Escaped Income Must Include Real Taxable Income, Not Aggregate Value: ITAT Ahmedabad

The Ahmedabad Income Tax Appellate Tribunal (ITAT) on 16 March, held that the expression “income chargeable to tax which has escaped assessment” under Section 149 of the Income Tax Act refers to the actual taxable income sought to be brought to tax, and not the gross value of underlying transactions.

A Bench comprising Judicial Member T.R. Senthil Kumar quashed the reassessment proceedings for Assessment Year 2017–18, holding that the assumption of jurisdiction under Section 148 was invalid because the alleged escaped income did not meet the statutory threshold of Rs.50 lakhs.

The Tribunal observed:

"Since the alleged escaped income in the present case does not satisfy the statutory threshold of Rs.50 lakhs as prescribed u/s.149(1)(b) of the Act, the very assumption of jurisdiction under section 148 is invalid in law and the consequential reassessment proceeding is liable to be quashed. Since the reassessment is quashed on lack of jurisdiction, the other grounds raised by the assessee are not adjudicated."

Rupinder Singh Duggal, the taxpayer, had not filed a return of income for AY 2017–18. Based on information available on the income tax portal, the Department noted that he had earned salary income, sold immovable property, and entered into equity share transactions. On this basis, proceedings were initiated alleging substantial income escaping assessment.

In response, the Duggal filed a return declaring income of Rs.8.98 lakh and submitted relevant documents, including Form 16 and property records. The Assessing Officer, however, completed reassessment by determining total income at Rs.30.92 lakh, making additions towards salary, capital gains, and disallowance of deductions. The Commissioner (Appeals) upheld the reassessment.

On appeal, the Tribunal examined whether the conditions for reopening under Section 149 were satisfied. It noted that even according to the Assessing Officer's own computation, the total income determined was below Rs.50 lakh.

The Tribunal emphasised that “income chargeable to tax which has escaped assessment” must be understood as the real income liable to tax, and not the aggregate or gross value of transactions reflected in the Department's information.

Since the matter was decided on jurisdictional grounds, the Tribunal did not examine other issues raised by the assessee on merits.

For Appellant: Mehul Thakker, CA

For Respondent: Ketaki Desai, Sr. D.R.