Notice issued under section 148 of the Act beyond three years considered as invalid without escaped income represented in the form of an ‘asset’ as required under section 149(1)(b) of the Act for year under consideration– Delhi bench of the Tribunal

In brief

The Delhi bench of the Income-tax Appellate Tribunal (Tribunal), in a recent ruling¹, quashed the reassessment proceedings initiated against the taxpayer, holding that the notice issued under section 148 of the Income-tax Act, 1961 (the Act) on 23 April 2021 was time-barred.
The Tribunal observed that, as per the amended section 149(1)(b) of the Act effective from 1 April 2021, reassessment beyond three years from the end of the relevant assessment year is permissible only if the escaped income is represented in the form of an ‘asset’ and it exceeds INR5m. In this case, the disallowance pertained solely to purchases treated as accommodation entries, which did not result in the escaped income being represented in the form of an asset. Consequently, the Tribunal ruled that the conditions to reopen the assessment beyond three years were not satisfied, and the reassessment order was set aside.