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Facts
The assessee, an individual, did not file her return of income for AY 2016-17. Her case was reopened based on information regarding the purchase of an immovable property for Rs. 57,69,950/-, falling under the Non-Filing of Returns (NMS) category. The AO issued a notice under Section 148A(b), and subsequently under Section 148, after the assessee failed to respond, leading to an assessment order under Section 147 read with Section 144B with additions under Section 69 and Section 69A.
Held
The Tribunal held that the reopening notice issued under Section 148 on 11.03.2023 was invalid and bad in law. This was because it was issued beyond 3 years from the end of the relevant assessment year (2016-17) and the income escaping assessment (Rs. 22,32,379/-) was less than the monetary threshold of Rs. 50,00,000/- stipulated in Section 149(1)(b) of the Act for reopening beyond the three-year period. The Tribunal emphasized that the Rs. 50 lakh limit applies to the income chargeable to tax that escaped assessment for that specific year, not the total sale consideration of the property.
Key Issues
Whether the reopening of assessment under Section 148 was valid, specifically concerning the time limit and the monetary threshold for income escaping assessment as per Section 149(1)(b) of the Income Tax Act.
Sections Cited
250, 147, 148, 151, 69, 69A, 148A(b), 148A(d), 142(1), 133(6), 144B, 144, 149(1)(b), 48, 149
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Income Tax Appellate Tribunal, “J(SMC
Before: SHRI NARENDRA KUMAR BILLAIYA, AM
(Assessment Year: 2016-17) Ankita Ashok Wairkar ITO-42(1)(1), Mumbai CHL No. 4, R No. 04, Mahadev Haridas Kautilya Bhavan, Bandra Kurla Patil, CHL, Opp. Jay, Jalaram Hanuman Complex, Mumbai – 400051. Vs. Tekadi, Kajupada, Borivali, East, Mumbai – 400066. PAN/GIR No. ABPPW9824N (Appellant) : (Respondent) Assessee by : Shri Ravindra Poojary Respondent by : Shri Asif Karmali (SR. DR.) Date of Hearing : 27.03.2025 Date of Pronouncement : 11.06.2025 O R D E R Per Kavitha Rajagopal, J M: This appeal has been filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) Delhi - (‘ld. CIT(A)’ for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2016-17.
The assessee has raised the following grounds of appeal: I. The assessment order has been set-aside in total, to be made afresh by the AО 1) That on the facts and the circumstances of the case, the Ld. NFAC / CIT Appeals had erred in set-aside the assessment order without disposing the ground on Reopening and Jurisdiction specifically taken in the Ground of appeal filed before him. II. Reopening is bad in law:
(A.Y. 2016-17) Ankita Ashok Wairkar 2) On facts and circumstances of the case and in law, the Ld. National Faceless Appeal Centre (NFAC) has erred in reopening the assessment by issuing the reopening notice u/s 148 of the act on 11.03.2023 is invalid since issued after 3 years from the end of AY 2016-17 and where the income escaping assessment is less than Rs. 50 lakhs. Therefore, the reassessment initiated in the present case deserves to be quashed. 3) On facts and circumstances of the case and in law, the Ld. National Faceless Appeal Centre (NFAC) has erred in reopening the assessment u/s.147 of the Act vide notice u/s 148 dt 11/03/2023 which is issued by the Jurisdictional A.O instead of the National Faceless Assessment Centre. Therefore, reopening Notice u/s 148 of the act issued is bad in law. 4) On facts and circumstances of the case and in law, the Ld. National Faceless Appeal Centre (NFAC) has erred in reopening the assessment without taking the approval u/s 151 of the act of higher authority. Therefore, the reopening is bad in law. 5) On facts and circumstances of the case and in law, the Ld. National Faceless Appeal Centre (NFAC) has erred in reopening the assessment merely on the basis of information received without considering the fact that there was no tangible material on the basis of which the assessment could be reopened, further, the AО failed to apply his independent mind to such material before reopening the assessment, therefore the reopening is bad in law. III. Addition of Rs. 9,95,226/- u/s 69 of the act 6) On facts and circumstances of the case and in law, the Ld. National Faceless Appeal Centre (NFAC) has erred in making the addition of Rs. 9,95,226/- as unexplained money u/s 69 of the I T act on the basis that the assessee along with her husband jointly purchased the immovable property of Rs.57,69,950/- on 20.06.2015 and during the year the total consideration paid amounting to Rs. 26,61,403/- out of this her husband Sri Ashok Shantaram Wairkar paid Rs. 16,66,177/- through Housing Loan and the balance amount of Rs.9,95,226/- paid during the year remains unexplained without appreciating the facts that during the year out of total consideration of Rs. 26,61,403/- the husband of the assessee has paid the consideration money of Rs.22,75,933/- to the vendor to purchase the property and balance payment of Rs.3,85,470/- is paid by the assessee. 7) The ld A.O failed to appreciating that the husband of the assessee had paid the consideration money to the vendor to purchase the property, and included the joint name of his wife. The assessee is housewife and paid only Rs.3,85,470/- through her bank account of purchase the property. Thus, the (A.Y. 2016-17) Ankita Ashok Wairkar addition of Rs. 9,95,226/- as unexplained money u/s 69 of the I T act is bad in law. IV. Addition u/s 69A for Cash deposited of Rs. 12,32,379/- 8) On facts and circumstances of the case and in law, the Ld. National Faceless Appeal Centre (NFAC) has erred in making the addition of Rs.12,32,379/- u/s 69A of the act on cash deposited in the assessee bank account without appreciation the facts that the source of cash deposits is the re-deposited of the cash withdrawals from the same bank account of the assessee and cash withdrawal from Husband account. In support of this the assessee enclosed the cash book. Therefore, the addition on account of unexplained cash deposit in bank account of assessee was unjustified.”
Brief facts of the case are that the assessee is an individual and had not filed her return of income for the year under consideration. The assessee’s case was reopened as per information from Risk Management Strategy formulated by CBDT, where the Jurisdictional Assessing Officer (JAO) was brought to the knowledge, the financial transactions of the assessee, where she had purchased an immovable property for a consideration of Rs. 57,69,950/- falling under the category of Non-Filing of the Returns (NMS). The ld. AO issued show cause notice u/s. 148A(b) of the Act, dated 06.02.2023, seeking explanation as to why notice u/s. 148 should not be issued. As the assessee failed to respond to the same, the ld. AO after prior approval of the specified authority and order u/s. 148A(d) of the Act, dated 11.03.2023 which was duly issued and served upon the assessee, reopened the assessee’s case vide notice u/s. 148, dated 11.03.2023, for the reason that the assessee has failed to explain the source of the investment by not filing the return of income, resulting in income chargeable to tax escaped assessment. The assessee filed her return of income dated 11.04.2023, declaring total income at Rs. 2,55,000/- in response to the said notice. The assessee was asked to furnish various details pertaining to her source of income and the purchase transactions entered into by (A.Y. 2016-17) Ankita Ashok Wairkar the assessee and the assessee did not comply with the notice u/s. 142(1) of the Act. The ld. AO issued notice u/s. 133(6) of the Act to various third parties including the Sub Registrar, seeking for copy of the registered conveyance deed of the property and on perusal of the copy of the agreement for sale dated 20.06.2015, furnished by the Sub Registrar, the ld. AO observed that the assessee had entered into an agreement for sale between the developer, M/s. Sheth Infraworld Pvt. Ltd. and Shri Ashok Shantaram Wairkar, the assessee’s husband and the assessee who was the second owner of the said property. The fair market value as per the stamp duty authority was determined at Rs. 57,45,500/-. It is also observed that the assessee has made a payment of Rs. 26,61,403/- to the developer during the year under consideration as being part consideration for the said property. The ld. AO also observed that the assessee’s husband Shri Ashok Shantaram Wairkar, has also not filed his return of income even being the first owner of the immovable property. The assessee contended that she had invested in the immovable property out of gold loan of Rs. 12,80,000/- availed from Mumbai District Central Co-operative Bank and the balance amount was from sale of immovable property during financial year 2012-13, for a consideration of Rs. 30,00,000/-. The assessee also contended that her share in the property as per the payment schedule was 43% and had given a break-up of the source of the investment as below: Sources of Funds INR Bank of Baroda Home Loan – Ashok 2,000,000 Wairkar Sale of Old Chawl Property in the FY 3,000,000 2012-13 – Ankita Wairkar Sale of property in the FY 2015-16 – 1,637,746 Ashok Wairkar Gold Loan – Ankita Wairkar 1,280,000 (A.Y. 2016-17) Ankita Ashok Wairkar Total Funds arranged 7,917,746 4. The details of the gold loan availed by the assessee is also tabulated herein under: A/c No. Open Closed Amount 51501000000719 1/3/2013 2/7/2013 400,000 051180700000511 5/15/2015 5/15/2016 300,000 051501000001200 11/11/2013 6/18/2015 25,000 051180700000493 4/30/2015 6/1/2015 326,000 051180700001550 3/15/2017 3/15/2018 100,000 051501000000783 2/12/2013 2/24/2014 95,000 051180700001724 6/28/2017 7/28/2018 34,000 1,280,000
The ld. AO held that the assessee has availed gold loan of Rs. 3,26,000/- and Rs. 3,00,000/- during the year under consideration but had failed to furnish any documentary evidences to show that the said loan was utilized for payment for the purchase of the property and the assessee has also failed to give evidence pertaining to the sale of immovable property during F.Y. 2013-14 in support of her contention and on perusal of the bank account statement of the assessee, there was only a meager opening balance in both the bank of India account as well as in the Mumbai District Central Co-Operative Bank account. The ld. AO also observed that out of the total investment of Rs. 26,61,403/-, the assessee’s husband has paid Rs. 16,66,177/- out of his housing loan and the balance of Rs. 9,95,226/- was held to be an unexplained investment. Though, the assessee’s contention that she was engaged in the business of the selling readymade garments and on perusal of her cash flow statement, the assessee has failed to explain by cogent evidence, the cash deposits aggregating to Rs. (A.Y. 2016-17) Ankita Ashok Wairkar 12,37,153/- was also treated as unexplained money in the absence of the supporting documentary evidence. The ld. AO made an addition on both as unexplained investment u/s. 69 and 69A of the Act amounting to Rs. 9,95,226/- and Rs. 12,37,153/- aggregating to Rs. 22,32,379/-. The ld. AO determined the total income at Rs. 22,32,379/- and passed the assessment order dated 11.03.2024, u/s. 147 r.w.s. 144B of the Act.
Aggrieved the assessee was in appeal before the first appellate authority, who vide order dated 20.12.2024, remanded this issue back to the file of the ld. AO for the reason that the assessee has failed to comply with notice before the ld. AO, where the ld. AO has passed the assessment order u/s. 144, being the best judgement assessment and in order to provide the assessee with one more opportunity before the ld. AO. The ld. CIT(A) did not decide the legal grounds as well as the grounds on the merits of the case.
The assessee is in appeal before us, challenging the impugned order of the ld. CIT(A).
We have heard the rival submissions and perused the materials available on record. Before getting into the merits of the case, we deem it fit to decide the legal ground raised
by the assessee challenging the reassessment notice issued u/s. 148 of the Act dated 11.03.2023, as being invalid, for the reason that the same was issued after 3 years from the end of the relevant assessment year, where income escaped assessment was less than Rs. 50,00,000/-. As this issued goes to the very root of the case, we deem it fit to decide this issue prima facie before getting into the other grounds of appeal raised by the assessee.
9. The learned Authorised Representative ('ld. AR' for short) for the assessee contended that the notice u/s. 148 was issued beyond 3 years from the end of the relevant (A.Y. 2016-17) Ankita Ashok Wairkar assessment year i.e., 2016-17 which is per se invalid because of the reason that the alleged income which has escaped assessment is less than Rs. 50,00,000/- as per Section 149(1)(b) of the Act in which case no notice u/s. 148 shall be issued if 3 years has lapsed from the end of the relevant assessment year. The ld. AR relied on the decision of the Hon'ble Karnataka High Court in the case of Sanath Kumar Murali vs. Income-tax Officer [2023] 152 taxmann.com 231 (Karnataka)/[2023] 294 Taxman 80 (Karnataka)/[2023] 455 ITR 370 (Karnataka)[24-05-2023] in support of the assessee’s contention.
The learned Departmental Representative (ld. DR for short) on the other hand controverted the said fact and contended that the total sale consideration which has not been disclosed amounts to Rs. 57,69,950/- which is more than Rs. 50,00,000/- and hence, the ld. AO has rightly reopened the assessee’s case vide notice u/s. 148 of the Act. The ld. DR relied on the order of the lower authorities.
In the above facts of the case, the moot issue that ought to be decided is whether the reopening of the assessment is valid in terms of Section 149(1)(b) of the Act. It is observed that though the assessee has raised the grounds challenging the reopening before the first appellate authority, the same has not been adjudicated by the ld. CIT(A) who had merely remanded the issue to ld. AO for de novo assessment as the assessment order was on best judgment assessment were the assessee has failed to comply with the assessment proceeding. As it may be so, we deem it fit to decide the legal ground raised by the assessee though not decided by ld. CIT(A). For this, it is relevant to extract the provisions of Section 149(1)(b) of the Act for ease of reference:
(A.Y. 2016-17) Ankita Ashok Wairkar 149. (1) No notice under section 148 shall be issued for the relevant assessment year,— (a) ……………………………… (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 accounts or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:”
On perusal of the above provision, it is evident that notice u/s. 148 of the Act cannot be issued in case where 3 years but not more than 10 years have elapsed from the end of relevant assessment year when the income which has escaped assessment is less than Rs. 50,00,000/-for that year. In the present case in hand, notice u/s. 148 was dated 11.03.2023, which is beyond 3 years from the end of the relevant assessment year were the last date would be 30.06.2021 and the same can be reopened beyond the last date only when the alleged income chargeable to tax which has escaped assessment is Rs. 50,00,000/- or more. The ld. AO has made an addition of Rs. 22,32,379/- which is no doubt the quantum of income which has escaped assessment for the year under consideration. The argument enhanced by the ld. DR that though for the impugned year the income escaped assessment is less, the overall sale consideration is beyond Rs. 50,00,000/-. We are not convinced with this contention of the ld. DR for the reason that the provision that was applicable during this period was that income escaped assessment should have been more than Rs.50,00,000/- ‘for that year’ which clearly implies that the limit of income which has escaped assessment has to be considered qua the year under consideration and not the total sale consideration. For this, we would (A.Y. 2016-17) Ankita Ashok Wairkar like to place our reliance on the decision relied upon by the ld. AR in the case of Sanath Kumar Murali (supra), where the Hon’ble High Court held as under: 18. Accordingly, in the present case, the words found in section 149 which is 'income chargeable to tax' must be read in terms of 'income' as arising out of the 'Capital Gains' as provided under section 48 and this is the only manner of understanding the words, 'income chargeable to tax under section 149(1)(b) of I.T. Act.
The contention of the Revenue that under section 149 what is required to be taken note of, is the 'income that has escaped assessment' being the entirety of sale consideration of Rs. 55,77,700/-cannot be accepted, in light of the express words in the statutory provision '...... income chargeable to tax. which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more'. It cannot be stated that since the stage at which the notice is issued is at a premature stage, the entirety of consideration of Rs. 55,77,700/-ought to be taken note of. A plain reading of section 48 would provide that the entirety of sale consideration does not constitute 'income'. The memorandum explaining the provisions of Finance Act, 2021 does not in any way lead to giving a different interpretation to the words, 'income chargeable to tax'. The words used under section 149 for the purpose of extended time limit is to be interpreted in terms of the plain wordings of section 149 and cannot be construed differently while relying on any executive instruction.
From the above legal dictum, it is evident that only the income chargeable to tax which has escaped assessment has to be Rs. 50,00,000/- or more for the purpose of reopening which has to be qua the impend year and not the entire sale consideration. Even otherwise, the ld. AO has made an addition only to the extent of the part payment made towards the purchase of the property by the assessee during the impugned year which is much lesser than the limit prescribed by Section 149(1)(b) of the Act. We find no ambiguity in the provisions of law were the intent of the legislature is very clearly worded. We therefore, deem it fit to hold that the notice u/s. 148 is invalid and bad in law for the reason that the time limit for notice u/s. 148 is available if 3 years but not more than 10 years have lapsed only when the income chargeable to tax which has (A.Y. 2016-17) Ankita Ashok Wairkar escaped assessment amounts to or is likely to amounts to Rs. 50,00,000/- or more as per Section 149(1)(b) of the Act, which condition is not satisfied in assessee’s case were the income which has escaped assessment is much less than Rs. 50,00,000/-. We therefore allow ground no. 2 raised by the assessee on the above observation. As we have quashed the reopening notice, the consequential assessment order is also held to be invalid and therefore, the other grounds of appeal
raised by the assessee is rendered academic and requires no separate adjudication.