 of the Act in cases covered u/s 132 of the Act cannot be said to be incorrect. Once provisions of section 148A of the Act are not applicable and case is covered by the proviso to the said section, the question of granting time as per section 148A(b) of the Act does not arise.
The Tribunal further observed that there was no dispute that only 4 days’ time was given by the AO in the notice issued u/s 148A(b). This was not even disputed by the revenue. However, the ratio of the decisions relied upon by the appellant were not related to search operations and not applicable to the facts of the present case. Hence, the case of the appellant was covered under the instances provided in the proviso to section 148A of the Act, whereas the case relied upon was covered under the main provisions of section 148A of the Act. Hence, reliance on the decisions would not further the cause of the appellant.
In view of the above, the ground raised by the assessee was dismissed.
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