Income Escapement | Value Determined At S.148A(d) Stage Relevant To Determine Threshold U/S 149 Of Income Tax Act: Delhi HC
The Delhi High Court has held that when determining whether a reassessment action meets the ₹50 lakh threshold prescribed under Section 149 of the Income Tax Act 1961, the value of income that allegedly escaped assessment as determined by the Assessing Officer at Section 148A(d) stage is relevant.A division bench of Justices Vibhu Bakhru and Tejas Karia clarified that the value alleged by...
The Delhi High Court has held that when determining whether a reassessment action meets the ₹50 lakh threshold prescribed under Section 149 of the Income Tax Act 1961, the value of income that allegedly escaped assessment as determined by the Assessing Officer at Section 148A(d) stage is relevant.
A division bench of Justices Vibhu Bakhru and Tejas Karia clarified that the value alleged by the AO at Section 148A(b) stage, i.e. before considering the Assessee's stand, is not relevant for the purposes of threshold under Section 149.
Section 149 bars issuance of reassessment notice under section 148 if three years have elapsed from the end of the relevant assessment year. Sub-clause (b) thereof adds that reassessment can be initiated where ten years have not lapsed, if the Assessing Officer has evidence that the income chargeable to tax which escaped assessment amounts to or is likely to amount to ₹50 lakh rupees or more.
The High Court held,
“The purpose for sharing the information, which is construed as suggestive of the assessee's income escaping assessment is to enable the assessee to respond to the same and, for the AO to take an informed decision on the basis of the record including the assessee's response. Thus, 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) of the Act.”
It rejected the Revenue's contention that the value of information as set out under Section 148A(b) must be accepted for the purpose of determining the period of limitation under Section 149(1) of the Act.
The Court observed, “This contention is without merit and is contrary to the scheme of the provisions for initiation of proceedings for assessment/reassessment of income that has escaped assessment under Section 147 of the Act. It militates against procedure prescribed under Section 148A of the Act.”
The development comes in a case where the income alleged to have escaped assessment as set out in the information supplied to the assessee under Section 148A(b) was ₹61,95,000, i.e. above the threshold.
However, the High Court noted that this information was not substantiated and there was no material to support the same.
It further noted the Assessee's claim that he had only received a sum of ₹9,43,944/- in his bank account remains unrebutted.
In this backdrop the Court observed,
“In terms of Section 148A(d) of the Act, the AO is required to examine the material on record as well as the response furnished by the Assesee to the notice under Section 143A(b) of the Act and take an informed decision. In the present case, the information available with the AO that the Assessee had earned long term capital gains of ₹61,93,800/- is admittedly incorrect…The said material on record cannot by any stretch lead to the conclusion that the income above ₹50,00,000/- has escaped assessment during the relevant assessment year.”
As such, the Court allowed the petition and the reassessment action was set aside.
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.
Citation: 2025 LiveLaw (Del) 488
Case no.: W.P.(C) 297/2023