Hyderabad ITAT on Section 148: Reassessment Void If Actual Escaped Income Below ₹50 Lakh

The Hyderabad Bench of the Income Tax Appellate Tribunal in Sridevi Mogulla Vs ITO has held that reassessment proceedings initiated beyond three years from the end of the relevant assessment year are invalid where the actual income alleged to have escaped assessment is less than ₹50 lakh.

The Tribunal clarified that for the purpose of invoking the extended time limit under Section 149(1)(b), the benchmark is the real escapement of income, not inflated or erroneous figures relied upon by the Assessing Officer (AO). Once it is established that the quantum of escapement is below ₹50 lakh, any notice under Section 148 issued after three years is barred by limitation and therefore suffers from lack of jurisdiction.

This decision is particularly relevant for reassessment proceedings initiated under the substituted scheme of Sections 147–151 (post 01.04.2021), especially where the AO relies on information relating to cash deposits or similar third-party data.

Background of the Appeal

The assessee, Sridevi Mogulla, filed an appeal against the order dated 29.12.2025 passed by the CIT(A) – National Faceless Appeal Centre (NFAC), Delhi for Assessment Year (AY) 2016-17.

The reassessment was triggered on the basis of information relating to cash deposits in the assessee’s bank account. The AO issued a notice under Section 148A(b) alleging cash deposits of ₹52,43,400, on the premise that income to that extent had escaped assessment. Based on this, the AO proceeded to pass an order under Section 148A(d) and subsequently issued a notice under Section 148 dated 29.03.2023.

A central ground raised by the assessee before the Tribunal was that the reassessment notice was issued beyond three years from the end of AY 2016-17, while the actual escaped income was below ₹50 lakh, thus attracting only the shorter limitation period under Section 149(1)(a) and not the extended 10-year period under Section 149(1)(b).

Core Grounds Raised by the Assessee

Among several grounds, the key jurisdictional challenge relevant to limitation was:

  • The reassessment for AY 2016-17 was initiated after three years from the end of the assessment year.
  • The AO initially alleged escapement of income of ₹52,43,400, but:
    • The assessee demonstrated through the bank statement that the figure of ₹52,43,400 was inflated due to double counting.
    • The actual cash deposit in the relevant bank account was ₹48,43,000, which is below the ₹50 lakh threshold prescribed in Section 149(1)(b).
  • During reassessment, the AO himself accepted that the genuine cash deposits were around ₹48,43,000.
  • Therefore, extended limitation under Section 149(1)(b) (up to ten years) was not available, rendering the notice under Section 148 time-barred.

The assessee argued that once this factual position was clearly brought to the notice of the AO in response to the Section 148A(b) notice, the AO could not mechanically rely on an incorrect higher figure merely to attract the 10-year limitation.

Facts Relating to Cash Deposit and Limitation

Information Considered by the AO

  1. The AO issued a show cause notice under Section 148A(b) on 12.03.2023.
  2. In this notice, the AO referred to:
    • One cash deposit of ₹48,43,400, and
    • Another cash deposit of ₹4,00,000,
      aggregating to ₹52,43,400, which he treated as income escaping assessment.

Assessee’s Response Under Section 148A(b)