The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has quashed reassessment proceedings initiated against a taxpayer over a ₹6 lakh political donation, holding that the notice issued under Section 148 of the Income Tax Act, 1961, was barred by limitation and void from inception.
The Bench of Narender Kumar Choudhry (Judicial Member) and Makarand Vasant Mahadeokar (Accountant Member) observed that the alleged escaped income was below the statutory threshold of ₹50 lakh and that the reassessment notice had been issued more than three years after the end of the relevant assessment year.
The taxpayer’s case was reopened substantially on the basis of information arising from a search and seizure operation conducted on September 7, 2022, in the case of the RUPPs Group of Ahmedabad.
According to the Tribunal’s order, the search covered 23 registered unrecognised political parties, more than 25 alleged bogus intermediary entities and three major exit providers, collectively referred to as the “RUPPs Group of Ahmedabad”.
Following the search, the jurisdictional Assessing Officer issued a notice under Section 148 on April 19, 2023. The taxpayer filed her income tax return in response to the notice on May 17, 2023, and subsequently submitted replies and supporting documents during the reassessment proceedings.
The Assessing Officer, through an order dated February 10, 2025, passed under Section 147 read with Section 144B, added ₹6 lakh to the taxpayer’s income. The amount represented a political donation for which a deduction had been claimed under Section 80GGC.
Consequently, the taxpayer’s total income was determined at ₹14,77,540, as against the returned income of ₹8,77,540.
The NFAC affirmed the addition, prompting the taxpayer to approach the ITAT.
The taxpayer raised several legal objections to the reassessment proceedings. It was contended that the notice issued by the jurisdictional Assessing Officer was contrary to Section 151A and that the entire reassessment was consequently without jurisdiction.
Through additional grounds, the taxpayer also challenged the validity of the approval obtained under Section 151, the notice issued under Section 143(2), and the alleged violation of the principles of natural justice.
The taxpayer’s representative submitted that the additional grounds raised pure questions of law arising from the material already available on record. Reliance was placed on the Supreme Court’s decision in National Thermal Power Co. Ltd. v. Commissioner of Income Tax to support their admission.
The department opposed the appeal and maintained that Sections 147 and 148 had been validly invoked by the Assessing Officer.
The Tribunal accepted the taxpayer’s request to raise the additional legal grounds. It noted that the grounds questioning the legality and jurisdiction of the reassessment proceedings were purely legal in nature and arose from the existing record.
Following the Supreme Court’s ruling in National Thermal Power Co. Ltd., the ITAT held that the grounds deserved to be admitted and adjudicated.
The Tribunal noted that the alleged escaped income in the case was only ₹6 lakh. It was, therefore, substantially below the threshold of ₹50 lakh prescribed under Section 149(1)(b).
The notice under Section 148 was issued on April 19, 2023, more than three years after the end of Assessment Year 2019-20.
Under Section 149, once three years have elapsed from the end of the relevant assessment year, a reassessment notice can be issued only where the conditions prescribed for the extended limitation period are fulfilled. One of the material requirements is that the income escaping assessment must amount to or be likely to amount to ₹50 lakh or more.
Since the alleged escaped income was only ₹6 lakh, the Tribunal concluded that the extended limitation period was unavailable to the Income Tax Department.
Accordingly, the notice issued under Section 148 and all consequential proceedings, including the reassessment order, were liable to be quashed as time-barred.
The Tribunal also considered whether the Revenue could exclude the time consumed in proceedings under Section 148A while calculating the limitation period.
It observed that the information forming the basis of the reopening arose from a search conducted under Section 132 on September 7, 2022, which was after April 1, 2021.
In view of the first proviso to Section 148A, the procedure contemplated under that provision was not applicable to the taxpayer’s case.
The ITAT held that when the Section 148A procedure itself was inapplicable, the period between the issuance of a show-cause notice under Section 148A(b) and the passing of an order under Section 148A(d) could not be excluded to extend the deadline for issuing the reassessment notice.
Therefore, the Department could not rely on the Section 148A proceedings to save the notice dated April 19, 2023, from limitation.
The Bench referred to the decision of a coordinate bench in Amit Pahuja v. DCIT, involving an identical issue for Assessment Year 2019-20.
That case also arose from the September 7, 2022 search and concerned a political donation deduction claimed under Section 80GGC. The coordinate bench had quashed the reassessment proceedings on jurisdictional and limitation grounds.
The Tribunal also relied on the Ahmedabad Bench’s decision in Nimish Maheshkumar Bhavsar v. ACIT. In that case, the alleged escaped income was ₹5 lakh and the Section 148 notice had been issued after the limitation period prescribed under Section 149(1)(b). The notice and the resulting proceedings were held to be void from inception.
The Mumbai Bench held that the Section 148 notice issued to the taxpayer was barred by limitation.
Since the jurisdictional notice itself was invalid, the reassessment order dated February 10, 2025, passed under Section 147 read with Section 144B could not survive. The Tribunal consequently quashed the reassessment order and allowed the taxpayer’s appeal.
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