ITAT Rajkot Delivers Landmark Ruling on Reassessment Beyond 3 Years: ₹50 Lakh Threshold Under Section 149 Cannot Be Artificially Inflated
In a significant judgment impacting reassessment proceedings across India, the Rajkot Bench of the Income Tax Appellate Tribunal (ITAT Rajkot) has held that the Income Tax Department cannot reopen assessments beyond 3 years by artificially inflating transaction figures through duplicated data on the INSIGHT Portal.
In the case of Jayaben Karsanbhai Dalvadi vs. ITO, Ward-1, Surendranagar [ITA No. 146/RJT/2026 | A.Y. 2015-16 | Order dated 15.05.2026], the Tribunal emphatically ruled that the ₹50 lakh threshold prescribed under Section 149(1)(b) is a strict jurisdictional condition and cannot be bypassed through erroneous or duplicated reporting.
The ruling is likely to become a major precedent in reassessment litigation involving notices issued beyond 3 years under the new reassessment regime.
Core Legal Issue Before ITAT Rajkot
The fundamental question before the Tribunal was:
Can the Income Tax Department reopen an assessment beyond 3 years where the actual escaped income is below ₹50 lakh merely because transaction figures were wrongly inflated in the notice issued under Section 148A(b)?
The ITAT Rajkot answered this question with a clear and categorical “No.”
Facts of the Case
The reassessment proceedings arose from alleged cash deposits appearing on the INSIGHT Portal.
However, the crucial issue was that:
• The same transaction data had been uploaded twice on the INSIGHT Portal;
• This duplication artificially inflated the transaction figure to ₹76 lakh;
• Actual cash deposits were only ₹38 lakh.
Based on the inflated figure:
• Notice under Section 148A(b) was issued on 17.03.2022;
• Notice under Section 148 was issued on 31.03.2022.
Since A.Y. 2015-16 ended on 31.03.2016, the reopening was beyond 3 years.
The Assessing Officer thereafter made addition of ₹20 lakh under Section 69A, which was upheld by CIT(A).
The assessee challenged the reassessment before the ITAT.
ITAT Rajkot’s Landmark Findings
1. ₹50 Lakh Threshold Under Section 149(1)(b) is Mandatory
The Tribunal held that for reopening beyond 3 years, the escaped income must be ₹50 lakh or more as mandated under Section 149(1)(b).
Since the actual transaction amount was only ₹38 lakh, the extended limitation period was not available to the department.
Thus, the reassessment itself lacked jurisdiction.
This finding is extremely important because many reassessment notices issued beyond 3 years mechanically assume that the threshold condition is satisfied.
2. Artificial Inflation of Transaction Figures Criticized
The Tribunal took serious note of the fact that:
• Duplicated INSIGHT Portal data inflated the transaction value to ₹76 lakh;
• This inflated figure formed the basis of reassessment proceedings.
The ITAT observed that the inflated figure was used to “circumvent the provisions of the Act.”
This is a very strong judicial observation and may have wide implications in cases involving:
• INSIGHT Portal discrepancies;
• Duplicate AIR/SFT reporting;
• Incorrect transaction aggregation;
• Automated data-driven reassessment notices.
3. CBDT Instruction No. 1/2022 Held Binding
The Tribunal also referred to CBDT Instruction No. 1/2022 dated 11.05.2022 and emphasized that CBDT circulars and instructions are binding on the Income Tax Department.
This aspect is particularly important because many practitioners overlook the strategic value of CBDT instructions while challenging reassessment notices.
Why This Judgment is Extremely Important
This ruling may become a major weapon for taxpayers challenging reassessment notices issued under Sections 147/148 after expiry of 3 years.
The decision reinforces several critical legal principles:
• Jurisdiction cannot be assumed on incorrect facts;
• ₹50 lakh threshold under Section 149(1)(b) is non-negotiable;
• Automated portal data cannot override statutory conditions;
• Reassessment notices based on incorrect data are vulnerable to challenge;
• CBDT instructions bind tax authorities.
Major Practical Takeaways for Tax Professionals
Verify INSIGHT Portal Data Carefully
Tax practitioners should never blindly accept figures mentioned in:
• Section 148A(b) notices;
• INSIGHT Portal reports;
• SFT/AIR data summaries.
Cross-verification with:
• Actual bank statements;
• Transaction records;
• Cash books;
• Reconciliations
is absolutely essential.
Data duplication and reporting errors are becoming increasingly common in AI-driven and automated tax scrutiny systems.
Challenge Jurisdiction at the Earliest Stage If:
• Reopening is beyond 3 years, and
• Escaped income is below ₹50 lakh,
jurisdictional objection under Section 149(1)(b) should be raised immediately before:
• Assessing Officer;
• CIT(A);
• ITAT.
Jurisdictional defects can invalidate the entire reassessment proceeding.
Use CBDT Instruction No. 1/2022 Strategically
The ruling highlights the importance of specifically relying upon CBDT Instruction No. 1/2022 while filing objections under Section 148A(b).
The instruction can become a powerful defence tool in reassessment cases involving A.Ys. 2013-14 to 2017-18 where escaped income does not cross the ₹50 lakh threshold.
Conclusion
The ITAT Rajkot ruling in Jayaben Karsanbhai Dalvadi vs. ITO is a landmark decision in reassessment jurisprudence under the new regime.
The judgment sends a strong message that:
• Reassessment jurisdiction cannot be assumed casually;
• Statutory safeguards under Section 149 must be strictly complied with;
• Duplicated or inflated data cannot be used to extend limitation period.
In the era of AI-based scrutiny and INSIGHT Portal-driven reassessment notices, this ruling is likely to become one of the most cited decisions in future litigation relating to invalid reassessment proceedings.
The copy of the order is as under:
