Case Law Details
Davies Manuel Vs ITO (Kerala High Court)
Introduction: The recent judgment by the Kerala High Court in the case of Davies Manuel vs. Income Tax Officer (ITO) delves into the applicability of the limitation period under Section 149(1)(a) of the Income Tax Act when the escaped income exceeds Rs.50 lakhs. This article provides a comprehensive overview of the court’s decision and its implications.
Detailed Analysis: Davies Manuel, an individual assessee under the Income Tax Act, faced scrutiny for not filing his income tax return for the assessment year 2016-17. The assessing officer noted cash deposits of over Rs.50 lakhs in Manuel’s bank accounts, leading to the reopening of his case under Section 147 of the Income Tax Act.
Manuel argued that the proceedings initiated under Section 148A were barred by limitation as his income did not exceed Rs.50 lakhs. However, the Income Tax Department contended that the cash deposits amounted to around Rs.76 lakhs, justifying the reopening of the assessment after three years.
The court emphasized that the applicability of the limitation period under Section 149(1)(a) hinges on whether the escaped income exceeds Rs.50 lakhs. In Manuel’s case, where the alleged escaped income surpassed this threshold, the 3-year limitation period was deemed irrelevant.
Therefore, the court dismissed Manuel’s writ petition, stating that the limitation period did not apply in his case due to the substantial amount of escaped income. The assessing authority was instructed to proceed with the assessment under Section 148 of the Income Tax Act.
Conclusion: The Kerala High Court’s ruling clarifies that the limitation period of three years under Section 149(1)(a) of the Income Tax Act does not apply when the income escaped assessment exceeds Rs.50 lakhs. This decision underscores the importance of considering the magnitude of escaped income when determining the applicability of statutory limitations, ensuring effective tax enforcement and compliance.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The petitioner is an individual assessee under the provisions of the Income Tax Act, 1961,(hereinafter referred to as ‘I.T Act of 1961’). The petitioner/assessee did not file return of his income for the assessment year 2016-17. The petitioner’s case was selected for a scrutiny inasmuch as according to the assessment officer, the petitioner had deposited more than Rs.50,00,000/- cash in his two bank accounts and in the estimation of the assessing officer the said income of the petitioner had escaped assessment under the provisions of the I.T Act, 1961. Therefore, the petitioner’s case was re-opened under Section 147 of the I.T Act, 1961. The petitioner was issued a notice under Section148A(b) on 17.03.2023, to which the petitioner had submitted reply on 23.03.2023, and after affording an opportunity of hearing, an order under Section 148A(d) came to be passed on 28.03.2023. Thereafter, notice under Section 148 has been issued asking the petitioner to file his returns.
2. Learned counsel for the petitioner submits that normal limitation period for re-opening the assessment under Section 149(1)(a) of the IT Act, is three years. However, it may extend to ten years if the escaped income is more than Rs.50,00,000/-. He submits that the petitioner’s income is not more than Rs.50,00,000/- which has escaped asssessment. Therefore, the proceedings initiated under Section 148A of the IT Act are barred by limitation, and therefore, without jurisdiction.
3. Sri. P.G Jayashankar, learned Senior Standing Counsel for the Income Tax Department submits that in the two bank accounts of the petitioner, there has been a cash deposit of around Rs.76,00,000/-. The petitioner did not file return of his income under Section 139 of the IT Act, and therefore, the assessing authority rightly considered that this income to have escaped assessment under the provisions of the IT Act, 1961. The case has been re-opened after 3 years which is as per the statute.
4. The question whether the petitioner’s explanation for the cash amount deposited in two bank accounts is correct or otherwise a question which can be considered only when the petitioner files the return in pursuance to the notice issued under Section 148 of the IT Act, 1961. At the initial stage of enquiry of re-opening the assessment under Section 148A, the assessing authority has to satisfy itself that whether the income of the petitioner has escaped assessment and if the 3 years period has elapsed from the last date of relevant assessment year, whether the income which has escaped assessment is more than Rs.50,00,000/-. In the present case, income escaped assessment is allegedly more than Rs.50,00,000/- and therefore, the limitation period of 3 years provided under Section 149 (1)(a) has no applicability in the facts of the present case.
In view thereof, I find no substance in this writ petition. Therefore, the present writ petition is hereby dismissed.
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