After finding that the income tax (I-T) assessing officer (AO) had relied merely on information available on the ITBA portal without verifying the registered sale deed of a jointly purchased property, the Pune bench of income tax appellate tribunal (ITAT) quashed a reassessment proceeding against a taxpayer.
In an order passed last month, the bench comprising Dr Dipak P Ripote (accountant member) and Vinay Bhamore (judicial member) held that the reassessment notice issued after three years was without jurisdiction because the AO had failed to establish, on the basis of the required documents or evidence, that the income of ₹50 lakh or more had escaped assessment.
"...(the) assessee (Annamma Samkutty) is co-owner along with her husband for the purchase of property at ₹62.02 lakh. During the proceedings under Section 148A(b) of the I-T Act, the assessee had submitted a copy of the sale deed and submitted that the said property had been purchased along with her husband, and her husband had funded it. In these facts, the assessee’s share was less than ₹50 lakh. Therefore, notice under Section 148 could not have been issued for assessment year (AY)16-17 after a lapse of three years as the alleged escapement of income is less than ₹50 lakh," the ITAT bench said.
The dispute arose from information available with the I-T department showing a property purchase involving consideration of ₹6,202,401. The information, sourced from the TDS statement for payment of consideration for the purchase of immovable property under Section 194IA, was available on the ITBA portal.
Ms Samkutty, the assessee, had been flagged as a non-filer and the AO issued a notice under Section 148A(b) on 30 January 2023. She submitted her reply on 13 February 2023. The AO subsequently passed an order under Section 148A(d) on 14 March 2023 and issued a notice under Section 148 on the same day.
The taxpayer explained that she was only a co-owner of the property and that the purchase had been made jointly with her husband, who was a non-resident Indian (NRI) at the time. She told the tax authorities that the payments for the property had been funded from her husband's earnings and savings abroad. She also submitted bank statements, passport and visa details in support of her explanation.
The assessment proceedings also involved several documents, including the husband's NRE bank statement, Ms Samkutty's bank statement, the stamp duty and registration fee receipt, a fund-flow statement and a copy of the sale deed.
Despite the explanation, the AO made an addition of ₹10 lakh. Ms Samkutty challenged the assessment before the commissioner of income tax (appeals) (CIT-A), national faceless appeal centre (NFAC), which confirmed the addition. She then approached the ITAT.
The tribunal found that the AO had acknowledged that the property was purchased jointly by Ms Samkutty and her husband. It noted that the reassessment proceedings had been initiated more than three years after the relevant assessment year.
According to the tribunal, the AO had not bothered to verify the registered purchase documents before issuing the notices under Sections 148A(b) and 148.
Had the AO obtained and examined the registered purchase deed before issuing the notice, he would have understood that the property was purchased by two persons and that Ms Samkutty's share was below ₹50 lakh.
The tribunal's finding is significant because the case concerned a reassessment initiated beyond the normal three-year period.
The tribunal examined Section 149(1)(b) of the I-T Act, which restricts the issuance of a notice under Section 148 after three years unless the AO possesses books of account or other documents or evidence revealing that income chargeable to tax, represented in the form of an asset, expenditure or an entry in the books, has escaped assessment and amounts to, or is likely to amount to, ₹50 lakh or more.
ITAT said that after three years, both requirements become important: there must be evidence revealing escapement of income of ₹50 lakh or more and the AO must have the specified books, documents or evidence to support such a conclusion.
In this case, however, the AO had issued the notice merely on the basis of the information displayed on the tax portal.
The tribunal held that the chart appearing on the portal, without the registered sale deed, could not be treated as documents or evidence establishing escapement of income for the purposes of Section 149(1)(b).
Since the property had been purchased jointly by the assessee and her husband for ₹6,202,401, the tribunal held that Ms Samkutty's share was below ₹50 lakh. It therefore concluded that a notice under Section 148 could not have been issued for the assessment year 2016-17 after three years based on the alleged escapement.
The tribunal also relied on a CBDT circular dated 22 August 2022 which specifically required information available on the 'Insight' portal to be independently verified by the assessing officer and supervisory authorities before proceedings were initiated.
ITAT noted that CBDT had recognised that data uploaded by various institutions could contain factual errors and had consequently directed tax officers and supervisory authorities to verify the information before initiating proceedings.
The tribunal found that the AO had failed to undertake the necessary verification before issuing the reassessment notice.
Bombay High Court Precedent Strengthens ITAT Ruling
The Pune tribunal also relied on a 2024 judgment of the Bombay High Court (HC) in Sunita Purushottam Virgincar vs ITO.
In that case, the HC had held that where the relevant sale deed was already available through the sub-registrar's records, failure by the tax department to take it into consideration before assuming jurisdiction could constitute a jurisdictional error.
ITAT noted that the Bombay HC had held it was mandatory for the AO to obtain the registered sale deed before issuing a notice under Section 148 and that failure to do so could result in a jurisdictional defect.
Applying these principles, ITAT concluded that the Section 148 notice issued on 14 March 2023 for AY16-17, more than three years after the relevant assessment year, was bad in law.
The tribunal consequently held that the reassessment order was also invalid and allowed Ms Samkutty's appeal.
(ITA No3147/PUN/2025 (AY16-17) Date: 21 July 2026)
