Proceedings U/S 148A Of Income Tax Act Unsustainable If Escaped Income Is Below ₹50 Lakhs & Notice Is Issued After 3 Years: Kerala High Court
The Kerala High Court held that proceedings under Section 148A of Income Tax Act not sustainable if escaped income is below Rs. 50 lakhs and notice issued after 3-years. Justice Ziyad Rahman A.A. stated that “when the order of the assessing authority is found to be without jurisdiction and hit by the period of limitation, it is not necessary to relegate the party concerned to...
The Kerala High Court held that proceedings under Section 148A of Income Tax Act not sustainable if escaped income is below Rs. 50 lakhs and notice issued after 3-years.
Justice Ziyad Rahman A.A. stated that “when the order of the assessing authority is found to be without jurisdiction and hit by the period of limitation, it is not necessary to relegate the party concerned to undergo the rigor of the statutory proceedings”.
Section 148A of the Income Tax Act, 1961 empowers taxpayers to provide an explanation to the income tax department regarding any income that escaped assessment.
In this case, the assessee/petitioner was served with notice (Ext.P1) under subsection 6 of section 133 of the Income Tax Act, 1961, requiring certain documents/information, as it was pointed out that the assessee failed to submit returns pertaining to the assessment year 2016-2017.
The assessee submitted that he did not submit the return as the income received by him from the panchayat public market and comfort station taken in auction by the assessee, was below the ceiling limit that mandates the compulsory filing of income tax returns.
It was also pointed out that the amount referred to in notice, pertains to the total transactions that the assessee had, and out of the said amount, the assessee had already remitted Rs.26,47,575/- to the panchayat with whom the petitioner had entered into the contract. Thus, the income generated from the same was below the ceiling contemplated under the Act.
Later, notice (Ext.P4) was issued to the assessee under Section 148 A(b) of the Income Tax Act, 1961, and the said proceeding ultimately culminated in assessment order (Ext.P6) even though the assessee submitted a detailed objection against the notice.
One of the objections raised by the assessee was that the proceedings under Section 148 A are barred under the limitation contemplated under Section 149(1).
The bench agreed with the assessee that as per Section 149, the statutory time limit contemplated for initiating proceedings under Section 148 is three years from the end of the relevant assessment year. However, in a case where the escaped assessment is likely to be Rs.50 lakhs or more, the period can be up to 10 years. Therefore, as the amount alleged to have escaped from assessment is less than Rs. 50 lakhs, under no circumstances can the proceedings now initiated, be said to be legally sustainable.
The relevant assessment year is 2016-17, and therefore, going by the statutory stipulations, the proceedings ought to have been commenced on or before 31.03.2020. It is also evident from assessment order that the amount allegedly escaped from the assessment was less than 50 lakhs, and therefore the higher period as specified in subclause (b) of Section 149 (1) is not applicable, added the bench.
The bench disagreed with the department that this is the matter to be agitated before the assessing officer.
The bench held that any proceeding under section 148A or the consequential proceeding under 148 beyond the statutory period contemplated under the provisions of the Income Tax Act.
In view of the above, the bench allowed the petition.
Case Title: Salim Aboobacker v. The Income Tax Officer
Case Number: WP(C) NO. 12164 OF 2023
Counsel for Petitioner/ Assessee: Babu S. Nair and Smitha Babu
Counsel for Respondent/ Department: Christopher Abraham