Meaning of ‘income chargeable to tax’ for time limit under 149(1)(b) for reopening

Sanath Kumar Murali Vs ITO (Karnataka High Court)

Petitioner challenged the order  u/s 148A(d)  for AY 2016-2017 & sought for quashing  148 notice before the Karnataka High Court.

Notice u/s 148A(b)  was issued to the petitioner stating that information was received which suggested that income chargeable to tax for the AY has escaped assessment within the meaning of Section 147, . detailing the information along with the supporting documents related to sale of property for Rs55,77,700.

Petitioner   replied  to the said notice dt 16.03.2023 in which details were laid out, setting out the  computation of capital gains giving the details of the Date of transfer[ 22.12.2015], Sale consideration [Rs 55,77,700], Date of acquisition [24/09/2011] and Cost Of Acquisition [Rs15,91,735]. After indexing the cost, the Taxable Capital gain was shown as  Rs 33,85,769. Petitioner  submitted that as the income escaping assessment did not exceed Rs 50 lakh in terms of Sec 149(1)(b), notice u/s 148 could not be issued. Time limit for issuance of such notice as per Sec 149(1)(a) would be 3 years from the end of the relevant AY and if the Dept seeks to justify the issuance of notice in the extended time provided u/s 149(1)(b) beyond three years, but not more than ten years, the Dept would have to demonstrate that the ‘income chargeable to tax’ which has escaped assessment is likely to amount to Rs 50  lakh or more.

Revenue contended that  since the proceedings u/s 148 is at the initial stage and adjudication is to take place in terms of the procedure prescribed and provided u/s 148A, it would be premature to construe the contention relating to ‘income chargeable to tax’ as contended by the petitioner and that the income that has escaped assessment to be taken note of for the purpose of Section 149(1)(b) which would be the total sale consideration received as reflected in the sale deed , i.e.Rs.55,77,700/-. It is the income that has escaped assessment that has to be taken note of, which being above Rs.50 lakh, the extended period u/s 149(1)(b) would save such notice from the bar of the period prescribed to re-open provided u/s 149(1)(a). Revenue  also relied upon the memorandum explaining the provisions in the Finance Bill, 2021 to justify such interpretation

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