1 day ago
ITAT Quashes Tax Demand Over Invalid Reassessment Notice
Vandana Vijay Kumar Chudamasa bought a property in India while she and her husband were working in Dubai.
Tax officials believed the money used for the purchase had not been properly explained.
They sent her a notice asking her to file a tax return, but she did not respond.
Officials then treated the full property amount as unexplained income and demanded tax.
She said the property was bought jointly and partly paid for with a housing loan.
Her appeal was late because she relied on a professional adviser to handle the case.
The ITAT allowed the late appeal.
It found that the wrong senior tax authority had approved the reassessment notice.
Because of this procedural error, the tribunal cancelled the reassessment and tax demand.
It did not decide whether the investment itself was actually unexplained.
Vandana Vijay Kumar Chudamasa, who had moved to Dubai, bought property worth about Rs 2.31 crore during financial year 2017-18.
After she did not file a return following a Section 148 notice, the Assessing Officer treated Rs 2.32 crore as unexplained investment under Section 69.
The Commissioner of Income Tax (Appeals) dismissed her challenge for lack of supporting evidence.
The Mumbai ITAT condoned her 148-day appeal delay, citing her reliance on a professional adviser while living and working in Dubai.
The tribunal ruled that the Section 148 approval came from the wrong authority, invalidated the notice, and quashed the reassessment and tax demand.
- Who
- Vandana Vijay Kumar Chudamasa, the Income Tax Department, and the Mumbai Income Tax Appellate Tribunal.
- What
- The tribunal quashed a reassessment and tax demand after finding that the Section 148 notice lacked approval from the legally required authority.
- Where
- The property and tax proceedings involved India; Chudamasa and her husband were residing and working in Dubai, and the appeal was heard by the Mumbai ITAT.
- When
- The property was purchased during financial year 2017-18; the notice was issued on April 2, 2022, and the appeal was filed 148 days late.
- Why
- The tribunal found that the notice had been approved by the Principal Commissioner of Income Tax instead of the authority required under Section 151(ii).
Tax Department's Position
Taxpayer's Position
Whether the investment was unexplained
Tax Department's Position
The Assessing Officer treated the entire Rs 2.32 crore property investment as unexplained because Chudamasa did not file a return or respond to subsequent notices.
Taxpayer's Position
Chudamasa argued that the property was purchased jointly with her husband and that payments were funded through a housing loan and contributions from both spouses.
Validity of the reassessment notice
Tax Department's Position
The reassessment proceeded after approval was obtained from the Principal Commissioner of Income Tax, Bengaluru-3.
Taxpayer's Position
Chudamasa argued that, because the relevant three-year period had ended, approval was required from the Principal Chief Commissioner or Principal Director General under Section 151(ii). The ITAT accepted this argument.
Reason for the delayed appeal
Tax Department's Position
The initial appeal was dismissed for lack of supporting evidence, and the later ITAT appeal was filed 148 days late.
Taxpayer's Position
Chudamasa said she relied on a professional adviser while living in Dubai, and the ITAT found this explanation sufficient to condone the delay.
Key facts
- Property value
- About Rs 2.31 crore
- Tax addition
- Rs 2.32 crore was treated as unexplained investment under Section 69
- Section 148 notice
- Issued on April 2, 2022
- Appeal delay
- 148 days
- Reported funding
- Rs 1.61 crore housing loan, Rs 1 lakh from her husband, and Rs 23.31 lakh from Chudamasa
- Tribunal ruling
- The notice, reassessment proceedings, and resulting tax demand were quashed
- Approval dispute
- The notice was approved by the Principal Commissioner of Income Tax, Bengaluru-3, rather than the authority specified under Section 151(ii)
Sources
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