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Facts
The assessee, an individual, did not file her income tax return for AY 2015-16. Based on information of gross bank transactions amounting to Rs. 64,47,450/-, a notice under Section 148 was issued. Subsequently, an assessment order was passed under Section 147 r.w.s. 144 r.w.s 144B, making additions for unexplained cash credit and unexplained money regarding term deposits.
Held
The Tribunal held that the assumption of jurisdiction under Section 148 of the Act was bad in law and the reassessment order was quashed. This was primarily because, after removing duplicate entries, the alleged escaped income was less than Rs. 50 Lakhs, making the assumption of jurisdiction beyond 3 years barred by limitation under Section 149 of the Act.
Key Issues
Whether the assumption of jurisdiction under Section 147/148 of the Act was valid beyond three years, especially when the escaped income, after rectifying duplications, was less than Rs. 50 Lakhs as per Section 149.
Sections Cited
147, 148, 143(1), 144, 144B, 69A, 69, 148A, 149, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘D’ (SMC
Before: SHRI GEORGE GEORGE K
आदेश/ O R D E R
This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 07.03.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2015-16.
2 -: 2. The grounds raised by the assessee read as follows:-
1. The order of the NEAC, Delhi dated 07.03.2025 vide DIN & Order No. ITBA/NEAc/s/250/2024-25/1074168703(1) for the above mentioned Assessment Year is contrary to law, fact and in circumstances of the case.
2. The NFAC, Delhi erred in confirming the assumption of jurisdiction under Section 147 of the Act and consequently erred in confirming the re- assessment order without assigning proper reasons and justification.
3. The NFAC, Delhi failed to appreciate that the assumption of jurisdiction under Section 147 of the Act was without sanction of law and ought to have appreciated that the consequential re-assessment order accordingly should be reckoned as bad in law.
4. The NFAC, Delhi failed to appreciate that having not followed the prescription of law/procedure for framing the re-assessment, the consequential re-assessment order passed should be reckoned as nullity in law for want of jurisdiction.
5. The NFAC, Delhi failed to appreciate that the re-assessnment order was passed out of time, especially in view of Section 149(1) of the Act, invalid, passed without jurisdiction especially in view of the income alleged to have escaped as suggested not crossing the threshold limit of Rs. 50,00,000/- and not sustainable both on facts and in law.
6. The NFAC, Delhi failed to appreciate that the passing of the order under Section 148A(d) of the Act by the JAO would completely defy the prescription of law / procedure in relation thereto and hence ought to have appreciated that in the absence of valid foundation for issuance of notice under Section 148 of the Act, the consequential re-assessment should be considered as nullity in law.
7. The NFAC, Delhi erred in sustaining the addition of Rs. 27,12,800/- being the cash deposits into the bank account of the appellant as unexplained money in terms of Section 69A of the Act in the computation of taxable total income without assigning proper reasons and justification.
8. The NFAC, Delhi erred in sustaining the addition of Rs. 10,34,650/- being the time deposits into the bank account of the appellant as unexplained investment in terms of Section 69 of the Act in the computation of taxable total income without assigning proper reasons and justification.
9. The NFAC, Delhi failed to appreciate that the provisions of Section 69/ 3 -: 69A of the Act had no application to the present facts and in circumstances of the case, thereby vitiating the findings in relation thereto.
10. The NFAC, Delhi failed to appreciate that the pre-requisite conditions required for making an addition in terms of Section 69 / 69A of the Act were absent in the present case and in circumstances, thereby negating the findings in relation thereto.
11. The NFAC, Delhi failed to appreciate that, in any event, having not independently examined the nature and source of the disputed cash / time deposits, the consequential sustenance of entire cash / time deposits as unexplained was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law.
12. The NFAC, Delhi failed to appreciate that the entire computation of taxable total income was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law.
The NFAC, Delhi failed to appreciate that having not adhered to the prescription of faceless regime, the consequential assessment passed should be reckoned a bad in law.
14. The NFAC, Delhi failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law.
15. The Appellant craves leave to file additional grounds/arguments at the time of hearing.
Brief facts of the case are as follows: The assessee, an individual, had not filed her return of income for the assessment year 2015-16. Based on the information available with the Department that assessee had gross bank transactions to the tune of Rs.64,47,450/-, notice u/s.148 of the Act was issued on 31.03.2022. Since there was no compliance, assessee was issued various notices u/s.142(1) of the Act and also show cause notice’s 4 -: proposing a best judgment assessment u/s.144 of the Act. Since assessee did not furnish any reply to the show-cause notice issued on 20.01.2023 and 30.01.2023, assessment was completed u/s.147 r.w.s. 144 r.w.s 144B of the Act vide order dated 17.02.2023. In the said assessment order, the AO made an addition of Rs.27,12,800/- as unexplained cash credit and a sum of Rs.10,34,650/- as unexplained money u/s.69A of the Act with regard to the term deposits.
4. Aggrieved by the assessment completed vide order dated 17.02.2023, assessee filed appeal before the First Appellate Authority (FAA). Before the FAA, assessee has raised various legal contentions and also issues on merits. The FAA rejected all the legal contentions raised by the assessee. As regards the issues raised on merits since there was no evidence filed with regard to the source of unexplained cash credits and the term deposits, the addition made by the AO was sustained by the FAA.
Aggrieved by the order of the FAA, assessee has filed the present appeal before the Tribunal. The assessee has filed a paper-book enclosing therein the notice issued u/s.148A of the Act, notice issued u/s.148 of the Act, written submissions filed 5 -: before the FAA etc. The Ld.AR has also filed a brief written submission essentially challenging the reopening of assessment on two counts. The first facet of the legal contention raised by the Ld.AR is that notice was issued beyond three years and the income escaping assessment being less than Rs.50 lakhs, notice issued u/s.148 of the Act is barred by limitation. The second facet of the legal submission of Ld.AR is that the reassessment completed by the jurisdictional AO is bad in law as it ought to have been completed by the Faceless AO (including notice issued u/s.148 of the Act). In this regard, the Ld.AR relied on the CBDT notification dated 29.03.2022, wherein the e-assessment of income escaping assessment scheme 2022 was notified w.e.f.29.03.2022, wherein it was categorically stated all assessment proceedings, reassessment proceedings and the issue of notice u/s.148A of the Act shall be done through automated allocation. As regards the issue on merits, the Ld.AR submitted that assessee is a senior citizen and her son had passed away in an accident and the amount received as compensation from insurance company has been put in the bank account of the assessee. However, the Ld.AR did not have any material on record to prove the above statement.
I have heard rival submissions and perused the material on record. The first facet of the legal issues raised by the assessee is that the assumption of jurisdiction under Section 147 of the Act beyond 3 years under the new regime for income escaping assessment of less than Rs.50,00,000/- is barred by the operation of the Section 149 of the Act. In this context, I find that the assessee is an illiterate and she did not have any email ID/ profile in the income tax web portal. The show cause notice u/s 148A(b) of the Act was issued on 23.03.2022 vide DIN & Notice No. ITBA/AST/F/148A(SCN) /2021-22/1041352840(1) after obtaining the prior approval of PCCIT by stating the following reasons: “On perusal of the information available with this office, it is found that the assessee has made time deposit of Rs. 10,34,650/-, deposited in cash in a savings bank account amounting to Rs. 27,12,800/-, made cash deposits amounting to Rs.27,00,000/- with a banking company during F.Y 2014-15, Whereas, it is observed that the assessee has failed to file the return of income for A.Y 2015-16. In view of the above, the assessee is hereby required to show-cause as to why a notice u/s.148 should not be issued on the basis of above information which suggests that income chargeable to tax, in the form of an asset (Time deposits/cash deposits) amounting to Rs.64,47,450/- has 7 -: escaped assessment in accordance with provision of sec. 149(b) of Income tax Act, 1961 in the case of the assessee for the AY 2015-16. This notice is issued with the prior approval of the Principal Chief Commissioner of Income Tax (TN &P), Chennai.”
Further, the above notice was not sent through email which is evident from the screenshot taken from the income tax web portal which shows the email details as blank. The relevant screenshot is captured below:
Similarly, the order u/s 148A(d) of the Act was passed on 31.03.2022 vide DIN & Notice No. ITBA/AST/E/148A/2021- 22/1042326720 (1) and the same was not sent through email and the screenshot is as under:
In the order passed u/s 148A(d) of the Act, the AO had re- iterated the reasons stated in the show cause notice without validating the information received / available in the insight portal. The relevant portion of the order is extracted below: "2. Hence notice u/s 148A(b) was issued to the assessee on 23/03/2022 with the prior approval of Pr. CCIT, Chennai requiring him to show cause by 29/03/2022 as to why a notice u/s 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant AY. The information in the possession of the undersigned was also communicated to the assessee while granting such opportunity of being heard.
3. The assessee did not respond to the notice w/s. 148A even though the notice was served by email /post / affixture on 23/03/2022.
Hence, I am constrained to conclude that assessee does not have any objection against issuing the notice u/s 148. As per the information and evidence available with the undersigned, assessee has made time deposit of Rs. 10,34, 650/-, deposited in cash in a savings bank account amounting to Rs. 27,12,800/-, made cash deposits amounting to Rs.27,00,000/- with a banking company in the previous year relevant to 9 -: A.Y.2015-16. However, the assessee has not filed return of income for the relevant A. Y /fled return of income but the above-mentioned transaction is not disclosed therein and thus income in the form of asset of Rs. 50 lakhs or more has escaped assessment. As per the material available on record I am satisfied that it is a fit case for issue of notice w/s 148 of the I.T. Act.
This order is passed with the prior approval of Pr. CCIT, Chennai. "
Subsequently while passing the impugned re-assessment order, the Assessing Officer after examining the information available in the insight portal had concluded the following: "3.4 Variation proposed on the basis of inference drawn -1he assessee had made Time deposit with Dena Bank amounting to Rs. 10,34,650/-, deposited cash in a saving bank account amounting to Rs.27,12,800/- & Rs. 27,00,000- in Dena Bank, Hamilton Bridge, Chennai. On going through the data available on Insight portal under different information codes, the cash deposit amount seems repetitive and the maximum amount is considered for unexplained cash credits of Rs.27,12,800/-. "
The Assessing Officer while passing the impugned order had examined the veracity of the information available in the insight portal and had concluded that the same information has been received from multiple sources with different codes as stated in Para 3.1 of the assessment order which is extracted below: a. (CIB-403) Time deposit with a banking company amounting to Rs. 10,34,650/- b. (AIR-001) Deposited cash in a saving bank account amounting to Rs.27,12,800/- c. (CIB-410) Deposit cash with a banking company amounting to Rs.27,00,000/- 10 -: 13. From the above details, it is evident to note that the information mentioned in clause b. and c. pertains to the same transaction which fact is also confirmed by the Assessing Officer in Para 3.4 of the impugned assessment order, extracted supra. If such duplication is removed, the escapement of income would be only to the extent of Rs.37,47,450/-. The time limit for re-opening the assessment in terms of Section 149 of the Act read as under:-
"Time limit for notices under sections 148 and 148A. 149. (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:”
The Assessing Officer before passing the order u/s 148A(d) of the Act had to establish that the escapement of income is more than Rs. 50 Lakhs by validating the information available with him. In fact, the provisions of Section 148A of the Act specifically mandates the Assessing Officer to validate the information 11 -: available in the insight portal irrespective of whether the assessee has responded or not. The relevant portion of Section 148A of the Act is extracted below: "Conducting inquiry, providing opportunity before issue of notice under section 148. 148A. The Assessing Officer shall, before issuing any notice under section 148,- (a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;
(b) provide an opportunity of being heard to the assessee, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);
(c) consider the reply of assessee furnished, if any, in response to the show- cause notice referred to in clause (b),;
(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires: "
In the instant case, if the duplication entry on account of information received from multiple sources on the same transaction is excluded, the alleged escapement of income would 12 -: be less than Rs. 50 Lakhs and hence, the assumption of jurisdiction by issuance of notice u/s 148 of the Act is barred by limitation in terms of Section 149 of the Act. Therefore, in order to invoke the powers u/s.148 of the Act for the assessment years beyond 3 years, the admitted position of law as per Section 149 of the Act prescribes a minimum threshold limit of Rs. 50,00,000/- and the same is not satisfied on the facts of the present case. Hence, I hold that the assumption of jurisdiction under Section 148 of the Act is bad in law and the reassessment completed pursuant to the issuance of notice u/s.148 of the Act is quashed on the peculiar facts of the present case. Since I have quashed the reassessment order on the first facet of the legal contention, the other grounds are not adjudicated. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 8th July, 2025 at Chennai.