The Kerala High Court recently held that any reassessment proceedings initiated under Section 148A of the Income Tax Act are unsustainable if the escaped income is less than ₹50 lakhs and the notice is issued after a period of three years from the end of the relevant assessment year.
This significant ruling was delivered by Justice Ziyad Rahman A.A., who emphasized that once a statutory time limit has expired, initiating proceedings violates jurisdictional boundaries of the assessing authority.
“When the order of the assessing authority is found to be without jurisdiction and hit by the period of limitation, it is not necessary to relegate the party concerned to undergo the rigor of the statutory proceedings,”
— Justice Ziyad Rahman A.A.
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In the case titled Salim Aboobacker v. The Income Tax Officer [WP(C) No. 12164 of 2023], the petitioner challenged the issuance of reassessment notice under Section 148A(b) of the Income Tax Act for the assessment year 2016–17. Initially, a notice under Section 133(6) was issued (Ext. P1), stating that the petitioner had not filed the income tax return.
The petitioner, through a reply (Ext. P2), clarified that the income earned from managing a public market and comfort station taken on auction from the panchayat was below the threshold for compulsory income tax filing. He also highlighted that a substantial portion — ₹26,47,575 — was already paid to the panchayat under the contract, thus the net income was below the taxable limit.
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Despite this, a notice under Section 148A(b) (Ext. P4) was served, which eventually resulted in an assessment order (Ext. P6). The petitioner objected, asserting that the proceedings violated the time limitation under Section 149(1).
The High Court agreed with the petitioner. As per Section 149(1), reassessment proceedings must be initiated within three years from the end of the relevant assessment year — unless the escaped income exceeds ₹50 lakhs, in which case the time frame can extend to ten years. Since the income allegedly escaped was under ₹50 lakhs, the longer limitation period did not apply.
“It is evident from the assessment order that the amount allegedly escaped from the assessment was less than ₹50 lakhs, and therefore the higher period as specified in subclause (b) of Section 149(1) is not applicable,”
— Kerala High Court Bench
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The Court rejected the Income Tax Department's reliance on the Supreme Court's judgment in Anshul Jain v. Principal Commissioner of Income Tax [449 ITR 251], clarifying that the factual scenario in that case was different and the matter of limitation goes to the very root of jurisdiction.
The Court held that reassessment initiated beyond the statutory period is without authority and quashed the assessment order (Ext. P6).
“There is a statutory bar by virtue of the period of limitation... to determine the same, no detailed enquiry is necessary,”
— Kerala High Court
Case Title: Salim Aboobacker v. The Income Tax Officer
Case Number: WP(C) NO. 12164 OF 2023
Counsel for Petitioner: Babu S. Nair and Smitha Babu
Counsel for Respondent: Christopher Abraham (Income Tax Department)
