Reassessment Proceeding: Section 149(1)(b) of the Act would be satisfied if the cumulative value of the expenditure exceeds ₹ 50 lakhs provided that the same is related to an event or occasion.

A plain reading of Section 149(1A) of the Act indicates that the condition of a minimum amount of ₹ 50 lakhs of income escaping assessment, may be satisfied by the cumulative amount that has escaped assessment or is likely to escape assessment in respect of more than one assessment year exceeding the said amount. However, the same is subject to the condition that the income chargeable to tax is represented in the form of an “asset” or “expenditure in relation to an event or occasion”.

Thus, in cases where the income that has escaped assessment is represented by ‘an asset’, notwithstanding that the said asset is on account of income that escaped assessment for more than one previous years, the condition under Section 149(1)(b) of the Act would be satisfied, if the value of the asset exceeds ₹50 lakhs. The same would hold true if there is an expenditure in relation to an ‘event’ or ‘occasion’, which exceeds the value of ₹50 lakhs.

The Court noted that:

“In this case as well as notwithstanding that the expenditure has been incurred in different previous years, the condition under Section 149(1)(b) of the Act would be satisfied if the cumulative value of the expenditure exceeds ₹50 lakhs, provided that the same is related to an event or occasion.

In the present case, it is apparent that there is no singular occasion or event which has resulted in the income of more than one previous year exceeding the sum of ₹50 lakhs. As noted above, the allegations against the Assessee are that it has undercharged its Associated Enterprises for the R&D Services rendered by it, and therefore, the income is required to be adjusted to the extent of ₹ 27 lakhs. Additionally, it is alleged that the Assessee has overpaid for certain managerial and group related services to the extent of ₹ 21 lakhs. None of these two adjustments can be stated to have been a part of a singular event or occasion spanning more than one previous year”

Delhi High Court in the case of L-1 Identity Solutions Operating Company Private Limited [W.P(C) 4845/2025], dated 17.04.2025

 

The copy of the order is as under:

1745690684699