ITAT Holds Reassessment Void Ab Initio as Notice Issued Beyond Three-Year Limit for Income Below ₹50 Lakh [Read Order]
The tribunal noted that the fresh notice dated 27.07.2022 was issued after the expiry of the permissible time limit under Section 149(1)(a), and the provisions of TOLA did not apply in this case
Reassessment Notice
Reassessment Notice
The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) held the reassessment proceedings void ab initio as the notice under Section 148 of Income Tax Act,1961,was issued beyond the three-year limitation period, while the alleged escaped income was below ₹50 lakh.
ETC Electric Pvt. Ltd., appellant-assessee, filed its return of income for AY 2018-19 on 31.10.2018, declaring an income of ₹23,49,490. Based on departmental information indicating accommodation entries amounting to ₹21,50,000 during FY 2017-18, notice under Section 148 was issued on 27.07.2022, following the Supreme Court’s ruling in Union of India vs. Ashish Agrawal (Civil Appeal No. 3005/2022).
The Assessing Officer (AO), after considering the submissions, completed the assessment by making an addition of ₹29,00,000 towards accommodation entries and ₹2,84,164 towards interest expenditure, thereby assessing the total income at ₹55,33,654.
Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)[CIT(A)], which was dismissed. The assessee then filed the present appeal before the tribunal.
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The two member bench comprising Pradip Kumar Choubey (Judicial Member) and Rajesh Kumar (Accountant Member) heard both sides and reviewed the records. It noted that the original Section 148 notice was dated 29.06.2021, and material alleging escaped income of ₹21.5 lakhs was shared on 02.06.2022. The AO passed the order under Section 148A and issued a fresh notice under Section 148 on 27.07.2022, followed by a Section 143(2) notice on 04.01.2023.
The assessee counsel argued that the reassessment was time-barred as per Section 149(1)(a), since the escaped income was below ₹50 lakhs and the three-year time limit had expired on 31.03.2022. Reliance was placed on the Supreme Court’s ruling in Rajib Bansal, which held that post-April 1, 2021, notices could be issued beyond three years only if the escaped income exceeded ₹50 lakhs.
The tribunal found that the reassessment notice issued on 27.07.2022 was beyond the permissible time limit and the income involved was below the ₹50 lakh threshold. It also held that the Taxation and Other Laws Act (TOLA) did not extend the limitation in this case.
Accordingly, the ITAT declared the reassessment proceedings void ab initio, and since the matter was decided on legal grounds, it did not examine other issues on merit.
Accordingly, the appeal was allowed.
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