Vandana Nitinkumar Bharadwaj Vs ITO (ITAT Rajkot)
Section 149(1)(b): Reopening Beyond Three Years Invalid Where Alleged Escaped Income Is Below ₹50 Lakh
The controversy
The Rajkot Tribunal quashed reassessment proceedings for AY 2016-17, holding that the notice under Section 148 issued on 22 March 2023 was barred by limitation.
The Assessing Officer had quantified the alleged escaped income at ₹12,35,500, substantially below the ₹50 lakh threshold prescribed under the version of Section 149(1)(b) applicable to the notice.
Since more than three years had elapsed from the end of the relevant assessment year, the Revenue could not invoke the extended reopening period without satisfying that statutory condition.
The addition failed because the reassessment itself lacked a valid foundation in limitation; its merits were not adjudicated.
Cash-deposit information led to reopening
The assessee was an individual who, according to the information available with the assessment unit, had not filed her original return.
The initial information reflected cash deposits of ₹24,71,000. However, the actual cash deposits in the bank account were found to be only ₹12,35,500.
The Assessing Officer reopened the case on the allegation that income of ₹12,35,500 had escaped assessment and issued notice under Section 148 on 22 March 2023.
In response, the assessee filed her return on 11 April 2023, declaring total income of ₹1,90,320.
Supporting documents did not prevent the addition
During the proceedings, the assessee furnished several documents, including her computation of income, statement of affairs, bank details, income and expenditure statement, property particulars, builder confirmation, sale deed, bank book and Form 26AS.
She also submitted a schedule of payments relating to the purchase of property.
The Assessing Officer nevertheless concluded that she had not satisfactorily explained the nature of the transactions in her bank account.
The cash deposits of ₹12,35,500 were consequently added as unexplained money under Section 69A, in the reassessment order dated 22 March 2024.
Jurisdictional objections raised before the Tribunal
The grounds before the Tribunal challenged the Commissioner (Appeals)’s failure to decide the legal objections before setting aside the assessment.
The assessee questioned the validity of sanction under Section 151, alleged absence of the necessary prior approval for an inquiry under Section 148A(a), and complained that the appellate order did not satisfy the requirement of a speaking order under Section 250(6).
The decisive objection, however, concerned Section 149(1)(b).
The assessee submitted that the notice was issued beyond three years from the end of AY 2016-17, while the quantified escapement remained below ₹50 lakh. The statutory gateway to extended limitation was therefore unavailable.
Extended limitation required evidence of the prescribed quantum
The Tribunal examined the provisions applicable to the notice.
Under Section 149(1)(a), notice could not ordinarily be issued after three years from the end of the relevant assessment year, unless the case satisfied clause (b).
The extended period under clause (b) required the Assessing Officer to possess books, documents or evidence revealing escaped income represented in the prescribed forms—an asset, specified expenditure, or an entry or entries in the books—amounting to, or likely to amount to, ₹50 lakh or more.
The Tribunal emphasised that this monetary requirement was a condition precedent to invoking the extended period.
It was not enough that the Department had information concerning a potentially unexplained bank transaction.
AO’s own quantification defeated extended limitation
In the present case, the Assessing Officer had quantified the alleged escapement at ₹12,35,500.
That amount did not satisfy the ₹50 lakh requirement. Even the initial information of ₹24,71,000 was below the statutory threshold.
The Tribunal therefore held that the condition permitting reopening beyond three years had not been fulfilled.
The reasoning rested on the amount alleged to have escaped assessment when reopening was undertaken, rather than a subsequent reduction of a qualifying allegation during assessment.
High Court decisions supported the conclusion
The Tribunal relied upon Ekaksh Commerce Pvt. Ltd. v. ITO, WPO No. 2522/2022, where the Calcutta High Court quashed proceedings concerning alleged escapement below ₹50 lakh after the ordinary three-year period.
It also referred to Bhavesh Maganlal Dharod v. ITO, [2023] 155 taxmann.com 335 (Bombay), concerning the statutory conditions governing reopening and approval.
Applying these principles, the Tribunal quashed the reassessment proceedings. All other issues concerning the addition became academic and infructuous.
The assessee’s appeal was allowed.
Author’s comments
The decision demonstrates that information suggesting escaped income does not dispense with the statutory limitation conditions.
Before defending an addition on its merits, the date of the Section 148 notice, the relevant assessment year and the quantified alleged escapement should be examined together.
The ruling concerns a notice issued in March 2023 under the statutory framework applicable at that time. Its reference to a ten-year extended period should therefore be understood in that historical context.
Its central principle is clear: where extended limitation depends upon a monetary threshold, an allegation below that threshold cannot sustain reopening merely because the underlying transaction calls for explanation.
Cases Discussed
- Ekaksh Commerce Pvt. Ltd. Vs ITO (Calcutta High Court), WPO 2522/2022
- Bhavesh Maganlal Dharod Vs ITO (Bombay High Court), [2023] 155 taxmann.com 335
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT RAJKOT
The captioned appeal filed by the assessee, pertaining to Assessment year 2016-17 is directed against the order passed by the Commissioner of Income Tax Appeal vide order 01.12.2025, which in turn arises out of an order passed by the Assessing Officer u/s. 147 of the Act, dated 22.03.2024.
2. The grounds of appeal raised by the assessee, are as follows:
1. The learned CIT(A) erred in law and on facts in setting aside the assessment order without first adjudicating the jurisdictional ground challenging the validity of reopening under section 148 thereby failing to exercise jurisdiction vested under section 250.
2. The learned CIT(A) erred in not adjudicating the ground that approval granted under section 151 was mechanical and without application of mind.
3. The learned CIT(A) erred in not adjudicating the legal ground that the Assessing Officer conducted enquiries under section 148A(a) without obtaining prior approval of the specified authority as mandated under the Act. The approval granted under section 151 does not record any sanction for such enquiry. The entire reassessment proceedings are therefore vitiated for non-compliance with the mandatory requirement of section 148A(a).
4. The learned CIT(A) failed to appreciate that the reopening was barred under section 149(1)(b), as the alleged escapement of income represented in the form of asset did not exceed ₹50,00,000 for A.Y. 2016-17.
5. The learned CIT(A) violated mandatory provisions of section 250(6) by not passing a speaking order on the legal grounds specifically raised before him.
6. The reassessment proceedings initiated under section 148A and completed under section 147 r.w.s. 144 are void ab initio and liable to be quashed.
7. Without prejudice, the addition of Rs.12,35,500/- u/s 69A is unsustainable on facts and law.
8. The appellant craves leave to add, amend or alter any ground at the time of hearing.
3. Succinctly, the factual panorama of the case is that assessee before me is an Individual. As per the information available with the assessment unit, the assessee is a non-filer and has made the transaction during FY 2016-17. Although the initial information showed cash deposit of Rs.24,71,000/-, it was found that the actual cash deposit in the bank account was Rs.12,35,500/- only. Therefore, the case of the assessee was re-opened that income has escaped from assessment of Rs.12,35,500/- and therefore, notice u/s 148 of the Act, was issued on 22.03.2023.
4. In response to the notice u/s 148 dated 22.03.2023, the assessee has filed her return of income on 11.04.2023 declaring total income of Rs. 1,90,320/-. The assessee also submitted computation of income, statement of affairs, bank details income and expenditure statement, property details, builder confirmation and bank statement, sale deed, bank book, form 26AS, schedule of payment for purchase of property etc. before the assessing officer.
5. However, assessing officer rejected the above contention of the assessee and observed that assessee failed to explain about the nature of transactions in her bank account therefore, cash deposits aggregating to Rs. 12,35,500/- was treated as ‘Unexplained Money’ u/s. 69A of the Income Tax Act.
6. Being aggrieved by the said order of the Assessing Officer, the assessee filed an appeal before the Ld. CIT(A), but remained unsuccessful. Therefore, assessee is left with no other alternative but to knock on the doors of the Tribunal with this appeal praying for justice.
7. I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record.
8. Learned Counsel for the assessee, argued that in the assessee’s case under consideration, income escaped from assessment is to the tune of Rs. 12,35,500/- only, which is below Rs.50,00,000/-. The assessment year involved in the assessee’s case, is the assessment year 2016–17 and to reopen the said assessment year after a period of three years, the income has escaped from assessment should be Rs.50,00,000 or more therefore condition prescribed under section 149(1)(b) of the Act is not satisfied.
9. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which I have already noted in my earlier para and is not being repeated for the sake of brevity.
10. I have considered submissions of both the parties. I find that notice u/s 148 of the Act, is barred by limitation, as the alleged escaped income of Rs. 12,35,500/-, falls below the statutory threshold of Rs. 50 lakhs prescribed under section 149(1)(b) of the Act. I note that the notice u/s 148 of the Act has been issued on 22.03.2023 for the AY 2016-17 after five years and the escapement of income is quantified at Rs. 12,35,500/-, which is below Rs. 50 lakhs. I find that since the notice u/s 148 of the Act is issued beyond three years from end of the assessment year (AY) 2016-17, and the escapement of income must be quantified to be above Rs. 50 lacs which shall be further classified / identified to asset/ book entry/expenditure as per the provisions of section 149 of the Act. In this regards, the provisions of section 149 of the Act are as under:
“Time limit for notice.
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”
11. On perusal of the above provisions, it can be stated that the assessing officer has reopened the assessment by quantifying the income at Rs. 12,35,500/-, which is much below the statutory limit provided u/s 149(1)(b) of the Act, of Rs.50,00,000/-. Section 149(1) of the amended 1961 Act mandates that no notice u/s 148 of the Act could be issued for the relevant assessment year if three (03) years have elapsed from the end of the said assessment year. The Ld. AO can take recourse to the extended limitation period if the conditions precedent prescribed in clause (b) of sub-section (1) of section 149 are fulfilled. Therefore, where three (03) years from the end of the relevant assessment year have elapsed, the AO can issue a notice u/s 148 of the Act provided the conditions prescribed in clause (b) of section 149(1) of the amended 1961 Act are fulfilled. As per clause (b) of section 149 one of the conditions for triggering the extended period of 10 years in cases where 3 years has lapsed is, income chargeable to tax which has escaped assessment amounts to, or is likely to amount to Rs. 50 lakhs or more for the assessment year in consideration. The condition that the escaped income ‘amounts to or is likely to amount to Rs. 50 lakhs or more’ is not satisfied in the present case. Consequently, the notice under section 148 is barred by limitation and deserves to be quashed. For this reliance is placed on following decisions:
(i) Ekaksh Commerce Pvt Ltd Vs ITO WPO/2522/2022 (Calcutta HC)
“By this writ petition, petitioner has challenged the impugned order dated 27th April, 2022 under Section 148A(d) of the Income Tax Act, 1961, relating to assessment year 2018-19 on the ground that the same being without jurisdiction and contrary to the provision of Section 149(1)(a) and (b) of the Income Tax Act, 1961 by contending that admittedly the impugned notice has been issued after the expiry of three years from the end of relevant assessment year and it is also an admitted position which appears from the conclusion of the assessing officer himself in the impugned order that the alleged escapement of income is Rs. 36,98,550/- which is below Rs. 50 lakh. Considering the submission of the parties and admitted factual and legal position which appears on perusal of the impugned order dated 27th April, 2022, I am of the considered view that the aforesaid impugned order is bad and not sustainable in law and is liable to be quashed for the reason that the impugned notice under Section 148A(b) under the newly amended Act was issued after expiry of three years from the end of relevant assessment year and the alleged escapement of income is below Rs. 50 lakh. In view of the discussion made above, this writ petition being WPO 2522 of 2022 is disposed of by quashing the aforesaid impugned order dated 27th April, 2022 under Section 148A(d) of the Act”.
(ii) Bhavesh Maganlal Dharodv. ITO [2023] 155 taxmann.com 335 (HC Bombay)
“Where Principal Commissioner granted sanction under section 151 on basis of form submitted by revenue wherein it was stated that time limit for current proceedings was covered under section 149(1)(b) and quantum of income escaped assessment was four lakhs, since notice under section 148A(b) was issued within three years time limit, current proceedings should be covered under section 149(1)(a), furthermore no notice could be issued for amount less than Rs. 50 lakhs under section 149(1)(b) and approval could only be granted by Principal Chief Commissioner, thus, grant of approval was made mechanically without application of mind.
12. In view of the reasons set out above, as also bearing in mind entirety of the case, I am of the considered view that the reasons recorded by the Assessing Officer, as set out earlier, were not sufficient reasons for reopening the assessment proceedings. I, therefore, quash the reassessment proceedings. As the reassessment itself is quashed, all other issues on merits of the additions, in the impugned assessment proceedings, are rendered academic and infructuous.
13. In the result, the appeal is allowed in the terms indicated above.
Order is pronounced in the open Court Today on 13/10/2026.
