Facts of the Case

The assessee, Sunny Fulchandji Shah, filed his return of income for Assessment Year 2019-20 on 27.08.2019 declaring total income of ₹25,59,370. A notice under Section 148 dated 20.04.2023 was issued alleging escapement of income on account of donation of ₹5,00,000 paid to a non-genuine political party and claimed as deduction under Section 80GGC.

The assessment was completed and the disallowance of ₹5,00,000 under Section 80GGC was upheld by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi. Aggrieved, the assessee filed an appeal before the Tribunal challenging both the validity of reopening under Section 147 and the disallowance on merits.

Issues Involved

Whether reopening under Section 147 initiated on 20.04.2023 for Assessment Year 2019-20 was valid when the alleged escapement was only ₹5,00,000, whether such reopening was barred by limitation under Section 149, and whether the disallowance under Section 80GGC could survive once reopening was held invalid.

Petitioner’s Arguments

The assessee contended that reopening was illegal and void ab initio as the alleged escapement of income was only ₹5,00,000, which was far below the threshold of ₹50,00,000 prescribed under Section 149(1)(b) for reopening beyond three years. It was argued that the conditions precedent for valid reopening were not satisfied and therefore the entire proceedings stood vitiated. The assessee also challenged the disallowance under Section 80GGC on merits and for violation of principles of natural justice.

Respondent’s Arguments

The Revenue supported the orders of the Assessing Officer and the CIT(A) and contended that the reassessment proceedings were validly initiated and that the donation was rightly treated as bogus.

Court Order / Findings

The ITAT Ahmedabad examined the provisions of Section 149 as applicable on the date of issuance of notice under Section 148, i.e., 20.04.2023. The Tribunal noted that for reopening beyond three years from the end of the relevant assessment year, the alleged escapement must be represented by an asset, expenditure or entry amounting to or likely to amount to ₹50,00,000 or more.

The Tribunal found that the reasons recorded for reopening clearly stated the alleged escapement at only ₹5,00,000 on account of donation under Section 80GGC. Since the escapement did not meet the statutory threshold of ₹50,00,000, the Tribunal held that the notice issued under Section 148 was invalid. Consequently, the reassessment proceedings were held to be void ab initio.

Once the reopening itself was held invalid, the Tribunal held that the disallowance under Section 80GGC could not survive.

Important Clarification

The Tribunal clarified that the limitation provisions under Section 149 are mandatory in nature. Where the alleged escapement of income does not satisfy the monetary threshold prescribed for reopening beyond three years, the notice under Section 148 is invalid and all consequential proceedings are void.

Final Outcome

The appeal filed by the assessee was allowed. The reopening under Section 147 was held to be invalid and void ab initio, and the disallowance of ₹5,00,000 made under Section 80GGC was quashed in full.

Link to Download Order
https://www.mytaxexpert.co.in/uploads/1769063226_SUNNYFULCHANDJISHAHAHMEDABADVS.THEACITCIR211AHMEDABAD.pdf

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