Jaipur, January 4, 2024 – The Rajasthan High Court, Jaipur Bench, has quashed reassessment notices issued by the Income Tax Department against Bijendra Singh in connection with alleged undisclosed cash deposits for the Assessment Year 2015-16. The court found procedural lapses, including non-compliance with mandatory timelines and jurisdictional errors, rendering the notices invalid.
Background of the Case
The petitioner, Bijendra Singh, had challenged the issuance of notices under Sections 148A(b) and 148 of the Income Tax Act, 1961, contending that the reassessment process initiated by the Department was legally unsustainable. The primary concerns raised were:
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Violation of Minimum Notice Period: The initial notice dated March 16, 2022, required a response by March 23, 2022, allowing less than the statutorily mandated seven days, making it procedurally flawed.
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Time-Barred Action: As per Section 149(1)(a) of the Act, reassessment notices for income escaping assessment must be issued within three years if the amount involved is below ₹50,00,000. The alleged cash deposits in Singh’s account totaled ₹42,15,000, well below the threshold for the extended 10-year limitation under Section 149(1)(b). Since the reassessment proceedings pertained to AY 2015-16, any notice issued beyond March 31, 2019, was time-barred.
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Failure of Service and Mechanical Issuance of Orders: The notice was returned undelivered and received by the Department on March 28, 2022. However, an order under Section 148A(d) was passed on March 27, 2022, before confirming if the petitioner had been served.
Court’s Observations and Findings
After reviewing the submissions from both parties, the Rajasthan High Court ruled in favor of the petitioner, making the following key observations:
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Non-Compliance with Section 148A(b): The requirement of ‘not less than seven days’ for response, as interpreted by the Supreme Court in Pioneer Motors (P) Ltd. v. Municipal Council, Nagercoil (AIR 1967 SC 684), means that both the day of issuance and the deadline day must be excluded. The notice in this case did not meet this requirement.
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Jurisdictional Error Under Section 149: Since the total alleged cash deposits were below ₹50,00,000, the Department could not invoke the extended 10-year limitation. Consequently, the notice was issued beyond the three-year limitation period, making it void.
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Improper Service and Premature Order: The Department’s failure to confirm service of notice before passing the order under Section 148A(d) on March 27, 2022, was termed a ‘mechanical exercise of power,’ highlighting administrative negligence.
Verdict and Implications
The High Court allowed the writ petition and set aside the following actions taken by the Income Tax Department:
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Notice dated March 16, 2022, issued under Section 148A(b);
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Order dated March 27, 2022, passed under Section 148A(d);
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Notice dated March 27, 2022, issued under Section 148.
This ruling underscores the importance of strict adherence to procedural requirements in reassessment proceedings and reinforces judicial scrutiny over tax authorities’ exercise of powers. It serves as a precedent ensuring taxpayers’ rights against arbitrary reassessment notices beyond statutory limitations.
Parties Involved
Petitioner: Bijendra Singh, resident of Ondela Road, Durga Colony, Dholpur, Rajasthan.
Respondents:
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Principal Chief Commissioner of Income Tax, Jaipur
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Income Tax Officer, Ward-I, Bharatpur
This judgment reinforces the judiciary’s role in ensuring tax administration adheres to statutory limitations and procedural fairness.