Sanjana N Malpe Vs ITO (ITAT Bangalore)
Bangalore ITAT Quashes Reassessment: Notice Beyond Three Years Invalid Where Escaped Income Was Only ₹20.52 Lakh
The assessee sold an immovable property for ₹20.52 lakh during AY 2016-17. Alleging non-disclosure of the resultant capital gain, the AO initially issued a notice under Section 148 on 21 June 2021. Following the Supreme Court’s decision in Union of India v. Ashish Agarwal, the notice was treated as a show-cause notice under Section 148A(b), and a fresh Section 148 notice was issued on 29 June 2022.
The AO rejected the assessee’s contention that part of the property constituted a long-term capital asset and that the gain was eligible for exemption under Section 54. The entire sale consideration of ₹20.52 lakh was consequently assessed as short-term capital gain.
The Bangalore ITAT observed that under Section 149(1), a reassessment notice issued after three years but within ten years is permissible only where escaped income, represented in the prescribed form, amounts to or is likely to amount to ₹50 lakh or more.
Here, even the gross sale consideration and the eventual addition were only ₹20.52 lakh. Therefore, the escaped income could under no circumstances reach the statutory threshold of ₹50 lakh. The AO could issue notice only within three years from the end of AY 2016-17, whereas the impugned notice was issued on 29 June 2022.
