Escaped Income measured net of taxes invalidates reassessment if below statutory threshold; gross profit addback deleted.

Reassessment under section 148 was found invalid because escaped income must be measured as real income chargeable to tax (excluding IGST) and, at the applied gross profit rate, the escaped income fell below the monetary threshold in section 149(1)(b), depriving the Assessing Officer of jurisdiction. Separately, an addition of a gross profit element on purchases was deleted on merits because primary transactional evidence (invoices, e-way bills, bank payments, goods received notes) existed, books were not rejected under section 145(3), and the AO failed to independently disprove the transactions, resulting in impermissible double taxation.

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Issues: (i) Whether reassessment proceedings initiated under section 148 read with section 144B are valid where the alleged escaped income, calculated by excluding IGST and applying GP rate, is below the monetary threshold of Rs. 50,00,000 under section 149(1)(b); (ii) Whether the addition of gross profit element on purchases treated as bogus is sustainable on merits when primary transactional evidence exists and books of account have not been rejected under section 145(3).

Issue (i): Whether the reassessment under section 148 is valid given the alleged escaped income falls below the statutory threshold.

Analysis: The reassessment was based on information alleging bogus purchases of Rs. 4,09,76,267/-. The assessee's audited books show IGST of Rs. 62,50,617/- separately accounted and purchases debited at Rs. 3,47,25,650/-. Applying the adopted GP rate of 13.85% to Rs. 3,47,25,650/- yields escaped income of Rs. 48,09,503/-, which is below Rs. 50,00,000/-. The statutory threshold in section 149(1)(b) refers to income chargeable to tax which has escaped assessment, not the gross value of transactions. Jurisdiction under section 148 depends on the existence of escaped income meeting the statutory criterion; if the real escaped income does not meet the threshold, the assumption of jurisdiction is invalid.

Conclusion: The reassessment proceedings under section 148 are invalid as the alleged escaped income, computed on the real value of purchases (excluding IGST) at the accepted GP rate, is below Rs. 50,00,000/-, and therefore jurisdiction under section 148 is lacking in favour of the assessee.

Issue (ii): Whether the addition of the gross profit element on the purchases should be sustained on merits.

Analysis: The assessee placed primary transactional evidence on record including purchase orders, invoices, e-way bills, bank RTGS/NEFT payments and goods received notes. The books of account were not rejected under section 145(3). The Assessing Officer relied primarily on an investigation report without conducting independent verification to disprove the transactional evidence. The gross profit component on the purchases was already reflected in the returned income; adding the same amount separately without rejecting books and without independent disproof results in double taxation.

Conclusion: The addition of the gross profit element is unsustainable on merits and is deleted in favour of the assessee.

Final Conclusion: The appeal is allowed on both jurisdictional and merit grounds, resulting in quashing of the reassessment and deletion of the addition; the reassessment proceedings do not survive and the impugned addition is not sustained.

Ratio Decidendi: For the purpose of jurisdiction under section 148, escaped income must be measured by the real income chargeable to tax (net of taxes like IGST where not part of purchases); if such escaped income is below the statutory monetary threshold in section 149(1)(b), reassessment proceedings under section 148 cannot be validly initiated.

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