Clipped from: https://taxguru.in/income-tax/reopening-3-years-invalid-escapement-rs-50-lakh.html
Sanjay Champalal Jaiswal Vs ITO (ITAT Pune)
Reopening Beyond Three Years Invalid Where Escapement Is Below ₹50 Lakh — ITAT Pune Quashes Reassessment
The Pune SMC Bench of the ITAT quashed the reassessment for AY 2016-17, holding that the notice under section 148 dated 27-07-2022 was without jurisdiction, as the alleged income escaping assessment was ₹49.01 lakh, i.e. below the statutory threshold of ₹50 lakh prescribed under section 149.
Key findings of the Tribunal:
- Statutory bar under section 149: After expiry of three years from the end of the relevant assessment year, a notice u/s 148 can be issued only if the escapement of income is ₹50 lakh or more. In the present case, the department itself recorded escapement of ₹49.01 lakh, falling short of the threshold.
- Incorrect sanction under section 151: Since the notice was issued beyond three years, approval of the Principal Chief Commissioner/Principal Director General was mandatory. However, approval was obtained merely from the Principal Commissioner, rendering the notice invalid.
- Jurisdictional defect not curable: The defect went to the root of jurisdiction; hence the reassessment could not survive.
- Judicial support: The Tribunal relied on recent High Court rulings including ITO v. Sanath Kumar Murali (Karnataka HC) and Core Logistic Co. v. ACIT (Madras HC), which have consistently held that both the ₹50-lakh threshold and correct sanction are mandatory.
Accordingly, the ITAT quashed the assessment order passed u/s 147 r.w.s. 144 dated 29-03-2023. Since the reassessment itself was held invalid, all other grounds on merits were treated as academic.
FULL TEXT OF THE ORDER OF ITAT PUNE
This is an appeal filed by the Assessee against the order of ld.Commissioner of Income Tax(Appeal)[NFAC] passed under section 250 of the Income Tax Act, 1961 for the A.Y.2016-17 dated 18.07.2025 emanating from the Assessment Order passed under section 147 r.w.s 144 of the Act, dated 29.03.2023. The Assessee has raised the following grounds of appeal :
“1) The learned CIT (A) erred in upholding the reopening of assessment vide notice u/s. 148 of the Act dated 27/7/2022 Le. After expiry of three years from the end of the assessment year 2016-17 without appreciating that notice under 148 can be issued beyond 3 years only if income escapement is above 50 lacs, in fact of present case the impugned notice issued for A.Y. 2016-17 is for income escaped below Rs.50 lacs. Le Rs 49,01,630/-, therefore reopening is bad in law.
2) Without prejudice to ground no. 1 above. The learned CIT(A) erred in upholding the treating of entire cash deposits of 149,01,630/- in the appellant’s bank account as unexplained income u/s69A of the Income Tax Act 1961, without appreciating that the appellant was merely acting as a broker of cotton, routing amounts received from buyers to sellers, and earning only a commission income of 1-1.5% as per the prevalent market rates thereon.
3) The Ld CIT(A) has erred in forming his opinion regarding the nature of the business of the appellant and upheld the highpitched addition made by the LFAO without examining the nature of transactions appearing in the bank account of the appellant.
4) The Ld CIT(A) has erred in forming his opinion regarding the nature of the business of the appellant as a trader instead of a commission agent merely due to the fact that he was involved in buying/purchasing from market and then selling them to the customers on commission basis.
5) The learned CIT(A) failed to appreciate that only the commission element, if any. could be brought to tax in the appellant’s hands, and not the entire amount of deposits which represented third-party funds passing through the appellant’s account.
6) The learned CIT(A) failed to appreciate that the appellant’s real income was limited to commission earnings which were below the basic exemption limit, and therefore, no taxable income arose for the relevant assessment year.
7) The appellant craves leave to add, alter, amend, or withdraw any of the above grounds of appeal at the time of hearing.”
Findings & Analysis :
2. We have heard both the parties and perused the records. Assessee is an individual and had not filed return of income for A.Y.2016-17. The Assessing Officer -ITO, Ward-1, Nanded received certain information from Assistant Commissioner of Income Tax, Central Circle-4, Mumbai through Insight Portal of the Income Tax Department regarding cash deposits by assessee in Shri Renukamata Multistate Urban Co-operative Credit Society Limited. Accordingly, the ITO issued notice u/s.148 of the Act, dated 27.07.2022.
3. Ld. AR submitted that the notice u/s.148 dated 27.07.2022 for A.Y.2016-17 was issued after a lapse of three years from the end of Assessment Year. Ld.AR further submitted that the alleged income escaped assessment is only Rs.49,01,630/- which is less than Rs.50 lakhs. Ld.AR submitted that hence the notice u/s.148 is bad in law.
4. Section 149 of the Income Tax Act, 1961 is reproduced here as under :
“149. Time limit for notice.— (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:]
4.1 Thus, Section 149 of the Income Tax Act, has specifically precluded Assessing Officer for issuing notice u/s.148 if three years have elapsed from the end of the relevant assessment year and income escaping assessment is less than Rs.50 lakhs.
4.2 The relevant part of the order u/s.148A(d) for A.Y.2016-17 dated 26.07.2022 is scanned and reproduced here as under:
GOVERNMENT OF INDIAMINISTRY OF FINANCEINCOME TM DEPARTMENTOFFICE OF THE INCOME TAXOFFICERWARD 1, NANDED/
| To,SANJAY CHAMPALAL JAISWAL AT PO HADSANI TQ MAHUR DIST NANDED NANDED 431721,Maharashtra |
–
| PAN: | Assessment Year: | Dated: | DIN & Order No : ‘ |
| AWLPJ7783Q | 2016.17 | 26/07/2022 | ITBA/COM/F/17/2022-23/1044087016(1) |
Sid Madam/ M/s,
Subject: Proceedings u/s 148A(d) in consequence to Hon’ble SC Order dated 04.05.2022 – Order
1. Brief Facts: –
The assessee, Shri Sanjay Champalal Jaiswal (PAN: AWLPJ7783Q) is an individual. In this case, a notice u/s 148 for AY 2016-17 was issued on 22.04.2021 on the basis of information in possession of the AO after following the provisions of Taxation and Other laws ( Relaxation and Amendment of Certain Provisions) Act, 2020
hereinafter referred to as TOLA ) and as per the CBDT Notification No.20 dated 31-03-2021 and subsequent Notification No.38 dated 27-04-2021 according to which the time limit for issue of notice u/s 148 was extended to 30-04-2021 and 30-06-2021 respectively. The above notice was issued after obtaining the prior approval of the competent Authority as per the prevailing provisions of section 151 of the IT Act, 1961. The basis for issue of notice u/s 148 was as under:-
As per the information available with AO while issuing original notice u/s 148 of the LT Act, 1961, the assessee had deposited huge cash to the tune of Rs. 49,01,630/- in the bank account maintained with M/s Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. during the year under consideration. On verification of further details of this case, it came to notice that the assessee is a non-filer for the year under consideration. Despite having undertaken such huge transaction as stated above the assessee chose not to file return of income and hence it was clear that in the absence of return of income the amount of cash deposit mentioned above remained unaccounted for the year under consideration. In view of the facts narrated
4.3 Thus, admittedly the income escaping assessment is only Rs.49,01,630/- which is less than Rs.50 lakhs. The Assessment Year involved is A.Y.2016-17 and date of notice u/s.148 is dated 27.07.2022 which is beyond a period of three years from the end of the assessment year. Therefore, as per Section 149 of the Act, Assessing Officer had no jurisdiction to issue notice u/s.148 of the Act, for A.Y.2016-17. It is also noted that approval has been obtained from Principal Commissioner of Income Tax, whereas after the lapse of three years from the end of assessment year, approval of Principal Chief Commissioner of the Income Tax was required. Therefore, on both these grounds, the notice u/s.148 is bad in law.
5.On identical facts, Hon’ble Karnataka High Court in the case of ITO Vs. Sanath Kumar Murali [2025]172 com290 dated 10.02.2025 has quashed notice u/s.148 of the Act.
6. Hon’ble Madras High Court in the case of Core Logistic Company vs. ACIT [2025] 175 com453 order dated 05.06.2025 has held as under :
Quote “9. A perusal of Section 151(i) would show that, the specified authority for the purpose of issuing notice under Section 148 within a period of three years from the end of the relevant assessment year is, the Principal Commissioner or Principal Director or Commissioner or Director. Further, in terms of provision of Section149, three year time period is fixed for issuance of 148 notice, in the event of the amount is below 50 lakhs. In the present case, the amount involved is Rs.3,65,09,748/-, which is more than 50 lakhs. 148 notice was issued on 25.07.2022, which is beyond the period of three years. So admittedly, the approval has to be obtained from the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General as defined under Section 151(ii). But, in the present case, the approval was obtained from the Principal Commissioner in terms of Section 151(i) and no approval was obtained before issuance of 148 notice in terms of provision of Section 151(ii), which is mandatory. Therefore, the notice under Section 148 was issued in the present case in violation of provision of Section 151(ii) of the Income Tax Act. In view thereof, the initiation of proceedings itself is without any jurisdiction. Hence, the same is liable to be quashed.”Unqote.
6.1 Thus, respectfully following the decision of Hon’ble High Courts(supra), we hold that the notice u/s.148 for A.Y.2016-17 dated 27.07.2022 is held as bad in law for the reason that alleged income escaping assessment is less than Rs.50 lakhs and approval of Principal Commissioner of Income Tax has been taken for A.Y.2016-17 after the lapse of three years from the end of the assessment year.
7. Accordingly, assessment order under section 147 r.w.s 144 of the Act, for A.Y.2016-17 dated 29.03.2023 is quashed. Accordingly, Ground No.1 raised by the assessee is allowed.
8. Since we have quashed the assessment order, the remaining grounds of appeal becomes academic in nature and hence, dismissed as unadjudication.
9. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open Court on 08 January, 2026.
aniltikotekar4sme.com 