ITAT Jaipur Quashes Time-Barred Reassessment of ₹2.50 Lakh Political Donation

Piyush Maheshwari Vs Assessment Unit (ITAT Jaipur)

Section 148A Procedure Excluded by Law Cannot Extend Reopening Limitation: ITAT Quashes Political Donation Reassessment

The controversy

The Jaipur ITAT held that the Revenue could not extend the limitation for issuing a reassessment notice by following section 148A proceedings where that procedure was statutorily excluded.

The reopening concerned a ₹2.50 lakh political donation, with information originating from a search on a third party. The notice under section 148 was issued after the ordinary three-year limitation had expired.

The Tribunal rejected the Revenue’s attempt to exclude the time allowed for responding to a section 148A(b) notice. It quashed both the reopening notice and the reassessment, leaving the genuineness of the donation undecided.

Political donation questioned after third-party search

The assessee, a salaried individual, filed his return on 29 July 2019, declaring total income of ₹63,47,300 after claiming deduction of ₹2,50,000 under section 80GGC.

The contribution was made to Rashtriya Samajwadi Party (Secular).

On 7 September 2022, the Department searched a group of 23 Registered Unrecognised Political Parties in Ahmedabad, including the recipient party.

According to the Revenue, the search revealed an arrangement under which donations received through banking channels were returned to donors, principally in cash, after retaining a commission.

Although the Assessing Officer accepted that the payment was made through banking channels and that the recipient remained a registered political party, he treated the contribution as bogus. The deduction was disallowed, and income was reassessed at ₹65,97,300.

The CIT(A) upheld the reopening and disallowance.

Notice issued beyond the ordinary limitation

Information was flagged on the Insight Portal on 27 March 2023. The Assessing Officer issued a show-cause notice under section 148A(b) on 30 March 2023, and the assessee replied on 6 April 2023.

The section 148A(d) order and section 148 notice were issued on 12 April 2023.

For AY 2019-20, the ordinary three-year period under section 149(1)(a), as applicable when the notice was issued, expired on 31 March 2023.

Since the alleged escaped income was only ₹2.50 lakh, the ₹50 lakh threshold for invoking the extended period under section 149(1)(b) was not met.

The notice could therefore survive only if the statutory exclusion of time associated with section 148A proceedings was available.

Jurisdictional objection admitted for the first time

The assessee raised the limitation plea before the Tribunal, arguing that information originating from the third-party search brought the case within the exclusion contained in the first proviso to section 148A.

The Tribunal admitted the plea because it was a pure jurisdictional question arising from undisputed facts already on record. The Revenue fairly accepted its admissibility, referring to National Thermal Power Co. Ltd. v. CIT, 229 ITR 383 (SC).

The Tribunal further held that participation in proceedings could not confer jurisdiction that the statute did not provide.

Information’s source mattered, not its transmission channel

The Revenue argued that the information had been flagged under the CBDT’s Risk Management Strategy. It also contended that following section 148A gave an additional opportunity and caused no prejudice.

The Tribunal rejected this reasoning.

The assessment order itself recorded that the information originated from the search on the political parties. The Department also relied on the search appraisal report to support the disallowance.

The Insight Portal was merely the channel of communication. It did not alter the source or character of the information.

The Tribunal treated the case as falling within clause (c) of the first proviso to section 148A, concerning relevant information in third-party search documents. It also held that omission to record the contemplated satisfaction and approval could not be used to take advantage of a different procedural route for limitation.

Excluded procedure could not generate additional time

The Tribunal reasoned that, where section 148A did not apply, a show-cause notice under that provision was not contemplated.

Following that excluded procedure could not generate the time exclusion and consequential extension otherwise associated with it under section 149.

Limitation concerned jurisdiction; absence of prejudice could not cure the defect.

Following Amit Pahuja v. DCIT, [2026] 187 taxmann.com 961 (Mumbai Tribunal), the Bench quashed the notice dated 12 April 2023 and the reassessment dated 23 January 2025.

The appeal was allowed. Other objections concerning sanction and section 151A, together with the donation’s merits, were left open.

Author’s comments

The decision’s central principle concerns limitation and the correct statutory route, rather than automatic acceptance of political donations routed through banks.

The Revenue’s decisions supporting disallowance on merits did not answer the jurisdictional question. Equally, the assessee’s success does not establish that the contribution was genuine.

The order highlights the need to trace information to its actual source. A portal classification cannot, on these findings, convert third-party search information into a different category merely to secure additional time.

The ruling should also be applied with reference to the statutory provisions operative on the notice date. Its conclusion rests on the particular search facts, excluded procedure and limitation framework examined by the Tribunal.

Cases Discussed

• Amit Pahuja v. DCIT, [2026] 187 taxmann.com 961 (ITAT Mumbai) — Relied upon and followed for the proposition that an excluded section 148A procedure cannot be used to extend the limitation for issuing a section 148 notice.
• National Thermal Power Co. Ltd. v. CIT, [1998] 229 ITR 383 (Supreme Court) — Referred to by the Revenue regarding admission of a pure question of law raised for the first time before the Tribunal.
• Pavan Anil Bakeri v. DCIT, [2022] 142 taxmann.com 574 (ITAT Ahmedabad) — Cited by the Revenue on the merits of political donation disallowance; held not determinative of the limitation question.
• Rajen Jayantilal Merchant v. Assessment Unit, [2025] 180 taxmann.com 568 (ITAT Ahmedabad) — Relied upon by the Revenue concerning the genuineness of political donations; distinguished as not addressing the limitation issue.
• Mahesh Upendra Majithia v. DCIT, ITA No. 620/Ahd/2026 (ITAT Ahmedabad) — Cited by the Revenue on the merits of the disallowance; not considered determinative of the jurisdictional limitation issue.

FULL TEXT OF THE JUDGMENT/ORDER OF ITAT JAIPUR

1. This appeal by the Assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the learned CIT(A)”] dated 31.08.2025 arising out of the assessment order dated 23.01.2025 passed by the Assessing Officer (hereinafter referred to as “the AO”) under section 147 read with section 144B of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for the assessment year 2019-20.

2. The grounds of appeal raised by the Assessee before us in the memorandum of appeal in Form No. 36 read as under:

“1. Under the given facts and circumstances of the case and in law, impugned order dated 31.08.2025 passed by the Learned Commissioner of Income Tax (Appeals) [hereinafter referred to as “CIT(A)” u/s 250 of the Income Tax Act, 1961 “The Act”] is perverse, arbitrary and bad in law.

2. Under the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the Ld. AO in reopening the assessment u/s 147 of the Act.

3. Under the facts and circumstances of the case and in law, the impugned notice u/s 148 of the Act dated 12.04.2023 is perverse, arbitrary and bad in law.

4. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding that the consequential assessment proceedings initiated by the Ld. AO u/s 147 of the Act without following the due procedure of the law.

5. Under the facts and circumstances of the case, the Ld. CIT(A) erred in confirming the disallowance of deduction of Rs. 2,50,000/- u/s 80GGC of the Act.

6. Under the facts and circumstances of the case, the Ld. CIT(A) erred in

a. upholding the action of the Ld. AO, which is based on unconfronted, vague and forwarded information without any cogent evidence and based on third party statements or actions having no nexus with the Appellant

b. in upholding the action of the Ld. AO without allowing an opportunity of rebuttal and cross examination of third parties whose statements were allegedly relied upon against the Appellant

7. The appellant craves leave to add, alter, amend, or withdraw any grounds of appeal at the time of hearing.

8. Under the facts and circumstances of the case the Ld. AO has erred in levying the interest u/s 234B and 234C of the Act.”

3. Briefly stated, the facts of the case are that the assessee, a salaried individual, filed his return of income for the year under consideration on 29.07.2019 declaring a total income of Rs 63,47,300, after claiming a deduction of Rs 2,50,000 under section 80GGC of the Act for a contribution made to Rashtriya Samajwadi Party (Secular) [hereinafter referred to as “RSP(S)”]. A search under section 132 of the Act was conducted on 07.09.2022 on a group of 23 Registered Unrecognised Political Parties of Ahmedabad, including RSP(S). On the basis of information flagged on the Insight Portal on 27.03.2023 under the Risk Management Strategy of the CBDT, the AO issued a show cause notice under section 148A(b) of the Act on 30.03.2023. After considering the reply of the assessee dated 06.04.2023, the AO passed an order under section 148A(d) of the Act and issued a notice under section 148 of the Act, both on 12.04.2023. The assessee filed his return in response on 11.05.2023.

4. In the reassessment, the AO held, on the basis of the material gathered in the search, that RSP(S) received donations through banking channels and returned them to the donors, mainly in cash, after retaining a commission. Although the AO accepted that the donation was made through proper banking channels and that RSP(S) continued to be a registered political party, the AO held the donation to be bogus, disallowed the deduction of Rs 2,50,000 and determined the total income at Rs 65,97,300 by order dated 23.01.2025. The learned CIT(A) upheld the reopening and confirmed the disallowance.

5. The learned Authorized Representative (hereinafter referred to as “the learned AR”) contended that the reassessment is barred by limitation. For the assessment year 2019-20, the period of three years under section 149(1)(a) of the Act expired on 31.03.2023, and the extended period under section 149(1)(b) of the Act is not available, as the income alleged to have escaped is only Rs 2,50,000. The information on which the AO acted emanated admittedly from the search conducted on 07.09.2022 in the case of a third party. Such a case is excluded from section 148A of the Act by its first proviso. The AO nevertheless issued a show cause notice under section 148A(b) of the Act on 30.03.2023, and then relied on the time allowed for the reply to issue the notice under section 148 of the Act on 12.04.2023. A procedure that the statute excludes cannot be used to enlarge the period of limitation. Reliance was placed on Amit Pahuja v. DCIT [2026] 187 taxmann.com 961 (Mumbai – Trib.). Without prejudice, it was argued that the approval under section 151 of the Act was granted by the wrong authority and that the notice was not issued in the manner required by section 151A of the Act. On merits, the learned AR submitted that the contribution was made by bank transfer to a registered political party and that no material specific to the assessee was brought on record.

6. The learned Departmental Representative (hereinafter referred to as “the learned DR”) submitted that the plea of limitation was raised for the first time before the Tribunal, though it was fairly accepted that a pure question of law arising from the facts on record may be raised, following National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC). It was argued that the information was flagged in the case of the assessee under the Risk Management Strategy of the CBDT and is therefore information within the meaning of Explanation 1 to section 148 of the Act, as also recorded in the approval under section 151 of the Act dated 11.04.2023. It was further argued that the first proviso to section 148A of the Act operates only to relieve the AO from following the procedure, and that an AO who nonetheless follows it does not lose jurisdiction. The assessee, who participated in the proceedings under section 148A of the Act and filed a return in response to the notice under section 148 of the Act without objection, suffered no prejudice. On merits, the learned DR relied on the decisions of the Ahmedabad Bench in Pavan Anil Bakeri v. DCIT [2022] 142 taxmann.com 574 (Ahmedabad – Trib.), Rajen Jayantilal Merchant v. Assessment Unit [2025] 180 taxmann.com 568 (Ahmedabad – Trib.) and Mahesh Upendra Majithia v. DCIT (ITA No. 620/Ahd/2026), and on extracts of the appraisal report prepared in the case of RSP(S).

7. We have heard the rival contentions and perused the material available on record. The plea of limitation goes to the root of the jurisdiction of the AO. It arises from facts which are not in dispute and which are fully on record. The learned DR has fairly accepted that such a plea may be raised for the first time before the Tribunal. We therefore admit it and take it up first. Participation by the assessee in the proceedings cannot confer a jurisdiction which the statute does not give.

8. The relevant dates are not in dispute and are as under:

9. Section 149(1) of the Act, as it stood when the notice was issued, reads as under:

“(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:”

The income alleged to have escaped is Rs 2,50,000. Clause (b) is therefore not attracted, and the notice had to be issued within three years from the end of the assessment year, that is, by 31.03.2023. The notice was issued on 12.04.2023. It can survive only if the period between 30.03.2023 and 12.04.2023 is excluded under the provisos to section 149(1) of the Act. Those provisos exclude the time allowed to the assessee in a show cause notice issued under section 148A(b) of the Act, and extend the remaining period to seven days where it falls short. The Revenue’s case on limitation thus rests entirely on the proceedings under section 148A of the Act.

10. The first proviso to section 148A of the Act provides that the section shall not apply in four classes of cases. Clauses (b) and (c) cover cases where the AO is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money or asset, or any books of account or documents, seized in a search under section 132 of the Act in the case of any other person on or after 01.04.2021 belong to, or relate to, the assessee. Clause (c) reads as under:

“(c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee;”

In the classes of cases covered by the proviso, no show cause notice under section 148A(b) of the Act is contemplated. It follows that in such cases there is no time allowed to the assessee under such a notice that can be excluded under the provisos to section 149(1) of the Act.

11. The source of the information in the present case is beyond doubt. The AO has recorded in the very first paragraph of the assessment order as under:

“The information has been received on the basis of the search u/s 132 of the Act, in the case of RUPPs group of Ahmadabad on 07.09.2022.”

“Thereafter, on the basis of bank account statements of these RUPPs, beneficiaries/donors who had availed accommodation entries in from of the bogus donation made to these RUPPs have been identified.”

The disallowance itself rests on the material found in that search, and the learned DR has supported it before us with extracts of the appraisal report prepared in the case of RSP(S). The information that the assessee had made a donation to RSP(S) was thus information contained in, or derived from, the books and documents of a third party gathered in a search conducted after 01.04.2021. That is precisely the class of case covered by clause (c) of the first proviso to section 148A of the Act. The satisfaction and approval mentioned in that clause are the conditions on which the AO is to proceed in such a case. The omission of the AO to record them cannot take the case out of the class to which it plainly belongs, and cannot be turned to the advantage of the Revenue on the question of limitation.

12. The contention of the learned DR that the information is information under the Risk Management Strategy does not alter this position. The Insight Portal is the channel through which the information reached the AO. It does not change the source or character of the information, which, on the AO’s own record, is the third party search. Nor can the procedure under section 148A of the Act be treated as a mere additional opportunity given to the assessee. When the statute excludes a procedure, following it anyway cannot produce a consequence which the statute attaches only to that procedure, namely the exclusion of time for computing limitation. To hold otherwise would allow the Revenue to choose its route according to the time left on the clock. Limitation is a matter of jurisdiction, and the absence of prejudice to the assessee cannot cure it.

13. This view is consistent with the decisions of coordinate Benches on facts that are, for all practical purposes, identical. The Revenue cannot derive any advantage from the proceedings under section 148A of the Act when the statute itself excludes them, and that an action not contemplated by the Act cannot confer jurisdiction on the AO.

14. The decisions relied on by the learned DR were rendered on the merits of the disallowance and no question of limitation under the present scheme arose. None of these decisions, therefore, answers the question before us.

15. Respectfully following the decision in Amit Pahuja (supra), we hold that the notice under section 148 of the Act dated 12.04.2023 was issued after the expiry of the period of limitation under section 149(1) of the Act. The notice, and the reassessment order dated 23.01.2025 founded on it, are without jurisdiction and are quashed. Grounds no. 2, 3 and 4 are allowed.

16. As the reassessment has been quashed, the grounds on the merits of the disallowance under section 80GGC of the Act (grounds no. 5 and 6) and the remaining legal contentions regarding the approval under section 151 of the Act and compliance with section 151A of the Act have become academic. They are left open. Ground no. 8, relating to interest under sections 234B and 234C of the Act, does not survive. Ground no. 1 is general in nature, and ground no. 7 does not call for any adjudication.

17. In the result, the appeal filed by the Assessee is allowed.

Order pronounced in the open court on 08 -10-2026