Escaped Income Below ₹50 Lakh: Delhi HC quashes Reassessment as Beyond 3-Year Time Limit

The Delhi High Court has invalidated a reassessment notice for alleged escaped income of ₹42 lakh, ruling it was barred by the three-year limitation period under Section 149 of the Income Tax Act. Justice Manmohan emphasized that reopening assessments beyond three years requires "tangible material" demonstrating actual income escapement, not just a change of opinion. The case involved a salaried taxpayer whose bank deposits were questioned after initial scrutiny assessment. The court clarified that the ₹50 lakh threshold for extended limitation applies to aggregate escaped income across all years, not per assessment year. This judgment strengthens taxpayer protections against arbitrary reopening of old cases, particularly for small taxpayers. It establishes that reassessment cannot serve as a "second innings" when original assessment was completed after due verification. While safeguarding against harassment, the ruling may complicate enforcement in genuine evasion cases with initially concealed evidence. Tax experts advise maintaining documentation for six years and carefully reviewing reopening notices for valid jurisdictional grounds. The department is considering an appeal to preserve investigative flexibility.