Jharkhand HC Sets 3-Year Limit for Tax Reassessment Notice on Concealed Income Below 50 Lakh

In a recent ruling, the Jharkhand High Court made a significant decision regarding a tax reassessment notice issued under Section 148 of the Income Tax Act, 1961.

Facts:

1. The petitioner, a Private Limited Company, challenged a notice dated 21.07.2022 issued by respondent no. 3 under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2016-17.
2. The petitioner also contested the order dated 21.07.2022 passed by respondent no. 4 under Section 148A(d) of the Income Tax Act, 1961 for the same assessment year.
3. The reassessment order dated 31.05.2023 and the consequential Notice of Demand issued for an amount of Rs. 50,27,860/- were also challenged by the petitioner.

Observations:

1. The petitioner argued that the notices and orders were issued beyond the limitation period prescribed under Section 149 of the Income Tax Act, 1961.
2. They contended that the orders were passed without the approval of the prescribed authority under Section 151 of the Income Tax Act, 1961.
3. The petitioner highlighted that the orders were issued without considering the replies filed by them and without providing detailed information and material/documents.

Conclusion:

1. The court analyzed the period of limitation provided under Section 149 of the Income Tax Act, 1961, which allows a three-year time period for issuing notices under Section 148.
2. It was noted that the alleged income which had escaped assessment amounted to Rs. 39,21,450/-, falling below the threshold of Rs. 50,00,000/-.
3. The court held that the initiation of reassessment proceedings was wholly without jurisdiction as it exceeded the prescribed limitation period.
4. Consequently, the reassessment order and the Notice of Demand were deemed unsustainable and void ab initio.
5. The court emphasized that if the foundation of any proceeding is illegal, all consequential proceedings or orders stemming from it are also invalid.
6. The ruling concluded by allowing the writ petition and closing any pending issues related to the case.

In summary, the Jharkhand High Court’s decision provides clarity on the limitations surrounding tax reassessment notices and upholds the principle of jurisdictional legality in tax proceedings.

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