The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) dismissed an appeal filed by the revenue by upholding the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] that a notice issued under Section 148 of the Income Tax Act was barred by limitation.
The revenue has appealed against the order of the CIT(A) for the assessment year (AY) 2017-18.
Coming to the facts of the present case, the Assessing Officer (AO) reopened the assessee’s assessment under Section 148 of the Income Tax Act, 1961, as the AO was of the opinion that the assessee had booked fictitious profits of Rs. 16,82,439 through equity trading in shares of M/s. Shivansh Finserv Ltd. The AO issued the notice on 31.07.2022, claiming that the income had escaped assessment.
The assessee challenged the reopening, arguing that it was time-barred. According to Section 149(1)(a) of the Income Tax Act, an assessment can only be reopened within three years from the end of the relevant assessment year unless the escaped income is Rs. 50 lakhs or more, in which case the period extends to ten years.
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The assessee, who was aggrieved by the decision of the AO appealed before the CIT(A) for relief. The CIT(A) ruled in favor of the assessee, quashing the notice as time-barred. The CIT(A) relied on the provisions of Section 149(1)(a) and a decision by the Delhi High Court (HC) in the case of Ganesh Dass Khanna Vs. Income Tax Officer [2023] 156 taxmann.com 417, in which the Delhi HC held that the extended period of ten years could only be invoked in cases of serious tax evasion involving Rs. 50 lakhs or more.
The CIT(A) also noted that the approval for reopening the assessment was taken from the Principal Commissioner of Income Tax, not the Principal Chief Commissioner, as required for invoking the extended period.
The ITAT found no fault in the decision of the CIT(A) and held that the AO had issued the notice under Section 148 of the Income Tax Act, which was beyond the stipulated period prescribed under Section 149(1)(a) of the Income Tax Act.
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The ITAT, comprising Dr. BRR Kumar (Vice President) and Siddhartha Nautiyal (Judicial Member), dismissed the revenue’s appeal.
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