The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has quashed a reassessment initiated for AY 2015-16, holding that notices issued under Section 148 after 1 April 2021 for the said assessment year are not sustainable in view of the Revenue’s concession recorded by the Supreme Court and the subsequent binding decision of the Bombay High Court. A Bench comprising Vice President R.K. Panda and Judicial Member Vinay Bhamore allowed the appeal filed by Mangala Dilip Shewale and set aside the reassessment proceedings in their entirety.

The case arose after the Income Tax Department received information that the assessee had purchased a flat for Rs.57.05 lakh during FY 2014-15 and had earned interest income of Rs.30,598. Since no return of income had been filed for AY 2015-16, the Assessing Officer initiated reassessment proceedings under the new reassessment regime. After issuing a notice under Section 148A(b) and subsequently a notice under Section 148 on 5 April 2022, the Assessing Officer completed the assessment by treating the investment in the flat as unexplained under Section 69 and added Rs.57.05 lakh to the assessee’s income.

Before the first appellate authority, the assessee explained that the amount invested in the property had been received as a gift from her real brother through banking channels. It was submitted that the brother had sourced the funds from the maturity proceeds of National Highway Authority of India bonds and that the gift was exempt as it was received from a relative. However, the Commissioner (Appeals) upheld the addition on the ground that adequate supporting evidence regarding the donor and source of funds had not been furnished.

Before the Tribunal, the assessee primarily challenged the validity of the reassessment itself. Relying on the Bombay High Court’s decision in Selvakumar Vethamonickam Nadar, it was argued that for AY 2015-16 all notices issued under Section 148 on or after 1 April 2021 were liable to be dropped in light of the concession made by the Revenue before the Supreme Court in Union of India v. Rajeev Bansal.

“The Revenue has categorically made a concession that for A.Y. 2015-16 they would drop all notices issued under Section 148 after 1st April 2021.”

The Department contended that the concession before the Supreme Court related to notices issued under the old reassessment regime and did not apply to notices issued under the new framework introduced from 1 April 2021. It was further argued that the impugned notice had been issued after following the procedure prescribed under Sections 148A(b) and 148A(d).

The Tribunal, however, noted that the Bombay High Court had already applied the Revenue’s concession and quashed reassessment notices issued after 1 April 2021 for AY 2015-16. Since the High Court’s decision was binding on the Tribunal, it held that the notice dated 5 April 2022 issued under Section 148 could not survive.

“The notice under Section 148 dated 23rd April 2022, and the consequential assessment order, notice of demand, penalty notices/orders as well as the recovery notices be quashed and set aside.”

Thus, the Tribunal quashed the reassessment notice, the assessment order dated 14 March 2024, and the appellate order. Having allowed the appeal on the legal grounds challenging jurisdiction, the Tribunal declined to examine the merits of the addition relating to the alleged unexplained investment.

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