Income Alleged To Have Escaped Assessment In Different Years Can't Be Consolidated To Meet ₹50 Lakh Threshold U/S 149 Of Income Tax Act: Delhi HC

The Delhi High Court has held that an Assessing Officer cannot add income that allegedly escaped assessment in different previous years, to meet the threshold of ₹50 lakh prescribed under Section 149(1)(b) of the Income Tax Act 1961 for initiating reassessment action after lapse of three years.The provision 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.A division bench of Justices Vibhu Bakhru and Tejas Karia in the facts of the case observed,“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 Act bearing in mind the cumulative income that has escaped assessment in respect of FYs 2016-17, 2017-18 and 2018-19. It is impermissible for the AO to add income which is alleged to have escaped assessment for different previous years for determining the threshold figure of ₹50 lakhs as specified under Section 149(1)(b) of the Act.”The Petitioner is a private company engaged in providing certain services to its foreign associated enterprises. It was aggrieved by reassessment action for AY 2018-19, stating that is barred by time and that the income alleged to have escaped assessment is less than ₹50 lakhs and therefore, the principal condition specified under Section 149(1)(b) of the Act is not satisfied.The AO was of the view that the Assessee had undercharged its AE for R&D Services provided by it to the extent of ₹73 lakhs [In the series of year's i.e. Rs.0.18 Cr. in FY 2016-17, Rs.0.27 Cr. in FY 2017-18 and Rs.0.28 Cr. in FY 2018-19]. Thus, it was contended that AO is not precluded from issuing reassessment notice as cumulatively the income alleged to have escaped assessment is in excess of ₹50 lakhs. Disagreeing with the Revenue, the High Court held, “the threshold amount of ₹50 lakhs of the income that has escaped assessment or is likely to escape assessment, is to be reckoned in respect of the specified assessment year.”Court clarified that the ₹50 lakhs threshold may be satisfied by the cumulative amount that has escaped assessment in respect of more than one assessment year if the income chargeable to tax is represented in the form of an “asset” or “expenditure in relation to an event or occasion”.However, in the present case, the Court said, “it is apparent that there is no singular occasion or event which has resulted in the income of more than one previous year exceeding the sum of ₹50 lakhs. As noted above, 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 ₹27 lakhs. Additionally, it is alleged that the Assessee has overpaid for certain managerial and group related services to the extent of ₹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.”As such, the Court allowed the petition and set aside the impugned notices and all proceedings.Appearance: Mr Shankey Agrawal with Mr Siddarth Agrawal, Advocates for Petitioner; Mr Gaurav Gupta, SSC with Mr Shivendra Singh and Mr Yojit Pareek, JSCs for RespondentCase title: M/S L-1 Identity Solutions Operating Company Private Limited v. Assistant Commissioner Of Income Tax, Central Circle – 25Citation: 2025 LiveLaw (Del) 482Case no.: W.P.(C) 4845/2025Click here to read order

Income Alleged To Have Escaped Assessment In Different Years Can't Be Consolidated To Meet ₹50 Lakh Threshold U/S 149 Of Income Tax Act: Delhi HC

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