Reassessment Quashed: Income Below ₹50 Lakh Threshold Bars Extended Limitation

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Hyderabad ITAT Rules on Jurisdictional Limit under Section 149(1)(b) Post-Lapse of Three Years.

A crucial ruling from the Hyderabad Income Tax Appellate Tribunal (ITAT) has reinforced the importance of the monetary threshold for issuing reopening notices under Section 148 after the standard three-year period has lapsed. The Tribunal held that if the income that has escaped assessment is substantially less than the ₹50 lakh limit, the Assessing Officer (AO) is divested of jurisdiction to invoke the extended time limit 180 taxmann.com 709 (Hyderabad - Trib.)].


The Facts of the ₹19.31 Lakh Dispute

The case pertains to Assessment Year (AY) 2016-17. The assessee had:

  • Traded in shares and claimed Long Term Capital Gains (LTCG) as exempt under Section 10(38).
  • The AO subsequently issued a reopening notice on July 30, 2022, alleging that the assessee was a beneficiary who brought unaccounted income in the guise of LTCG.
  • The reassessment order treated the entire sale proceeds of ₹19.31 lakhs as an unexplained cash credit under Section 68 180 taxmann.com 709 (Hyderabad - Trib.)].

The ITAT's Jurisdictional Bar Analysis

The core issue revolved around the validity of the notice issued on July 30, 2022, since the standard three-year limitation period for AY 2016-17 had expired much earlier, on March 30, 2020 180 taxmann.com 709 (Hyderabad - Trib.)].

The Statutory Hurdle (Section 149(1)(b)):

For a notice under Section 148 to be issued after the lapse of three years but before ten years (the extended limit), Section 149(1)(b) requires that the AO must have evidence showing that the income chargeable to tax which has escaped assessment amounts to or is likely to amount to fifty lakh rupees (₹50 lakhs) or more in that year.

Since the escaped income alleged by the AO (₹19.31 lakhs) was substantially less than the statutory threshold of ₹50 lakhs, the ITAT concluded that the AO was divested of his jurisdiction to issue the notice under Section 148 on July 30, 2022. Consequently, the reassessment proceedings were set aside 180 taxmann.com 709 (Hyderabad - Trib.)].

Professional Insight: Key Takeaway 💡

This judgment provides critical protection against arbitrary use of the extended reassessment window. For any reassessment notice issued after three years from the end of the relevant AY, the primary defence is to challenge the jurisdictional ground under Section 149(1)(b), proving that the alleged escaped income is below the mandatory ₹50 lakh threshold. If the AO fails to meet this threshold, the notice is void ab initio (void from the beginning).

Case Citation: Assistant Commissioner of Income Tax vs. Rajiv Gupta [2025] 180 taxmann.com 709 (Hyderabad - Trib.).

Statutory Reference: Sections 68, 148, and 149(1)(b) of the Income-tax Act, 1961. CBDT Instruction No. 01/2022, dated 11-05-2022 and Circular No. 23 of 2019, dated 06-09-2019

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