Introduction
The recent ruling by the Income Tax Appellate Tribunal (ITAT), Jaipur Bench, in Rajesh Kumar Khandelwal v. ITO (NFAC), ITA No. 21/JPR/2026, provides a significant clarification on the jurisdictional limits of tax reassessment. The case addresses the critical interplay between the monetary thresholds prescribed under Section 149 of the Income-tax Act, 1961 (“the Act”), and the powers of the Assessing Officer (AO) to reopen cases beyond the standard three-year period. By quashing the reassessment proceedings, the Tribunal reinforced the principle that the validity of a notice under Section 148 must be tested against the “income chargeable to tax” alleged to have escaped assessment, rather than the gross transaction value. This commentary analyses the ITAT’s reasoning, the reliance on High Court precedents, and the implications for faceless assessments where the assessee fails to respond to notices.
Facts of the Case
The genesis of the dispute lies in information flagged under the Risk Management Strategy (RMS) of the Central Board of Direct Taxes (CBDT). The specific information indicated that the assessee, Shri Rajesh Kumar Khandelwal, had engaged in the sale of immovable property located at Bhikampura, Thanagazi, for a total consideration of ₹1,69,01,000 during the relevant previous year.
Because the assessee had not filed a return of income for the Assessment Year 2016-17, the Assessing Officer initiated proceedings. A notice under Section 148A(b) of the Act was issued to the assessee. However, the assessee did not furnish any response to this notice. Consequently, the AO passed an order under Section 148A(d), treating the entire sale consideration of ₹1,69,01,000 as income that had escaped assessment. Subsequently, a notice under Section 148 was issued on 19.12.2023.
During the reassessment proceedings, the AO made an addition of ₹34,36,535 towards capital gains, attributing this to the assessee’s one-fourth share in the property. The assessee challenged the validity of the reassessment proceedings before the National Faceless Appeal Center (NFAC). As the assessee did not appear during the appellate proceedings, the Ld. CIT(A) dismissed the appeal. Aggrieved, the assessee approached the ITAT, Jaipur Bench.
Reasoning and Legal Analysis
The core legal question before the ITAT was whether the reassessment proceedings initiated under Sections 148A and 148 of the Act were sustainable, given the monetary threshold prescribed under Section 149. The Tribunal, comprising Shri Om Prakash Kant (Accountant Member) and Shri T. R. Senthil Kumar (Judicial Member), undertook a detailed analysis of the statutory provisions and the material on record.
The Statutory Threshold under Section 149
The Tribunal examined the provisions of Section 149 of the Act, which governs the time limits for issuing notices under Section 148. Specifically, Section 149(1)(b) allows for the issuance of a notice beyond three years but within five years and three months, provided the Assessing Officer has evidence showing that the income chargeable to tax which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more.
The Tribunal emphasized that the threshold is not based on the gross value of the transaction but on the “income chargeable to tax alleged to have escaped assessment.” This distinction is crucial in cases involving the sale of capital assets, where the gross sale consideration is subject to deductions (such as the cost of acquisition) to arrive at the taxable capital gains.
Disregard of Material on Record
The assessee’s primary contention was that the registered sale deed explicitly disclosed that the property was jointly owned by four persons. Therefore, the assessee’s one-fourth share in the sale consideration amounted to ₹42,25,250. This figure is demonstrably below the ₹50 lakh statutory threshold required for invoking the extended limitation period under Section 149.
The Tribunal noted that the Assessing Officer, despite having access to the registered sale deed, proceeded to treat the entire sale consideration of ₹1,69,01,000 as the income escaping assessment. The ITAT held that the AO could not have ignored the disclosed co-ownership merely because the assessee failed to respond to the notice under Section 148A(b). The Tribunal opined that the failure to respond to a notice does not grant the AO the license to disregard material evidence already available on record. The AO was duty-bound to consider the registered document and determine if the income chargeable to tax in the assessee’s hands met the statutory threshold.
Reliance on Judicial Precedents
To bolster its reasoning, the ITAT relied heavily on the decision of the Hon’ble Madhya Pradesh High Court in Nitin Nema v. Office of the Principal Chief Commissioner of Income-tax (2023) 458 ITR 690 (MP). The High Court in that case emphasized the distinction between gross sale consideration and income chargeable to tax. The ITAT also followed the coordinate Bench decision in Vipendra Ravindra Mandal v. ITO, ITA No. 1819/Mum/2025, which dealt with a similar issue regarding the sustainability of reassessment proceedings where the alleged escaped income was below the prescribed monetary threshold.
The Tribunal further applied the principle established by the Hon’ble Supreme Court in CIT v. Vegetable Products Ltd., which dictates that if two views are possible on a legal issue, the view favorable to the assessee should be adopted. Given that the assessee’s share was below ₹50 lakh, the jurisdictional condition for invoking the extended period of limitation was not satisfied.
The “Faceless” Aspect and Non-Compliance
The case also highlights a common issue in faceless assessments: the treatment of non-compliance. The Revenue argued that since the assessee did not respond to the Section 148A(b) notice, the AO had no material to ascertain the correct income. However, the ITAT rejected this argument. It held that the AO cannot treat the entire sale consideration as income when the registered document—which is part of the material relating to the transaction—clearly discloses co-ownership. The Tribunal effectively ruled that administrative convenience or the assessee’s default cannot override the statutory jurisdictional requirement of ₹50 lakh.
Conclusion
The ITAT’s decision in Rajesh Kumar Khandelwal is a significant victory for taxpayers facing reassessment based on gross transaction values. It reinforces the principle that the jurisdictional threshold under Section 149 is a condition precedent for the valid exercise of power under Section 148. By quashing the proceedings, the Tribunal has clarified that the Assessing Officer must apply their mind to the material available on record—such as registered sale deeds—to determine the “income chargeable to tax” rather than adopting a mechanical approach of treating the gross receipt as escaped income. This ruling serves as a strong precedent for cases where the extended period of limitation is invoked without satisfying the monetary threshold, ensuring that the “view favorable to the assessee” prevails in ambiguous situations.