Man earning ₹3,500 a month faced ₹1.46 crore tax demand; how ITAT Mumbai came to his rescue

A Mumbai man who said he earned ₹3,500 a month as an office worker was assessed to a tax liability based on transactions worth nearly ₹1.46 crore that he denied making. The Income Tax Appellate Tribunal (ITAT), Mumbai, has now quashed the reassessment after finding that the Income Tax Department failed to establish valid service of the notice required to reopen his assessment.

In Ravi Dilip Waghela v. Income Tax Officer, ITA No. 1799/Mum/2025, for assessment year 2012-13, the tribunal ruled on 21 September 2026 that the reassessment could not legally proceed without valid service of the notice under Section 148 of the Income-tax Act, 1961. It consequently set aside the assessment of ₹1.46 crore, without deciding whether the disputed transactions were genuine.

How did the ₹1.46 crore tax assessment arise?

According to the tribunal order, the Income Tax Department received information from the investigation wing in March 2018 about a business identified as a provider of accommodation entries. Examination of its bank account revealed debit entries of ₹1.27 crore and credit entries of ₹18.85 lakh associated with Kingsy Pharma, which the department's information identified as a proprietary concern belonging to Waghela.

The assessing officer treated ₹1.27 crore as unexplained expenditure under Section 69C and ₹18.85 lakh as unexplained credit under Section 68 of the Income-tax Act. With the returned income taken at ₹10,000, the assessment under Sections 144 and 147 was completed at ₹1,46,57,500.