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Facts
The assessee challenged an order passed by the CIT(A) for the assessment year 2016-17. The assessee's counsel argued that the reopening initiated under Section 149(1)(b) of the Income Tax Act, 1961, was invalid as the escaped income of Rs. 7,54,000/- was below the mandatory threshold of Rs. 50 lakhs required for reopening under the new provisions effective from April 1, 2021.
Held
The tribunal referred to the Supreme Court's decision in Union of India vs. Rajeev Bansal, which clarified that the new provisions of Section 149(1)(b) apply retrospectively. It was held that reassessment notices can only be issued if the escaped income exceeds Rs. 50 lakhs, and if it is less, such notices, even if issued under the old regime's time limit, must be dropped.
Key Issues
Whether the reassessment proceedings initiated under Section 149(1)(b) of the Income Tax Act, 1961, are valid when the escaped income is below the prescribed threshold of Rs. 50 lakhs as per the new provisions.
Sections Cited
250, 149, 148
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Income Tax Appellate Tribunal, “C” BENCH MUMBAI
Before: SHRI SANDEEP GOSAIN & MS. PADMAVATHY S
Assessee by Shri Vijay Mehta Revenue by Shri Krishna Kumar सुनवाई क" तारीख/Date of Hearing 07.11.2024 घोषणा क" तारीख/Date of Pronouncement 08.11.2024 आदेश / ORDER
PER SANDEEP GOSAIN, JM:
The present appeal has been filed by the assessee challenging the impugned order 02.08.2024, passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (‘Ld. CIT(A)’), for the assessment year 2016-17.
At the very outset, it was submitted by the Ld.AR that as per the new provisions u/s 149 Sub Clause (1) Sub Clause 2 The Imperial Condominium, Mumbai
(b) of the Income Tax Act which is effective from 01.04.2021, the reopening can only be done in the cases where the escaped income is likely to be more than 50 lakhs. Undisputedly in the facts of present case the amount of escaped income as determined by the Ld.AO is Rs. 7,54,000/- which is below the stipulated mandatory limit. Thus, accordingly the entire reassessment is bad in law.
In this regard reliance has also been placed on the decision of Hon’ble Supreme Court in the case of Union of India Vs. Rajeev Bansal, [2024] 167 taxmann.com 70 (SC), wherein it has been held as under:
"50. Another important change under section 149(1)(b) of the new regime is the increase in the monetary threshold from Rupees one lakh to Rupees fifty lakhs. The old regime prescribed a time limit of six years from the end of the relevant assessment year if the income chargeable to tax which escaped assessment was more than Rupees one lakh. In comparison, the new regime increases the time limit to ten years if the escaped assessment amounts to more than Rupees fifty lakhs. This change could be summarized thus:
Regime Time limit Income chargeable to tax which has escaped assessment Old regime Four years but not Rupees one lakh or more than six years more. New regime Three years but not Rupees fifty lakhs or more than ten years more.
3 The Imperial Condominium, Mumbai
Given Section 149(1)(b) of the new regime, reassessment notices could be issued after three years only if the income chargeable to tax which escaped assessment is more than Rupees fifty lakhs. The proviso to Section 149(1)(b) limits the retrospectivity of that provision with respect to the time limits specified under section 149(1)(b) of the old regime.
In Ashish Agarwal (supra), this Court held that the benefit of the new regime must be provided for the reassessment conducted for the past periods. The increase of the monetary threshold from Rupees one lakh to Rupees fifty lakh is beneficial for the assesses. Mr. Venkataraman has also conceded on behalf of the Revenue that all notices issued under the new regime by invoking the six year time limit prescribed under section 149(1)(b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than Rupees fifty lakhs.
The position of law which can be derived based on the above discussion may be summarized thus: (i) Section 149(1) of the new regime is not prospective. It also applies to past assessment years; (ii) The time limit of four years is now reduced to three years for all situations. The Revenue can issue notices under section 148 of the new regime only if three years or less have elapsed from the end of the relevant assessment year; (iii) the proviso to Section 149(1)(b) of the new regime stipulates that the Revenue can issue reassessment notices for past assessment years only if the time limit survives according to Section 149(1)(b) of the old regime, that is, six years from the end of the relevant assessment year; and (iv) all notices issued invoking the time limit under section 149(1)(b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than Rupees fifty lakhs."
On the other hand, the Ld. DR relied upon the orders passed by the revenue authorities.
We have heard the counsels of both the parties and also perused the orders passed by the revenue authorities and judgment cited by Ld.AR. Since, in the present case the 4 The Imperial Condominium, Mumbai reopening was initiated vide notice u/s 148 of the Act dated 29.07.2022 and as per Sec. 149 Sub Clause (1) Sub Clause (b) of the Income Tax Act, the reopening can only be initiated where the escaped income is more than 50 lakhs and since undisputedly in the present case the escaped income as determined by the Ld.AO is Rs. 7,54,000/-. Therefore, in our view the entire exercise of reassessment is bad in law and in valid and is accordingly held as such. In the net result the appeal of the assessee is allowed and the reassessment proceedings stands quashed with no orders as to cost.
In the result the appeal filed by the assessee is allowed.