The Delhi Bench of the Income Tax Appellate Tribunal in the case of Rajiv Garg vs Commissioner of Income Tax Appeals ITA No 7804 Del 2025 has delivered an important ruling on reassessment proceedings initiated under Section 148 of the Income Tax Act after the amendments introduced by the Finance Act, 2021.
The Tribunal held that reassessment proceedings initiated for Assessment Year 2014-15 were invalid because the alleged escaped income was below Rs. 50 lakh. The ITAT clarified that under the amended provisions of Section 149(1), notices under Section 148 cannot be issued for old assessment years beyond three years unless the escaped income amounts to or is likely to amount to Rs. 50 lakh or more.
This judgment is highly relevant for taxpayers who received reassessment notices issued after 1 April 2021 for old assessment years where the alleged escaped income is less than Rs. 50 lakh. The ruling once again highlights the strict applicability of the amended reassessment provisions introduced by the Finance Act, 2021 and the limitations imposed on the department while reopening completed assessments.
Background of the Case
The assessee, Rajiv Garg, had filed his return of income for Assessment Year 2014-15 declaring income of Rs. 9,76,450. Subsequently, reassessment proceedings were initiated by the Income Tax Department and notice under Section 148 of the Income Tax Act was issued on 07.04.2021.
The reassessment proceedings ultimately resulted in an addition of Rs. 2,49,729. The Assessing Officer made the addition by estimating gross profit at 11.79% on the alleged difference in purchases reflected in the Profit and Loss Account and ledger accounts.
According to the department, there was a mismatch in purchases amounting to Rs. 21,18,143. Based on this alleged discrepancy, reassessment proceedings were completed under Section 147 read with Section 144B of the Income Tax Act.
The assessee challenged both the validity of reassessment proceedings and the consequential assessment order before the ITAT Delhi Bench.
Major Legal Issue Before ITAT
The primary issue before the Tribunal was whether reassessment proceedings initiated after 1 April 2021 for Assessment Year 2014-15 could survive when the escaped income was less than Rs. 50 lakh.
This issue became important because the Finance Act, 2021 completely overhauled the reassessment provisions under Sections 147 to 151 of the Income Tax Act.
Under the amended law, reopening of assessments beyond three years is permitted only in cases where the income escaping assessment amounts to or is likely to amount to Rs. 50 lakh or more.
Since the alleged addition in the present case was only Rs. 2,49,729, the assessee argued that the reassessment notice itself was invalid and without jurisdiction.
Changes Introduced by Finance Act 2021
The Finance Act, 2021 brought significant changes to reassessment provisions.
Before the amendment, reassessment notices could generally be issued up to six years from the end of the relevant assessment year. However, after the amendment effective from 01.04.2021, the reassessment framework was substantially modified.
The amended Section 149 provides that:
- Notices under Section 148 can generally be issued within three years from the end of the relevant assessment year.
- Beyond three years and up to ten years, reassessment is permitted only if the escaped income represented in the form of an asset exceeds Rs. 50 lakh.
This amendment was intended to reduce unnecessary litigation and provide certainty to taxpayers.
Supreme Court Judgment in Ashish Aggarwal Case
The present case also involved discussion relating to the landmark Supreme Court judgment in Union of India vs Ashish Aggarwal.
After the Finance Act, 2021 amendments came into force, many reassessment notices were still issued under the old law between 01.04.2021 and 30.06.2021. These notices were challenged before various High Courts across India.
The Supreme Court in Ashish Aggarwal granted one-time relief to the department by treating such notices as show-cause notices under the new reassessment regime.
Following this judgment, the Central Board of Direct Taxes issued Instruction No. 1/2022 dated 11.05.2022 to guide implementation of the Supreme Court ruling.
The CBDT instructions specifically clarified that for Assessment Years 2013-14, 2014-15 and 2015-16, reassessment notices could survive only if the escaped income exceeded Rs. 50 lakh.
Arguments Raised by the Assessee
The assessee strongly argued before the Tribunal that the reassessment proceedings were invalid because the alleged escaped income was far below Rs. 50 lakh.
It was submitted that:
- The notice under Section 148 was issued after 01.04.2021.
- The amended reassessment provisions therefore became applicable.
- Under Section 149(1), reopening beyond three years was permissible only where escaped income exceeded Rs. 50 lakh.
- In the assessee’s case, the addition was only Rs. 2,49,729.
- The addition itself was based merely on estimation and assumptions.
The assessee further relied upon CBDT Instruction No. 1/2022 and the Supreme Court judgment in Ashish Aggarwal to contend that the reassessment proceedings lacked jurisdiction.
Department’s Stand Before the Tribunal
During the course of hearing, the departmental representative fairly admitted that the addition made in reassessment proceedings was less than Rs. 50 lakh.
This admission became significant because the monetary threshold under amended Section 149 was not satisfied.
Findings of the ITAT Delhi Bench
After considering the submissions of both parties and examining the legal provisions, the Tribunal ruled in favour of the assessee.
The ITAT observed that under amended Section 149(1), reassessment notices beyond three years can be issued only where the income escaping assessment amounts to or is likely to amount to Rs. 50 lakh or more.
In the present case, the addition made by the department was only Rs. 2,49,729, which was substantially below the statutory threshold prescribed under the law.
The Tribunal therefore held that the reassessment proceedings initiated against the assessee were without jurisdiction and liable to be quashed.
Accordingly, the reassessment proceedings as well as the assessment order were set aside.
Importance of This Judgment
This ruling is extremely important for taxpayers who received reassessment notices after 1 April 2021 for old assessment years.
Many reassessment notices issued during the transition period after the Finance Act, 2021 amendments have been challenged across the country. The present judgment reinforces the legal position that reopening beyond three years is not permissible unless the escaped income exceeds Rs. 50 lakh.
The decision also demonstrates that the monetary threshold prescribed under amended Section 149 is mandatory and cannot be ignored by the department.
Growing Judicial Trend Against Invalid Reopening
In recent years, courts and tribunals have repeatedly emphasized that reassessment provisions must be strictly interpreted because reopening of completed assessments has serious consequences for taxpayers.
The amended reassessment framework introduced by the Finance Act, 2021 was intended to create safeguards against arbitrary reopening of assessments.
The present ITAT Delhi ruling further strengthens the judicial trend of protecting taxpayers against invalid reassessment proceedings initiated contrary to statutory limitations.
Final Words
The Delhi ITAT ruling in Rajiv Garg vs CIT(A) is an important decision concerning reassessment proceedings under the amended provisions of the Income Tax Act.
The Tribunal has clearly held that reassessment notices issued after 01.04.2021 for old assessment years cannot survive where the escaped income is less than Rs. 50 lakh. The judgment reinforces the applicability of amended Section 149 and the safeguards introduced by the Finance Act, 2021.
This ruling will provide significant support to taxpayers challenging reassessment notices issued beyond the permissible time limits without satisfying the statutory monetary threshold.
Taxpayers facing reassessment proceedings should carefully review whether the conditions prescribed under amended Section 149 have been properly fulfilled before accepting reassessment actions initiated by the department.
