ITAT Quashes Reassessment Proceedings: Invalid Sanction and Monetary Threshold Breach Under Section 148
The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has delivered a significant ruling regarding the strict adherence to procedural norms under the new reassessment regime. In the case of Late Chanchal Hiralal Shah Vs ITO, the Tribunal invalidated the entire reassessment proceedings initiated against the assessee. The primary grounds for quashing the order were the issuance of a notice beyond the statutory limitation period where the escaped income was below Rs. 50 lakh, and the failure to obtain sanction from the correct specified authority under Section 151 of the Income Tax Act 1961.
Factual Matrix of the Case
The dispute pertains to the Assessment Year 2017-18. The assessee, an individual, had filed a return of income declaring a total income of Rs. 10,56,190. Subsequent to the filing, the Revenue authorities accessed information via the Insight Portal indicating a discrepancy in a property transaction.
The data revealed that the assessee had purchased an immovable property for a consideration of Rs. 21,27,480. However, the Stamp Valuation Authority had determined the value of the said property at Rs. 57,83,400. Consequently, the Assessing Officer (AO) observed a difference of Rs. 36,55,920 between the stamp duty value and the purchase consideration. The Revenue alleged that this differential amount constituted income from other sources under the provisions of Section 56(2)(vii)(b) of the Income Tax Act 1961 and had escaped assessment.
Based on this information, the AO initially issued a notice under Section 148 on June 30, 2021. Following the landmark judgment of the Supreme Court in Union of India vs Ashish Agarwal, this notice was deemed to be a show-cause notice under Section 148A(b). After rejecting the assessee's objections, the AO passed an order under Section 148A(d) and issued a fresh notice under Section 148 on July 30, 2022.