Narayan Ram Luhar Vs ITO (ITAT Mumbai)
Mumbai ITAT: Reassessment Beyond Three Years Quashed Where Escaped Income Was Below ₹50 Lakh
The Mumbai ITAT quashed the reassessment proceedings for AY 2016-17, holding that no notice under section 148 can be issued beyond three years from the end of the relevant assessment year where the alleged escaped income is less than ₹50 lakh. The Tribunal also held that approval from the wrong authority vitiated the reopening.
The Tribunal first condoned a 463-day delay in filing the appeal, accepting the assessee’s explanation that the delay occurred due to bona fide reliance on the advice of the previous Chartered Accountant to await the outcome of the consequential assessment proceedings. The Tribunal observed that there was sufficient cause and no mala fide or deliberate inaction.
On merits, the assessee challenged the validity of the reassessment on the ground that the notice under section 148, issued pursuant to an order under section 148A(d) dated 29.07.2022, related to AY 2016-17 and sought to tax alleged escaped income of only ₹25.13 lakh, which was below the statutory threshold of ₹50 lakh prescribed under section 149(1)(b).
The Tribunal relied on its earlier decision in Manish Jagdish Joshi v. CIT and held that after the expiry of three years from the end of the relevant assessment year, reopening is permissible only where the escaped income represented in the specified forms amounts to ₹50 lakh or more. Since the alleged escapement was only ₹25.13 lakh, the statutory condition was not satisfied.
The Tribunal further held that the reopening also suffered from a jurisdictional defect because the approval for issuance of notice under section 148 had been obtained from the Principal Commissioner of Income-tax (PCIT) instead of the higher authority prescribed under section 151 for cases where more than three years had elapsed.
Accordingly, the ITAT held that the notice under section 148 was time-barred and without valid sanction, quashed the reassessment proceedings, and set aside the consequential assessment order. Having allowed the jurisdictional ground, the Tribunal left the other grounds on merits open.
Cases Discussed
- Manish Jagdish Joshi vs. CIT (ITAT Mumbai), (2024) 165 taxmann.com 836 (Mumbai – Trib.)
- Collector, Land Acquisition, Anantnag v. Mst. Katiji & Ors. (SC), (1987) 2 SCC 107
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), NFAC, Delhi, dated 23.10.2024 for the assessment year 2016-17.
2. At the outset, it is noticed from the appeal record that there is a delay of 463 days in filing the appeal before the Tribunal. Ld. Counsel for the assessee referred to the affidavit for condonation of delay dated 09.04.2026 and submitted that the reasons for the delay have been explained in the affidavit, which are reproduced hereunder:
“Affidavit for Condonation of Delay
1. I, Narayan Ram Luhar, son of, aged about years, residing at Room No. 226, Ground Floor, Sahara Shopping Center, Siddik Road, Musafirkhana, Mumbai – 400001, Maharashtra, do hereby solemnly affirm and state as under:
2. That I am the Appellant in the accompanying appeal proposed to be filed before this Hon’ble Tribunal and am fully conversant with the facts of the case, and therefore competent to swear this affidavit.
3. That I say that I am a person of humble means and have limited formal education. I do not possess adequate knowledge of income-tax law, appellate procedure, or the statutory period of limitation for filing appeals before this Hon’ble Tribunal.
4. That I say that I was wholly dependent upon the advice and guidance of my then Chartered Accountant / tax representative in relation to the proceedings arising out of the reassessment initiated under section 148 of the Income-tax Act, 1961.
5. That I say that the notice issued under section 148 of the Income-tax Act, 1961, which formed the very basis of the reassessment proceedings, was, according to my understanding and legal advice now received, issued beyond the period of limitation prescribed under the Act, and is therefore time-barred and void ab initio.
6. That I say that the aforesaid jurisdictional issue regarding the validity of the time- barred notice under section 148 had been specifically raised before the learned Commissioner of Income-tax (Appeals).
7. That I say that the learned CIT(A), vide appellate order dated 23.10.2024, did not adjudicate the said jurisdictional ground, but instead set aside / restored the matter to the file of the Assessing Officer for fresh adjudication.
8. That immediately after receipt of the said order dated 23.10.2024, I handed over the matter to my then Chartered Accountant and acted strictly in accordance with his professional advice.
9. That I say that my then Chartered Accountant was conducting the consequential fresh assessment proceedings before the Assessing Officer pursuant to the said order and advised me that the proper course would be to await the outcome of the fresh assessment proceedings before taking any further legal steps.
10. That I say that, being uneducated in legal and tax matters and having complete faith in the professional advice so given, I bona fide believed the said advice be correct and did not file an appeal before this Hon’ble Tribunal within the period prescribed under section 253(3) of the Income-tax Act, 1961, while section 253(5) empowers the Tribunal to admit a delayed appeal on sufficient cause being shown
11. That I say that the Assessing Officer thereafter passed the fresh/final assessment order on 06.03.2026 pursuant to the set-aside proceedings.
12. That it was only upon receipt of the said fresh/final assessment order that I realized that my fundamental objection regarding the time-barred notice under section 148 had still not been adjudicated on merits and that I continued to remain aggrieved by the appellate order dated 23.10.2024.
13. That thereafter I engaged a new Chartered Accountant, Shri Bharatkumar, who, after examining the complete record, advised me that the proper, efficacious and necessary remedy was to challenge the order dated 23.10.2024 before this Hon’ble Tribunal, particularly on the jurisdictional ground relating to the time-barred notice under section 148.
14. That immediately upon receiving the said fresh legal advice, I took prompt steps for preparation and filing of the present appeal along with the accompanying condonation application and this affidavit.
15. That I say that the delay in filing the present appeal has occurred neither due to any deliberate inaction nor due to any mala fide intention on my part. The delay has occurred solely on account of my bona fide reliance on the advice of my erstwhile Chartered Accountant, my lack of legal knowledge, and the pendency of the fresh assessment proceedings, which concluded only on 06.03.2026.
16. That I say that I have hot derived any benefit whatsoever by delaying the fi’ of the present appeal. On the contrary, I have suffered continuing prejudice because my jurisdictional challenge to the validity of the notice under section 148 remains undecided.
17. That I respectfully submit that the expression “sufficient cause” is required to receive a liberal construction so as to advance substantial justice, as laid down by the Hon’ble Supreme Court in Collector, Land Acquisition, Anantnag v. Mst. Katiji & Ors. reported in (1987) 2 SCC 107.
18. That I further say that the delay occasioned due to bona fide mistaken professional advice has been recognized in tax jurisprudence as a valid ground for condonation where no negligence, deliberate inaction or want of bona fides is attributable to the appellant.
19. That in the facts and circumstances stated hereinabove, I respectfully pray that this Hon’ble Tribunal may be pleased to condone the delay in filing the accompanying appeal and admit the same for hearing on merits in the interest of substantial justice.”
3. Heard rival submissions and perused the affidavit filed by the assessee explaining the reasons for the delay in filing the present appeal. On consideration of the reasons stated in the affidavit, we are satisfied that the assessee was prevented by sufficient and reasonable cause from filing the appeal within the prescribed period. The delay does not appear to be deliberate or attributable to any mala fide Considering the facts and circumstances of the case, and in the interest of substantial justice, we condone the delay of 463 days in filing the present appeal and admit the appeal for adjudication on merits.
4. The assessee has raised the following grounds of appeal.
“1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not adjudicating the specific ground challenging the validity of the reassessment on the issue that the notice issued under section 148 is barred by limitation under section 149 for AY 2016-17. The notice being time barred, the entire reassessment is bad in law and liable to be quashed.
2. On the facts and in the circumstances of the case and in law, the learned AO issued notice which was time barred.
3. On the facts and in the circumstances of the case and in law, the learned CIT(A) has further erred in not adjudicating the ground challenging the validity of the reassessment on the issue that the prior approval for issue of notice under section 148 was obtained from an authority not specified as specified authority under section 151 of the Act for notices issued beyond three years from the end of the relevant assessment year, thereby rendering the reassessment proceedings void ab initio.
4. On the facts and in the circumstances of the case and in law, the learned AO issued notice without taking approval from specified authority under the Act.
5. Without prejudice to the above grounds on jurisdiction and validity, on the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the addition by treating the entire gross amount of Rs 25,12,883 deposited in the credit society as unexplained income, instead of accepting the same as gross business receipts on which only the profit element could be brought to tax. It is submitted that, having regard to section 44AD and settled principles of estimation, at the highest only 8 percent of such turnover could be taxed as income, which stands duly offered in the returned income of Rs 5,86,380.
6. Without prejudice to and independent of the above grounds, on the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not appreciating that the amounts deposited in the bank OR credit society account represent business turnover of the appellant, who has no source of income other than business and incidental bank interest. The said receipts are liable to be assessed as income from business and profession and not as unexplained money OR income from other sources, and are taxable only at the normal slab rates applicable to an individual”
5. Referring to Ground No. 3 of the grounds of appeal, Ld. Counsel for the assessee submitted that the learned CIT(A) erred in not adjudicating the ground challenging the validity of the reassessment on the issue that the prior approval for issuance of notice u/s 148 was obtained from an authority not specified as “specified authority” u/s 151 of the Act for notice issued beyond the period of three years from the end of the relevant assessment year, thereby rendering the reassessment proceedings void ab initio. Ld. Counsel for the assessee submitted that in the case of the assessee, proceedings u/s 148A(d) in consequence to the decision of the Hon’ble Supreme Court was passed on 29.07.2022 for the assessment year 2016-17, which is beyond the period of three years from the end of the relevant assessment year and the income escaping assessment was ₹25,12,883/-, which is less than ₹50 lakhs and therefore, Ld. Counsel submitted that the Assessing Officer should not have reopened the assessment by issuing notice u/s 148 beyond the period of three years for alleged escapement of income of less than ₹50 lakhs. Reliance was placed on the decision of the Coordinate Bench of the Tribunal in the case of Manish Jagdish Joshi vs. CIT reported in (2024) 165 taxmann.com 836 (Mumbai – Trib.).
6. On the other hand, Ld. DR placed reliance on the orders of the authorities below.
7. Heard rival contentions and perused the orders of the authorities below and the material placed before us. On perusal of the order passed u/s 148A(d) dated 29.07.2022, which is placed at page 10 of the paper book, it is noticed that the Assessing Officer issued notice u/s 148 for reopening the assessment beyond the period of three years from the end of the relevant assessment year, i.e., assessment year 2016-17, to assess income escaping assessment of ₹25,12,883/-. We also note that the issue is squarely covered by the decision of the Coordinate Bench of the Tribunal in the case of Manish Jagdish Joshi vs. CIT (supra), wherein the Tribunal held as under:
“10. Therefore, as per the first proviso to section 148 of the Act, it is evident that for issuing notice under the section the AO is required to obtain prior approval of the Specified Authority. The second proviso to section 148 further provides that no such approval shall be required where the AO with the prior approval of the Specified Authority has passed the order under section 148A(d) of the Act. Further, Explanation 3 clarifies that the Specified Authority for the purpose of section 148 shall be the Specified Authority as referred to in section 151 of the Act.
11. Further, section 151 of the Act deals with the Specified Authority for section 148 and section 148A of the Act, and the same reads as follows:
151. Specified authority for the purposes of seco 76 48 and section 148A shall be,
(i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year;
(ii) Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.”
12. Therefore, from the plain reading of section 151 of the Act, it is evident that in the case where more than three years have elapsed from the end of the relevant assessment year, the Specified Authority for the purpose of granting prior approval, as required under section 148 of the Act, is Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.
13. Section 149 of the Act provides a time limit for issuance of notice under section 148 of the Act and the relevant portion of the same reads as follows: –
“149. (1) No notice under section 148 shall be issued for the relevant assessment year,-
(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);
(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:
14.Therefore, in a case where three years have elapsed no notice under section 148 of the Act can be issued unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to Rs. 50 lakh or more.
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19. Thus, in the present case, it is discernible that the notice under section 148 of the Act was issued not only in contravention of the provisions of section 151 as the sanction of the concerned Specified Authority was not obtained, but the same is also time-barred as per the provisions of section 149 of the Act as the same was issued after three years and the amount alleged to have escaped assessment is only Rs.43,32,000, i.e. less than Rs.50 lakh. Accordingly, we are of the considered view that the notice issued under section 148 of the Act is void ab initio and bad in law and therefore is quashed. Consequently, the entire reopening proceedings and impugned final assessment order passed under section 147 r/w section 144C(13) of the Act is also quashed.”
8. In the case on hand also, the assessment was sought to be reopened beyond the period of three years from the end of the relevant assessment year and the approval for issuance of notice u/s 148 was obtained from the PCIT on 28.07.2022 for reopening the assessment in respect of income escaping assessment of ₹25,12,883/-. Therefore, since as per the provisions of section 149(1)(iii) of the Act, the income escaping assessment is less than ₹50 lakhs, no notice u/s 148 could have been issued for the relevant assessment year. Thus, the action of the Assessing Officer is contrary to the provisions of section 149 read with section 151 of the Act. Accordingly, we quash the reassessment framed by the Assessing Officer for the assessment year 2016-17. Ground No. 3 of the grounds of appeal is allowed. The other grounds are left open at this stage.
9. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 04/08/2026
