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Facts
The assessee's appeal challenges an addition of ₹55,04,242 made by the Assessing Officer (AO) treating cash deposits in bank accounts as unexplained money under section 69A. The CIT(A) upheld this addition. The assessee contended that the deposits were genuine business receipts.
Held
The Tribunal admitted the additional grounds of appeal regarding the limitation period for issuing the reassessment notice. Examining the issue, the Tribunal found that the notice under section 148 was issued beyond the six-year period from the end of the assessment year, and the amended provisions did not extend this period in this case.
Key Issues
Whether the reassessment notice issued under section 148 was barred by limitation, and whether cash deposits constituted unexplained money or genuine business receipts.
Sections Cited
69A, 147, 144, 44AD, 271(1)(c), 271F, 148A, 148, 149
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Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G.
PER VIJAY PAL RAO, VICE PRESIDENT :
This appeal by the Assessee is directed against the Order dated 25.02.2025 of the learned CIT(A)-National Faceless Appeal Centre [in short “NFAC], Delhi, for the assessment year 2015-2016.
The assessee has raised the following grounds of appeal:
2 ITA.No.758/Hyd./2025 “The appellant respectfully submits the following grounds, which are without prejudice to one another: 1. That the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, has erred both in law and on facts in upholding the addition of ₹55,04,242/-made by the Assessing Officer under section 69A of the Income-tax Act, 1961, by treating the cash deposits in the appellant's bank accounts as unexplained money, without appreciating the nature and source of the said deposits arising out of genuine business receipts. 2. That the learned CIT(A) as well as the Assessing Officer failed to appreciate the settled position of law that the burden to establish "unexplained money" under section 69A lies with the department, and mere non-filing of return or absence of formal documentation does not ipso facto convert business receipts into undisclosed income. 3. That the learned CIT(A) as well as the Assessing Officer grossly erred in law in rejecting the explanation furnished by the appellant in a summary manner and in not giving due credence to the partial evidentiary trail submitted by the appellant through bank statements reflecting recurring deposits from identified customers such as Nagula Enterprises and SVR Electronics. 4. That the learned CIT(A) as well as the Assessing Officer failed to apply the ratio laid down in various judicial pronouncements that in case of small traders carrying on informal business activities, absence of books of account per se cannot be the sole ground to invoke section 69A, particularly when business nexus of cash deposits is prima facie established. 5. That the learned CIT(A) failed to appreciate that under the facts and circumstances of the case, where no books of account were maintained, the income if any ought to have been estimated on a
3 ITA.No.758/Hyd./2025 reasonable presumptive basis u/s 44AD or alternatively based on GP/NP ratios instead of treating entire cash deposits as income. 6. That the learned CIT(A) as well as the Assessing Officer erred in treating the assessment proceedings u/s 147 r.w.s. 144 as concluded in accordance with law despite the absence of conclusive findings, failure to consider submissions made, and violation of the principles of natural justice. 7. That the impugned addition is arbitrary, excessive, and unjustified, and liable to be deleted as it is not supported by cogent material or any corroborative evidence suggesting concealment or suppression of income by the appellant. 8. That the penalty proceedings-initiated u/s 271(1)(c) and 271F based on the above addition are premature and consequential, and thus are liable to be dropped in the absence of a sustainable quantum addition. 9. That the appellant craves leave to add, alter, modify, substitute, or withdraw any of the grounds of appeal at the time of hearing or thereafter as may be deemed necessary for proper adjudication of the case. PRAYER In view of the above and the facts and circumstances of the case, the appellant most respectfully prays that the Hon'ble Tribunal may be pleased to:
Delete the addition of Rs.55,04,242/- made under section 69A of the Income-tax Act, 1961; Hold that the said cash deposits represent business receipts and not unexplained money; Alternatively, direct the authorities to estimate income on a reasonable and just basis under the applicable provisions of law;
4 ITA.No.758/Hyd./2025 Quash the assessment framed u/s 147 rw.s. 144 as bad in law; Drop the penalty proceedings initiated under sections 271(1)(c) and 271F; And grant such other relief(s) as may be deemed fit in the interest of justice.”
The assessee also raised the following additional grounds of appeal:
“On the facts and circumstances of the case and in law, the Income Tax Officer, Ward 10(1), Hyderabad ('Ld. AO") erred in assuming jurisdiction under section 147/148 after the expiry of the permissible time limit, and therefore the entire reassessment proceedings are without authority of law and deserve to be annulled.
The Learned Assessing Officer erred in re-opening the assessment by issuing the notice under section 148 that ought to have been issued only within the time limit prescribed under section 149(1)(b), Le, six years from the end of the relevant assessment year, which expired on 31.03.2022.
The order passed by the Learned Assessing Officer is barred by limitation as the notice issued u/s 148 on 15.04.2022 is beyond the statutory limitation period and hence invalid, void and liable to be quashed.
Any other ground or grounds that may be urged at the time of hearing.”
5 ITA.No.758/Hyd./2025 4. The learned Authorised Representative of the Assessee has submitted that the additional grounds raised by the assessee are purely legal issues regarding the validity of the notice issued by the Assessing Officer u/sec.148 Income Tax Act [in short "the Act"], 1961 being barred by limitation. This ground can be adjudicated based on the undisputed facts already available on record and therefore, no fresh enquiry or investigation of facts is required for adjudication of this issue. Thus, the learned Authorised Representative of the Assessee has submitted that the additional grounds raised by the assessee may be admitted for adjudication. He has relied upon the Judgment of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT [1998] 229 ITR 383 (SC).
On the other hand, the learned DR has objected to the additional grounds raised by the assessee at this stage and submitted that the assessee has not raised this issue either before the Assessing Officer in response to the show cause notice issued u/sec.148A(b) of the Act nor before the learned CIT(A).
6 ITA.No.758/Hyd./2025 6. We have considered the rival submissions as well as relevant material on record. There is no dispute that the issues raised by the assessee in the additional grounds of appeal is purely legal in nature and the same can be adjudicated on the basis of the facts and material already available on record before the Assessing Officer. Though the assessee did not raise this issue before the Assessing Officer in response to show cause notice issued u/sec.148A(b) of the Act as well as before the learned CIT(A), however, there is no bar for raising the legal issue before the Tribunal if for adjudication of the issue does not require any verification and investigation of any fact or record as held by the Hon'ble Supreme Court in the case of NTPC vs. CIT (supra). Accordingly, we admit the additional grounds raised by the assessee for adjudication.
Since the issue raised in additional grounds is purely legal in nature and goes to the root of the matter, therefore, we first take up the issue raised by the assessee in the additional grounds of appeal. The learned Authorised Representative of the Assessee of the assessee has submitted
7 ITA.No.758/Hyd./2025 that the Assessing Officer has issued show cause notice u/sec.148A(b) of the Act on 19.03.2022 and thereafter, passed Order u/sec.148A(d) of the Act on 15.04.2022 and issued notice u/sec.148 of the Act on 15.04.2022. The learned Authorised Representative of the Assessee has submitted that the notice issued by the Assessing Officer u/sec.148 dated 15.04.2022 is barred by limitation as the period of six years expired on 31.03.2022. He has further submitted that the Assessing Officer in the show cause notice u/sec.148A(b) of the Act has given the time for filing the reply on or before 23.03.2022. Therefore, the Assessing Officer had the time period of more than 07 days to pass the Order u/secx.148A(d) of the Act and issue notice u/sec.148 of the Act. However, instead of issuing the notice u/sec.148 within the period of limitation, the Assessing Officer issued the same on 15.04.2022 which is barred by limitation. In support of his contention, he has relied upon the Judgment of Hon’ble Jurisdictional High Court in the case of Cyberabad Citizens Health Services Private Limited vs. DCIT & Anr. Dated 17.11.2025 in WP.No.25121/2024 and submitted that the
8 ITA.No.758/Hyd./2025 Hon’ble High Court has held that the limitation for issuing notice u/sec.148 of the Act for the assessment year ending before 01.04.2021 is 06 years from the end of the particular assessment year and therefore, the notice issued after the limitation period is held as barred by limitation. He has relied upon the decision of this Tribunal in the case of Peda Subbarao Unnam, r/o. Ongole vs. ITO, Ward-1, Ongole in ITA.No.1664/Hyd./2025, dated 28.01.2026. Thus, the learned Authorised Representative of the Assessee has submitted that the issue of notice by the Assessing Officer u/sec.148 of the Act dated 15.04.2022 is invalid being barred by limitation and the same is liable to be quashed.
On the other hand, the learned DR has submitted that after the amendment of the provisions for reopening of the assessment w.e.f. 01.04.2021 the limitation period for reopening of the assessment is 03 years in case where the income escaped assessment is below Rs.50 lakhs and it is 10 years in case the income escaped assessment is Rs.50 lakhs or more. This limitation is provided under the amended provisions u/sec.149 of the Act under Clauses (a) and (b) of
9 ITA.No.758/Hyd./2025 sub-sec.(1) of the said section. The learned DR has further submitted that as per the proviso to sec.149(1) of the Act, in a case where the limitation for issuing notice u/sec.148 already expired for the assessment year beginning on or before 01.04.2021, then the notice u/sec.148 of the Act cannot be issued under the new amended provisions extending the limitation from 06 years to 10 years. Thus, the learned DR has submitted that the proviso to sec.149(1) of the Act is applicable only in cases where the limitation of 06 years as per the un-amended provisions of reopening expired before 01.04.2021 and therefore, if the limitation for issuing the notice u/sec.148 of the Act was available as on 01.04.2021, then the limitation for issuing the notice u/sec.148 shall be as per the amended provisions of the Act. In support of his contention, he has relied upon the Judgment of Hon'ble Supreme Court in the case of Union of India vs. Rajeev Bansal [2024] 469 ITR 46 (SC) as well as Judgment of Hon’ble Delhi High Court in the case of Salil Gulati vs. ACIT [2023[ 455 ITR 24 (Del.) (HC). The learned DR has also relied upon Judgment of Hon’ble Madras High
10 ITA.No.758/Hyd./2025 Court in the case of Ramadoss Srikanthi vs. ACIT [2025] 481 ITR 126 (Mad.) (HC).
We have considered the rival submissions as well as relevant material on record. In the case in hand, the Assessing Officer has issued show cause notice u/sec.148A(b) of the Act on 19.03.2022 as under:
11 ITA.No.758/Hyd./2025 9.1. Thereafter, the Assessing Officer has passed an Order u/sec.148A(d) of the Act on 15.04.2022 and issued notice u/sec.148 of the Act dated 15.04.2022 as under:
12 ITA.No.758/Hyd./2025
13 ITA.No.758/Hyd./2025 9.2. Thus, the notice u/sec.148 of the Act was issued by the Assessing Officer on 15.04.2022 which is undisputedly beyond the period of 06 years from the end of the assessment year under consideration i.e., A.Y. 2015-2016. As per the unamended provisions of sec.148 of the Act, the notice u/sec.148 of the Act could be issued within the period of 06 years from the end of the assessment year under consideration. However, as per the amended provisions for reopening u/sec.148A and 148 r.w.s.149 of the Act, the limitation for reopening of the assessment has been reduced from 06 years to 03 years in cases where the income which is escaped assessment is less than Rs.50 lakhs; but the limitation for reopening of the assessment is increased from 06 years to 10 years in the cases where the amount of income escaped assessment is Rs.50 lakhs or more. The learned DR has submitted that as per the new provision of reopening u/sec.148A and 149 of the Act the limitation available to the Assessing Officer is 10 years from the end of the assessment year in the cases where the income escaped assessment is Rs.50 lakhs or more. In the case of the assessee, the income
14 ITA.No.758/Hyd./2025 escaped assessment was more than Rs.50 lakhs and therefore, the 1st proviso to sec.149(1) would not apply to the case of the assessee. This contention of the learned DR is not acceptable in view of the plain language of the proviso to sec.149(1) of the Act which has been considered and interpreted by the Hon’ble Jurisdictional Telangana High Court in the case of Cyberabad Citizens Health Services Private Limited vs. DCIT (supra) in Para nos.10 to 21 as under:
“10. This, we say so for the following reasons: In the case of Rajeev Bansal (supra), the position of law stands clear as regards the operation of amended Section 149(1) of the Act. The relevant paragraphs 49 and 53 thereof are extracted hereunder:
“49. The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under Section 149(1xb) of the old regime continues to exist for the assessment year 2021-2022 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the
(a) if three years have elapsed from the end of the relevant assessment year unless the case falls under clause (b),
15 ITA.No.758/Hyd./2025 (b) if three years, that not more than ten years, have elapsed from the end of the relevant assessment yes unless the Assessing Officer has it his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of-
(i) an asset (ii) expenditure in respect of a transaction or in relation to an event of occasion; or (iii) an entry or entries in the books of account, Which has escaped assessment amounts to or in likely to amount to fifty lakh rupees or more;
Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1 day of April, 2021, if a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C. as the case may be, as they stood immediately before the commencement of the Finance Act, 2021;
Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order er injunction of any court, shall be excluded:
16 ITA.No.758/Hyd./2025 Provided also that where immediately after the exclusion of the period referred to in the Immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A does not exceed seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly.
notice. This also ensures that the new time limit of ten years prescribed under Section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012-2013, the ten year period would have expired on 31 March 2023, while the six year period expired on 31 March 2019 Without the proviso to Section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012-2013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assessees.”
“53. The position of law which can be derived based on the above discussion may be summarized thus (1) Section 140(1) of the new regime is not prospective. It also applies to past assessment years; (4) The time limit of four years is now reduced to three years for all situations. The Revenue can issue notices under Section 148 of the new regime only if three years or less have elapsed from the end of the relevant assessment year, (iii) the proviso to Section 149(1)(b) of the new regime stipulates that the Revenue can issue reassessment notices for past assessment years only if the tune
17 ITA.No.758/Hyd./2025 limit survives according to Section 149(1)(b) of the old regime, that is, six years from the end of the relevant assessment year, and (iv) all notices issued invoking the time limit under Section 149(1)(b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than Rupees fifty lakhs.”
The first proviso to the amended Section 149 of the Act prescribes that no notice under Section 148 of the Act shall be issued at any time in a case for the relevant assessment year beginning on or before 01.04.2021, if a notice under Section 148 of the Act could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of Section 149 of the Act or as they stood immediately before the commencement of the Finance Act, 2021. For the purposes of appreciating the first proviso, the un-amended Section 149 of the Act is also extracted in the foot note. ------------------------- Time limit for notice. 149. (1) No notice under section 148 shall be issued for the relevant assessment year; (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c); (b) if four years, but nor more than six years, have elapsed trees the end of the relevant assessment year unless the chargeable to tax which has escaped assessment amounts or is likely to amount to one lakh rupees or more for that year.
18 ITA.No.758/Hyd./2025 (c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any city) located outside India, chargeable to tax, has escaped assessment. Explanation in determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section.
(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151. (3) If the person on whom a notice under section 148 is to be treated as the agent of a non-resident under section 163 and the assessment, reassessment or re-computation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of six years from the end of the relevant assessment year.
Explanation for the removal of doubt, it is hereby clarified that the provisions of sub-sections (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1 day of April, 2012. ---------------- 12. Apparently, the fifth and sixth provisos of the amended Section 149 of the Act extracted hereinabove provide for excluding certain periods while computing the period of limitation as per the amended Section. It prescribes the time or extended time allowed
19 ITA.No.758/Hyd./2025 to the assessee as per the show cause notice under clause (b) of Section 148 of the Act or the period during which the proceeding under Section 148A of the Act is stayed shall be excluded. The sixth proviso to the amended Section 149 of the Act also deals with exclusion of the period referred to in the fifth proviso i.e., the period of limitation available to the Assessing Officer for passing an order under clause (d) of Section 148A of the Act if it does not exceed seven days. In that event, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended. Accordingly, both the fifth and sixth provisos in the first place do not amount to clarification of the first proviso. These two provisos qualify the substantive amended Section 149 of the Act and do not relate to the un-amended Section 149 of the Act for which the first proviso takes care of. The contention of the learned counsel for the Revenue that the time spent from the issuance of notice under Section 148A(b) of the Act up to the passing of the order under Section 148A(d) of the Act in terms of the fifth and sixth provisos stands excluded for reckoning the limitation period for issuance of notice under Section 148 of the Act is not worth acceptance. Section 148A of the Act lays down the procedure for issuance of notice under Section 148 of the Act whereas Section 149 of the Act prescribes strict time limit within which notice under Section 148 of the Act can be issued in the prescribed circumstances. The Revenue is therefore obliged to adhere to the timeline prescribed under Section 149 of the Act for issuance of such notice and undertake the procedure before issuance of notice under Section 148A of the Act.
In this regard, it is apposite to refer to opinion of the Delhi High Court. Paragraphs 15 and 16 of Godrej Industries Ltd., (supra) are extracted hereunder:
20 ITA.No.758/Hyd./2025 “15. The validity of a notice must be judged on the basis of the law existing as on the date on which the notice is issued under Section 148 of the Act, which in the present case is 31st July 2022, by which time the Finance Act, 2021 is already on the statute and in terms thereof, no notice under Section 148 of the Act for AY 2014-15 could be issued on or after" April 2021 based on the first proviso to Section 149 of the Act. Therefore, the fifth proviso cannot apply in a case where the first proviso applies because, if a notice under Section 148 of the Act could not be issued beyond the time period provided in the first proviso, then the fifth proviso could not save such notices The fifth proviso can only apply where one has to determine whether the time limit of three years and ten years in Section 149(1) of the Act are breached. 16. The sixth proviso to Section 149 of the Act has no impact as it only provides a situation where after exclusion of the time period referred to in the fifth proviso, the time available with the Assessing Officer for passing an order under Section 148A(d) of the Act is less than 7 days, then the remaining time frame shall be extended to 7 days and limitation also stands extended by 7 days”
Paragraph 12 of Shree Cement Ltd., (supra) is also extracted hereunder.
"12. In this case, as it pertains to Assessment Year 2017-18, six years period would have expired on 31 March 2024 whereas notice under Section 148 of the Act itself came to be issued on 1 May 2024. Mr. Siddharth Bapna, counsel for Revenue, made an attempt to argue that fifth and sixth provisos to Section 149(1)(b) of the Act would save the period of limitation for issuing notice under
21 ITA.No.758/Hyd./2025 Section 148 of the Act. We are afraid we do not agree with him. Same argument was raised in Hexaware Technologies Lid (supra) and was rejected. The Court held, with respect to applicability of fifth and sixth provisos to Section 149(1)(b) of the Act for extension of limitation for issuing notice under Section 148 of the Act, fifth and sixth provisos are only applicable with respect to the period of limitation prescribed under Section 149(1) of the Act ie, three years or ten years, as the case may be. The Court also held that fifth and sixth provisos extend limitation for issuing notice under Section 149 of the Act, however, first proviso is an exception to the period of limitation and provides for a restriction on the notices under Section 148 of the Act being issued for assessment years up to 2021-22 (in thes case, it is Assessment Year 2017-18) beyond a certain date. Therefore, the way the section would operate, is to first decide whether a notice issued under Section 148 of the Net is within the period of limitation under Section 149(1)(2 (b) of the Act. To decide whether the notice is within the period of limitation under Section 149(1)(a) or (b) of the Act, the extension of time as prescribed in fifth and/or sixth proviso would be considered. The Court further held once, the notice is otherwise within the period of limitation. thereafter one has to see whether the said limit is within the prescribed restriction provided in first proviso or not. If the netice is beyond the restriction period, the notice is invalid, and the fifth and/or the sixth proviso cannot apply at this stage to extend the period of restriction as per first proviso. Hence, if a notice is not within the time prescribed under first proviso to Section 149(1) of the Act, then such period cannot be extended by fifth or sixth proviso. In Hexaware Technologies Ltd.
22 ITA.No.758/Hyd./2025 (supra), the Court had relied upon another judgment of Bombay High Court in Godrej Industries Lid. v. Assistant Commissioner of Income-tax (2024) 160 tasmann.com 13 (Bombay)/(2024) 338 CTR (Bom) 25, which was also authored by one of us (the Chief Justice), where paragraph No.15 reads as under:
“15 The validity of a notice must be judged on the basis of the law existing as on the date on which the notice is issued under Section 148 of the Act, which in the present case is 31" July 2022, by which time the Finance Act, 2021 is already on the statute and in terms thereof, no notice under Section 148 of the Act for AY 2014-15 could be issued on or after 1" April 2021 based on the first proviso to Section 149 of the Act. Therefore, the fifth proviso cannot apply in case where the first proviso applies because, if a notice under Section 148 of the Act could not be issued beyond the time period provided in the first proviso, then the fifth proviso could not save such notices. The fifth proviso can only apply where one has to determine whether the time limit of three years and ten years in Section 149(1) of the Act are breached." 15. The reliance placed by the Revenue on the decision rendered by Patna High Court in the case of Chandra Shekhar (supra) is distinguishable as it relates to the Assessment Year 2020-21 in respect of which the notice under Section 148A(b) of the Act was issued on 28.03.2024. The petitioner therein had assailed the notice on the ground that the Assessing Officer had no jurisdiction to undertake the assessment for the Assessment Year 2020-21 after 31.03.2024 with reference to the second notice issued on
23 ITA.No.758/Hyd./2025 22.04.2024 as it was beyond the time limit stipulated under Section 149(1)(a) of the Act. In the aforesaid facts, the learned Court held that the combined reading of the fifth and sixth provisos meant that the first notice dated 28.03.2024 was issued well within the time limit stipulated. Therefore, the Assessment Officer has jurisdiction.
In view of the above discussion, the initiation of reopening of assessment by the impugned notice dated 22.04.2024 is barred by limitation being beyond the period of six (6) years reckoned from the relevant Assessment Year 2017-18 as per the un-amended Section 149 of the Act read with the first proviso thereof brought into effect from 01.04.2021.
We are also in agreement with the submission made by the learned Senior Counsel for the petitioner that the grounds on which the notice under Section 148 of the Act and the order under Section 148A(d) of the Act have been issued are already taken up in the rectification proceedings vide notice dated 20.01.2022. It is pertinent to refer to the grounds taken in the rectification notice under Section 154 of the Act which are extracted hereunder: "1. On perusal of the assessment order u/s 143(3), it is seen that addition made of Rs.40,00,00,000/- on unexplained cash credits with regard to shares allotment to M/s. Cancer Treatment Services Hyderabad Pvt. Ltd. However, AO added only Rs.40,00,000/- instead of Rs.40,00,00,000/- in the computation of total income. This amounts to short addition made of Rs.39,60,00,000/- having tax effect of Rs.30,59,10,000/- excluding interest.
24 ITA.No.758/Hyd./2025 2. From the tax audit report in Farm 3CD, it is observed that the assessee's company has not paid employees contribution to PF within the due dates prescribed under the acts. In view of the same, the same has to be disallowed u/s 36(1)(va) of the Act. The AO has not made any disallowance u/s 35(1)(va). Hence, an amount of Rs.6,35,949/- shall be disallowed u/s 36(1)(va). Tax effect (excluding interest) of disallowance u/s 36(1)(va) is Rs.2.20,089/- 3. As verified from 3CD report, assessee was shown the an amount of Rs. 78,26,412/- additions to the block of assets. During the assessment proceedings, assessee has not given details and supporting evidences about additions to the block of assets. Hence, the AO has not verified the genuineness of the additions to the block of assets. Hence, the depreciation claimed of Rs. 78,26,412/- is not allowable and the same has to be added to the total income of the assessee. The tax effect of disallowing depreciation is Rs.27,08,565/-"
The reasons mentioned in the order passed under Section 148A(d) of the Act are also extracted hereunder:
“5.1. The assessee requested that the claim of the assessee is found to be in order towards belated payments of ESVEPF amounting to Rs.6,35,949, However, in recent judgement passed by Apex court in the case of Mis Checkmate Services (P) Ltd Vs CIT (791 SC 2022) hell that it is an essential condition for the deduction of employees contribution that such amounts are deposited on or before the due dates defined by the respective statues Therefore contention of the assessee is not in order.
25 ITA.No.758/Hyd./2025 5.2. Further, the assessee furnished partial bills/vouchers towards additions made to fixed assets for the Y 2016-17 relevant to A.Y 2017-18. Since the volumes of the information furnished the same needs to be verified further with third party confirmations, Therefore, the depreciation claimed by the assessee amounting to Rs. 78,26,412 is still stand unexplained with proper evidence."
The Revenue has not disclosed as to whether the proceedings under Section 154 of the Act had ended up in passing of an order. Even then, the reopening of assessment proceedings under Section 148 of the Act would amount to a change in opinion which is not permissible in law. Reliance has also been placed upon the decision of the Apex Court in S.M. Overseas (P.) Ltd., (supra) on the proposition that parallel proceedings cannot be initiated for reopening of the assessment during pendency of the proceedings under Section 154 of the Act. Paras 4 and 5 of the said decision are also quoted hereunder:
"4. Having heard learned counsel appearing on behalf of the respective parties and having gone through the impugned judgment and order passed by the High Court, we are of the opinion that the High Court has committed serious error in observing and holding that the notice under section 154 was invalid as the same was beyond the period of limitation as prescribed/provided under section 154(7) of the Act. It is required to be noted that the proceedings under section 154 of the Act were not the subject-matter before the High Court. Nothing was on record that, in fact, the notice under section 154 of the Act was withdrawn on the ground that the same was beyond the period of
26 ITA.No.758/Hyd./2025 limitation prescribed under section 154(7) of the Act. In the absence of any specific order of withdrawal of the proceedings under section 154 of the Act, the proceedings initiated under section 154 of the Act can be said to have been pending. 5. In that view of the matter, during the pendency of the proceedings under section 154 of the Act, it was not permissible on the part of the Revenue to initiate the proceedings under section 147/148 of the Act pending the proceedings under section 154 of the Act. The High Court has erred in presuming and observing that the proceedings under section 154 were invalid because the same were beyond the period of limitation." 20. In the aforesaid facts and circumstances, we are satisfied that the second issue raised by the petitioner is also required to be answered in the affirmative. 21. Therefore, for the reasons recorded hereinabove, the proceedings initiated under Section 148 of the Act for reopening of the assessment relating to the Assessment Year 2017-18 are barred by limitation and accordingly, set aside.”
9.3. Thus, the Hon’ble Jurisdictional Telangana High Court has held that the notice issued by the Assessing Officer u/sec.148 of the Act dated 22.04.2024 was beyond the time limit stipulated u/sec.149(1)(a) of the Act though the show cause notice dated 28.03.2024 was well within the time limit. In the case in hand also the show cause notice u/sec.148A(b)
27 ITA.No.758/Hyd./2025 of the Act was issued on 19.03.2022 which is well within the time limit, however, the Assessing Officer has not issued the notice u/sec.148 of the Act within the period of limitation as prescribed u/sec.149(1) read with proviso to the said section and therefore, the notice u/sec.148 was issued after 06 years from the end of the assessment year even after availing the time period given to the assessee for reply to the said show cause notice. An identical issue has been considered by this Tribunal in the case of Peda Subbarao Unnam vs. ITO (supra) in Para nos.17 to 20 as under:
“17. We have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered the relevant notice issued by the A.O. under Section 148 of the Act dated 09.04.2022 in the light of the first proviso to Section 149(1)(b) of the Act. The first proviso to Section 149(1)(b) of the Act states that, no notice under Section 148 of the Act shall be issued at any time in a case for the relevant assessment year beginning on or before 01.04.2021 if a notice under Section 148 of the Act could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of Section 149 of the Act, as it stood immediately before the commencement of the Finance Act, 2021.
28 ITA.No.758/Hyd./2025 18. In the present case, the assessment year involved is 2015-16 and as per the unamended provisions of Section 149, if the income escaped assessment is more than Rs. 1 lakh, then the assessment can be reopened up to six years from the end of the relevant assessment year. Accordingly, for the assessment year 2015-16, the assessment could have been reopened on or before 31.03.2022. Since the time limit available for issuance of notice under Section 148 of the Act, as per the old regime of reassessment, was up to 31.03.2022, in our considered view, the A.O. cannot issue reassessment notice under Section 148 of the Act for the assessment year 2015-16 on or after 01.04.2022. In the present case, it is an undisputed fact that the A.O. has issued notice under Section 148 of the Act on 09.04.2022, which is beyond six years from the end of the relevant assessment year. Therefore, the notice issued by the A.O. under Section 148 of the Act dated 09.04.2022 is barred by limitation in view of the first proviso to Section 149(1)(b) of the Act and consequently the impugned assessment order passed by the A.O. dated 28.11.2023 is bad in law and liable to be quashed. 19. This legal proposition is supported by the decision of the Hon'ble High Court of Telangana in the case of Cyberabad Citizens Health Services Private Limited Vs. D.C.I.T. (supra). A similar view has been taken by the Coordinate Bench in the case of A.C.I.T. Vs. Manish Financial in ITA No. 5055/Mum/2024 (supra), wherein the coordinate Bench, after considering the decision of the Hon'ble Supreme Court in the case of Union of India Vs. Rajeev Bansal, held as under:
"6. We heard the parties and perused the material on record. In assessee's case, the AO issued the original notice under section 148 dated 29.06.2021 for AY 2015-16 and consequent to the directions
29 ITA.No.758/Hyd./2025 given by the Hon'ble Supreme Court in the case of Ashish Agrawal (supra), the said notice was deemed as notice issued under section 148A(b). The Assessing Officer after passing the order under section 148A(d) issued the notice under section 148 dated 29.07.2022. The contention of the assessee is that the said notice is barred by limitation as per the first proviso to the un-amended provisions of section 149(1) as has been confirmed by the decision of the Hon'ble Supreme Court in the case of Rajeev Bansal (Supra). The relevant observations of the Hon'ble Supreme Court reads as under- 19. Mr N Venkataraman, learned Additional Solicitor General of India, made the following submissions on behalf of the Revenue: (a) to (c)**** (f). The Revenue concedes that for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA; 46. The ingredients of the proviso could be broken down for analysis as follows: (i) no notice under section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021; (ii) if it is barred at the time when the notice is sought to be issued because of the "time limits specified under the provisions of 149(1)(b) of the old regime.
30 ITA.No.758/Hyd./2025 Thus, a notice could be issued under section 148 of the new regime for assessment year 2021-2022 and before only if the time limit for issuance of such notice continued to exist under section 149(1)(b) of the old regime. 49. The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under section 149(1)(b) of the old regime continues to exist for the assessment year 2021-2022 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed under section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012- 2013, the ten year period would have expired on 31 March 2023, while the six year period expired on 31 March 2019. Without the proviso to Section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012-2013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses. 7. This issue of notice under section 148 issued for 2015-16 being time barred is considered by the coordinate bench in the case of Pushpak Realities Pvt. Ltd. (supra) and it is held that *****For the A.Y.2015-16, the Revenue itself has contended before the Hon'ble Supreme Court as noted above, all the notices issued on or after 01/04/2021 will have to be
31 ITA.No.758/Hyd./2025 dropped as they will not fall for completion during the period prescribed under TOLA. Here notice w/s. 148 for the A.Y. 2015-16 has been issued on 28/07/2022 which is admittedly barred by limitation under the new provision of Section 149(1) and it is not covered under TOLA. Accordingly, all the notices are quashed being barred by limitation on the reasons given above and we are not going on the reasons given by the Id. CIT (A) for quashing the notice." 8. A combined reading of the above observations of the Hon'ble Supreme Court and the findings of coordinate bench makes it clear that the test for checking the validity of notices issued under section 148 under new regime for AYs 2021-22 or prior years is whether the period of six years has expired at the time of issue of such notice and in that case the notice under section 148 becomes invalid. These observations also makes it clear that the time limit of ten years as per the amended provisions of section 149(1)(b) can be applied only prospectively. In assessee's case when we apply this test for AY 2015-16, the period of six years has expired on 31.03.2022 and therefore the notice dated 29.07.2022 under section 148 of the Act for AY 2015-16 is invalid since it is barred by limitation. Accordingly the assessment completed under section 147 of the Act is liable to be quashed. 9. Since we have already quashed the order under section 147 based on the legal contention of notice being time barred the other legal contentions raised by the assessee in the CO have become
32 ITA.No.758/Hyd./2025 academic not warranting any adjudication. Accordingly the CO is partly allowed. 10. We have quashed the order of re-assessment for AY 2015- 16 considering the legal contentions raised by the assessee in the C.O. therefore the appeals of the revenue for AY 2015-16 contending the relief granted by the CIT(A) on the merits of the issues have become infructuous. Accordingly, the appeals of the revenue are dismissed.” 20. In view of the above discussion and respectfully following the ratio laid down by the Hon'ble High Court of Telangana, we hold that the notice issued under Section 148 of the Act dated 09.04.2022 is barred by limitation and therefore the consequent assessment order passed by the A.O. under Section 147 r.w.s. Section 144 of the Act dated 28.11.2023 is bad in law and liable to be quashed. Accordingly, we quash the assessment order passed by the A.O. 21. In the result, the appeal filed by the assessee is allowed.”
9.4. Accordingly, in the facts and circumstances of the case and by following the binding precedent of Hon’ble Jurisdictional High Court (supra), we hold that the notice issued by the Assessing Officer u/sec.148 of the Act dated 15.04.2022 is barred by limitation and the same is liable to be quashed. We Order accordingly. Since we have quashed the notice issued u/sec.148 of the Act being invalid which
33 ITA.No.758/Hyd./2025 also vitiates the re-assessment order passed by the Assessing Officer, therefore, the other grounds raised by the assessee becomes infructuous.
In the result, appeal of the Assessee is allowed.
Order pronounced in the open Court on 17.04.2026.
Sd/- Sd/- [MANJUNATHA G.] [VIJAY PAL RAO] ACCOUNTANT MEMBER VICE PRESIDENT Hyderabad, Dated 17th April, 2026. VBP Copy to : Sudheer Parimala, 7-1-59/7 Dharam Karan Road, 1. Ameerpet, Hyderabad – 500 016. The Income Tax Officer, Ward-10(1), IT Towers, 2. Professor Elyas Burney Road, AC Guards, Masab Tank, Hyderabad – 500 004. Telangana 3. The Pr. CIT, Hyderabad. 4. The DR, ITAT, “B” Bench, Hyderabad. 5. Guard file. BY ORDER VADREVU Digitally signed by VADREVU PRASADA PRASADA RAO Date: 2026.04.17 RAO 12:23:20 +05'30'