The Delhi High Court has held that income alleged to have escaped assessment in different assessment years cannot be consolidated to meet Rs. 50 lakhs threshold limit under section 149 of the Income Tax Act.
The bench of Justice Vibhu Bakhru and Justice Tejas Karia has observed that the AO has erred in proceeding on the basis that it was open for the AO to issue a notice under Section 148 of the Income Tax Act bearing in mind the cumulative income that has escaped assessment in respect of FYs 2016-17, 2017-18 and 2018-19.
The petitioner/Assessee has challenged the reassessment notices issued under Section 148 of the Income Tax Act, 1961 in respect of Assessment Year [AY] 2018-19.
The petitioner contended that no such notices could have been issued, as according to the Assessing Officer the income of the Assessee which has escaped assessment for the relevant assessment year [AY 2018-19] is less than Rs. 50 lakhs.
In terms of Section 149(1)(a) of the Income Tax Act, as applicable at the material time, no such notices could be issued beyond the period of three years from the end of the relevant assessment year, save and except in cases where the conditions specified in Section 149(1)(b) of the Income Tax Act were satisfied.
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The Assessee contended that in the present case the income alleged to have escaped assessment is less than Rs. 50 lakhs and therefore, the principal condition specified under Section 149(1)(b) of the Income Tax Act is not satisfied.
The court held that there is no singular occasion or event which has resulted in the income of more than one previous year exceeding the sum of Rs. 50 lakhs. The allegations against the Assessee are that it has undercharged its AE for the R&D Services rendered by it, and therefore, the income is required to be adjusted to the extent of Rs. 27 lakhs. Additionally, it is alleged that the Assessee has overpaid for certain managerial and group related services to the extent of Rs. 21 lakhs. None of these two adjustments can be stated to have been a part of a singular event or occasion spanning more than one previous year.
The court held that notices have been issued beyond the period of limitation as prescribed under Section 149(1) of the Income Tax Act. Accordingly, the notices and all proceedings commenced pursuant are set aside.
Case Details
Case Title: M/S L-1 Identity Solutions Operating Company Private Limited Versus ACIT
Case No.: W.P.(C) 4845/2025 and CM APPLs. 22179-80/2025
Date: 17.04.2025
Counsel For Petitioner: Shankey Agrawal with Siddarth Agrawal
Counsel For Respondent: Gaurav Gupta
