Gujarat High Court Quashes Reassessment After Escaped Income Falls Below ₹50 Lakh

The Gujarat High Court has quashed reassessment proceedings against Touch Comm Tech Private Limited after finding that the alleged escaped income fell below ₹50 lakh, making the reopening time-barred.

A division bench of Justice A.S. Supehia and Justice Vaibhavi D. Nanavati allowed the company's writ petition and set aside the order passed under Section 148A(d) along with the consequential reassessment notice.

“Thus, it appears that in order to bring the assessment within the ambit of limitation, the entire amount of 70,00,000/- has been determined by the Assessing officer,” the court observed.

The reassessment was initiated on the basis of material recovered during a search conducted on Vipul Vidur Bhatt. The tax department alleged that accommodation entries amounting to ₹70 lakh were linked to the company.

The company disputed the figure. It contended that certain entries relied upon by the department were opening balances, while a ₹25 lakh transaction involving Sampada Chemicals Ltd. resulted in a nil position because there were matching debit and credit entries.

The court noted that the ₹25 lakh credit entry relating to Sampada Chemicals Ltd. had been ignored while computing the alleged escaped income.

“On deleting of the amount of Rs.25,00,000/-, the alleged amount of escapement will come to Rs.45,00,000/-, which is below the threshold limit of Rs.50,00,000/- as envisaged under the provision of section 149(1)(b) of the Act,” the bench held.

The court recorded that the assessment had been reopened after more than six years. With the alleged escaped income reduced to ₹45 lakh, the reopening could not be sustained.

“Once the amount of alleged escapement of income comes below the threshold of limitation of Rs.50,00,000/- as provided under section 149 of the Act, the same debars reopening of the assessment under section 147/148 of the Act beyond the period of 3 years,” the bench observed.

The court consequently quashed the order dated July 27, 2022 and allowed the petition.

For Petitioner: Dhinal A. Shah

For Revenue: Aaditya D. Bhatt, Senior Standing Counsel