ITAT Quashes Reopening Beyond 3 Years Where Escaped Income Was Rs. 10.25 Lakh

The Revenue and the assessee filed cross appeals against the order dated 30/09/2025 passed by the CIT(A) for AY 2016-17. The assessment was reopened on the ground that the assessee had claimed a loss of Rs. 10,25,756 from trading in stock options of Goenka Business & Finance Ltd., flagged by DIT (Systems). The original notice was issued under the old regime and later treated as a deemed notice after  Supreme Court’s decision in Union of India v. Ashish Agarwal.

A fresh notice under Section 148 dated 30/07/2022 was issued, alleging escaped income of Rs. 10,25,756, with approval from the Principal Commissioner of Income Tax–3, Ahmedabad. The assessee challenged the reopening, contending that the notice was issued beyond three years and the escaped income was below Rs. 50 lakh.

Issue Raised: Whether the notice under Section 148, issued beyond three years for alleged escaped income of Rs. 10,25,756 with approval from the Principal Commissioner, was valid under Section 151 of the Act.

ITAT Held: The Income Tax Appellate Tribunal held that under the new reassessment regime introduced by the Finance Act, 2021, prior approval under Section 151 is a mandatory jurisdictional condition. Where escaped income is below Rs. 50 lakh, no notice can be issued beyond three years from the end of the relevant assessment year. Approval beyond three years must be obtained from the higher authority specified under Section 151(ii).

The escaped income was only Rs. 10,25,756 and the notice dated 30/07/2022 was issued beyond three years. Also, approval was granted by the Principal Commissioner, not the authority prescribed under Section 151(ii).  The Tribunal quashed the notice and reassessment proceedings. Therefore, the Revenue’s appeal was dismissed as infructuous, and the assessee’s cross-objection was allowed.

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