Reassessment under Section 148 cannot proceed where alleged income escapement falls below Section 149(1)(b) threshold.

The petitioner, a partnership firm, challenged the order dated 16 June 2025 passed under Section 148A(3) of the Income Tax Act, 1961 (“IT Act”) and the consequential notice under Section 148 proposing reassessment for AY 2019–20.

During the relevant year, the petitioner purchased three vehicles for ₹1,35,92,001, financed through loans of ₹1,17,13,000 from IndusInd Bank and ₹18,79,001 contributed by its partners.

The partners also paid EMIs directly into the vehicle loan accounts, aggregating to ₹26,49,130.

A notice under Section 148A(1) alleged escapement of income amounting to ₹92,04,500.

The petitioner filed a reply explaining the transactions and produced the relevant loan statements and books of account, contending that the alleged escapement was below the ₹50 lakh threshold prescribed under Section 149(1)(b).

The Assessing Officer nevertheless passed the order under Section 148A(3) and issued the consequential notice under Section 148.

1. Whether the reassessment proceedings under Sections 148A(3) and 148 of the IT Act could be initiated when the amount allegedly represented as escaped income was below the ₹50 lakh threshold under Section 149(1)(b)?

2. Whether the Assessing Officer was justified in relying on the higher figure relating to the vehicle purchases, despite the loan financing and the actual amount treated as cash paid being below ₹50 lakh?

The Court applied Section 148A(3) of the IT Act, which governs the Assessing Officer’s order on whether notice under Section 148 should be issued, and Section 148, which concerns reassessment pursuant to such notice.

It further applied Section 149(1)(b), which requires the prescribed monetary threshold of ₹50 lakh to be met for reopening assessment on the relevant ground.

The Court proceeded on the principle that reassessment cannot be sustained where the amount treated by the Assessing Officer as having escaped assessment does not satisfy the statutory threshold under Section 149(1)(b).

The Court noted that the purchase of the three vehicles was financed substantially through bank loans and partly through partner contributions, rather than representing unexplained income of the petitioner.

It further relied on the Assessing Officer’s own finding that the total amount paid in cash while disbursing or repaying the loans was ₹45,79,481, which was below the statutory threshold of ₹50 lakh under Section 149(1)(b).

Accordingly, the figure of approximately ₹1.76 crore relied upon by the Revenue did not establish satisfaction of the threshold, particularly when the relevant loan financing and payments were considered.

The statutory condition for reopening was therefore not met, and the order under Section 148A(3) and the notice under Section 148 could not be sustained.

It quashed and set aside the order dated 16 June 2025 passed under Section 148A(3) and the consequential notice issued under Section 148.

The writ petition was allowed accordingly.