Prakash Babulal Bhandari Vs ITO (ITAT Ahmedabad)
In a significant decision concerning reassessment proceedings, the Income Tax Appellate Tribunal (ITAT) Ahmedabad Bench has ruled that a reassessment notice issued beyond the three-year limitation period is invalid if the income genuinely “likely to escape assessment,” after a preliminary analysis, is below the Rs. 50 lakh threshold stipulated under Section 149(1)(b) of the Income Tax Act, 1961. This ruling came in the case of Prakash Babulal Bhandari vs. ITO, pertaining to Assessment Year 2015-16, where the ITAT allowed the assessee’s appeal, concluding that the reassessment notice was barred by limitation.
The case originated when the assessee, Prakash Babulal Bhandari, filed his original income tax return declaring a total income of Rs. 7,77,960. Subsequently, the Assessing Officer (AO) initiated reassessment proceedings under Section 148 of the Act, based on information that the assessee had engaged in transactions totaling Rs. 55,60,705 in a bank account maintained with M/s. Renuka Mata Multi State Urban Cooperative Credit Society Ltd. The AO initially believed these transactions represented unaccounted money, leading to income escaping assessment.
During the reassessment proceedings, the assessee clarified that out of the Rs. 55,60,705, a sum of Rs. 14,34,183 was from the maturity of fixed deposits. The remaining amount, the assessee contended, was from a transportation business. While the AO did not accept the transportation business claim, he did acknowledge and deduct the Rs. 14,34,183 received from matured fixed deposits. Consequently, the AO made an addition of Rs. 41,26,522 as unexplained income under Section 69 of the Act, along with an addition for interest income. This final addition for unexplained income was less than Rs. 50 lakhs. The Commissioner of Income Tax (Appeals) subsequently upheld these additions.
