Late Chanchal Hiralal Shah Vs ITO (ITAT Mumbai)
Reassessment notice invalid – Escaped income below ₹50 lakh & wrong sanctioning authority – Entire proceedings quashed – ITAT Mumbai
In Late Chanchal Hiralal Shah vs ITO (A.Y. 2017-18), reassessment was initiated alleging difference between purchase consideration and stamp duty value of property, leading to proposed addition u/s 56(2)(vii)(b). The assessee challenged validity of notice issued u/s 148 under the new regime on limitation and sanction grounds.
The ITAT examined the provisions of sections 149 and 151 along with the Supreme Court ruling in Union of India v. Rajeev Bansal. It noted that the alleged escaped income was below ₹50 lakh and the notice dated 30-07-2022 was issued beyond three years from the end of the relevant assessment year. Under the amended law, reopening after three years is not permissible where escaped income is below ₹50 lakh. Further, sanction was granted by the Principal Commissioner instead of the higher specified authority, making the jurisdiction defective.
Accordingly, the Tribunal held that non-compliance with section 151 rendered the notice u/s 148 and subsequent reassessment proceedings void ab initio. Since the reassessment itself was quashed, the addition u/s 56(2)(vii)(b) on merits became academic. The assessee’s appeal was allowed.
