Amit Sharma Vs ITO (ITAT Agra)
The Income Tax Appellate Tribunal, Agra, partly allowed Amit Sharma’s appeal for Assessment Year 2019–20 on the jurisdictional issue of limitation. The assessee had filed his original return on 22 July 2019 declaring income of ₹21,02,070. Reassessment was initiated following information from an investigation into registered unrecognised political parties. The Assessing Officer alleged that a contribution of ₹3,50,000 to Manavadhikar National Party, claimed as a deduction under Section 80GGC, was bogus. The assessee supplied bank statements, a donation receipt, party registration documents and returns, but the deduction was disallowed. The NFAC Commissioner (Appeals) upheld the reassessment and the disallowance.
The assessee contended that the three-year period under Section 149(1)(a) expired on 31 March 2023 and that Section 149(1)(b), which prescribed a ₹50 lakh threshold for the extended period in the circumstances described, could not apply to a ₹3.50 lakh allegation. The notice under Section 148A(b) was issued on 29 March 2023, allowing a reply until 5 April 2023. According to the assessee, exclusion of seven days extended the deadline for issuing a Section 148 notice only until 7 April 2023. The actual notice was issued on 10 April 2023.
The Tribunal agreed that the ₹50 lakh threshold was not met and accepted 7 April 2023 as the applicable extended deadline. It found the sixth proviso to Section 149 inapplicable on the facts and held that the Section 148 notice was time-barred. Accordingly, it allowed the legal ground and left the merits of the political-donation disallowance undecided. The appeal was partly allowed.
FULL TEXT OF THE ORDER OF ITAT AGRA
The assessee has filed this appeal against the order of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 07.10.2025 for the Assessment Year 2019-20.
2. Brief facts of the case are that the assessee filed his return of income on 22.07.2019 for the assessment year 2019-20 declaring total income of Rs. 21,02,070/-. The Assessing Officer observed that no scrutiny assessment was done in the cases of the assessee for the year under consideration. Accordingly, the Assessing Officer issued notice u/s 148A(b) of the Act and has extracted the order passed u/s 148(d) of the Act dated 10.04.2023 in his order. Further, notice u/s 148 of the Act was issued on 10.04.2023 after obtaining necessary approval from the competent authority. In response to the above notice, the assessee filed return of income on 18.04.2023 declaring total income as declared in the original return of income. Accordingly, notice u/s 143(2) and 142(1) of the Act were issued and served on the assessee. In response, Ld. AR of the assessee attended and submitted the relevant information as called for.
3. In response to notice issued u/s 142(1) of the Act dated 13.06.2024 the assessee has furnished copy of bank statement maintained with ICICI Bank, Kotak Bank, RBL, Induslndi Bank, donation receipt, party registration letter, ITR for four assessment years. After consideration of the above submissions, the Assessing Officer observed that assessee is a salaried person and draws salary from RBL Bank Ltd. and he has given donation of Rs. 3,50,000/- to M/s Manavadhikar National Party during the year and the same was claimed u/s 80GGC of the Act. Subsequently, further notice was issued and assessee was directed to file explanation why the above said donation should not be treated as bogus donation.
4. In response, the assessee denied the same. However the Assessing Officer by relying on the search conducted u/s 132 of the Act on 07.09.2022 on Registered Unrecognized Political Parties by the Investigation Wing of the department and post search enquires, it was established that the donation made to Registered Unrecognized Political Parties are in the nature of scam for claiming bogus deductions and intended to defraud the legitimate tax of the assessee, relying on the findings in such proceedings, the Assessing Officer treated the donation made by the assessee as bogus and disallowed the claim made by the assessee.
5. Aggrieved with the above order, the assessee preferred an appeal before NFAC, Delhi, raised various grounds including legal ground, wherein assessee has raised ground on valid notice issued u/s 148 r.w.s. 149(1)(a) read with relevant proviso and assessment order passed u/s 147 of the Act is beyond jurisdiction. After considering the grounds of appeal and detailed submission made by the assessee, ld. CIT(Appeals) dismissed the grounds raised by the assessee on merit as well as above technical ground with the following observation:-
“5.7 Ground No. 4, the appellant has challenges the validity of issuing of notice u/s 148 of the Act. It is noted that section 149(1) of the Act, as substituted by the Finance Act, 2021, clearly provides that a notice u/s 148 can be issued within three years from the end of the relevant assessment year. In the instant case, the AO had specific information of bogus donation to political party undertaken by the appellant during F.Y. 2018-19, falling squarely within the scope of clause (b) of section 149(1) of the Act. Further, the third proviso to section 149(1), as amended, categorically stipulates that for computing the limitation period, the time allowed to the assessee for responding to show cause notice u/s 148(b) shall be excluded. In this case, the show cause notice u/s 148(b) was issued on 29/03/2023, providing time till 05/04/2023 for submission of reply, and thereafter, the order u/s 148A(d) was passed on 10/04/2023 with prior approval of the competent authority. The subsequent notice u/s 148 dated 10/04/2023 was therefore issued well within the extended limitation period as per law. The appellant’s reliance on the three-year cut-off without considering the statutory exclusion is misplaced. Therefore, the objection raised by the appellant stands Dismissed.”
6. Aggrieved with the above order, the assessee is in appeal before us raised following grounds of appeal:-
“1. The learned CIT (A) has erred in law and on facts in dismissing the grounds of appeal contesting validity of notice issued u/s. 148 of the Act and also contesting validity of assessment made in pursuance of invalid notice u/s. 148 of the Act.
2. The learned CIT (A) has further erred in law and on facts in confirming disallowance of claim u/s.80GGC of the Act of Rs.3,50,000/-.
2. On the facts and in the circumstances of the case and in law, the learned CIT (A) ought to have quashed the notice u/s. 148, ought to have annulled the assessment under appeal being void ab initio, and ought not to have upheld/confirmed the disallowance of Rs.3,50,000/-.
3. It is therefore prayed that the notice u/s. 148 may be quashed, the assessment under appeal may be annulled and the disallowance of Rs.3,50,000/- may be deleted.
4. Your appellant craves leave to add, amend, alter or withdraw any ground of appeal at the time of hearing.”
7. At the time of hearing, Learned AR of the assessee has contested the validity of the reassessment proceedings on the ground that the notice issued u/s. 148 of the Act on 10-04-2023 is invalid and liable to be quashed. As a necessary consequence, the reassessment made in pursuance of invalid notice u/s. 148 of the Act is also void ab initio and liable to be annulled. In this regard, relevant facts and statutory provisions are submitted as under:-
> The assessment year under appeal is 2019-20.
>Notice u/s. 148 of the Act is issued for this assessment year on 10-04- 2023
> As per the provisions of S. 149 (1) (a) of the Act, the notice u/s. 148 can be issued within 3 years from the end of the relevant assessment year. Thus, in the instant case the notice u/s. 148 can be issued latest by 31-03- 2023.
> The provisions of S. 149 (1) (b)of the Act are not applicable in this case as the proposed escaped income did not relate to any asset or expense or entries likely to amount to fifty lakh rupees or more.
>The fifth proviso to S. 149 of the Act needs to be considered here. The said proviso is reproduced below for ready reference. “Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded:”
As provided by the proviso reproduced above, the time allowed as per the show cause notice u/s. 148A (b) of the Act, shall be excluded. In the instant case, the notice u/s. 148A (b) was issued on 29-03-2023 allowing time for response till 05-04-2023. Excluding 29-03-2023, the AO allowed clear 7 days’ time for response. Therefore, in computing the period of limitation u/s. 149 (1) (a), period of 7 days need to be excluded. In other words, the limitation for issuing notice u/s. 148 would be extended from 31-03-2023 to 07-04-2023. However, the notice u/s. 148 was issued after 07-04-2023, i.e., on 10-04-2023. The same was therefore issued after expiry of limitation, and therefore being was liable to be quashed.
- During the hearing, we had further pointed out the sixth proviso for consideration so as to clarify every relevant issue and avoid confusion. The sixth proviso reads as under.
“Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A does not exceed seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly.”
> The above mentioned proviso provides that where period available for passing order u/s. 148A (d) of the Act is less than 7 days after the exclusion of the period as per the fifth proviso, such period shall be extended to 7 days. Now, in the instant case, the period available for passing order u/s. 148A (d) of the Act, is as shown in the clause (d) reproduced below. “(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires”
>As provided in the clause (d) reproduced above, the period available for passing the order under this clause is one month from the end of the month in which the reply to show cause notice u/s. 148A (b) is received or where no such reply is received (as is the case of the appellant), from the end of the month in which the period allowed to furnish the reply expires.
> Applying the above provision to the facts of the instant case, the appellant was allowed to furnish reply by 05-04-2023. He did not furnish reply. Therefore, the period available for passing the order u/s. 148A (d) of the Act was one month from the end of the month of April, 2023, i.e., 31-05- 2023.
>Thus, it is clear that the period available for passing order u/s. 148A (d) of the Act was more than a month and a half. Therefore the sixth proviso was not applicable in the facts of the instant case.
>At this stage it may be submitted that the provisions of S. 148A (d) and S. 149 of the Act, operate in their own field, and there is no express provision in either of these two sections that limits or impacts the operation of these two provisions. To put it plainly, there is no provision in S. 149 that limits the period available for passing order u/s. 148A (d) of the Act, or conversely, there is no provision in S. 148A of the Act that makes it subject to any limitation on account of the provisions of S. 149 of the Act.
>Therefore, as stated above, the sixth proviso is not applicable in the facts of the instant case, and consequently, additional extension of 7 days under the sixth proviso was not available to the extended period as per the fifth proviso of up to 07-04-2023.
>Therefore, the notice u/s. 148 of the Act issued after 07-04-2023 i.e., on 10-04-2023, was not valid in law and was liable to be quashed.
>As a necessary consequence, the reassessment made in pursuance of invalid notice was void ab initio and liable to be annulled.
8. On the other hand, Ld. DR brought to our notice detailed findings of the Assessing Officer which is based on explicit finding by the Investigation Wing and also brought to our notice para 5.6 and 5.7 of the appellate order. He heavily relied on the findings of the lower authorities.
9. Considered the rival submissions and the material placed on record. I observed that the AO initiated the reassessment proceedings based on the information received from the investigation wing that the assessee utilized the bogus donation from the unregistered political party to book the donation to curtail the tax. However, the amount involved is only Rs.3,50,000/-. In order to reopen the assessment beyond 3 years, as per the provisions of section 149(1)(b)the precondition is, the AO 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 as asset, expenditure or an entry in the books, which has escaped income amounts to or likely to amounts to fifty lakh rupees or more. In the given case, the amount involved is only Rs. 3.50 lakhs. The precondition to invoke the provisions of section 149(1)(b) is not fulfilled. On this count itself, the initiation of proceedings u/s section 148 fails. However, the Ld CIT(A) hadth invoked the proviso to the above section, in our view, as per the 5 proviso, the time available to pass the order u/s 148is extended to accommodate the proceedings-initiated u/s 148 of the Act. In the given case, the notice issued u/s 148A(b) was issued on 29/3/2023, AO had to allow clear 7 days, therefore, AO had time upto 05/04/2023. However, clear 7 days has to be excluded from the end of the month of issue of notice, therefore, the AO had time upto 07/04/2023. We noticed that the AO had actually issued the notice only on 10/04/2023. Which is beyond the period of limitation. The sixth proviso has no application to the present fact on record as the assessee had not filed any reply to process the order u/s 148A(d) of the Act.
10. Therefore, in my considered view, the section 149(1)(b)has no application to the facts on record, even otherwise, the proviso to section 149(1) has limitation to pass notice u/s 148of the act, as per which the AO had to issue the above notice on or before 07/04/2023, whereas the AO had actually issued the notice on 10/04/2023, which is beyond the statutory limit prescribed in the Act. In the result, legal ground raised by the assessee before me is allowed. The issue raised on merit is not adjudicated at this stage and kept open.
11. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 19.05.2026.
