Section 148 Notice Quashed as Escaped Income Was Below ₹50 Lakh & Issued After 3 Years

Manojbhai Parsottambhai Poriya Vs ITO (ITAT Mumbai)

Summary: The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) allowed the appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals) dated 07.01.2025 for Assessment Year 2017-18.

The assessee had challenged several issues, including the validity of the reassessment proceedings, the issuance of notice under Section 148 of the Income Tax Act, additions made under Sections 69C and 56(2)(vii)(b), levy of penalties under Sections 270A and 272A(1)(d), and charging of interest under Section 234B.

At the outset, the assessee’s counsel argued that the notice under Section 148 issued on 20.07.2022 was invalid because the amount alleged to have escaped assessment was less than ₹50 lakh and more than three years had elapsed from Assessment Year 2017-18. Reliance was placed on the Supreme Court’s decision in Union of India v. Rajiv Bansal and the Mumbai Tribunal’s decision in Amina Aslam Qureshi v. ITO.

The Tribunal reproduced and relied upon the reasoning of the coordinate bench in Amina Aslam Qureshi v. ITO. In that case, the Tribunal had noted that, under the amended provisions governing reassessment, the limitation period of three years applies retrospectively in all situations, while a longer period of six years is available only in cases where the income escaping assessment is likely to exceed ₹50 lakh. The coordinate bench had held that where the escaped income was below ₹50 lakh, a notice issued beyond three years could not be sustained.

Applying the same principle to the present case, the Tribunal observed that the income alleged to have escaped assessment, as recorded in the reasons for reopening, was less than ₹50 lakh. Therefore, notice under Section 148 could not have been issued beyond the period of three years under the amended law.

Respectfully following the decision of the coordinate bench, the Tribunal held that the notice issued under Section 148 was invalid. Since the reassessment notice itself was not sustainable, the consequential assessment order passed under Sections 147 read with 144B was liable to be quashed.

Having quashed the reassessment proceedings, the Tribunal did not examine the additions challenged on merits, as those issues became infructuous. Consequently, the assessee’s appeal was allowed.

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FULL TEXT OF THE ORDER OF ITAT MUMBAI

This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 07.01.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2017-18.

2. The assessee has raised the following grounds of appeal:

1. “On the facts and circumstances of the case and law, the Ld. CIT(A) erred in dismissing the appeal without adjudicating the grounds of appeal on merits

2. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming reopening of assessment which is bad-in-law

3. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming reopening of assessment without considering the fact that the proceedings for AY 2017-18 are time barred as per section 149(1)(b) of Income Tax Act, 1961

4. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming issue of notice u/s 148 without considering the fact that the notice issued without mentioning DIN number on notice which is in violation of CBDT circular no. 19 of 2019 dated 14.08.2019 Apeal

5. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming addition of Rs. 47,61,500/- u/s 69C of Income Tax Act, 1961 without considering the fact that source for purchase of property is from explained source

6. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming addition of Rs. 1,93,250/- u/s 56(2)(vii)(b) of Income Tax Act, 1961

7. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming addition u/s 56(2)(vii)(b) without considering the fact that the difference between purchase value and stamp duty value is within the tolerance limits prescribed

8. On the facts and circumstances of the case and law, the Ld. 8 CIT(A) erred in levying penalty u/s 270A & 272A(1)(d) of Income Tax Act, 1961

9. On the facts and circumstances of the case and law, the Ld. 9 CIT(A) erred in charging interest u/s 234B of Income Tax Act, 1961.

10. Appellant craves leave to add further grounds or to amend or alter the existing grounds of appeal on or before the date of hearing.”

3. We have heard the rival submissions. At the outset, it has been mentioned by Ld. AR that since the amount involved in this case is less than Rs. 50,00,000/- and more than three years period has elapsed after AY 2017-18, therefore, the notice u/s 148 could not have been issued on 20.07.2022 i.e. beyond three years as per the provisions of the Act. Ld.AR has placed reliance on the decision of the Hon’ble Apex Court in the case of UOI v/s Rajiv Bansal (2024) 167 taxmann.com 70 as well as the decision of the coordinate bench in the case of Amina Aslam Qureshi v/s ITO 769/Mum/2025. Relevant portion of the decision of the coordinate bench is reproduced below:

5.5. On perusal of para 60 reproduced herein above it is noted that Hon’ble Court categorically observed the time limit prescribed for issuing reassessment notices u/s.149 shall operate retrospectively for three years for all situation and six years for the case where the escaped assessment is likely to exceed rupees fifty lakhs. In the present facts of the case the revenue issued notice to the assessee on 29/07/2022 under the amended law. However, in respect of the amended law the three period already expired 3year period on 30/06/2021 then for validating the said notice the second condition must be satisfy in respect of the monitory limit regarding the income that escaped assessment. In the present facts of the case it is noted that the income that was said to have escaped assessment as per reasons recorded was Rs.26,46,000/-. Thus the notice issued beyond period of 3 years under the new law in the present facts of the case cannot be upheld.

7. We therefore do not find any reason not to uphold the argument advanced by the Ld.AR. Accordingly the notice issued under section 148 for assessment year under consideration is held to be invalid and the consequent assessment order passed under section 147 read with section 144B of the is liable to be quashed.

8. As the assessment orders under section 147 stands quashed, the addition challenged by the assessee on merits becomes infructuous.

4. Respectfully following the decision of the coordinate bench, we hereby hold that the notice u/s 148 issued in this case is invalid as the income that was stated to have escaped assessment as per the reason recorded was less than Rs. 50,00,000/- and therefore, notice u/s 148 could not have been issued beyond the period of three years as per the new law.

5. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 15.05.2025.