Tax Reassessment Quashed: ₹50 Lakh Claim Cannot Extend Limitation Period

The Chandigarh Bench of the Income Tax Appellate Tribunal has quashed an Income-Tax Assessment reopening after the tax department failed to substantiate the figure used to invoke a longer reassessment deadline. The case involved ₹50 Lakh as the statutory threshold, but the Tribunal found that the amount cited in the proceedings lacked a clear evidentiary foundation.

The ruling came in Dharamvir Singh, Village Thamber v. ITO, Ward-1, Ambala, ITA No. 66/Chd/2024, decided on April 7, 2025. It concerned Assessment Year 2015-16. The Tribunal held that the Department could not secure extra time simply by writing an amount above the threshold in its order.

The notice arrived after the ordinary three-year period had expired. That made the threshold a jurisdictional condition, not a routine calculation.

Under Section 149 of the Income-tax Act, 1961, Section 148 notices generally follow the time limits set by law. In the regime applicable to this case, reopening after three years required books, documents or other evidence showing escaped income represented in an asset and amounting to or likely to amount to ₹50 lakh or more.

The law has since changed. The Finance (No. 2) Act, 2024 revised reassessment time limits, so authorities must apply the provisions in force on the date of the proposed notice.

The dispute began with bank deposits. The taxpayer had not filed a return under Section 139(1) for Assessment Year 2015-16, while information from the Department’s Non-Filers Monitoring System showed substantial deposits during Financial Year 2014-15.

The figures did not remain consistent.

The Section 148A(b) notice cited ₹28.80 lakh in one bank account and a ₹22 lakh time deposit. The later Section 148A(d) order referred to cash deposits of about ₹50.90 lakh. The assessment order used other bank-account and deposit figures, while the eventual Section 69A addition came to ₹41,45,150.

The Department relied on ₹50.90 lakh to invoke the extended time limit. It could not, however, show how that amount had been calculated from identifiable material.

The Tribunal therefore treated the defect as jurisdictional. It did not proceed to decide whether the addition itself was correct.

The reassessment failed because the Department did not establish the factual basis for using the longer statutory period.

The final addition fell below the threshold, but that fact alone did not decide the appeal. The Tribunal focused on the mismatch between the amount cited for reopening and the records supporting it.

The ruling rejects an unsupported threshold, not every lower addition

A reassessment does not automatically fail whenever the final addition falls below ₹50 lakh. The central question is what evidence the Assessing Officer possessed when the reassessment notice was issued.

That evidence must show that escaped income met the statutory requirement under Section 149. The Department must identify the transactions, explain the computation and connect the claimed amount to reliable records.

A figure cannot be pushed over the threshold through conjecture. Duplicate counting, unsupported assumptions or unverified bank credits cannot supply jurisdiction merely because the resulting total is large enough.

The defect in Dharamvir Singh was therefore broader than the difference between ₹50.90 lakh and ₹41.45 lakh. The Department could not reconcile the figure in the Section 148A(d) order with the earlier notice, the assessment order or the underlying material.

An earlier Rajasthan ruling supplied the Tribunal’s supporting framework

The Chandigarh Tribunal relied on the Rajasthan High Court’s decision in Abdul Majeed v. Income Tax Officer, D.B. Civil Writ Petition No. 7853/2022, decided on June 29, 2022.

That court rejected an attempt to support reopening beyond three years by assuming that a taxpayer might hold additional undisclosed bank accounts. The information already available to the Assessing Officer had to support the required escaped-income amount.

The Rajasthan High Court’s ruling binds authorities within its territorial jurisdiction, subject to a contrary Supreme Court decision or a later statutory amendment. The Chandigarh ITAT ruling directly binds the parties to that appeal and carries persuasive value elsewhere.

The distinction affects how other reassessment disputes may be argued. A taxpayer cannot rely only on the final addition being below the threshold, and the Department cannot rely only on a threshold figure without tracing it to evidence.

Section 148A requires a reasoned record before reopening

Section 148A operates as a safeguard before a notice under Section 148 is issued. The Assessing Officer is generally expected to:

1. Provide the taxpayer with information and material indicating possible income escapement.
2. Give the taxpayer an opportunity to respond.
3. Consider the response alongside the material on record.
4. Pass a reasoned Section 148A(d) order deciding whether reopening is appropriate.

An order proposing reopening beyond the ordinary period must also explain how Section 149 is satisfied. Merely reproducing information generated through a risk-management system may not be enough when the transaction figures are disputed or inconsistent.

The record should also show that the required approval came from the competent authority. A bare reference to an amount does not replace those steps.

Records should reconcile the amount used to extend the deadline

Before using the longer period, an assessment record should establish several connected facts:

• The relevant assessment year and the last permissible date for issuing notice.
• The specific transaction or transaction category said to represent escaped income.
• The evidence supporting each amount in the calculation.
• Whether any transaction has been counted more than once.
• Whether deposits include transfers between the taxpayer’s own accounts.
• Whether the amount represents income rather than gross receipts or bank credits.
• Whether the Section 149 threshold is genuinely met.
• Whether the prescribed approval has been obtained.

The Section 148A(d) order should reconcile any difference between the amount in the show-cause notice and the amount ultimately treated as escaped income. In Dharamvir Singh, the conflicting figures prevented that reconciliation.

Taxpayers can test jurisdiction before litigating the underlying deposits

A taxpayer served with a reassessment notice for an older year can compare the entire sequence of documents before addressing only the merits of the deposits. The relevant set includes the Section 148A(b) notice, the information supplied with it, the taxpayer’s response, the Section 148A(d) order, the Section 148 notice and the final assessment order.

Differences in account numbers, deposit totals, transaction descriptions or the computation of escaped income may point to inadequate verification. They may also support an argument that the authority did not apply its mind to the record.

The taxpayer should preserve bank statements, cash-flow statements, sale documents, loan confirmations and records showing transfers between personal accounts. Winning a jurisdictional objection does not make unexplained income immune from examination under a valid and timely proceeding.

The limitation objection can also arise during an appeal. In Dharamvir Singh, the Tribunal admitted it as an additional legal ground.

The Tribunal applied the Supreme Court principle in National Thermal Power Co. Ltd. v. CIT, 229 ITR 383. That principle allows a pure question of law based on facts already present in the record to be raised at the appellate stage, particularly where the issue concerns jurisdiction and does not require new factual investigation.

The Department remains able to examine substantial or unexplained bank deposits when it acts within the applicable statutory period. The governing time limit must be determined under the law in force on the relevant notice date, including the changes made by the Finance (No. 2) Act, 2024.

This article provides general information and is not legal advice. Consult a qualified immigration attorney about your specific case.