Reassessment Quashed: Co-owner’s Share Below ₹50 Lakh, Notice Held Time-Barred

Mohd Muslim Asgar Ali Mandawariya Vs ITO (ITAT Mumbai)

Reassessment Quashed: Co-owner’s Share Below ₹50 Lakh, Notice Held Time-Barred

The Mumbai ITAT quashed the reassessment proceedings against Mohd Muslim Asgar Ali Mandawariya for AY 2016-17, holding that the notice issued under section 148 was barred by limitation since the alleged escaped income was less than ₹50 lakh.

The case was reopened on the basis of information that the assessee had participated in the purchase of an immovable property valued at more than ₹50 lakh. During the proceedings under section 148A, the assessee explained that the property had been purchased jointly by three co-owners for a total cost of about ₹53.65 lakh, including stamp duty and registration charges, and that his individual share worked out to only ₹17.88 lakh. The assessee furnished supporting documents, including the property records, to substantiate this claim.

The Tribunal noted that the Assessing Officer did not dispute the fact that the assessee’s share in the property was only one-third and amounted to ₹17.88 lakh. Despite recording this fact, the AO proceeded to pass an order under section 148A(d) and issued notice under section 148. Ultimately, even the reassessment addition was restricted to ₹17.88 lakh.

The ITAT held that for AY 2016-17, where the reopening was sought beyond three years, the extended limitation under section 149 could be invoked only if the alleged escaped income exceeded ₹50 lakh. Since the Revenue itself accepted that the assessee’s alleged unexplained investment was only ₹17.88 lakh, the statutory condition for reopening beyond three years was not satisfied.

Accordingly, the Tribunal held that the notice under section 148 was invalid and that all subsequent proceedings founded on such notice were void ab initio. Having quashed the reassessment on the legal issue, the Tribunal treated the merits of the addition as academic and did not adjudicate them.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

1. This appeal by assessee is directed against the order of Ld. CIT(A) / NFAC dated 31.10.2025 for assessment year (A.Y.) 2016-17. The assessee has raised following grounds of appeal;

i. On the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in appreciating that the notice u/s 148 and order u/s 148A(d) needs to be issued by Faceless Assessing Officer. However, in the current appeal the same has been issued by the Jurisdictional Assessing Officer and hence thus the notice u/s 148 and the order u/s 148A(d) are bad in law and the whole proceeding needs to be quashed.

ii. On facts and in circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in upholding the issuance of notice u/s 148 dated 28.03.2023 as the same was without jurisdiction and barred by limitation of time, thereby rendering the assessment order passed by the Learned Assessing Officer as invalid and bad in law.

iii. On facts and in circumstances of the case, the Learned Commissioner of Income Tax (Appeals) erred in upholding the reopening of the assessment without appreciating the time limit provided u/s 149(1)(a) as the income which is alleged to have escaped the assessment is Rs. 17,88,292/- (below Rs. 50 Lakhs).

iv. On facts and in circumstances of the case, the Learned Commissioner of Income Tax (Appeals) erred in ascertaining the share of the appellant in the property, without considering the submissions made by the appellant. The actual share of the appellant is 1/3rd of the total amounting to Rs. 17,88,292 on the basis of Index-2 dated 18.04.2015 filed in response to SCN u/s 148A(b).

v. On facts and in circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in upholding that objections can be raised only before the Order u/s 148A(d) and issuance of Notice u/s 148 without appreciating that the order passed u/s 148A(d) of the Act is neither final assessment order nor creates any demand and remains subject to final Assessment Order to be passed. Reliance is placed on judgements of various high courts in writ petitions filed by various appellants.

vi. On the facts and circumstances of the case, the Learned Commissioner of Income Tax (Appeals) erred in upholding the additions of Rs. 17,88,292 u/s 69A of the Act made by the Ld. Assessing Officer on account of unexplained investment without appreciating that the source of investment was accumulated savings from the past incomes.

2. Rival submissions of both the parties have been heard and record perused. The Ld. Authorized Representative (in short ‘AR’) of the assessee submits that the case of the assessee for AY 2016-17 was reopened by issuing show cause notice under Section 148 dated 28.03.2023. Admittedly, the case of the assessee was reopened after three years from the end of the relevant assessment year. The escaped income was less than Rs. 50.00 Lacs, therefore, notice under section 148 is barred by limitation period prescribed under section 149(1)(b) and assessment completed pursuant thereto is invalid. While explaining the facts, the Ld. AR of the assessee submits that the notice under section 148(A)(b) dated 19.01.2023 was served upon the assessee. The said notice was based on information with the AO in ITD system that the assessee had made a transaction of purchase of immovable property more than Rs.50.00 Lacs. In response to such show cause notice, the assessee filed his reply on 20.02.2023, copy of acknowledgement of reply by ITB Portal is filed on record. In the reply, the assessee explained the fact that the assessee along with two other co-owner have purchased immovable property at Rs. 50,80,777/-. All three co-owner paid stamp duty for registration of transaction at Rs. 2,54,100/- and paid registration charges of Rs. 30,000/-. Thus, aggregate cost of entire transaction was of Rs. 53,64,877/-. The assessee is having one-third (1/3) share thus, the share of assessee is only of Rs. 17,88,292/-. Such fact is clearly discernible from the acknowledgment of ITB Portal. The AO despite recording such fact in para 5 of the order passed under Section 148 (A)(d) dated 27.03.2023 and issued notice under Section 148 dated 28.03.2023. The AO ultimately while passing assessment order, made addition of Rs. 17,88,292/-only. It is an admitted fact that the case of assessee was reopened beyond three year and alleged escapement of income was less than Rs.50.00 Lacs, therefore, notice under Section 148 is barred by limitation period prescribed under Section 149(1)(b), hence all subsequent action is void ab initio. To support such issue, the assessee relied upon following case laws;-

> Hrishikesh, 175 taxmann.com [2025]1062 (Bombay High Court)

> Vasuki Global Industries Ltd. [2025] 180 Taxmann.com 16 (Gujarat High Court)

> Chetak Nandkumar Gandhi, [2025] 181 taxmann.com 769 (Gujarat High Court)

> Jothiramalingam Sangeetha [2025] 158 taxmann.com 375 (Madras High Court)

> Gedalia Multitrading (P.) Ltd. [2026] 183 taxmann.com 476 (ITAT-Mumbai)

> Akshay Deepak Talim [2026] 183 taxmann.com 426 (ITAT-Mumbai)

> Amit Jain [2025] 170 taxmann.com 2 (Supreme Court of India)

> Rajeev Bansal [2024] taxmann.com 70 (Supreme Court of India)

> Ganesh Dass Khanna [2023] 156 taxmann.com 417 (Delhi High Court)

3. On the other hand, the learned senior departmental representative (Ld. Sr. DR) for the revenue supported the order of lower authorities.

4. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied upon by Ld. AR of the assessee. We find that there is no much dispute about factual aspect of the case. We find that in response to show cause notice under Section 148(A)(b) dated 19.01.2023, the assessee while explaining the fact specifically contended that he along with two other co-owner purchased immovable property and his share in the said property is only of Rs. 17,88,292/-. Such fact has not been disputed by AO. We find that despite recording such fact, the AO passed order under Section 148A(d) and issued notice under Section 148 dated 28.03.2024. the AO failed to appreciate the facts that alleged income escaped is less than Rs. 50.00 lacs. The case of assessee sought to be reopened was for AY 2016-17. We find that notice under Section 148 is beyond the limit prescribed under Section 149(1)(b) as escaped income was less than Rs. 50.00 Lacs. Thus, notice under Section 148 is invalid. Considering the fact that notice is invalid, therefore, subsequent action initiated thereon is void ab initio. In the result, ground No. 1 to 5 of the appeal is allowed. Further, considering the fact that we have held the notice under Section 148 as invalid, therefore, adjudication on ground No. 6 of appeal have become academic.

5. In the result, appeal of the assessee is allowed.

Order was pronounced on 04/06/2026 in open Court.