ITAT Bangalore Rejects Revenue Appeal on Reassessment Quashing Due to Low Tax Effect Threshold
In a recent judicial pronouncement, the Income Tax Appellate Tribunal (ITAT), Bangalore Bench, delivered its judgment in the case of ITO Vs Sreenath Murugesh Adimoolam. The tribunal dismissed the appeal brought forward by the Income Tax Department against an order that had previously nullified a reassessment proceeding. The dismissal by the ITAT was not based on the substantive merits of the jurisdictional dispute between the Jurisdictional Assessing Officer (JAO) and the Faceless Assessing Officer (FAO), but rather on the strict application of the monetary limits prescribed for departmental litigation.
Background of the Dispute
The factual matrix of the case revolves around the Assessment Year (AY) 2020-21. During this period, the assessee had accrued salary income amounting to exactly ₹28,59,361. This remuneration was disbursed by two corporate entities, namely SAP Labs India Pvt Ltd and Dataformix Technologies Pvt Ltd.
Despite this income being clearly reported and visible in the assessee's Form 26AS, the assessee neglected to file the mandatory return of income for the relevant assessment year. This discrepancy was flagged by the tax authorities utilizing the Risk Management Strategy implemented by the Central Board of Direct Taxes (CBDT).
Initiation of Reassessment
Acting on this intelligence, the tax department initiated proceedings to assess the escaped income. The Jurisdictional Assessing Officer (JAO) undertook the preliminary procedural requirements mandated under Section 148A of the Income Tax Act, 1961. Following this, a formal notice under Section 148 was issued to the assessee on 9 February 2024.
The assessee failed to respond to this notice by filing a return. Consequently, the Assessing Officer proceeded to finalize the assessment ex-parte. An assessment order was issued on 6 February 2025, invoking the provisions of Section 147 read in conjunction with Section 144 and Section 144B of the Act. In this order, the entire salary receipt of ₹28,59,361 was classified as undisclosed income and added to the assessee's total taxable income.