The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has quashed reassessment proceedings initiated against an assessee over the disallowance of a ₹2 lakh deduction claimed under Section 80GGC for a political donation.
The bench of Anikesh Banerjee (Judicial Member) and Om Prakash Kant (Accountant Member) has observed that the reassessment notice was without jurisdiction and barred by limitation, as the alleged escaped income was far below the statutory threshold required for reopening an assessment beyond three years.
The assessee had filed his income tax return for Assessment Year 2019-20 declaring a total income of ₹8.56 lakh. Subsequently, following a search conducted under Section 132 in the case of Rashtriya Samajwadi Party (Secular) [RSP(S)] on September 7, 2022, the Income Tax Department received information through its Risk Management Strategy (RMS) system alleging that donations claimed by certain taxpayers to the political party were not genuine.
Based on this information, the Assessing Officer issued a notice under Section 148A(b) and later passed an order under Section 148A(d) before issuing a reassessment notice under Section 148. The department alleged that the assessee had wrongly claimed a deduction of ₹2 lakh under Section 80GGC, treating the donation as a bogus transaction intended to evade taxes. Consequently, the deduction was disallowed during reassessment proceedings.
Buy Now: Income Tax (Direct Tax) Judgments Monthly E-Magazine – May 2026
Before the Tribunal, the assessee raised additional legal grounds challenging the very validity of the reassessment proceedings. It was argued that the reassessment proceedings were initiated beyond the permissible limitation period; approval had allegedly been obtained from an incorrect authority; proceedings under Section 148A could not legally be invoked because the information originated from a search conducted in the case of a third party.
The assessee relied upon the Supreme Court’s decision in National Thermal Power Company Ltd. v. CIT, contending that a pure question of law can be raised for the first time before the appellate authority. The Tribunal admitted the additional grounds since they involved jurisdictional issues arising from undisputed facts already available on record.
The Tribunal observed that the Revenue itself had admitted that the information regarding the alleged bogus donation had originated from a search conducted under Section 132 in the case of another person.
The Bench noted that the proviso to Section 148A specifically excludes such cases from the procedure prescribed under Section 148A where the Assessing Officer relies upon information discovered during a search conducted in the case of another person.
According to the Tribunal, once the case falls within the statutory exceptions contained in the proviso to Section 148A, the Assessing Officer could not invoke the Section 148A procedure. Therefore, issuing a notice under Section 148A(b), passing an order under Section 148A(d), and thereafter issuing notice under Section 148 were contrary to the statutory framework.
The Tribunal held that an action not contemplated by the Act cannot confer jurisdiction upon the Assessing Officer nor cure an inherent jurisdictional defect. Consequently, the entire reassessment proceedings suffered from a fundamental legal infirmity.
The Tribunal further examined the limitation prescribed under Section 149(1)(b) of the Income Tax Act.
It noted that the alleged escaped income in the present case amounted to only ₹2 lakh, whereas reassessment beyond three years is permissible only when the escaped income represented in the form of an asset amounts to ₹50 lakh or more.
Since Assessment Year 2019-20 had already crossed the normal three-year limitation period and the alleged escapement was significantly below the statutory threshold, the extended limitation under Section 149(1)(b) could not be invoked.
Accordingly, the reassessment notice issued under Section 148 was held to be barred by limitation and without authority of law.
Allowing the appeal, the ITAT held that the assumption of jurisdiction under Sections 148A and 148 was contrary to law; the reassessment proceedings were barred by limitation; and the reassessment notice deserved to be quashed.
Since the reassessment itself was held invalid on legal grounds, the Tribunal did not consider it necessary to examine the merits of the addition relating to the alleged bogus political donation and left those issues open.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
