₹50 lakh income-tax case: ITAT quashes reassessment after tax department issued notice beyond the legal deadline

A taxpayer who had declared ₹50 lakh under the Income Declaration Scheme (IDS), 2016, but could not complete the process after a bank-related payment issue, has received relief from the Income Tax Appellate Tribunal (ITAT). In Harshali Lavishkumar Jain v. ITO, Ward-1(2)(1), Surat (ITA No. 1463/SRT/2025), the Surat bench quashed the reassessment after finding that the tax department’s fresh notice under section 148 was issued beyond the permissible time limit.

The case relates to the assessment year 2017-18. Jain had filed her return declaring income of ₹6.88 lakh. The tax department later received information that she had declared ₹50 lakh under IDS 2016 for assessment year 2012-13 but had not completed the declaration process by submitting Form-4, the certificate of final acceptance. The department subsequently reopened her assessment and eventually added the entire ₹50 lakh as unexplained income.

Why the ₹50 lakh was added

Under IDS 2016, Jain had declared ₹50 lakh and claimed that she had paid the required tax of ₹22.50 lakh. However, she said a payment of ₹5.625 lakh could not be credited to the government’s account before the deadline because of a technical error at the bank’s end.

According to her submissions before the tribunal, the bank issued a certificate acknowledging the error. She argued that the assessing officer had also accepted that the full ₹22.50 lakh tax had ultimately been paid, but Form-4 could not be submitted because of the payment issue.

The assessing officer nevertheless treated the ₹50 lakh as unexplained income and added it under “income from other sources”. The assessment was completed under section 147 read with sections 144 and 144B in May 2023. The taxpayer challenged the addition, but the Commissioner of Income Tax (Appeals) dismissed her appeal.

ITAT focuses on the reassessment deadline

Before the ITAT, Jain also challenged the validity of the reassessment notice itself.

The original notice under section 148 had been issued on 30 June 2021, under the old reassessment regime. Following the Supreme Court’s ruling in Union of India v. Ashish Agarwal, such notices were treated as notices under section 148A(b) under the new reassessment framework.

The Supreme Court subsequently clarified in Union of India v. Rajeev Bansal that tax authorities could use only the “surviving time” available under the applicable limitation provisions to complete the remaining reassessment proceedings. A fresh section 148 notice issued beyond that surviving period would be time-barred.

In Jain’s case, the tax department supplied the relevant information and issued a section 148A(b) notice on 25 May 2022. Jain responded on 26 May. The ITAT found that, given the original notice was issued on the last day of the relevant period, the department had only a limited surviving period to issue the fresh section 148 notice.

However, the fresh notice under section 148 was issued on 29 June 2022. The tribunal held that this was beyond the permissible surviving period and therefore invalid.

ITAT quashes ₹50 lakh assessment

The Surat bench, comprising Judicial Member Suchitra Kamble and Accountant Member B.M. Biyani, held that the section 148 notice was time-barred. It consequently quashed the reassessment proceedings and the assessment order that had added ₹50 lakh to Jain’s income. The appeal was allowed.

Importantly, the tribunal did not decide the underlying dispute about the IDS declaration or the bank’s payment error on merits. Since the reassessment itself was found to be invalid on limitation grounds, the other grounds raised by the taxpayer became infructuous.

What taxpayers should know

The ruling does not mean that a bank-related payment problem automatically wipes out a tax liability. Nor does it establish that taxpayers can ignore Form-4 requirements under IDS.

The key takeaway is about reassessment notices and limitation periods. Taxpayers facing a reassessment should examine the dates of the original notice, subsequent notices, responses and the final section 148 notice. A reassessment initiated beyond the legally permitted period can be challenged even when the tax department has made an addition on the underlying income.