Introduction
In a landmark judgment, the Rajasthan High Court bench at Jaipur (‘the Court’) pronounced a pivotal decision in Bijendra Singh v. PCCIT & Anr.[i], addressing procedural discrepancies in the issuance of a pre-reassessment notice under s. 148A(b) of the Income-tax Act, 1961. (‘the Act’). The Court scrutinized the notice’s adherence to statutory requirements, alongside challenges against subsequent orders under ss. 148A(d) and 148 of the Act. Resultantly, the Court set aside these notices for failing to meet legal standards, highlighting the criticality of procedural compliance in tax law enforcement.
Brief Facts
The proceedings were initiated with a notice dated 16.03.2022 under s. 148A(b) of the Act, requiring the petitioner to submit a response by 23.03.2022. The petitioner challenged the notice, arguing it did not comply with the mandated seven-day notice period as stipulated by s. 148A(b), asserting the interval from 16.03.2022 to 23.03.2022 was improperly calculated, thus rendering the notice procedurally flawed due to insufficient timing.
Furthermore, the petitioner advanced the argument that the notice was time-barred under s. 149(1)(a) of the Act. This assertion was based on the ground that, for the assessment year (‘AY’) 2015-16, the notices were issued beyond the permissible three-year period, involving an amount less than Rs. 50,00,000. Consequently, it was contended that the notice was devoid of jurisdiction, warranting its quashing.
Despite the notice sent on 16.03.2022 being returned to the department on 28.03.2022, an order under s.148A(d) was issued on 27.03.2022. This chronological inconsistency led the petitioner to challenge the legitimacy of the entire proceedings initiated by the respondents, advocating for their annulment.
In response, counsel for the department argued that the petitioner’s failure to adhere to the notice necessitated the issuance of the challenged order. With respect to the jurisdictional challenge under s. 149(1)(a) of the Act, it was contended that the issue falls within the purview of the appropriate authority and cannot be determined solely based on the petitioner’s assertions. Nevertheless, the department acknowledged that the notice did not meet the specific requirements outlined in s. 148A(b) of the Act regarding the timeframe for response. Therefore, the department sought a remand of the case to provide the petitioner with a fair opportunity to respond before issuing a revised order.
Held
Considering the submissions made by the counsel, the Court held that the notice issued under s. 148A(b) of the Act for the AY 2015-16, which involved cash deposits of Rs. 42,15,000/- in the petitioner’s bank account, did not meet the service requirements. The mandated notice period of ‘not less than seven days’ was not adhered to, as the notice was not effectively served—evidenced by the return of the notice envelope on 28.03.2022.
The petitioner contended that the notice dated 16.03.2022 dispatched on 17.03.2022, did not satisfy the statutory seven-day notice requirement, a shortfall even when excluding the dates of issuance and final response.
The Court invoked the precedent set by the Hon’ble Supreme Court in Pioneer Motors (Private) Ltd. v. The Municipal Council, Nagercoil[ii], to emphasize that the term ‘not less than’ specifies a minimum period that must be fully provided. This precedent underscored that when calculating the time period specified as ‘not less than’ a certain number of days, the days on which the notice is issued and the final date for compliance, should not be counted within the period.
The Court considered the petitioner’s argument regarding the limitation period under s. 149(1)(a) of the Act, highlighting discrepancies between the cash deposits reported and the amounts cited in the notices. The petitioner’s evidence showed deposits less than Rs. 50,00,000/-, while the notice, issued beyond the three-year mark for AY 2015-16, mentioned varying amounts. This discrepancy, coupled with the timing of the notice, led to the argument that the notice was barred by limitation and thus lacked jurisdiction.
The Court noted a mechanistic exercise of authority by the respondents, evident in the issuance of the order under s. 148A(d) of the Act on 27.03.2022. This occurred despite the returned notice reaching the office on 28.03.2022, signifying a lack of due diligence in determining whether the notice had been effectively served or not.
Analysis
This judgment constitutes a substantial milestone in the realm of income tax law, where the Court, in response to a writ petition, deliberated on the petitioner’s grievances pertaining to a pre-reassessment notice issued under s. 148A(b) of the Act. The petitioner’s reservations about the procedural deficiencies of the notice, encompassing a deficit in the prescribed seven-day notice period and discrepancies in the indicated amounts, were indeed well-founded. The Court, invoking established legal precedents, unequivocally nullified the notice, thereby underscoring the paramount importance of procedural rectitude and steadfast adherence to statutory timelines in the realm of tax proceedings.
Furthermore, the Court’s astute critique of the perfunctory exercise of authority and the subsequent annulment of the entire proceedings underscores a steadfast commitment to safeguarding the integrity of the tax assessment process. This seminal decision not only offers redress to the petitioner but also establishes a precedent that accentuates the gravity of precise information, prudent exercise of authority, and procedural diligence in ensuring an equitable outcome in tax-related matters.
End Notes:
[i] Bijendra Singh v. PCCIT, Jaipur & Anr., 2024:RJ-JP:516-DB, D. B. Civil Writ Petition No. 6852/2022
[ii] AIR 1967 SC 684
Authored by Pratima Ajmera, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.