INCOME TAX OFFICER -42(1)(3), MUMBAI, KAUTILYA BHAVAN, BKC, BANDRA, MUMBAI vs. KRISHNA DEEP BUILDERS, MUMBAI

Aggrieved the assessee was in appeal before the first appellate authority, challenging the impugned addition along with other grounds of appeal

The learned Departmental Representative (‘ld. DR’ for short) on the other hand controverted the said fact and stated that though notice for reassessment was issued for the issue of difference in stamp duty value of Rs. 32,78,500/-, the ld. AO proceeded to make an addition on the unexplained investment u/s. 69A of the Act amounting to Rs. 87,93,925/- both aggregating to Rs. 1,20,72,425/- and stated that the said amount is much above the threshold limit specified in the Act. The ld. DR relied on the order of the lower authority.

We have heard the rival submissions and perused the materials available on record. The moot issue to be decided prima facie in this case is whether the reassessment proceeding initiated by the ld. AO is valid. Upon considering the rival contentions, it is observed that the ld. AO has reopened the assessee’s case based on the information received from &6240/Mum/2024 (A.Y. 2017-18) Krishna Deep Builders SRO office that the assessee has entered into a transaction dated 04.04.2016 for purchase of a property for a sale consideration of Rs. 80 lacs which according to the ld. AO was to be reckoned as Rs. 1,12,78,500/- to be the stamp duty value, thereby adding the difference amount of Rs. 32,78,500/-. The ld. AR brought our attention to the impugned notice dated 25.05.2022 along with annexure A, wherein it was observed that this was the sole reason for reopening of the assessment. Pertinently notice has been issued beyond 3 years but not more than 10 years from the end of the relevant assessment year which would squarely fall under the provision of Section 149(1)(b) of the Act, which provision is cited hereinunder for ease of reference: “149. (1) No notice under section 148 shall be issued for the relevant assessment year,— [(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:]”

From the above provisions, it can be seen that condition for issuance of notice u/s. 148 of the Act, in a case which is 3 years but not more than 10 years from the end of the relevant assessment year has elapsed can be made by the ld. AO, when he is in possession of books of accounts or other documents or evidence which disclose that the income chargeable to tax either in the form of an asset, an expenditure in respect of a &6240/Mum/2024 (A.Y. 2017-18) Krishna Deep Builders transaction or in relation to an event or occasion or any entry in the books of account is found to have escaped assessment which amounts to Rs. 50 lacs or more. Without doubt the provisions are framed in such a manner that the ld. AO can reopen/reassess a case beyond 3 years from the end of the A.Y. only when the income which as escaped assessment is Rs. 50 lacs or more. The provision is clearly worded without any ambiguity per se, where the threshold limit of income which has escaped assessment cannot be lesser than Rs. 50 lacs as contemplated u/s. 149(1) of the Act. It is also evident that the said provision speaks of issuance of notice u/s. 148 and not the finality of the amount determined after assessment as contended by the ld. DR. There is no iota of doubt that the criteria for issuance of notice u/s. 148 ought to have been income escaping assessment amounting to Rs. 50 lacs or more in cases, where 3 years but not 10 years have elapsed from the end of the impugned year.

We would also place our reliance on the decision cited by the ld. AR, where the Hon’ble Jurisdictional High Court has categorically held that the AO cannot issue notice u/s. 148 of the Act, where the income which has escaped assessment is less than Rs. 50 lacs as contemplated u/s. 149(1)(b) of the Act. Further, it has been held that only when the amount in question which has escaped assessment is Rs. 50 lacs or more then the AO will assume jurisdiction to issue notice to reopen the assessment where 3 years but less than 10 years have lapsed from the end of the assessment year which was to be reopened. It is also to be noted that in the said case, the Hon’ble High Court has excluded certain amount for which notice was issued stating that the same was not to be taxed in the hands of the assessee and on considering the remaining amount which &6240/Mum/2024 (A.Y. 2017-18) Krishna Deep Builders was alleged to have escaped assessment was considered for the purpose of Section 149(1)(b) of the Act. In the present case in hand, the assessee was in a better footing where the notice issued by the ld. AO u/s. 148 of the Act dated 15.06.2021, and the subsequent order dated 30.07.2022, passed u/s. 148A(d) of the Act was only for income which has escaped assessment amounting to Rs. 32,78,500/-. Therefore, the assessee’s case would squarely be covered by the decision of the Hon’ble Jurisdictional High Court. By respectfully following the same, we are inclined to hold that the notice u/s. 148, dated 15.06.2021, and the order passed u/s. 148A(d) of the Act, 30.07.2022 are void ab initio and are therefore quashed.

As we have decided this issue on the legal ground thereby holding the reassessment notice to be invalid and the consequential assessment order is also held to be invalid in the eyes of law. We have restricted ourselves to the legal issue and have not gone into the merits of the case and hence, the other grounds of appeal