Case Law Details
Rohit Premji Chheda Vs ITO (ITAT Mumbai)
Summary: The Mumbai ITAT allowed the assessee’s appeal and quashed the reassessment proceedings initiated under Sections 147 and 148 for Assessment Year 2017-18. The assessee had originally filed a return declaring income of ₹6,28,770, and the case was reopened on the allegation that a cash loan of ₹5,00,000 had been given, leading to an addition under Section 69 as unexplained investment. Before the Tribunal, the assessee argued that the reopening was initiated beyond three years from the end of the relevant assessment year and that the alleged escaped income was only ₹5,00,000, far below the ₹50 lakh threshold prescribed under Section 149(1)(b). The Tribunal accepted this contention, holding that the reopening violated Section 149(1)(b) because the escaped income did not amount to ₹50 lakh or more. Consequently, the sanction granted under Section 151 was held invalid, rendering the reassessment proceedings unsustainable. The assessment order was quashed and all other grounds were left unadjudicated.
Core Issue: Whether reassessment proceedings initiated beyond three years from the end of AY 2017-18 could be sustained when the alleged escaped income was only ₹5,00,000, which was far below the statutory threshold of ₹50 lakh prescribed under section 149(1)(b), and whether the sanction granted under section 151 in such circumstances was valid.
Facts: The assessee filed his return of income on 28.09.2017 declaring total income of ₹6,28,770. Subsequently, the AO reopened the assessment alleging that the assessee had advanced a cash loan of ₹5,00,000 to one Shri Nilesh Bharani, which constituted unexplained investment under section 69. The AO issued an order under section 148A(d) on 22.07.2022, i.e., after expiry of more than three years from the end of AY 2017-18, and thereafter completed reassessment under section 147 read with section 144 by making an addition of ₹5,00,000. The CIT(A) upheld the reassessment as well as the addition. Before the Tribunal, the assessee challenged the very validity of reopening on the ground that the alleged escaped income was only ₹5 lakh, whereas section 149(1)(b) permits reopening beyond three years only where the income escaping assessment represented in the form of an asset, expenditure or book entry amounts to or is likely to amount to ₹50 lakh or more.
Assessee’s Contention: The assessee argued that since the reassessment was initiated after three years from the end of the relevant assessment year and the alleged escaped income was only ₹5 lakh, the mandatory condition prescribed in section 149(1)(b) was not satisfied. Therefore, the sanction granted under section 151 was contrary to law and the entire reassessment proceeding was void ab initio.
AO/CIT(A) Findings: The AO proceeded with reopening and treated the alleged cash loan of ₹5 lakh as unexplained investment under section 69. The CIT(A) dismissed the assessee’s appeal and sustained both the validity of reassessment and the addition made by the AO.
ITAT Findings: The Tribunal observed that the relevant assessment year was AY 2017-18 and the order under section 148A(d) was issued on 22.07.2022, which was admittedly beyond three years from the end of the assessment year. Therefore, the case could survive only if it satisfied the conditions prescribed under section 149(1)(b). The Tribunal reproduced section 149(1)(b) and noted that for reopening beyond three years, the escaped income represented in the specified form must amount to or be likely to amount to ₹50 lakh or more. In the present case, the very basis of reopening was an alleged escaped income of only ₹5,00,000. No material was brought on record by the Revenue to show that the escaped income exceeded the statutory threshold of ₹50 lakh. Consequently, the condition precedent for invoking section 149(1)(b) was absent.
The Tribunal held that when the statutory threshold prescribed by section 149(1)(b) is not satisfied, any sanction granted under section 151 becomes invalid. Since the notice under section 148 and the entire reassessment proceeding were founded upon an invalid sanction, the reassessment itself was liable to be quashed. The Tribunal followed the consistent view of the Bombay High Court and the Mumbai Benches of the Tribunal holding that reopening beyond three years cannot be sustained where the alleged escaped income is below ₹50 lakh.
The Tribunal further observed that once the reassessment itself is quashed on the legal issue, the addition of ₹5 lakh under section 69 and all other grounds become purely academic and therefore require no adjudication.
Case Laws Relied Upon:
1. Alag Property Construction Pvt. Ltd. vs. ACIT
2. Bhavesh Maganlal Dharod vs. ITO
3. DCIT vs. Bhavik Prafulchandra Vora
4. Sudhir Motiram Patil vs. ITO
5. Ramlal G. Suthar vs. ITO.
Relevant Paras: 7, 8, 9 and 10.
Held: Reopening of AY 2017-18 beyond three years on the basis of alleged escaped income of only ₹5,00,000 was contrary to section 149(1)(b), which mandates a minimum threshold of ₹50 lakh for reassessment beyond three years. Consequently, the approval granted under section 151 was invalid, the notice under section 148 and reassessment proceedings under section 147 were void, and the entire reassessment was quashed. Since the reassessment itself failed on jurisdictional grounds, the addition under section 69 and all other issues were treated as academic and left unadjudicated.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The captioned appeal is filed by the assessee against the order of the Commissioner of Income Tax Appeals, National Faceless Appeal Centre (NFAC), Delhi [in short, “the Ld. CIT(A)”], dated 17.12.2025 for the assessment year 2017-18,arises from the assessment order under section 147 r.w.s 144 of the Income Tax Act, 1961 [in short, “the Act”] dated 29.05.2023, passed by Assessment Unit, Income Tax Department [in short, “the Ld.AO”]. The grounds of appeal raised by the assessee, are as under:
“1. Ground 1 On the facts and circumstances of the case and law, the Ld. CIT(A) failed to considered that reassessment proceeding initiated under section 148 which is bad in law and required to be quashed
2. Ground 2 On the facts and circumstances of the case and law, the Ld. CIT(A) failed to considered that reassessment proceeding initiated under section 148 in violation section 149 of Income Tax Act, 1961 as no income represented in form of asset exceed Rs. 50 lakhs get escaped assessment. Hence, time barred.
3. Ground 3 On the facts and circumstances of the case and law, the Ld. CIT(A) failed to considered that notice issued under section 148 of Income Tax Act, 1961 without mentioning the DIN Number on notice itself which is violation of CBDT Circular No. 19 of 2019 dated 14.08.2019
4. Ground 4 On the facts and circumstances of the case and law, the Ld. CIT(A) failed to considered that permission obtained under section 151 of the Act is not in accordance with law
5. Ground 5 On the facts and circumstances of the case and in law the Ld.CIT(A) failed to considered that assessment order passed by Ld. AO is in violation of CBDT Guidelines as 7 working days time for filling the show cause was not provided
6. Ground 6 On the facts and circumstances of the case and in law the Ld. CIT(A) failed to considered that addition of Rs.5,00,000 made under section 69 as unexplained investment on allegation of giving cash loan to Nilesh Bharani is bad in law and deserved to be deleted specially when the Nilesh Bharani in response to Notice under section 133(6) denied any receipt of cash loan from appellant
7. Ground 7 On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming charging interest under section 234B & 234D of Income tax Act, 1961
8. Ground 8 On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming invocation of penalty provision under section 271(1)(c) of Income tax Act, 1961
9. Ground 9 Appellant craves leave to add further grounds OR to amend OR alter the existing grounds of appeal on OR before the date of hearing”
2. Brief facts of the case are that the assessee had filed his return of income u/s 139 on 28.09.2017, declaring total income at Rs.6,28,770/-. Subsequently, the case of assessee was re-opened on the issue of cash loan given by the assessee for Rs.5,00,000/-. The issue was discussed at length by the Ld. AO in the assessment order, who considered the submissions of the assessee, however was not convinced, therefore, an addition u/s 69 treating the cash loan to Shri Nilesh Bharani for Rs.5,00,000/- as unexplained investment was made to the income of assessee. Assessee carried the matter before the Ld. CIT(A) wherein the matter was discussed and deliberated, however, the contentions of assessee could not impress upon the Ld. CIT(A), therefore the appeal of assessee was dismissed in totality.
3. Before us, Ld. AR representing the assessee submitted that the re-opening assessment in the present matter was not in accordance with the law for the reason that the approval granted u/s 151 was in violation to the provisions of the Act. It is submitted that the assessment was re-opened after a period of 3 years from the end of the assessment year and the alleged escaped income was only Rs.5,00,000/-, which is below the prescribed limits of Rs.50,00,000/-. Therefore, the provisions of section 149(1)(b) shall come into play in the facts of the present case, according to which if the proceedings of the re-opening assessment are invoked after 3 years, then the quantum of escaped income should be equal to or more than 50,00,000/-. However, in the present case, which pertains to assessment year 2017-18, while the notice u/s 148A(d) was issued on 22.07.2022 i.e., after 31st March, 2021, which falls beyond a period of 3 years from the end of relevant assessment year and the disputed amount of escaped income was only Rs.5,00,000/-. Therefore, the approval granted u/s 151 vitiates, being granted in violation of provisions of section 141(1)(b) of the Act. It is further submitted that this issue is no more res integra, which is being decided by the Hon’ble Bombay High Court and also the Jurisdictional Tribunal of Mumbai in various cases.
Reliance was placed on the following decisions:
1. Alag Property Construction (P.) Ltd. V/s ACIT [2025] 179 taxmann.com 578 (Bombay)
2. Ramlal G Suthar V/s ITO ITA No. 3224/Mum/2024
3. ACIT V/s Nilkamal Crates & Containers ITA No. 3763/Mum/2025
4. Manojbhai Parsottambhai Poriya V/s ITO ITA No. 1731/Mum/2025
5. Manish Jagdish Joshi V/s CIT [2024] 165 com 836 (Mumbai – Trib.)
6. Sudhir Motiram Patil V/s ITO ITA No.6190/MUM/2025
7. Bhavik Prafulchandra Vora V/s DCIT CO. 20/Mum/2026
8. Senthilkumar Thangaraj V/s ITO 8221/Mum/2025
9. Narendra Khimji Savla V/s ITO ITA No. 8720/Mum/2025
4. Based on aforesaid submissions, it was the prayer that dehors a violated approval u/s 151, the order issues u/s 148A(d) and consequential assessment u/s 147 is bad in law and liable to be struck down.
5. Per contra Ld. DR vehemently supported the orders of Revenue Authorities.
6. We have considered the rival submissions, perused the material available on record and case laws relied upon by the assessee. Admittedly in the present case, which is concerned with assessment year 2017-18, the order u/s 148A(d) was issued in 22.07.2022. The case of assessee, therefore, falls within the category of cases, wherein the re-opening has been initiated beyond 3 years from the end of assessment year. Ld. AR of the assessee relied on the provisions of section 149(1)(b), which are reproduced as under:
“(1) No notice under section 148 shall be issued for the relevant assessment year,—
[(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of—
i. an asset;
ii. expenditure in respect of a transaction or in relation to an event or occasion; or
iii. an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:]”
7. Since in the present case, the disputed escaped income as per reasons of the re-opening was only 5,00,000/- Rs. and the assessment year re-opened after 3 years, the issue is covered by the provisions of section 149(1)(b) of the Act, according to which the income escaped assessment should have amounted to or likely to amount to Rs.50,00,000/- or more. However, such fact has not emanated from the order of Ld. AO as well as other documents or provision brought on record by the Revenue. Therefore, the approval u/s 151 granted in violation of section 149(1)(b) is found to be invalid and unsustainable. Consequently, the assessment u/s 147 would also be liable to be quashed. In the case of ACIT, Circle-24(1) vs. Nilkamal Crates & Containers in ITA No.3763/Mum/2025 vide order dated 03.02.2026, wherein the Tribunal has held that if the notice u/s 148 is issued on the foundation of invalid sanction u/s 151 of the Act, the consequential proceedings of re-opening assessment are bad in law and have to be set aside.
8. Hon’ble Bombay High Court in the case of Bhavesh Maganlal Dharod v. ITO [2023] 155 com 335 (Bom)(HC)vide order dated 29.09.2023, pertaining to AY 2019-20has held that no notice u/s 149(1)(b) of the Act can be issued if the amount of escaped income is less than 50,00,000/-, held as under:
Where Principal Commissioner granted sanction under section 151 on basis of form submitted by revenue wherein it was stated that time limit for current proceedings was covered under section 149(1)(b) and quantum of income escaped assessment was four lakhs, since notice under section 148A(b) was issued within three years time limit, current proceedings should be covered under section 149(1)(a), furthermore no notice could be issued for amount less than Rs. 50 lakhs under section 149(1)(b) and approval could only be granted by Principal Chief Commissioner, thus, grant of approval was made mechanically without application of mind
9. In backdrop of aforesaid facts and circumstances and respectfully following the jurisprudence (referred to supra), we find that in the present case the disputed escaped income was only Rs.5,00,000/- and also the proceedings of re-opening were initiated after 3 years from the end of relevant assessment year. Therefore, the re-opening was in violation of provisions of section 149(1)(b) of the Act which has no locus standiin the eyes of law. We, accordingly set aside the order of Ld. CIT(A) and quash the impugned assessment u/s 147 of the Act.
10. Since the appeal of assessee succeeds on legal aspect and the assessment is directed to be quashed, the substantive quantum addition has been vacated. The other issues, if any, raised by the assessee by way of different grounds of appeal challenging legality of proceedings or on merits of the case are, therefore, rendered as academic, hence left unadjudicated.
11. In result, the appeal of the assessee stands allowed in terms of our aforesaid observations.
Order pronounced in the open court on 27-05-2026
Author Bio
