RAMDEV MUNADHDA,WARANGAL vs. INCOME TAX OFFICE WARD -1, WARANGAL

Ostensibly, the AO had initiated the proceedings after following the procedure prescribed under Section 148A of the Act. The AO had issued a letter under Section 148A(a) of the Act, dated 12/01/2024, wherein taking specific cognizance of the fact that the assessee had not filed his return of income for the year under consideration, the assessee was called upon to explain the cash deposits or cash withdrawals (including through bearer cheques) amounting to Rs. 1,57,85,000/- in his current account held with State Bank of India, but he failed to reply to the same, Page 2-3 of “Assessee’s Paper Book” (APB). Thereafter, the AO issued notice under Section 148A(b) of the Act, dated 05/02/2024, wherein, based on the aforesaid information, the assessee was called upon to explain why a notice under Section 148 of the Act may not be issued to him, Page 4-8 of APB. As the assessee had failed to respond to the notice issued under Section 148A(b) of the Act, therefore, the AO passed an order under Section 148A(d) of the Act, dated 29/02/2024, wherein it was observed by him that based on the information available, the income of the assessee had escaped assessment to the extent of Rs. 1,57,85,000/-, Page 7- 9 of APB. Thereafter, the AO issued a notice under Section 148 of the Act, dated 29/02/2024, i.e., beyond three years but within ten years from the end of the relevant assessment year, Page 10 of APB.

Thereafter, the AO framed the assessment vide his order passed under Section 143(3) r.w.s. 147 r.w.s. 144B, determining the total income of the assessee at Rs. 8,53,659/-.

Aggrieved, the assessee assailed the assessment order before the CIT(A), but without success.

We have heard the Ld. Authorised Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home her contentions

Ms. Mrudulatha, CA, the Ld. Authorised Representative for the assessee (for short, “AR”) has confined her contention only to the validity of the notice issued under Section 148 of the Act, i.e., beyond three years from the end of the relevant assessment year. It was submitted by her that in view of Section 149(1)(b) of the Act, since the income of the assessee had been assessed at Rs. 8,53,659/-, which is less than Rs. 50 lakhs, thus the notice issued on 29.02.2024, being beyond a period of 3 years from the end of the relevant assessment year, is barred by limitation. The Ld. AR in support of her aforesaid contention had relied upon certain judicial pronouncements, viz. (i). Vasuki Global Industrial Ltd. Vs. Pr. CIT (2025) 180 taxmann.com 16 (Gujarat); (ii). ACIT Vs. Rajiv Gupta (2025) 180 taxmann.com 709 (Hyderabad); (iii). Principal Commissioner of Income Tax Vs. Nitin Nema (2024) 468 ITR 105 (SC); (iv). Pramila Mahadev Tadkase Vs. Income Tax Officer (2024) 468 ITR 275 (Karnataka); and (v). Ratan Bej Vs. Principal Commissioner of Income Tax (2024) 467 ITR 288 (Jharkhand).

Per Contra, the Ld. Departmental Representative (for short, “DR”) submitted that as the AO at the stage of initiating the proceedings under Section 147 of the Act was in possession of material which revealed that the income of the assessee chargeable to tax, amounting to or likely to amount to Rs. 50 lakhs or more had escaped assessment, therefore, he had rightly assumed jurisdiction and issued the notice under Section 148 of the Act beyond a period of 3 years from the end of the relevant assessment year.

As the Ld. AR has confined her contentions only to the validity of the notice issued under section 148 of the Act in the backdrop of the mandate of Section 149(1)(b) of the Act, therefore, we restrict our adjudication to the said extent.

We find that Section 149(1)(b), as was applicable during the relevant period, provided that where three years have elapsed from the end of the relevant assessment year, then notice under Section 148 could be be issued only if the AO has in his possession books of account or other documents or evidence which revealed that income chargeable to tax, represented in the form of an asset, amounting to or likely to amount to Rs.50 lakhs or more, has escaped assessment.

Coming to the facts involved in the case before us, we find that at the stage of initiation of proceedings, the information available with the department was that the assessee had though made cash withdrawals aggregating to Rs. 1,57,85,000/- during the relevant previous year, but not filed his return of income for the subject year, i.e., AY 2017-18. Thus, we concur with the Ld. DR that there was tangible material in the possession of the AO indicating substantial financial transactions exceeding Rs. 1.50 crores (approx.), which prima facie suggested escapement of income exceeding the threshold limit prescribed under Section 149(1)(b) of the Act.

Apropos the Ld. AR’s contention that, as ultimately the income of the assessee was assessed at only Rs. 8,53,659/-, therefore, the notice issued beyond three years is invalid, we are unable to persuade ourselves to concur with the same. In our considered view, the Ld. AR’s contention is not only flawed but proceeds on a fundamentally incorrect premise. We are of firm conviction that the validity of the assumption of jurisdiction has to be tested with reference to the material available with the AO at the time of issuance of notice under Section 148, and not on the basis of the income ultimately assessed. Although, as a word of caution, we may herein observe that if a basic analysis of the information available with the AO glaringly reveals that the income of the assessee chargeable to tax that had escaped assessment for the subject year is below the threshold limit of Rs. 50 lacs, then the AO cannot be allowed to put blinkers and remain oblivion to the said material fact.

Be that as it may, it is trite law that the validity of reassessment proceedings must be examined based on the reasons recorded and material available at the time of issuance of notice. We are of the view that the ultimate determination of income at a figure lower than Rs. 50 lakhs cannot retrospectively invalidate the assumption of jurisdiction, if at the inception stage the AO had material, which, prima facie, satisfied the statutory requirement.

We find that in the present case, the AO had information relating to cash withdrawals aggregating to Rs. 1,57,85,000/-, which read in the backdrop of the fact that the assessee had not filed his return of income for the year under consideration, i.e., AY 2017-18, constituted tangible material, i.e., the AO was in possession of documents or evidence which revealed that the income of the assessee chargeable to tax, represented in the form of an asset, amounting to or likely to amount to Rs.50 lakhs or more, had escaped assessment. We, thus, in the backdrop of our aforesaid deliberations, are of the view that the issuance of notice under Section 148 on 29.02.2024, though beyond three years, cannot be said to be barred by limitation under Section 149(1)(b) of the Act.

As the assessee had relied on certain judicial pronouncements (forming part of the case law compilation), therefore, in all fairness, we deem it apposite to deal with the same, as under:

As the Ld. AR has confined her contentions only to the jurisdictional issue, i.e., the validity of the notice issued under section 148 of the Act in te backdrop of the mandate of Section 149(1)(b) of the Act, which, has been held by us based on our aforesaid deliberations as valid, therefore, we refrain from adjudication on the merits of the case.

In the result, the appeal filed by the assessee is dismissed.