2025 (5) TMI 1481 - AT - Income Tax

Reopening of the assessment proceedings u/s 147 r/w section 148 considering the limitation period and the threshold of escaped income amounting to Rs. 50, 00, 000/- as prescribed u/s 149(1)(b) - HELD THAT - The escaped income has not exceeded the limit of Rs. 50, 00, 000/- as prescribed u/s 149(1) of the Act and therefore the reopening of the proceedings u/s 147 of the Act and/or notice dated 07.04.2022 u/s 148 would be nullity or invalid as the provisions of section 149(1) mandates that no notice u/s 148 of the Act shall be issued if three years have elapsed from the end of the relevant assessment year unless the case falls under clause b according to which if the escaped assessment amount to or is likely to amount to Rs. 50, 00, 000/- or more whereas it is not the case here as observed above. Thus the notice issued u/s 148 of the Act and in pursuance thereof the assessment order passed would be nullity; thus the same is quashed being void-ab-initio. Appeal filed by the Assessee stands allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the delay of 71 days in filing the first appeal before the Commissioner of Income Tax (Appeals) is liable to be condoned in light of the Assessee's health-related explanation and lack of intentional or mala fide delay.

- Whether the reopening of the assessment proceedings under section 147 read with section 148 of the Income Tax Act, 1961, is valid, considering the limitation period and the threshold of escaped income amounting to Rs. 50,00,000/- as prescribed under section 149(1)(b) of the Act.

- Whether the Assessing Officer (AO) rightly issued the notice under section 148 of the Act after the expiry of three years from the end of the relevant assessment year, based on the information about alleged undisclosed deposits and transactions.

- Whether the additions made by the AO on account of unexplained money under section 69A and income from other sources are sustainable in view of the acceptance of certain claims by the AO during assessment proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Condonation of Delay in Filing Appeal

Relevant Legal Framework and Precedents: The Income Tax Act and related procedural rules require appeals to be filed within prescribed time limits. Courts have consistently held that delay may be condoned if the appellant demonstrates sufficient cause, absence of mala fide intention, and bona fide reasons such as health issues.

Court's Interpretation and Reasoning: The Assessee claimed the delay was due to health issues (blood pressure and related ailments), compounded by the fact that the mobile number registered on the e-filing portal belonged to her husband who was unaware of the notices. The Court noted that although the Commissioner was not satisfied with the explanation due to lack of medical evidence, the reasons appeared bonafide and unintentional. The Court emphasized the peculiar facts and circumstances and was inclined to condone the delay.

Application of Law to Facts: The Court applied the principle that delay caused by genuine health issues and lack of deliberate neglect can be condoned. The absence of mala fide intention and the explanation that the husband inadvertently missed the communication were accepted as sufficient cause.

Conclusion: The delay of 71 days in filing the appeal was condoned.

Validity of Reopening Proceedings under Sections 147/148

Relevant Legal Framework and Precedents: Section 147 of the Income Tax Act permits reopening of assessment where income has escaped assessment. Section 148 provides for issuance of notice for reopening. Section 149(1)(b) imposes a three-year limitation period for issuance of such notice unless the escaped income is Rs. 50,00,000/- or more.

Court's Interpretation and Reasoning: The AO initiated proceedings based on information from the insight portal indicating non-filing of return despite deposits exceeding Rs. 20,00,000/-. The AO issued notice under section 148 after three years from the end of the relevant assessment year. The Assessee contended that the total escaped income was below Rs. 50,00,000/-, relying on the claim of reinvestment of matured time deposits and interest, which was ultimately accepted by the AO during assessment proceedings.

The Court found that the AO initially did not accept the claim but later accepted the principal and interest amount of Rs. 43,32,425/- as reinvested, thereby reducing the escaped income below the Rs. 50,00,000/- threshold. Since the escaped income did not meet or exceed the statutory threshold, issuance of notice under section 148 beyond three years was impermissible.

Application of Law to Facts: The Court applied the statutory limitation under section 149(1)(b), holding that the reopening notice issued after three years was invalid because the escaped income was less than Rs. 50,00,000/-. The reopening was thus held to be void ab initio.

Treatment of Competing Arguments: The Departmental Representative supported the orders below but did not substantively support the legal provisions or the Assessee's claim. The Court gave greater weight to the statutory provisions and the AO's acceptance of the reinvested amount, which was crucial to determining the escaped income.

Conclusion: The reopening notice and subsequent assessment order were quashed as nullity for being issued beyond the permissible limitation period without meeting the threshold escaped income.

Additions on Account of Unexplained Money and Income from Other Sources

Relevant Legal Framework and Precedents: Sections 69A and provisions relating to income from other sources empower the AO to make additions where money or income is unexplained or unaccounted for.

Court's Interpretation and Reasoning: Although the AO made additions of Rs. 17,85,848/- under section 69A and Rs. 4,17,401/- under income from other sources, the Court refrained from adjudicating these merits because it quashed the reopening notice and assessment order on limitation grounds.

Application of Law to Facts: Since the reopening itself was invalid, the Court held that delving into merits of additions would be futile.

Conclusion: No decision was rendered on the additions due to invalidity of the assessment proceedings.

3. SIGNIFICANT HOLDINGS

"The reasons stated by the Assessee appears to be bonafide, unintentional and reasonable and therefore this Court is inclined to condone the delay of 71 days in filing of the first appeal before the Ld. Commissioner."

"From the determination made by the AO in assessment order, it transpires that the escaped income has not exceeded the limit of Rs. 50,00,000/- as prescribed u/s 149(1) of the Act and therefore the reopening of the proceedings u/s 147 of the Act and/or notice dated 07.04.2022 u/s 148 of the Act, would be nullity or invalid."

"The provisions of section 149(1) of the Act mandates that no notice u/s 148 of the Act shall be issued, if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause b, according to which, if the escaped assessment amount to or is likely to amount to Rs. 50,00,000/- or more, whereas it is not the case here."

"Thus, the notice issued u/s 148 of the Act and in pursuance thereof the assessment order passed, would be nullity; thus the same is quashed being void-ab-initio."

Core Principles Established:

- Delay in filing appeal may be condoned on sufficient cause including health reasons, even without medical evidence, if the explanation is bona fide and unintentional.

- Reopening of assessment beyond three years from the end of the relevant assessment year is impermissible unless the escaped income is Rs. 50,00,000/- or more as per section 149(1)(b) of the Income Tax Act.

- Acceptance of claims by the AO during assessment proceedings is crucial in determining the escaped income for limitation purposes.

- Proceedings initiated in violation of statutory limitation provisions are void ab initio and liable to be quashed without delving into merits.

Final Determinations:

- The delay in filing the appeal was condoned.

- The reopening notice under section 148 and the assessment order passed thereunder were quashed as void ab initio for being barred by limitation.

- The appeal filed by the Assessee was allowed accordingly.