Nikhil Chandran Vs ITO (ITAT Bangalore)
The Bangalore ITAT quashed the reassessment proceedings against an NRI assessee, holding that the extended limitation under Section 149(1)(b) cannot be invoked unless income escaping assessment exceeds ₹50 lakh.
The case was reopened based on property purchase of ₹57 lakh. However, the assessee had clearly explained that the investment was largely funded through a housing loan (₹42.75 lakh) and the balance from taxed savings. The Tribunal observed that even if the explanation for the balance amount was doubted, the possible unexplained portion was far below ₹50 lakh, making extended reopening invalid.
The ITAT strongly criticized the AO’s approach as casual, non-speaking, and mechanical, noting that:
- The reply and evidences (loan sanction, bank statements, 26AS) were ignored without proper reasoning
- Reopening was based on mere suspicion, leading to a roving and fishing enquiry
- The AO himself was inconsistent—initiating reopening for ₹57 lakh but ultimately making additions of only ~₹6 lakh
It was further held that once, during Section 148A proceedings, it becomes clear that escaped income is below ₹50 lakh, the AO must drop proceedings if normal limitation has expired.
Accordingly, the ITAT:
- Set aside the order u/s 148A(d)
- Quashed notice u/s 148 as time-barred
- Quashed the entire reassessment u/s 147
The appeal of the assessee was allowed in full.
The Bangalore ITAT held that unaccounted cash receipts collected by Al-Badar Educational & Charitable Trust from students for management quota (MD seats) were in the nature of capitation fees, and therefore not eligible for exemption under Sections 11 and 12.
