Sridevi Mogulla Vs ITO (ITAT Hyderabad)
Hyderabad ITAT: Reassessment Beyond Three Years Invalid Where Actual Escaped Income Is Below ₹50 Lakh
The Hyderabad ITAT quashed the reassessment proceedings holding that the validity of a notice under section 148 issued beyond three years must be tested on the basis of the actual income alleged to have escaped assessment and not on inflated or incorrect figures adopted by the Assessing Officer. Where the actual cash deposits were less than ₹50 lakh, the extended limitation under section 149(1)(b) was unavailable, rendering the notice issued after three years time-barred and without jurisdiction.
In the present case, the Assessing Officer initiated proceedings under section 148A by alleging cash deposits of ₹52.43 lakh, comprising two entries of ₹48.43 lakh and ₹4 lakh. The assessee, in reply to the show-cause notice under section 148A(b), demonstrated through the bank statement that the ₹4 lakh was already included in the figure of ₹48.43 lakh, and therefore the actual cash deposits were below ₹50 lakh. Despite this, the Assessing Officer proceeded to issue notice under section 148 after the expiry of three years from the end of AY 2016-17. Significantly, during the reassessment itself, the Assessing Officer accepted that the actual cash deposits were only about ₹48.43 lakh, thereby confirming the factual error in the reopening proceedings.
The Tribunal held that once the assessee had brought the correct factual position to the Assessing Officer’s notice before passing the order under section 148A(d), the Assessing Officer could not rely upon an incorrect and inflated figure merely to invoke the extended ten-year limitation. The Tribunal followed its earlier decision in Adilakshmi Vangala and also relied on the principles laid down by the Madras High Court and Bombay High Court, holding that the limitation period cannot be enlarged on the basis of non-existent or erroneous facts. Accordingly, the notice issued under section 148 and the consequential reassessment order were quashed as barred by limitation, and the remaining grounds were rendered infructuous.
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