Reassessment Beyond Three Years Fails Where Escaped Income Is Below ₹50 Lakh: ITAT Amritsar

Ashok Kumar Chandela Vs ITO (ITAT Amritsar)

Summary: The ITAT Amritsar allowed Ashok Kumar Chandela’s appeal for Assessment Year 2019–20 after holding that the notice issued under section 148 on 12 April 2023 was barred by limitation, rendering the entire reassessment proceedings invalid. The dispute arose from disallowance of a ₹4,00,000 deduction under section 80GGC for a contribution to Rashtriya Samajwadi Party (Secular). The assessee furnished bank statements, donation receipts and the political party’s registration certificate. The Assessing Officer relied on an appraisal report and statements and materials arising from a search conducted on 7 September 2022 on Ahmedabad-based registered unrecognised political parties.

The CIT(A) upheld the disallowance, questioning the genuineness of the donation in light of the assessee’s income and funding. Before the Tribunal, the assessee argued that complete adverse material had not been supplied, cross-examination had not been provided and no evidence established that the donation had been returned to him. He also raised an additional jurisdictional ground, contending that the alleged escaped income of ₹6,54,465, comprising ₹2,54,465 in perquisite income and ₹4,00,000 in donation deduction, was below the ₹50 lakh threshold under section 149(1)(b) for reopening beyond three years. He relied on Amit Pahuja v. DCIT. The Tribunal held that the applicable three-year deadline expired on 31 March 2023. It further observed that the section 148A procedure was unnecessary in the search-based circumstances and no corresponding buffer period existed. Consequently, the notice dated 12 April 2023 was late and the appeal was allowed. The operative decision rests on limitation rather than a separate determination of the donation’s genuineness.

Cases Discussed

• Thakkar Govindbhai Ganpatlal HUF v. PCIT (Gujarat High Court) — Cited in ground 6 as support for the assessee’s contention that suspicion or third-party conduct cannot justify denial of deduction; the Tribunal’s operative decision did not separately adjudicate this merits contention.
• ACIT v. Armee Infotech (ITAT Ahmedabad) — Cited in ground 6 for the same deduction-related contention; no separate application of this precedent appears in the Tribunal’s operative reasoning.
• 2026(6) TMI-1387 — Amit Pahuja v. DCIT, Circle-1 (ITAT Mumbai) — Relied upon by the assessee in paragraph 18 for the proposition that non-fulfilment of section 149 jurisdictional conditions invalidates reassessment. The Tribunal held the present notice time-barred.

FULL TEXT OF THE ORDER OF ITAT AMRITSAR

This appeal is filed by the assessee against the order of ld. CIT(A), NFAC, Delhi, passed u/s 250 of the IT Act, 1961, dated 04.09.2025, which has emanated from the order of the AO, passed u/s 147 of the Act, dated 21.03.2025. 2. The grounds of appeal taken in Form No. 36 are as follows:

2. The grounds of appeal taken in Form No. 36 are as follows:

“1. That the order passed by the learned CIT(A), NFAC dated 04.09.2025, confirming the disallowance of deduction of ₹4,00,000/- claimed u/s 80GGC is bad in law, contrary to facts, and passed in violation of principles of natural justice.

2. That the learned CIT(A) erred in confirming the disallowance solely on the basis of general investigation reports concerning certain political parties without any specific evidence linking the appellant’s donation with the alleged cash-back transactions.

3. That both the CIT(A) and Assessing Officer failed to provide any opportunity for cross-examination of persons whose statements were relied upon, thereby violating the fundamental principles of natural justice.

4. That the learned CIT(A) failed to appreciate that the appellant had made a genuine donation of ₹4,00,000/- to Rashtriya Samajwadi Party (Secular), a political party duly registered under Section 29A of the Representation of People Act, 1951, through legitimate banking channels, supported by valid receipts.

5. That the deduction under Section 80GGC cannot be denied merely because of alleged irregularities or misconduct by the political party, when the donor has fulfilled all statutory conditions and made bona fide payment.

6. That the learned CIT(A) failed to appreciate the binding nature of judicial precedents including Thakkar Govindbhai Ganpatlal HUF v. PCIT (Gujarat High Court) and ACIT v. Armee Infotech (ITAT Ahmedabad), which held that deduction u/s 80GGC cannot be disallowed on suspicion or third-party conduct.

7. That the disallowance is based on assumptions and surmises, ignoring appellant’s bank statement, receipts, and registration

certificate of the donee political party, which substantiate the donation.

8. That the authorities erred in invoking human probability theory without any contrary material evidence, while ignoring direct, verifiable proof of genuine payment.

9. That the impugned order is contrary to law and facts, and the disallowance u/s 80GGC deserves to be deleted.

10. The appellant craves leave to add, amend, or withdraw any ground of appeal at the time of hearing.”

3. Brief facts of this case are that during the previous year relevant to A.Y. 2019-20 the Appellant made a contribution of Rs. 4,00,000/- to Rashtriya Samajwadi Party (Secular), a political party registered with the Election Commission of India under section 29A of the Representation of the People Act, 1951, and accordingly claimed deduction of the said sum under section 80GGC of the Income-tax Act, 1961.

However, on the basis of flagged information on the Insight Portal for financial year 2018-19, the allegation against the assessee was that he has claimed a bogus deduction under section 80GGC in respect of a donation made.

4. On the basis of the said information notice under section 148A of the Act, notice under section 148 dated12.04.2023 was issued in response to which the appellant filed his return of income on 29.04.2023 declaring net total income of Rs. 12,52,390/-, after claiming deduction under section 80GGC amounting to Rs. 4,00,000/-.

5. In course of assessment proceedings bank statement reflecting transfer of the donation to the political party through banking channels and receipts issued by the political party in respect of the contribution, copy of the certificate of registration of Rashtriya Samajwadi Party (Secular) under section 29A of the Representation of the People Act, 1951, issued by the Election Commission of India were also filed ( as proof of fulfilling all requisite conditions necessary for claiming the deduction under Chapter VI).

6. However, disallowance was made u/s 80GGC solely on the basis of appraisal report arising from the search conducted on 07.09.2022 in the cases of 23 Ahmedabad-based RUPPs, including Rashtriya Samajwadi Party (Secular), the statements recorded under section 132(4) of Smt. Sandhya Singh, Sh. Bishwajeet Singh, Sh. Riteshkumar Surendrakumar Shah and Sh. Nirmal Ambalal Patel, receipts, commission diaries, loose papers and WhatsApp chats seized during the search.

7. Eventually the assessment was completed on a total income of Rs. 16.52 lakhs against a returned income of Rs. 12.52 lakhs ( including an addition of Rs.4 lakhs being the disallowance of donations u/s 80GGC of the Act)

8. The matter carried in first appeal was dismissed by the Ld CIT ( A) raising doubts regarding the genuineness of his donations and claim of deduction, on the ground that the total income of the assessee being Rs. 12.52 lakhs, the donation of Rs.4 lakhs to a political party, made out of salary income and raising family loans, does not seem to be real.

9. In course of hearing before the Tribunal the Ld AR of the assessee referred to the observation of the AO where he recorded that ‘the relevant extracts’ of the aforesaid statements had been communicated to the Appellant vide show cause notice dated 05.03.2025, and that for the sake of brevity the statements were not being reproduced in the order and neither the appraisal report of the Investigation Wing, nor the complete statements of the said persons, nor the material seized in the course of the search, was furnished to the Appellant at any stage.

10. The Ld AR further pointed out that in the instant case no opportunity of cross- examination of Smt. SandhyaSingh, Sh. Bishwajeet Singh, Sh. Riteshkumar Surendrakumar Shah or Sh. Nirmal Ambalal Patel, or of any other person whose statement was relied upon against the Appellant, was afforded to the Appellant, although the disallowance rests wholly upon those statements.

11. He further submitted that the Assessing Officer brought no material whatsoever on record to establish that any part of the sum of ₹4,00,000 was returned to the Appellant, either in cash or otherwise. No cash trail was established; no intermediary, entry operator or “exit provider” was shown to have had any dealing with the Appellant; no seized document, diary, loose paper or digital record containing the Appellant’s name was identified and no statement of any person implicating or even naming the Appellant was brought on record. The addition was thus made solely on the basis of generalised findings of the Investigation Wing and the abstract theory of “human probabilities,” without any direct or corroborative evidence linking the Appellant to the alleged transaction.

12. The Ld AR raised an additional ground being a legal ground and has made submission in respect of the same: (Additional Ground):

13.He pointed out that search and seizure action under section 132 was conducted on 07.09.2022 in the case of the RUPPS Group, Ahmedabad. The search allegedly revealed accommodation entry operations involving multiple entities, intermediaries, and exit providers collectively referred to as the RUPP Group.

14.That the reassessment proceedings in the present case originate from the said third-party search where large number of incriminating documents related to bogus donation receipts, diaries containing details of commission charged, loose papers containing vital information and WhatsApp chats in the mobile phones of the office bearers of the RUPPs and their key handlers confirming the allegations, were found. The Assessing Officer has relied solely on material arising from that search while initiating proceedings under section 148A.

15. That paragraph 6 of the order under section 148A(d) confirms that the entire basis of initiation is third-party search material. That initiation under section 148A is without jurisdiction, as the case is founded exclusively on search material under section 132. The statutory framework does not permit invocation of section 148A in such circumstances, and the mandatory jurisdictional requirements are not satisfied.

16. The relevant provisions of Section 148A is reproduced below:

Provided that the provisions of this section shall not apply in a case where,—

(a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or

(b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in th e case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

(c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, 70[relate to, the assessee; or ( d) the Assessing Officer has received any information under the scheme notified under section 135A pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.]

Explanation.—For the purposes of this section, specified authority means the specified authority referred to in section 151.]

17. The Ld AR submitted that the Assessing Officer has thus wrongly assumed jurisdiction under section 148A based on third-party information without fulfilling statutory preconditions:

a) That as per the order under section 148A(d), the alleged escapement of income is computed at ₹6,54,465, comprising:

• • • Rs. 2,54,465 as alleged perquisite income, and
    • Rs. 4,00,000 as alleged bogus donation.

b) That the alleged escapement is below the threshold of Rs. 50,00,000/- prescribed under section 149(1)(b) for extended limitation beyond three years.

c) That the notice under section 148 dated 12.04.2023 for AY 2019–20 is therefore barred by limitation, as the conditions under section 149(1)(b) are not satisfied. T he relevant provisions of section 149(1)(b) are reproduced below: 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:]

d) That the statutory requirement of escapement represented in the form of an asset exceeding Rs. 50,00,000 is not met in the present case. Therefore, consequently, the assumption of jurisdiction under sections 148 is void ab initio and the reassessment proceedings are liable to be quashed.

18. In this regard, the AR relied upon the case Amit Pahuja v. DCIT, Circle-1, 2026(6) TMI-1387 (ITAT Mumbai), wherein it has been held that non- fulfilment of jurisdictional conditions under section 149 renders reassessment invalid.

19. He further submitted that in such a case, the matter falls within the exclusion contained in the proviso to section 148A where the AO is satisfied that seized material or information from the search of another person relates to the assessee. Once the statute excludes the application of section 148A to such cases, issuance of notice u/s 148A(b) and passing of order u/s 148A(d) are not merely irregular but without authority of law. Proceedings not contemplated by the Act cannot confer jurisdiction or cure the defect in assumption of jurisdiction. Limitation for reassessment beyond three years – Threshold u/s 149(1)(b) – Escaped income represented in the form of asset – The Tribunal held that the alleged escapement was confined to the deduction claimed under section 80GGC and was admittedly far below the statutory threshold of fifty lakh rupees required for invoking the extended limitation under section 149(1)(b). Therefore, for Assessment Year 2019 -20, reassessment could not validly be initiated after expiry of three years from the end of the relevant assessment year.

The notice under section 148 and the consequential reassessment proceedings are without jurisdiction and barred by limitation, and needs to be quashed.

20. The Ld DR relied on the order of the Ld CIT ( A)

21. We have heard the rival submissions and considered the materials on record. In this case the search was conducted u/s 132 on September, 2022, which falls under the framework of Finance Act 2021 and the time limits in such cases u/s 149(1) if the quantum of alleged income is less than Rs. 50 lakhs it is three years ( 3 years) from the end of the relevant Assessment year and the deadline ends on 31st March, 2023 and in this case the notice u/s 148 issued on 12th April, 2023 ( because the procedure of section 148A (b) and 148A(d) is not required and needs to be bypassed because the AO already has deemed information based on search and the buffer period does not exist) .

22. As such we hold that in the instant case the notice issued u/s 148 issued on 12th April, 2023, is barred by limitation, rendering the entire proceedings invalid.

23. In the result the appeal of the assessee is allowed.

Order pronounced on 15.09.2026 in the Open Court.