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Judgment
PER SHRI M BALAGANESH, ACCOUNTANT MEMBER:
The appeal in ITA Nos. 6661 & 6663/Del/2025 for AYs 2018-19 filed by different assessees arises out of the order of the ld National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 22.08.2025 against the order of assessment passed u/s 147 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 31.03.2023 by the Assessing Officer, DCIT, Central Circle-26, New Delhi (hereinafter referred to as ‘ld. AO’). Identical issues involved in both these appeals and hence they are taken up together and disposed of by this common order for the sake of convenience.
ITA No. 6661/Del/2025 for AY 2018-19
Ground No. 1 raised by the assessee challenging the validity of reassessment proceedings u/s 147 of the Act. Since this goes to the root of the matter, we deem it fit to take the same first for adjudication
We have heard the rival submissions and perused the materials available on record. The return of income for the AY 2018-19 was filed by the assessee company on 31-10-2018 declaring taxable income of Rs. 17,38,130. The revised return was filed on 29-03-2019 declaring the same income. Based on the information received on the Insight Portal uploaded by DDIT Investigation-1(1) New Delhi, the case of the assessee was sought to be reopened u/s 147 of the Act. The information flagged stated that assessee had made certain bogus purchases for Rs. 47,62,190 which was sought to be construed as accommodation entry. This information was flagged based on search conducted in the case of KK Spun India Limited wherein certain evidences were gathered. It was observed in that search that Shri Aditya Jain, being an accommodation entry operator, had provided accommodation entries to KK Spun Group. Shri Aditya Jain in the statement recorded by DDIT Investigation admitted on oath that he had provided accommodation entries to various beneficiary parties in reverse of cash and has received commission through various dummy proprietary concerns. One such dummy concern was Big Marketing, Proprietor Mr. Amit. The information flagged stated that assessee herein had made purchases from Mr. Amit for Rs. 47,62,190 which was sought to be treated as accommodation entry. Accordingly, a show-cause notice u/s 148A(b) of the Act was issued on 16-03-2022 to the assessee. The assessee filed reply to the same on 25-03-2022. Realizing the fact that requisite information and the relevant materials were not furnished to the assessee along with the notice u/s 148A(b) dated 16-03-2022, the said proceedings were purportedly dropped and another show-cause notice u/s 148A(b) of the Act was issued on 31-03-2022 giving less than 7 days time to the assessee to reply. The assessee was asked to give its reply on or before 06.04.2022. The assessee filed its reply on 05-04-2022 within the allotted time. Order under Section 148A(d) of the Act was passed on 07-04-2022 and notice u/s 148 of the Act was issued on 07-04-2022. From the above, it is clear that assessee was given less than 7 days time to file its reply to the show-cause notice dated 31-03-2022 u/s 148A(b) of the Act. Even though it could be argued that no prejudice was caused to the assessee in as much as the assessee had indeed filed its reply on 05-04-2022 itself which is within the prescribed time granted by the ld AO for filing the reply to show-cause notice u/s 148A(b) of the Act, still, whether the action of the AO could be construed as legal and valid by giving less than 7 days time to reply to the show-cause notice u/s 148A(b) of the Act. This issue was subject matter of consideration by the Hon’ble Kerala High Court in the case of Hosdurg Beedi Workers Industrial Service Type Co-operative Society Ltd. v. The Income Tax Officer & Others in WP(C) No. 13984 of 2023 dated 23-08-2023. In that case, notice u/s 148A(b) of the Act was issued on 18-03-2022 seeking reply from the assessee from that assessee on or before 24-03-2022 which was short of 7 clear days. The question which went before the Hon’ble Kerala High Court was whether the notice u/s 148A(b) of the Act is to be declared invalid for want of grant of minimum 7 clear days time for filing the reply. The Hon’ble Kerala High Court held that grant of non-grant of 7 clear days for filing the reply is against the statutory mandate u/s 148A(b) of the Act and consequentially, the notice u/s 148A(b) of the Act and 148 notice was quashed with a direction to issue fresh notice under Section 148A(b) of the Act in accordance with law. The entire assessment was quashed by the Hon’ble Kerala High Court due to the aforesaid deficiency in non-grant of sufficient time. Similar issue was also subject matter of adjudication by the Hon’ble Jurisdictional Delhi High Court in the case of Shri Sai Cooperative Thrift and Credit Society Limited Vs. ITO reported in 447 ITR 350 (Del) dated 12-05-2022. We find that the coordinate bench of this Delhi Tribunal had adjudicated the very same issue in dispute before us in the case of Lion Jeans Vs. ACIT in ITA Nos. 5494 and 5495/Del/2025 for AY 2018-19 dated 05-06-2026. For the sake of convenience, the relevant operative portion of the order is reproduced below:-
“2.At the time of hearing, Ld. AR for the assessee submitted that the notice issued under section 148A(b) of the Income Tax Act, 1961 on 12.03.2022 and the time given for compliance is 17.03.2022 which is less than the requisite seven days period. It was further submitted that under identical circumstances, the Hon’ble Delhi High Court in the case of Shri Sai Cooperative Thrift and Credit Society Ltd. vs. ITO [2022] 447 ITR 350 (Delhi) dated 12.5.2022 has quashed the assessment. Hence, it was prayed to follow the aforesaid ratio and notice u/s. 148 of the Act and its consequent assessment may be quashed. Further, it is submitted that since the notice u/s. 148 as well as assessment are bad in law, the penalty is also not valid and thus be deleted.
3.In reply, the Ld. CIT(DR) relied upon the orders of the authorities below. 4. We have considered the rival submissions. On perusal of the records, it is noted that the instant issue of the notice under section 148A(b) of the Act is now squarely covered by the decision of the Hon’ble Delhi High Court in the case of Shri Sai Cooperative Thrift and Credit Society Ltd. vs. ITO [2022] 447 ITR 350 (Delhi) dated 12.5.2022 wherein, the Hon’ble has observed as under:-
“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.”
4.1In the backdrop of the aforesaid discussions and respectfully following the aforesaid precedent, we are of the considered view that the time provided in the notice issued under section 148A(b) of the Act is less than the seven days prescribed by statute, thus the notice issued is held to be bad in law and consequently stands quashed. Since the notice issued under section 148A(b) of the Act stands quashed, as aforesaid, the consequential assessment order also stands quashed.
5.In the result, the quantum appeal being ITA No. 5494/Del/2025 is allowed.
6.As regards penalty No. ITA 5495/Del/2025 is concerned, since we have already quashed the notice as well as assessment, as aforesaid, the penalty in dispute is not sustainable in the eyes of law, hence, the same is hereby deleted and accordingly, the penalty appeal of the assessee is also allowed.
7.In the result, both the appeals of the assessee are allowed.”
Respectively following the aforesaid judicial precedent, we hold that the notice u/s 148 of the Act is bad in law and accordingly Ground No. 1 raised by the assessee is allowed by quashing the reassessment. Since the reassessment is quashed on this limited legal issue, the other legal facets argued by the ld AR and the grounds raised by the assessee on merits need not be adjudicated and they are left open.
In the result, the appeal of the assessee is partly allowed.
ITA No. 6663/Del/2025 for AY 2018-19
The grounds and facts raised in this appeal are identical to those raised in ITA No. 6661/Del/2025 adjudicated supra. In this appeal, initial notice u/s 148A(b) of the Act was given on 16.03.2022 and the assessee filed its reply on 25.03.2022 through email and also uploaded in portal on 28.03.2022. Realizing the mistake of not providing the requisite materials along with notice u/s 148A(b), fresh notice u/s 148A(b) of the Act was issued on 31.03.2022, wherein the assessee was asked to respond by 06.04.2022. The assessee filed its reply on 05.04.2022. Hence, it could be seen that the facts prevailing in this appeal are exactly identical to facts prevailing in ITA No.6661/Del/2025 except with variance in name of the suppliers and figures.
To sum up, both the appeals of the assessee are partly allowed.