Case: – Ganesh Dass Khanna v/s ITO; W.P.(C) 11527/2022
The Delhi High Court in a recent case held that an extended period of 10 years would apply in serious tax evasion cases where there was evidence of concealment of income above Rs. 50 lakhs. The Division bench of Court has held that no notice was intended to be issued if 3 years had elapsed from the end of the relevant AY. Notice, beyond the prescribed 3 years from the end of the relevant AY, could be issued only in a few specific cases. One such instance is where the AO was in possession of evidence that escaped income amounted to Rs. 50 lakhs or more.
Here the issue is that whether the notices issued to the petitioners under Section 148 of the Income Tax Act, 1961, are sustainable in law having regard to Clauses (a) and (b) of Section 149(1) of the Income Tax Act, 1961. The assesses contended that where the alleged income escaped is below the stipulated threshold of Rs. 50,000/-, the period of limitation prescribed in Section 149(1)(a) would be applicable. The period prescribed under the clause is three years from the end of the relevant AY. However, Department contended that notice issued was within the time limit prescribed under provisions and joint reading with the judgment of Hon’ble Supreme Court in case of Union of India & Ors. v/s Ashish Agarwal and also the various instructions issued by the Central Board of Direct Taxes (CBDT) in exercise of powers under Section 119 of the Act and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).
Thus, the Hon’ble Court observed that the time limit for reopening under the new regime was reduced from 6 years to 3 years, and only in respect of “serious tax evasion cases”, that too, where evidence of concealment of income of Rs 50 lakhs or more in a given period was found, the period for reopening the assessment was extended to 10 years. In order to ensure that utmost care was taken before invoking the extended period of limitation, the proposal was that approval should be obtained from the Principal Chief Commissioner of Income Tax, at the highest hierarchical level of the department. Likewise, the Memorandum emphasized that the new regime was forged with the hope that it would result in less litigation and would provide ease of doing business to tax payers, as there was a reduction in the time limit by which notice for assessment, reassessment and re-computation could be issued. Therefore, as per the Memorandum, in “normal cases”, no notice was intended to be issued if three 3 years had elapsed from the end of the relevant AY. Notice, beyond the prescribed three 3 years from the end of the relevant AY, could be issued only in a few specific cases; one such example which is given in the Bill is where the AO was in possession of evidence that escaped income amounted to Rs.50 lakhs or more.
Accordingly, the Hon’ble Court was of the opinion that the impugned actions, which include orders passed under Section 148A(d) and the consequent notices issued under Section 148 of the amended 1961 Act, concerning AY 2016-17 and AY 2017-18 cannot be sustained.

Author of this article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate

Connect with Mr. Bhatt on Linkedin: https://www.linkedin.com/in/adit-ravishbhatt/

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