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Facts
The assessee sold an immovable property for ₹71,00,000/- but did not file a return of income. A notice under Section 148A was issued, and after no response, a notice under Section 148 was issued to reopen the assessment. The assessee subsequently filed a return claiming long-term capital gains and deductions.
Held
The Tribunal held that the notice under Section 148 was issued beyond the three-year limitation period prescribed by Section 149(1)(b) of the Act, as the net income escaping assessment was below ₹50 lakhs. Therefore, the reassessment proceedings were unsustainable in law.
Key Issues
Whether the notice for reopening assessment under Section 148 was issued within the prescribed time limit under Section 149(1)(b) considering the net income escaping assessment?
Sections Cited
148, 148A, 149(1)(b), 54, 151
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Income Tax Appellate Tribunal, MUMBAI BENCH “K (SMC
Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN
ORDER PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 28.01.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2016-17, raising following grounds:
The learned CIT(A) NFAC has erred in law and on facts in dismissing the Ground No.1 in respect of the limitation for issue of Notice u/s 148 as provided u/s 149(1)(A) of Income Tax Act, 1961 without properly considering the interpretation of the law and judicial decisions relied by the appellant.
Vipendra Ravindra Mandal Vipendra Ravindra Mandal 2 ITA No. 1819/MUM/2025
2. The learned CIT(A) NFAC has erred in law and on facts in 2. The learned CIT(A) NFAC has erred in law and on facts in 2. The learned CIT(A) NFAC has erred in law and on facts in dismissing the Ground No.3 in respect of allow dismissing the Ground No.3 in respect of allowing the deduction ing the deduction of Indexed improvement cost / expenses as claimed by the of Indexed improvement cost / expenses as claimed by the of Indexed improvement cost / expenses as claimed by the appellant appellant appellant without without without properly properly properly considering considering considering the the the facts facts facts and and and evidence submitted. submitted. 2. Briefly stated, the facts of the case are that the assessee did Briefly stated, the facts of the case are that the assessee did Briefly stated, the facts of the case are that the assessee did not file any regular return of income for the assessment year under not file any regular return of income for the assessment year under not file any regular return of income for the assessment year under consideration. Based on information received through the Insight consideration. Based on information received through the Insight consideration. Based on information received through the Insight Portal maintained by the Income Portal maintained by the Income-tax Department under the he tax Department under the head “Risk Management Strategy – Non-filing of Return” formulated by the formulated by the “Risk Management Strategy Central Board of Direct Taxes (CBDT), the Assessing Officer Central Board of Direct Taxes (CBDT), the Assessing Officer Central Board of Direct Taxes (CBDT), the Assessing Officer (hereinafter “AO”) noted that the assessee had sold an immovable (hereinafter “AO”) noted that the assessee had sold an immovable (hereinafter “AO”) noted that the assessee had sold an immovable property for a consideration of property for a consideration of ₹71,00,000/-, yet had not fi , yet had not filed a return of income. Consequently, a notice under Section 148A(b) of Consequently, a notice under Section 148A(b) of Consequently, a notice under Section 148A(b) of the Income-tax Act, 1961 (hereinafter “the Act”) was issued, calling tax Act, 1961 (hereinafter “the Act”) was issued, calling tax Act, 1961 (hereinafter “the Act”) was issued, calling upon the assessee to explain the income arising from the sale of the upon the assessee to explain the income arising from the sale of the upon the assessee to explain the income arising from the sale of the said property. As there was no compliance on the part of the said property. As there was no compliance on t said property. As there was no compliance on t assessee, the AO, after obtaining due approval from the prescribed assessee, the AO, after obtaining due approval from the prescribed assessee, the AO, after obtaining due approval from the prescribed authority, passed an order under Section 148A(d) of the Act and authority, passed an order under Section 148A(d) of the Act and authority, passed an order under Section 148A(d) of the Act and thereafter issued a notice under Section 148 of the Act requiring the thereafter issued a notice under Section 148 of the Act requiring the thereafter issued a notice under Section 148 of the Act requiring the assessee to file a return of income. assessee to file a return of income. In response, the assessee filed a response, the assessee filed a return declaring long return declaring long-term capital gains on the sale of the said term capital gains on the sale of the said property and claimed deduction under Section 54 of the Act. In property and claimed deduction under Section 54 of the Act. In property and claimed deduction under Section 54 of the Act. In computing the said gains, the assessee reduced the indexed cost of computing the said gains, the assessee reduced the indexed cost of computing the said gains, the assessee reduced the indexed cost of acquisition as well as the ind acquisition as well as the indexed cost of improvement from the sale exed cost of improvement from the sale consideration.
Vipendra Ravindra Mandal Vipendra Ravindra Mandal 3 2.1 In the reassessment order dated 25.01.2024, the AO, in the In the reassessment order dated 25.01.2024, the AO, in the In the reassessment order dated 25.01.2024, the AO, in the absence of supporting documentary evidence, disallowed the absence of supporting documentary evidence, disallowed the absence of supporting documentary evidence, disallowed the indexed cost of improvement of ₹21,35,398/- while computing the indexed cost of improvement of while computing the long-term capital gain. The AO, however, allowed the claim of term capital gain. The AO, however, allowed the claim of term capital gain. The AO, however, allowed the claim of deduction under Section 54 of the Act and also allowed deduction of deduction under Section 54 of the Act and also allowed deduction of deduction under Section 54 of the Act and also allowed deduction of ₹75,000/- towards interest on borrowed capital. towards interest on borrowed capital.
2.2 On appeal, the ld. CIT(A) granted partial On appeal, the ld. CIT(A) granted partial relief in respect of the relief in respect of the deduction deduction deduction claimed claimed claimed under under under Section Section Section 54, 54, 54, but but but sustained sustained sustained the the the disallowance of the indexed cost of improvement. disallowance of the indexed cost of improvement. Aggrieved with the Aggrieved with the additions sustained by the Ld. CIT(A) additions sustained by the Ld. CIT(A), the assessee is in appeal the assessee is in appeal before the Income-tax Appellate Tribunal (IT tax Appellate Tribunal (ITAT) raising the grounds AT) raising the grounds as reproduced above. as reproduced above.
Before us, the Ld. Counsel for the assessee filed a Paper Book Before us, the Ld. Counsel for the assessee filed a Paper Book Before us, the Ld. Counsel for the assessee filed a Paper Book containing pages 1 to 57. containing pages 1 to 57.
In relation to Ground No. 1, it was submitted by learned In relation to Ground No. 1, it was submitted by learned In relation to Ground No. 1, it was submitted by learned counsel that the income chargeable to tax in the present case was counsel that the income chargeable to tax in the present counsel that the income chargeable to tax in the present below the monetary threshold of ₹50 lakhs as prescribed for below the monetary threshold of 50 lakhs as prescribed for issuance of notice under Section 148 of the Act beyond a period of issuance of notice under Section 148 of the Act beyond a period of issuance of notice under Section 148 of the Act beyond a period of three years in terms of Section 149(1)(b). Reliance was placed on three years in terms of Section 149(1)(b). Reliance was placed on three years in terms of Section 149(1)(b). Reliance was placed on the judgment of the Hon’ble Madhya Pradesh High Court in Nitin the judgment of the Hon’ble Madhya Pradesh High Court the judgment of the Hon’ble Madhya Pradesh High Court Nema v. PCIT (2023) 458 ITR 690 (MP), wherein it was held that the (2023) 458 ITR 690 (MP), wherein it was held that the (2023) 458 ITR 690 (MP), wherein it was held that the “income chargeable to tax” does not mean the gross sale “income chargeable to tax” does not mean the gross sale “income chargeable to tax” does not mean the gross sale consideration. It was argued that after giving effect to the indexed consideration. It was argued that after giving effect to the indexed consideration. It was argued that after giving effect to the indexed
Vipendra Ravindra Mandal Vipendra Ravindra Mandal 4 cost of acquisition/improvement and deduction under Section 54 of cost of acquisition/improvement and deduction under Sec cost of acquisition/improvement and deduction under Sec the Act, the resultant taxable income in the present case was below the Act, the resultant taxable income in the present case was below the Act, the resultant taxable income in the present case was below ₹50 lakhs. Therefore, the issuance of notice under Section 148 on 50 lakhs. Therefore, the issuance of notice under Section 148 on 50 lakhs. Therefore, the issuance of notice under Section 148 on 15.03.2023, pertaining to assessment year 2016 15.03.2023, pertaining to assessment year 2016-17, was beyond 17, was beyond the permissible three the permissible three-year limit and thus void.
5. Per Per Per contra, contra, contra, learned learned learned Departmental Departmental Departmental Representative Representative Representative (DR) (DR) (DR) submitted that information submitted that information from a credible source credible source had been received regarding the sale of an immovable property for ₹71 lakhs received regarding the sale of an immovable property for received regarding the sale of an immovable property for by the assessee who had not filed any return of income. Since no by the assessee who had not filed any return of income. by the assessee who had not filed any return of income. return of income was filed and the assessee didn’t comply to notice return of income was filed and the assessee didn’t comply to notice return of income was filed and the assessee didn’t comply to notice u/s 148A(b) of the Act, u/s 148A(b) of the Act, the AO had no record or material to the AO had no record or material to ascertain whether, ascertain whether, after allowing credit for indexed cost of after allowing credit for indexed cost of acquisition/improvement acquisition/improvement or deductions if any , the taxabl , the taxable income would be less than ₹50 lakhs. It was contended that the decision in 50 lakhs. It was contended that the decision in 50 lakhs. It was contended that the decision in Nitin Nema (supra) was distinguishable, as in that case the assessee (supra) was distinguishable, as in that case the assessee (supra) was distinguishable, as in that case the assessee had duly responded to the notice under Section 148A(b) and had duly responded to the notice under Section 148A(b) and had duly responded to the notice under Section 148A(b) and furnished computation showing taxable income below ₹50 lakhs, furnished computation showing taxable income below furnished computation showing taxable income below whereas, in the present case, the assessee neither filed a regular whereas, in the present case, the assessee neither filed a regular whereas, in the present case, the assessee neither filed a regular return of income nor responded to the statutory notices. return of income nor responded to the statutory notices. return of income nor responded to the statutory notices.
We have considered the rival submissions and perused the We have considered the rival submissions and perused the We have considered the rival submissions and perused the material on record. The core issue is whether the impugned notice material on record. The core issue is whether the impugned no material on record. The core issue is whether the impugned no under Section 148 was issued beyond the limitation prescribed under Section 148 was issued beyond the limitation prescribed under Section 148 was issued beyond the limitation prescribed under Section 149(1)(b) of the Act. For ease of reference, the under Section 149(1)(b) of the Act. For ease of reference, the under Section 149(1)(b) of the Act. For ease of reference, the provision is extracted as under: acted as under:
Vipendra Ravindra Mandal Vipendra Ravindra Mandal 5 [Time limit for notices under sections Time limit for notices under sections 148 and 148A. 149. (1) No notice under section 148 section 148 shall be issued for the relevant assessment year, shall be issued for the relevant assessment year,- (a) if three years and three months have elapsed from the end of the if three years and three months have elapsed from the end of the if three years and three months have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); relevant assessment year, unless the case falls under clause (b); relevant assessment year, unless the case falls under clause (b); (b) if three years and three months, but not more than five years and three months, if three years and three months, but not more than five years and three months, if three years and three months, but not more than five years and three months, have elapsed from the end of the relevant assessment year unless the Assessing have elapsed from the end of the relevant assessment year unless the Assessing 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 Officer has in his possession books of account or other documents or evidence Officer has in his possession books of account or other documents or evidence related to any asset or expenditure or transaction or entries which show that the any asset or expenditure or transaction or entries which show that the any asset or expenditure or transaction or entries which show that the income chargeable to tax, which has escaped assessment, amounts to or is likely income chargeable to tax, which has escaped assessment, amounts to or is likely income chargeable to tax, which has escaped assessment, amounts to or is likely to amount to fifty lakh rupees or more. to amount to fifty lakh rupees or more. (2) No notice to show cause under (2) No notice to show cause under section 148A shall be issued for the relevant shall be issued for the relevant assessment year,- (a) if three years have elapsed from the end of the relevant assessment year, unless if three years have elapsed from the end of the relevant assessment year, unless if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); the case falls under clause (b); (b) if three years, but not more t if three years, but not more than five years, have elapsed from the end of the han five years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has relevant assessment year unless the income chargeable to tax which has relevant assessment year unless the income chargeable to tax which has escaped assessment, as per the information with the Assessing Officer, amounts escaped assessment, as per the information with the Assessing Officer, amounts escaped assessment, as per the information with the Assessing Officer, amounts to or is likely to amount to fifty lakh rupees or more.] to or is likely to amount to fifty lakh rupees or more.] 6.1 On a plain reading, it is evident that where the alleged On a plain reading, it is evident that where the alleged On a plain reading, it is evident that where the alleged escapement of income represented in the form of an asset is less escapement of income represented in the form of an asset is less escapement of income represented in the form of an asset is less than ₹50 lakhs, a notice under Section 148 can be issued only 50 lakhs, a notice under Section 148 can be issued only 50 lakhs, a notice under Section 148 can be issued only within a period of three years from the end of the relevant within a period of three years from the end of the relevant within a period of three years from the end of the relevant assessment year. The CIT(A), while placing reliance on the decision ent year. The CIT(A), while placing reliance on the decision ent year. The CIT(A), while placing reliance on the decision of the Hon’ble Delhi High Court in of the Hon’ble Delhi High Court in Rohit Kumar v. ITO Rohit Kumar v. ITO (W.P.(C) No. 2830/2022), observed that at the stage of recording reasons, the AO 2830/2022), observed that at the stage of recording reasons, the AO 2830/2022), observed that at the stage of recording reasons, the AO can only proceed on the basis of the material available, and in the can only proceed on the basis of the material available, and in the can only proceed on the basis of the material available, and in the absence of a return or other details, may reasonably take the entire absence of a return or other details, may reasonably take the entire absence of a return or other details, may reasonably take the entire sale consideration as the amount of i sale consideration as the amount of income which has escaped ncome which has escaped assessment. The CIT(A) further held that an assessee cannot take assessment. The CIT(A) further held that an assessee cannot take assessment. The CIT(A) further held that an assessee cannot take advantage of his own default in failing to file a return, and advantage of his own default in failing to file a return, and advantage of his own default in failing to file a return, and thereafter, upon reopening, claim that the taxable income would be thereafter, upon reopening, claim that the taxable income would be thereafter, upon reopening, claim that the taxable income would be Vipendra Ravindra Mandal Vipendra Ravindra Mandal 6 ITA No. 1819/MUM/2025 below ₹50 lakhs so as to render the pr 50 lakhs so as to render the proceedings invalid. oceedings invalid. The Ld. CIT(A) accordingly rejected the contention of the assessee observing CIT(A) accordingly rejected the contention of the assessee observing CIT(A) accordingly rejected the contention of the assessee observing as under:
“5.7 In the present case it is seen that at the time of reopening of 5.7 In the present case it is seen that at the time of reopening of 5.7 In the present case it is seen that at the time of reopening of assessment, the alleged escapement was Rs 71,00,000 which is more assessment, the alleged escapement was Rs 71,00,000 which is more assessment, the alleged escapement was Rs 71,00,000 which is more than 50 lakhs. than 50 lakhs. It may be noted that as the appellant had not filed It may be noted that as the appellant had not filed return of income for the year and therefore, with due respect to the return of income for the year and therefore, with due respect to the return of income for the year and therefore, with due respect to the various judicial decision that the income chargeable to tax cannot be various judicial decision that the income chargeable to tax cannot be various judicial decision that the income chargeable to tax cannot be the gross receipts/consideration in any business transaction, AO the gross receipts/consideration in any business transaction, AO the gross receipts/consideration in any business transaction, AO could not have known or worked out the capital gain as there was no not have known or worked out the capital gain as there was no not have known or worked out the capital gain as there was no information available with the AO in the form of return etc. Therefore, I information available with the AO in the form of return etc. Therefore, I information available with the AO in the form of return etc. Therefore, I am of the considered view that AO was correct in assuming the whole am of the considered view that AO was correct in assuming the whole am of the considered view that AO was correct in assuming the whole of the transaction as undisclosed and as incom of the transaction as undisclosed and as income chargeable to tax. The e chargeable to tax. The appellant has the responsibility of filing the appeal within the due date appellant has the responsibility of filing the appeal within the due date appellant has the responsibility of filing the appeal within the due date and disclosing the transaction and income in the return of income but and disclosing the transaction and income in the return of income but and disclosing the transaction and income in the return of income but it failed to do so. An assessee cannot be allowed to take undue it failed to do so. An assessee cannot be allowed to take undue it failed to do so. An assessee cannot be allowed to take undue advantage of his own wr advantage of his own wrongi.enot filing return of income and on ongi.enot filing return of income and on reopening claim that even if the total transaction was above Rs 50 reopening claim that even if the total transaction was above Rs 50 reopening claim that even if the total transaction was above Rs 50 lakhs, the income out if it less than Rs 50 lakhs and on technicalities lakhs, the income out if it less than Rs 50 lakhs and on technicalities lakhs, the income out if it less than Rs 50 lakhs and on technicalities be allowed to claim that the reopening is invalid. Hence, the appeal on be allowed to claim that the reopening is invalid. Hence, the appeal on be allowed to claim that the reopening is invalid. Hence, the appeal on this ground is thus treated ground is thus treated as dismissed.” 6.2 In the present case, the AO issued a notice under Section In the present case, the AO issued a notice under Section In the present case, the AO issued a notice under Section 148A(b) giving the assessee an opportunity to explain the income 148A(b) giving the assessee an opportunity to explain the income 148A(b) giving the assessee an opportunity to explain the income corresponding to the sale consideration of ₹71 lakhs. No response corresponding to the sale consideration of 71 lakhs. No response was forthcoming. In such was forthcoming. In such circumstances, the AO, having no circumstances, the AO, having no contrary material, proceeded to treat the full sale consideration as contrary material, proceeded to treat the full sale consideration as contrary material, proceeded to treat the full sale consideration as income that had escaped assessment. The order under Section income that had escaped assessment. The order under Section income that had escaped assessment. The order under Section 148A(d) was passed with the prior approval of the specified 148A(d) was passed with the prior approval of the specified 148A(d) was passed with the prior approval of the specified e Act, and the notice under authority under Section 151 of th authority under Section 151 of the Act, and the notice under Section 148 was issued accordingly. Section 148 was issued accordingly. The relevant observation made The relevant observation made in the order u/s 148A(d) 148A(d) of the Act by the AO is reproduced as of the Act by the AO is reproduced as under:
Vipendra Ravindra Mandal Vipendra Ravindra Mandal 7 “Order under clause (d) of section 148A of the Income “Order under clause (d) of section 148A of the Income “Order under clause (d) of section 148A of the Income-tax Act, 1961 In this case Information In this case Information has been received in accordance with has been received in accordance with the Risk Management Strategy formulated by CBDT on Insight the Risk Management Strategy formulated by CBDT on Insight the Risk Management Strategy formulated by CBDT on Insight Portal maintained by the Income Tax Department under the Portal maintained by the Income Tax Department under the Portal maintained by the Income Tax Department under the Head RMS (Risk Management Strategy Head RMS (Risk Management Strategy-Non filing of Return) for Non filing of Return) for F.Y. 2015-16 (Α.Υ. 2016 16 (Α.Υ. 2016-17). In view of the explanation 1 to he explanation 1 to section 148, such information provided by Risk Management section 148, such information provided by Risk Management section 148, such information provided by Risk Management Strategy (RMS) constitutes/ suggest income chargeable to tax Strategy (RMS) constitutes/ suggest income chargeable to tax Strategy (RMS) constitutes/ suggest income chargeable to tax has escaped assessment for A.Y. 2016 has escaped assessment for A.Y. 2016-17.
In this case, the information is available 2. In this case, the information is available as under: Information Information description ormation description F.Y. Amount (in code Lakhs) AIR-007 Sold immovable property Sold immovable property 2015-16 71 valued at Rs. 30,00,000 or valued at Rs. 30,00,000 or more TDS-194IA TDS Statement - Sales TDS Statement 2015-16 71 (R) consideration on sale of consideration on sale of immovable property (Section immovable property (Section 194IA
2.1. In view of the above 2.1. In view of the above information available with this office information available with this office and verification of status of Return Of Income filed by the and verification of status of Return Of Income filed by the and verification of status of Return Of Income filed by the assessee from e assessee from e-filing portal, it is found that the assessee is not filing portal, it is found that the assessee is not filed its return of income. No assessment has been made earlier filed its return of income. No assessment has been made earlier filed its return of income. No assessment has been made earlier u/s 143(3)/147/144 of the u/s 143(3)/147/144 of the IT. Act. It is seen that during the IT. Act. It is seen that during the year under consideration, the assessee undertook above year under consideration, the assessee undertook above year under consideration, the assessee undertook above mentioned financial transactions wherein gross financial mentioned financial transactions wherein gross financial mentioned financial transactions wherein gross financial implication is Rs.71,00,000/ implication is Rs.71,00,000/-. Since, the assessee has not filed . Since, the assessee has not filed the Return Of Income for the relevant year the Return Of Income for the relevant year, it is clearly evident , it is clearly evident that the assessee has not offered the receipts from sale of that the assessee has not offered the receipts from sale of that the assessee has not offered the receipts from sale of immovable property of Rs. 71,00,000/ immovable property of Rs. 71,00,000/- as income for the year as income for the year under consideration. under consideration. Further, in accordance with section 148A(b) of the I.T. Act, in accordance with section 148A(b) of the I.T. Act, an opportunity of being heard an opportunity of being heard was provided to the assessee, was provided to the assessee, vide Showcause notice u/s 148A(b)of the I.T. Act along with vide Showcause notice u/s 148A(b)of the I.T. Act along with vide Showcause notice u/s 148A(b)of the I.T. Act along with information of insight portal dated 08.02.2023. The said notice information of insight portal dated 08.02.2023. The said notice information of insight portal dated 08.02.2023. The said notice was sent to the assessee through e was sent to the assessee through e-filing Portal and also filing Portal and also through Speed Post requiring it to furnish through Speed Post requiring it to furnish the relevant details the relevant details along with supporting documentary evidence with respect to the along with supporting documentary evidence with respect to the along with supporting documentary evidence with respect to the transactions as cited above, to this office by 17.02.2023. This transactions as cited above, to this office by 17.02.2023. This transactions as cited above, to this office by 17.02.2023. This notice was duly served upon the assessee. Vide the above said notice was duly served upon the assessee. Vide the above said notice was duly served upon the assessee. Vide the above said
Vipendra Ravindra Mandal Vipendra Ravindra Mandal 8 showcause notice the assessee was also asked a showcause notice the assessee was also asked as to why the s to why the subject transactions amount shall not be treated as income of subject transactions amount shall not be treated as income of subject transactions amount shall not be treated as income of the year under concerned and why the order u/s 148A(d) of the the year under concerned and why the order u/s 148A(d) of the the year under concerned and why the order u/s 148A(d) of the IT Act should not be passed and subsequently the notice under IT Act should not be passed and subsequently the notice under IT Act should not be passed and subsequently the notice under section 148 of the Act should not be issued to you on the section 148 of the Act should not be issued to you on the section 148 of the Act should not be issued to you on the basis of information which suggests that income chargeable to tax of information which suggests that income chargeable to tax of information which suggests that income chargeable to tax has escaped assessment in your case for the FY 2015 has escaped assessment in your case for the FY 2015 has escaped assessment in your case for the FY 2015-16 relevant to AY 2016 relevant to AY 2016-17. However, till date no response has been received from the However, till date no response has been received from the However, till date no response has been received from the assessee against the opportunity provided u/s 148A(b assessee against the opportunity provided u/s 148A(b assessee against the opportunity provided u/s 148A(b) of the Income tax Act, which establishes that assessee has no Income tax Act, which establishes that assessee has no Income tax Act, which establishes that assessee has no explanation for issue discussed above. The assessee has not explanation for issue discussed above. The assessee has not explanation for issue discussed above. The assessee has not filed its ITR despite having high value of financial transaction its ITR despite having high value of financial transaction its ITR despite having high value of financial transaction involving evasion of tax. It is also evident from information involving evasion of tax. It is also evident from information involving evasion of tax. It is also evident from information available with Assessing Officer that the income chargeable to able with Assessing Officer that the income chargeable to able with Assessing Officer that the income chargeable to tax for A.Y.2016 tax for A.Y.2016-17 has escaped assessment mentioned above. 17 has escaped assessment mentioned above. Accordingly, it is concluded that this is a fit case for issuing Accordingly, it is concluded that this is a fit case for issuing Accordingly, it is concluded that this is a fit case for issuing notice u/s 148 of the I.T. Act. notice u/s 148 of the I.T. Act.
Further, it is to be mentioned that th 5. Further, it is to be mentioned that the escapement to the tune e escapement to the tune of Rs. 71,00,000/ of Rs. 71,00,000/- from sale proceeds credited into bank from sale proceeds credited into bank account represents in the form of asset as per provisions of account represents in the form of asset as per provisions of account represents in the form of asset as per provisions of Section 149(1) of the I.T. Act. Section 149(1) of the I.T. Act.”
6. The Order u/s. 148A(d) is passed with the prior approval of 6. The Order u/s. 148A(d) is passed with the prior approval of 6. The Order u/s. 148A(d) is passed with the prior approval of the specified aut the specified authority (Pr. Chief Commissioner of Income Tax, hority (Pr. Chief Commissioner of Income Tax, Mumbai) u/s. 151 of the Income Tax Act, 1961. The Notice u/s. Mumbai) u/s. 151 of the Income Tax Act, 1961. The Notice u/s. Mumbai) u/s. 151 of the Income Tax Act, 1961. The Notice u/s. 148 of the Income Tax Act for reopening of the assessment 148 of the Income Tax Act for reopening of the assessment 148 of the Income Tax Act for reopening of the assessment proceedings for A.Y. 2016 proceedings for A.Y. 2016-17 is issued accordingly 6.3 In the case of Nitin Nem In the case of Nitin Nema vs. PCIT (supra) the Hon’ble Madhya (supra) the Hon’ble Madhya Pradesh High Court observed that revenue authorities are not Pradesh High Court observed that revenue authorities are not Pradesh High Court observed that revenue authorities are not supposed to consider sale consideration of the property as income supposed to consider sale consideration of the property as income supposed to consider sale consideration of the property as income chargeable to tax. The relevant finding of the Hon’ble High Court is chargeable to tax. The relevant finding of the Hon’ble High Court is chargeable to tax. The relevant finding of the Hon’ble High Court is reproduced as under: reproduced as under:
“9. From the aforesaid discussion what comes out loud and aforesaid discussion what comes out loud and clear is that the Revenue has failed to understand the clear is that the Revenue has failed to understand the clear is that the Revenue has failed to understand the fundamental difference between sale consideration on one hand fundamental difference between sale consideration on one hand fundamental difference between sale consideration on one hand and income chargeable to tax on the other. The Revenue despite and income chargeable to tax on the other. The Revenue despite and income chargeable to tax on the other. The Revenue despite being assisted by thousands of being assisted by thousands of experts in the field of finance experts in the field of finance and taxation, has committed such elementary mistake leading and taxation, has committed such elementary mistake leading and taxation, has committed such elementary mistake leading
Vipendra Ravindra Mandal Vipendra Ravindra Mandal 9 to harassment to the assessee who has been compelled to file to harassment to the assessee who has been compelled to file to harassment to the assessee who has been compelled to file the present avoidable piece of litigation. More so, this Court has the present avoidable piece of litigation. More so, this Court has the present avoidable piece of litigation. More so, this Court has been compelled to decide this frivo been compelled to decide this frivolous matter wasting its lous matter wasting its precious time and energy which could have been utilized in precious time and energy which could have been utilized in precious time and energy which could have been utilized in more pressing matters. more pressing matters. 9.1 Thus, the Revenue deserves to be saddled with exemplary 9.1 Thus, the Revenue deserves to be saddled with exemplary 9.1 Thus, the Revenue deserves to be saddled with exemplary cost cost cost and and and correspondingly correspondingly correspondingly the the the petitioner petitioner petitioner is is is entitled entitled entitled to to to compensatory cost. compensatory cost.” 6.4 The ratio laid down by the Hon’ble Madhya Pradesh High Court The ratio laid down by the Hon’ble Madhya Pradesh High Court The ratio laid down by the Hon’ble Madhya Pradesh High Court in Nitin Nema (supra) makes it abundantly clear that, for the (supra) makes it abundantly clear that, for the (supra) makes it abundantly clear that, for the purposes of determining the monetary limit of income escaping purposes of determining the monetary limit of income escaping purposes of determining the monetary limit of income escaping assessment under section 149(1)(b) of the Act, it is the net income assessment under section 149(1)(b) of the Act, it is the assessment under section 149(1)(b) of the Act, it is the which is to be reckoned, and not the gross receipts. In the present which is to be reckoned, and not the gross receipts. In the present which is to be reckoned, and not the gross receipts. In the present case, it is an admitted position that the net income likely to have case, it is an admitted position that the net income likely to have case, it is an admitted position that the net income likely to have escaped assessment falls below the threshold of ₹50,00,000/-. escaped assessment falls below the threshold of escaped assessment falls below the threshold of Consequently, no notice under section 148 of the Act could validly Consequently, no notice under section 148 of the Act coul Consequently, no notice under section 148 of the Act coul be issued against the assessee for reopening an assessment beyond be issued against the assessee for reopening an assessment beyond be issued against the assessee for reopening an assessment beyond the period of three years. the period of three years.
6.5 The statutory threshold of The statutory threshold of ₹50,00,000/- in respect of net in respect of net income escaping assessment continues to operate, notwithstanding income escaping assessment continues to operate, notwithstanding income escaping assessment continues to operate, notwithstanding the fact that the assessee the fact that the assessee did not make a representation during the did not make a representation during the proceedings proceedings proceedings under under under section section 148A. section 148A. 148A. During During During the the reassessment the reassessment reassessment proceedings, the assessee categorically explained that the net proceedings, the assessee categorically explained that the net proceedings, the assessee categorically explained that the net income likely to have escaped was less than income likely to have escaped was less than ₹50,00,000/ 50,00,000/-. The learned CIT(A), however, placing learned CIT(A), however, placing reliance on the judgment of the reliance on the judgment of the Hon’ble Delhi High Court in Hon’ble Delhi High Court in Rohit Kumar v. ITO (supra), held that at (supra), held that at the stage of recording reasons, the Assessing Officer was justified in the stage of recording reasons, the Assessing Officer was justified in the stage of recording reasons, the Assessing Officer was justified in Vipendra Ravindra Mandal Vipendra Ravindra Mandal 10 treating the entire sale consideration as income escaped, in the treating the entire sale consideration as income escaped, in the treating the entire sale consideration as income escaped, in the absence of further details. details.
6.6 We are, however, guided by the principle laid down by the We are, however, guided by the principle laid down by the We are, however, guided by the principle laid down by the Hon’ble Supreme Court in Hon’ble Supreme Court in CIT v. Vegetable Products Ltd. CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC), wherein it was held that if two views are possible on ITR 192 (SC), wherein it was held that if two views are possible on ITR 192 (SC), wherein it was held that if two views are possible on the interpretation of law, the view favorable to th the interpretation of law, the view favorable to the assessee should e assessee should be adopted. Respectfully following the above dictum of the Hon’ble be adopted. Respectfully following the above dictum of the Hon’ble be adopted. Respectfully following the above dictum of the Hon’ble Supreme Court, we prefer to adopt the view taken by the Hon’ble Supreme Court, we prefer to adopt the view taken by the Hon’ble Supreme Court, we prefer to adopt the view taken by the Hon’ble Madhya Pradesh High Court in Madhya Pradesh High Court in Nitin Nema (supra), which directly (supra), which directly supports the assessee’s case. supports the assessee’s case.
6.7 In the light of the admitted factual position that the net ght of the admitted factual position that the net ght of the admitted factual position that the net income chargeable to tax, represented in the form of assets, is income chargeable to tax, represented in the form of assets, is income chargeable to tax, represented in the form of assets, is below the monetary threshold of below the monetary threshold of ₹50,00,000/-, we hold that no , we hold that no notice under section 148 of the Act could have been issued. notice under section 148 of the Act could have been issued. notice under section 148 of the Act could have been issued. Accordingly, the reassessment proceedings initiated in the case of ssessment proceedings initiated in the case of ssessment proceedings initiated in the case of the assessee are held to be unsustainable in law. Ground No. 1 of the assessee are held to be unsustainable in law. Ground No. 1 of the assessee are held to be unsustainable in law. Ground No. 1 of the assessee’s appeal is, therefore, allowed. the assessee’s appeal is, therefore, allowed.
6.8 Since we have already held the reassessment proceedings as Since we have already held the reassessment proceedings as Since we have already held the reassessment proceedings as unsustainable in law the consequen unsustainable in law the consequent ground on merit is not t ground on merit is not required to be adjudicated and same is rendered infructuous. required to be adjudicated and same is rendered infructuous. required to be adjudicated and same is rendered infructuous.
Vipendra Ravindra Mandal Vipendra Ravindra Mandal 11 ITA No. 1819/MUM/2025
In the result, the appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on nounced in the open Court on 22/0 /09/2025.