The Delhi High Court has clarified a crucial aspect of reassessment proceedings under the Income Tax Act, 1961. The court ruled that the threshold of ₹50 lakh, required under Section 149 for reopening assessments beyond three years, must be determined based on the Assessing Officer’s (AO) findings at the Section 148A(d) stage—not at the earlier Section 148A(b) stage.
A division bench of Justices Vibhu Bakhru and Tejas Karia passed this decision in a case involving Ankit Khandelwal. The petitioner had received a reassessment notice for the Assessment Year 2014–15, claiming income escapement based on an alleged gain of ₹61.95 lakh. However, the court noted that this figure was unsubstantiated.
“The question as to the value of income that may have escaped assessment is required to be determined by the AO at the stage of passing of an order under Section 148A(d) of the Act and not at the stage of sharing the information with the Assessee in terms of Section 148A(b),” the court observed.
The petitioner had already declared an income of ₹9,43,944/- from short-term capital gains and paid taxes on it. This was supported by contract notes, bank statements, and the return of income. The court found that this was the only amount received and there was no evidence of ₹61.95 lakh being earned.
The AO’s assumption that the transaction was bogus due to the absence of margin money was also rejected. The court emphasized that no such allegation was part of the original information shared with the assessee, nor was it supported by any material.
“Even if the transaction is assumed to be bogus, the value of income that has escaped assessment cannot exceed ₹9,43,944/- as that is the only amount received by the Assessee,” the judgment stated.
The Revenue’s argument that the figure mentioned at the 148A(b) stage should determine the limitation period under Section 149 was also dismissed.
“This contention is without merit and is contrary to the scheme of the provisions for initiation of proceedings for assessment/reassessment… It militates against the procedure prescribed under Section 148A of the Act,” the court held.
Since the amount of income that allegedly escaped assessment was below ₹50 lakh, and the notice was issued beyond the three-year limitation period, the reassessment proceedings were declared invalid.
Accordingly, the High Court allowed the petition and quashed the reassessment notice and subsequent proceedings.
Appearance: Mr Rohit Jain and Mr Samarth Chaudhari, Advocates for Petitioner; Mr Gaurav Gupta, senior standing counsel with Mr Shivendra Singh and Mr Yojit Pareek, Advocates for Respondents
Case title: Ankit Khandelwal v. Income Tax Officer & Ors.
Case no.: W.P.(C) 297/2023
