Shivalik Packaging Industries Vs ACIT (ITAT Delhi)
Delhi ITAT: Reassessment Beyond Three Years Invalid Where Final Escaped Income Is Below ₹50 Lakh Threshold under Section 149(1)(b)
The Delhi ITAT quashed the reassessment proceedings for AYs 2017-18 to 2019-20, holding that section 149(1)(b) does not permit reopening beyond three years unless the income that has actually escaped assessment and is represented in the specified forms amounts to ₹50 lakh or more. Although the Assessing Officer had recorded reasons alleging escapement of income exceeding ₹1.52 crore on account of unaccounted sales while issuing notice under section 148, the reassessment ultimately resulted in additions of only ₹3.65 lakh (AY 2017-18), ₹33.65 lakh (AY 2018-19), and ₹1.13 crore (AY 2019-20), with the first two years falling below the statutory threshold. Following the Bombay High Court’s decision in Naresh Balchandrarao Shinde v. ITO and the Mumbai ITAT rulings in Pankaj Chandrakant Pimple v. International Tax and Krishna Deep Builders v. ITO, the Tribunal held that where the income ultimately found to have escaped assessment is below ₹50 lakh, the jurisdictional condition prescribed under section 149(1)(b) is not satisfied, rendering the notice issued beyond three years invalid. Accordingly, the reassessment orders for AYs 2017-18 to 2019-20 were quashed. In respect of AYs 2020-21 to 2023-24, where the CIT(A) had dismissed the appeals for non-prosecution, the Tribunal set aside the appellate orders and restored the matters to the CIT(A) for fresh adjudication after providing adequate opportunity of hearing.
Cases Discussed
- Pankaj Chandrakant Pimple Vs. International Tax (Mumbai ITAT), [2025] 174 Taxmann.com 169
- Krishna Deep Builders vs. ITO (Mumbai ITAT), [2025] 173 Taxmann.com 882
- Naresh Balchandrarao Shinde Vs. ITO (Bombay High Court), [2023] 146 Taxmann.com 66 (Bom.)
FULL TEXT OF THE ORDER OF ITAT DELHI
These are seven appeals filed by the Assessee against the common order of Learned Commissioner of Income Tax (Appeals)-27, New Delhi (`the CIT(A)’ in short) all dated 11.09.2025 arising out of the orders passed u/s 147 r.w.s143(3) of the Income Tax Act, 1961 (`the Act’ for short) for Assessment Years 2017-18 to 2023-24 respectively.
2. The captioned Appeals filed by the Assessee are tabulated as under:
| S.
No. |
Appeals | Asstt. Year | CIT(A)’s Order dated |
Assessment Order dated |
Assessment Order passed under section |
| 1 | ITA No.7852/De1/2025 | 2017-18 | 11.09.2025 | 31.03.2024 | 147 r.w.s 143(3) of the IT Act. |
| 2. | ITA No.7853/De1/2025 | 2018-19 | – do – | – do – | – do – |
| 3. | ITA No.7854/De1/2025 | 2019-20 | – do – | – do – | – do – |
| 4. | ITA No.7855/De1/2025 | 2020-21 | – do – | – do – | – do – |
| 5. | ITA No.7856/De1/2025 | 2021-22 | – do – | – do – | – do – |
| 6. | ITA No.7857/De1/2025 | 2022-23 | – do – | – do – | – do – |
| 7. | ITA No.7858/De1/2025 | 2023-24 | – do – | – do – | – do – |
4. Before us, both the parties have stated that the facts involved in all these appeals are common, therefore, they are taken together and decided by a common order.
5. First we take up the assessee’s appeal for Assessment Year 2017-18 in ITA No.7852/De/2025.
ITA No.7852/De/2025 [Assessment Year 2017-181
6. Brief facts of the case that the assessee is engaged in the business of manufacturing, sale of pet bottles to alcohol industry, distilled water companies. The return of income was filed on 04.03.2019 declaring total income at Rs.8,02,21,740/. Thereafter a search and seizure action u/s 132 of the Act was carried out at the business premises of the assessee on 30.01.2024 and the case of the assessee is reopened by issue of notice u/s 148 of the Act for various Assessment Years including the year under appeal. After considering the submission field by the assessee, reassessment order was passed u/s 147 r.w.s 143(3) of the Act dated 31.03.2024 at an income of Rs. 8,09,83,690/-.
7. Against the said order, assessee preferred an appeal before the Ld. CIT(A) who vide order dated 11.09.2024 has dismissed the appeal of the assessee for non-persuasion.
8. Aggrieved by the said order, the assessee is in appeal before the Tribunal by taking the various grounds of appeal as per appeal memo.
9. During the course of hearing, Ld. AR for the assessee submits that though the order was passed by the Ld. CIT(A) ex-parte without providing adequate opportunity of hearing, however, since, the assessee has raised the legal issue whereby assessee challenged the initiation of reassessment proceedings u/s 147 of the Act, therefore, being a legal ground, it can be decided by the Tribunal. Accordingly, after considering the request and going through the grounds of appeal No.3 & 3.1, it is observed that these grounds are purely legal in nature; therefore, they are taken for adjudication.
10. Before us, the AR for the assessee submits that in the instant case, notice u/s 148 was issued on 15.11.2023 which is after the expiry of three years from the end of the relevant assessment year. As per Ld. AR in terms of section 149(1)(b) of the Act, no notice u/s 148 can be issued after excluding of three years from the end of the relevant assessment year unless, the AO was in possession of information / material suggesting that the income escaped assessment for the relevant assessment year in the form of asset or expenditure of more than Rs.50 Lacs for more. The AR submits that in the impugned years, the AO though in the reasons recorded had recorded the satisfaction that income escaped assessment was of Rs.1,52,38,921/-in the shape of cash received from unaccounted sales, however, as could be observed from the assessment order that the addition was finally made of Rs.3,65,336/- only. The Ld. AR submits that once the income to the extent of escaped assessment was of Rs.3,65,336/- only, which was not exceeds the limits prescribed u/s 149(1)(b) of the Act and, therefore, reassessment proceedings initiated u/s 147 of the Act deserves to be hold bad in law and subsequent reassessment order passed be quashed. For this reliance is placed on the judgment of hon’ble High court of Bombay in the case of Naresh Balchandrarao Shinde Vs. ITO reported in [2023] 146 Taxmann.com 66 (Bom.) and further on the Coordinate Bench of Mumbai Tribunal in the case of Pankaj Chandrakant Pimple Vs. International Tax, reported in [2025] 174 Taxmann.com 169 (Mumbai ITAT) and in the case of Krishna deep Builders vs. ITO reported in [2025] 173 Taxmann.com 882 (Mum. ITAT).
11. On the other hand, the Ld. CIT-DR vehemently supported the order of the lower authorities and submits that at the time of recording the reasons, the AO has recorded the satisfaction that income to the extent Rs.1,52,38,921/- has escaped assessment. The Ld. CIT-DR submits that at the time of recording the satisfaction of escapement of income on account of unaccounted sales exceeds Rs.50 lacs, therefore, the AO has rightly invoked the provisions of section 149(1)(b) of the Act and requested for confirmation of the order so passed.
12. Heard both the parties and perused the materials available on record. At the outset, it is observed that the AO has recorded the satisfaction in the reasons for reopening the assessment that income of Rs.1,52,38,921/- on account of unaccounted sales has escaped assessment which was represented in the form of asset. However, the addition of only Rs. 3,65,336/- was made in the assessment order and thus the same was less than the limit prescribed u/s 149(1)(b) of the Act. The notice u/s 148 was issued beyond 3 years but not more than 10 years from the end of the relevant assessment year which would squarely fall under the provision of Section 149(1)(b) of the Act, which provision are reproduced herein below for sake of convenience:
“149. (1) No notice under section 148 shall be issued for the relevant assessment year,—
(a) ……
(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
(ii) 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] “
13. From the above provisions, it can be observed that notice u/s 148 of the Act, in a case where 3 years but not more than 10 years from the end of the relevant assessment year has elapsed can be issued, when the AO has in his possession books of accounts or other documents or evidence which disclose that the income chargeable to tax either in the form of an asset, an expenditure in respect of a transaction or in relation to an event or occasion or any entry in the books of account is found to have escaped assessment which amounts to Rs. 50 lacs or more. Without doubt the provisions are framed in such a manner that the AO can reopen/reassess a case beyond 3 years from the end of the relevant assessment year only when the income which has escaped assessment is Rs. 50.00 lacs or more. The provision is clearly worded without any ambiguity per se, where the threshold limit of income which has escaped assessment cannot be lesser than Rs. 50.00 lacs as contemplated u/s. 149(1) of the Act. The Hon’ble Mumbai High Court in the case of Naresh Balchandrarao Shinde vs. ITO (supra) has held as under :
6. “We have heard the learned counsel for the parties and we have perused the documents on record. To consider whether the writ petition could be entertained, it would be necessary to refer to certain undisputed facts. The notice under section 148 A(b) dated 23-3-2022 grants time to the petitioner to respond to the same by 29-3-2022. The period as granted is less than seven days as prescribed by section 148A(b) of the Act of 1961. Nevertheless, the petitioner has responded to the notice by his reply dated 29-3-2022.
Alongwith the reply, copy of the registered sale deed dated 3-2-2015 indicating that it was his daughter who had purchased the immovable property therein was supplied. The petitioner’s daughter is separately assessed for tax. The name of the petitioner is mentioned as special power of attorney holder for his daughter. The registered sale deed clearly indicates that the petitioner is not the purchaser of the immovable property mentioned therein but it is his daughter, a separate assessee. The amount of consideration mentioned is Rs. 40,00,000/- and it is stated that the purchaser had availed housing loan for the same. On a bare perusal of the registered sale deed, it becomes evident that the petitioner is not the purchaser of the said property as stated in the notice issued under section 148A (b) of the Act of 1961. Despite supplying copy of the registered sale deed to the Assessing Officer, it has not been taken into consideration by him before passing the order under section 148A(d) of the Act of 1961. The same thus clearly indicates lack of application of judicious mind to the material on record. The amount of Rs. 40,00,000/- as mentioned in the notice issued on 23-3-2022 under section 148A(b) thus deserves to be excluded from consideration.
7. As regards deposit of cash of Rs. 16,20,000/- is concerned, the petitioner had sought disclosure of the material or the source of information on the basis of which such notice was issued. The petitioner denied having deposited the aforesaid amount in his bank account. The material/source of information was not supplied to the petitioner. Be that as it may, even if the amount of Rs. 40,00,000/-as mentioned in the notice dated 23-3-2022 is excluded from consideration for the reason that the petitioner is not the purchaser of the property in question, the amount remaining for consideration is Rs. 20,71,500/- and Rs. 16,20,000/- thus totaling Rs. 36,91,500/-. In this regard, if the provisions of Section 149(1)(b) of the Act of 1961 are considered, it is seen that only if the amount in question that is likely to have escaped assessment is Rs. 50,00,000/- or more, the time limit for issuing notice to re-open the assessment is three years but less than ten years. Thus if the income that is likely to escape assessment is only Rs. 36,91,500/-after excluding the amount of Rs. 40,00,000/-, it is clear that the proceedings are not liable to be re-opened as the amount involved is less than the one contemplated under section 149(1)(b) of the Act of 1961 and the same pertains to Assessment Year 2015-16. The notice under section 148(b) is dated 23-3-2022 which is beyond the permissible period of three years. On this count, a case for interference has been made out
8. In the light of this undisputed position, it would be futile to require the petitioner to face proceedings under section 148 of the Act of 1961. The material on record that was placed before the Assessing Officer warranted consideration especially in the light of the fact that the document relied was a registered sale deed. If the amount of Rs. 40,00,000/- mentioned therein is excluded from consideration, the notice as issued on 23-3-2022 falls foul of the provisions of section 149(1)(b) of the Act of 1961. Hence for this reason, we do not find that the petitioner should be required to further contest the proceedings under section 148 of the Act of 1961.
9. In that view of the matter, the order dated 31-3-2022 passed under section 148 A(d) of the Income-tax Act, 1961 as well as notice dated 31-3-2022 issued under section 148 of the Act of 1961 are quashed and set aside. The respondents are free to take appropriate steps in accordance with law.”
14. The aforesaid order was followed by the coordinate bench of ITAT Mumbai in the Case of Pankaj Chandrakant Pimple Vs. International Tax (supra) and in the case of Krishna deep Builders vs. ITO (supra). Thus, by respectfully following the aforesaid orders, we are inclined to hold that the notice u/s. 148, dated 15.11.2023 is invalid and consequent order passed u/s 147/144 of the Act is hereby, quashed. In the result, ground of appeal No.3 of the assessee is allowed.
15. As we have decided the legal Ground of appeal raised by the assessee, thereby holding the reassessment notice to be invalid and the consequential assessment order is also held to be invalid in the eyes of law. We have restricted ourselves to the legal issue and have not gone into the merits of the case and hence, the other grounds of appeal are rendered academic.
16. In the result, Appeal of the assessee is allowed.
ITA Nos.7853 & 7854 /De1/2025 for Asst. Years 2018-19 & 2019-20
17. Admittedly, the facts are identical as were existed in Asst. Year 2017-18 except the amount of addition which is Rs. 33,65,002/- in AY 2018-19 and Rs.1,12,86,847/- in AY 2019-20. Since, in both the years, the income escaped assessment was less than Rs.50 lacs, thus, by following the observations made by us in ITA No.7852/Del/2025 for Asst. Year 2017-18 which are Mutatis Mutandis applied to the facts of both the assessment years, the reassessment orders passed u/s 147 are hereby, quashed.
18. In the result, all the three appeals filed by the assessee in ITA No.7852, 7853 and 7854/Del/2025 are allowed.
ITA Nos.7855 to 7858 /De1/2025 for Asstt. Years 2020-21 to AY 2023-24
19. Coming to the assessee’s appeal for Assessment Years 2020-21, 2021-22, 2022-23 and 2023-24 in ITA No.7855, 7856, 7857 and 7858/Del/2025 respectively. It is observed that Ld. CIT(A) has dismissed the appeal of the assessee for non-prosecution.
20. Heard both the parties and perused the materials available on record. It was the request of the assessee that one more opportunity be granted to represent his case before the Ld. CIT(A). Accordingly, in the larger interest of justice, all the appellate orders in captioned four appeals are hereby, set aside and remitted back to the file of Ld. CIT(A) with the direction to decide the appeal of the assessee afresh after providing fair and reasonable opportunities of hearing to the assessee. Accordingly, all the four appeals are allowed for statistical purposes.
21. In the final result, ITA Nos.7852 to 7854/De1/2025 for Assessment Years 2017-18 to 2019-20 respectively, filed by the assessee are allowed and ITA Nos.7855 to 7858/ DeU2025 for Assessment Years 2020-21 to 2023-24 respectively, are allowed for statistical purposes.
Order pronounced in open Court on 24.07.2026.
