Invalidation of Time-Barred Reassessment Under Section 148: ITAT Amritsar Quashes Notice for Escaped Income Below ₹50 Lakh
The landscape of income tax reassessments has been significantly altered by the amendments introduced via the Finance Act 2021, particularly concerning the strict timelines and monetary thresholds governing the reopening of concluded assessments. A recent judicial pronouncement by the Income Tax Appellate Tribunal (ITAT), Amritsar, in the case of Ashok Kumar Chandela Vs ITO, serves as a critical reiteration of these statutory boundaries.
In this comprehensive analysis, we delve into the tribunal's decision to quash a reassessment notice issued under Section 148 of the Income-tax Act, 1961, for Assessment Year (AY) 2019-20. The tribunal concluded that the reassessment proceedings were barred by limitation since the alleged escaped income was well below the ₹50 lakh threshold mandated by Section 149(1)(b), and the notice was issued after the expiry of the standard three-year limitation period.
Factual Matrix of the Dispute
The controversy stems from the income tax return filed by the assessee for the previous year corresponding to AY 2019-20. During this period, the assessee made a financial contribution amounting to ₹4,00,000 to a political entity named Rashtriya Samajwadi Party (Secular). This political party was duly registered with the Election Commission of India under Section 29A of the Representation of the People Act, 1951. Consequently, the assessee claimed a deduction for this contribution under Section 80GGC of the Income-tax Act, 1961.
The genesis of the dispute can be traced to a search and seizure operation conducted under Section 132 on 7 September 2022. This search targeted a group of Registered Unrecognised Political Parties (RUPPs) based in Ahmedabad, which included the Rashtriya Samajwadi Party (Secular). The investigation wing's appraisal report alleged the existence of accommodation entry operations, suggesting that donations made to these entities were returned to the donors in cash, thereby rendering the deductions claimed under Section 80GGC bogus.
Based on information flagged on the Insight Portal for the financial year 2018-19, the Assessing Officer (AO) initiated reassessment proceedings against the assessee. The AO calculated the total alleged escaped income at ₹6,54,465. This aggregate figure comprised two components:
- An alleged perquisite income amounting to ₹2,54,465.
- The allegedly bogus donation deduction amounting to ₹4,00,000.
Subsequently, a notice under Section 148 was issued to the assessee on 12 April 2023. In compliance with this notice, the assessee filed a return of income on 29 April 2023, declaring a net total income of ₹12,52,390, which included the claim for the ₹4,00,000 deduction under Section 80GGC.