Validity of notice under Section 148 and amended Section 149(1)(b): escapement below threshold led to reassessment quashed.

Amended limitation provisions require that a notice issued beyond three years from the end of the relevant assessment year is permissible only where escapement of income exceeds the specified threshold. The notices issued in the present matter were beyond three years and the escapement amounts were substantially below the threshold; consequently the reopening notices were invalid and the assumption of jurisdiction for reassessment was defective, resulting in quashing of the reassessment proceedings and allowance of the taxpayer's appeals.

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Issues: (i) Whether the notice issued under Section 148 of the Income-tax Act, 1961 (beyond three years) is valid in the absence of escapement of income exceeding Rs.50 lakhs, and consequently whether assumption of jurisdiction under Section 147 is valid.

Analysis: The issue concerns the effect of the amended limitation regime for issuance of notices beyond the three-year period. The factual quantification of escaped income for the assessment years was Rs.4,10,200 and Rs.3,17,776 respectively, both below the Rs.50 lakh threshold. Under the amended provision governing notices issued after the three-year period, a notice under Section 148 can be issued only where the income escaping assessment exceeds the prescribed threshold. The validity of the reassessment proceedings therefore turns on whether the statutory threshold for issuance of a Section 148 notice beyond three years is met.

Conclusion: The notice under Section 148 issued beyond the three-year period is invalid because the escapement of income does not exceed Rs.50 lakhs; the assumption of jurisdiction under Section 147 is therefore flawed and the reassessment proceedings are quashed. The result is in favour of the assessee.

Ratio Decidendi: Where a notice under Section 148 is issued after the three-year period, the notice is valid only if the income escaping assessment exceeds the statutory threshold in Section 149(1)(b); failure to meet that threshold renders the reassessment proceedings invalid.

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