Gujarat High Court sets aside Section 148A(d) order for violation of natural justice in Rishva Infrastructures Vs ITO

Background and Context

In Rishva Infrastructures Vs ITO, the Gujarat High Court examined the legality of reassessment proceedings initiated under Section 148 of the Income Tax Act 1961 for A.Y. 2018-19, where the assessee’s request for extension of time under Section 148A(b) was ignored by the Assessing Officer.

The Court ultimately quashed:

  • The order passed under Section 148A(d) dated 30.03.2022, and
  • The consequential notice issued under Section 148 on the same date,

on the ground that the proceedings were vitiated by a clear breach of the principles of natural justice.

Facts of the Case

Assessee’s profile and return filing

  • The petitioner, Rishva Infrastructures, is a partnership firm engaged in construction activities.
  • The assessee filed its return of income for A.Y. 2018-19 on 04.10.2018.
  • Returned income was declared at Rs. 58,66,260/-.

Initiation of proceedings under Section 148A(b)

  • The Assessing Officer issued a show cause notice under Section 148A(b) on 21.03.2022.
  • The notice called upon the assessee to show cause why a notice under Section 148 should not be issued.
  • The assessee was directed to submit its response on or before 28.03.2022.

Effectively:

  • Only 7 calendar days were given from the date of notice,
  • Of which, as argued, only 4 were working days (22 to 25 March), since 26 and 27 March were Saturday and Sunday.

Adjournment request by the assessee

According to the assessee:

  • On 26.03.2022, an adjournment request was filed on the Income-tax e-filing portal.
  • A confirmation email was received from communication@cpc.incometax.gov.in acknowledging successful submission of the adjournment application.
  • The assessee pointed out that the information sought by the Assessing Officer pertained to transactions about four years old, requiring time to retrieve and verify records.

The assessee’s core contention was that given the nature of the information requested, meaningful compliance within such a short effective period was not feasible, and that the statute itself contemplates extension of time under Section 148A(b).

Passing of order under Section 148A(d) and issuance of Section 148 notice

Despite the adjournment request:

  • The Assessing Officer passed an order under Section 148A(d) on 30.03.2022.
  • In this order, the Assessing Officer recorded a finding that income of Rs. 1,42,55,127/- had escaped assessment for A.Y. 2018-19.
  • The order noted that the assessee had neither filed any reply nor sought further time before 28.03.2022.
  • On the same date, 30.03.2022, a notice under Section 148 was issued to the assessee, commencing reassessment proceedings.

These two actions – the Section 148A(d) order and the Section 148 notice – formed the subject matter of challenge before the Gujarat High Court under Articles 226 and 227 of the Constitution of India.

Assessee’s Arguments Before the High Court

Challenge to the legality of the Section 148A(d) order and Section 148 notice

The assessee’s counsel argued that both:

  • the order dated 30.03.2022 under Section 148A(d), and
  • the notice dated 30.03.2022 under Section 148,

were without jurisdiction, illegal and bad in law, for the following reasons: