A notice under Section 148 of the Income Tax Act, 1961 issued after three years from the end of the relevant assessment year is invalid if the Assessing Officer fails to demonstrate that the escaped income qualifies as an asset, expenditure, or book entry per Section 149(1)(b).

ORDER

PER YOGESH KUMAR, U.S. JM:

The present appeal is filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals)-27, (‘Ld. CIT(A)/NFAC’ for short), New Delhi dated 29/08/2025 for the Assessment Year 2018-19.

2. The grounds of Appeal are as under:-

“1. On the facts and circumstances of the case and in law, the notice u/s 148 issued in this case is bad-in-law, illegal, without jurisdiction and barred by limitation and, therefore, the said notice u/s 148 along with assessment order passed on the foundation of such notice are liable to be quashed and CIT(A) erred in not holding so.

2. On the facts and circumstances of the case and in law, the reassessment proceedings initiated are contrary to the provisions of law including the specific provisions of section 147 to section 151 of Income Tax Act, 1961 and therefore, the reassessment proceeding initiated along with assessment order passed are liable to be quashed and CIT(A) erred in not holding so.

3. On the facts and circumstances of the case and in law, the order passed by the learned assessing officer and the addition made therein is bad-in-law and CIT(A) erred in not holding so.

4. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer to the extent of Rs. 65,81,611/- on account of unexplained cash receipts.

5. On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is contrary to the provisions of section 148B of the Income Tax Act, 1961.”

3. The Ld. Counsel for the Assessee canvassing on Ground No. 1 to 3 submitted that the notice u/s 148 of the Income Tax Act, 1961 ('Act' for short) was issued after the expiry of three years from the end of relevant Assessment Year on 20/10/2023 without fulfilling the conditions as specified u/s 149(1)(b) of the Act. Therefore, sought for allowing Ground No. 1 to 3. The Ld. Counsel has also relied on order of the Co-ordinate Bench of Hyderabad Tribunal in the case of M/s ACE Tyres (P) Ltd. Hyderabad vs. ACIT, Central Circle 1(2) Hyderabad, 2025 (10) TMI 936.

4. Per contra, the Ld. Departmental Representative relying on the orders of the Lower Authorities, submitted that the notice u/s 148 of the Act has been issuedwell within the period of limitation and the ground No. 1 to 3 of the Assessee are hyper technical and the additionmade on its merit cannot be deletedon the said count. Thus, sought for dismissal of Ground No. 1 to 3 of the Assessee.

5. We have heard both the parties and perused the material available on record. It is evident from the assessment order that, A.O. has estimated the business income/profit which according to A.O. himself were in respect of unaccounted transaction. Such estimated income does not fall in any category specified in Clause b of Section 149(1) of the Act. For the sake of ready reference Section 149(1)is reproduced as under:

“Section 149(1) in The Income Tax Act, 1961

(1)No notice under section 148 shall be issued for the relevant assessment year,—

(a)if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);

[(b) if three year