SARCPL EMPLOYEES CO OPERATIVE CREDIT SOCIETY LIMITED,HYDERABAD vs. ITO, WARD-9(1), HYDERABAD

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ITA 1373/HYD/2026Status: DisposedITAT Hyderabad02 September 2026AY 2018-1919 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the notice issued under Section 148 was invalid due to lack of proper approval from the specified authority under Section 151, as it was issued beyond three years from the end of the assessment year. Consequently, the reassessment order was quashed.

What were the facts?

The assessee, an employees' co-operative credit society, filed a return in response to a notice under Section 148, claiming deduction under Section 80P and also reporting FD interest. The Assessing Officer (AO) made additions and disallowed the deduction. The assessee appealed to the CIT(A), who upheld the AO's order.

What were the issues?

The primary issue was the validity of the reassessment proceedings initiated by the Assessing Officer due to invalid approval under Section 151 and the notice being barred by limitation.

Which sections of the Income-tax Act were involved?

Section 80P,Section 147,Section 148,Section 148A,Section 149,Section 151

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD

Pronounced: 02.09.2026

आदेश / ORDER

PER VIJAY PAL RAO, VICE PRESIDENT : This appeal by the Assessee is directed against the Order dated 16.02.2026 of the ld. CIT(A)-National Faceless Appeal Centre [in short "NFAC"], Delhi, for the Assessment Year 2018-2019.

2.

The Assessee has raised the following grounds of appeal:

1) He order of the Ld CIT (A) in confirming the AOs Order is erroneous in law contrary to the facts and probabilities of the case and against the principles of equity and natural justice The Ld CIT(A) erred in law in upholding the disallowance of deduction u/s 80P(2)(a)(i) amounting to Rs 2151319 The Appellant is an Employees Co-operative Credit Society providing loans exclusively to its members and squarely qualifies for the deduction on merits A valid return was filed on 06/05/2022 in response to notice u/s 148 claiming the said deduction There is no statutory bar under the Act for allowing a deduction u/s 80P in respect of A Y 2018-19 on a return filed in response to notice u/s 148. The AO ought to have allowed the claim on merits instead of mechanically denying it on the ground of belated filing 2) The Ld CIT(A) erred in upholding the addition of Rs 108018 as Income from Other Sources on account of FD interest. This amount was not concealed it formed part of total interest income of Rs 424266 included in the total income of Rs 4772785 duly reflected in the P & L Account and Balance Sheet The Appellant had classified it under Income from Business OR Profession Making a fresh addition of the same amount under a different head without excluding it from income already declared amounts to double taxation of the same income which is impermissible in law At best reclassification under the correct head was warranted no fresh addition was called for 3) The Ld CIT(A) further erred in upholding an assessment that is wholly without jurisdiction The case was reopened u/s 147 solely on the basis of SFT information relating to cash deposits of Rs 20964740 and cash withdrawals of Rs 51000 The AO after examining the Appellant s reply expressly held that no adverse inference was drawn on these transactions Having made no addition on the very reasons for which the assessment was reopened, the AO had no jurisdiction to make additions on any other issue Both additions disallowance u/s 80P and FD interest relate to issues entirely outside the recorded reasons It is well settled that other income can be assessed in reassessment proceedings only if an addition is first sustained on the original reasons for reopening in the absence thereof, the entire reassessment is bad in law and liable to be quashed. Reliance is placed on CIT v Jet Airways (I) Ltd (2011) 331 ITR 236 (Bom) and Ranbaxy Laboratories Ltd v CIT (2011) (Del) 4) The Learned Assessing officer erred in completing the assessment u/s 147 without issuing further notice u/s 148 for reassessment proceedings if an addition is first sustained on the original reasons for reopening in the absence thereof, the entire reassessment is bad in law and liable to be quashed.”

3.

The assessee has also raised additional grounds as under:

1.

That the notice issued under section 148 dated 27.04.2022 and the order passed under section 148A(d) dated 27.04.2022, both having been made after the expiry of three years from the end of the assessment year 2018-19, are bad in law and without jurisdiction, inasmuch as the prior approval was accorded by the Principal Commissioner of Income-tax, Hyderabad-4, under section 151(i), whereas, the case falling beyond three years, the sanction of the specified authority under section 151(ii), namely the Principal Chief Commissioner/Chief Commissioner of Income-tax, was mandatory, the reassessment, having been initiated upon an invalid sanction by an incompetent authority, is void ab initio, and the assessment order and the impugned appellate order are liable to be quashed.

2.

That, without prejudice to Ground No. 1, the notice under section 148 dated 27.04.2022, having been issued beyond three years from the end of the assessment year 2018-19, is barred by limitation under section 149(1)(b) of the Act, the income chargeable to tax shown to have escaped assessment being below Rs. 50,00,000 - the cash deposit of Rs. 2,09,64,740 that formed the basis of the reopening having been accepted in full without any addition, and the total income assessed being only Rs.22,59,337; the extended period of limitation being unavailable, the reassessment is void and liable to be quashed.”

4.

The learned Authorised Representative of the Assessee has submitted that the issue raised in the additional grounds is purely legal in nature to challenge the validity of the notice issued by the Assessing Officer u/sec.148 of the Income Tax Act [in short "the Act"], 1961 due to invalid approval u/sec.151 of the Act and barred by limitation. Therefore, for adjudication of the additional grounds no fresh verification/investigation of facts or material is required therefore, the additional grounds raised by the assessee be admitted for adjudication on merits as held by the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. Commissioner of Income Tax (1998) 229 ITR 383 (SC).

5.

The learned DR objected to the admission of the additional grounds raised by the assessee at this stage and submitted that the assessee has not raised these issues 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.

i 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 are 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, the additional grounds raised by the assessee is admitted for adjudication. Since the issue raised by the assessee is legal in nature and goes to the root of the matter therefore, I first take up the additional ground raised by the assessee for hearing and adjudication. 7. The learned Authorised Representative of the Assessee has submitted that the Assessing Officer has issued notice u/sec.148 of the Act on 27.04.2022 which is after the expiry of 03 years from the end of the assessment year under consideration. He further submitted that the Assessing Officer has issued the said notice u/sec.148 by taking the approval of PCIT whereas the Competent Authority for granting the approval u/sec.151 is for issuing the notice u/sec.148 after three years from the end of the assessment year under consideration is CCIT/DGIT and not PCIT. Therefore, the notice issued by the Assessing Officer u/sec.148 is invalid for want of valid approval u/sec.151 of the Act and the same is liable to be quashed. In support of his contention, he has relied upon the decision of this Tribunal dated 24.09.2025 in the case of Sama Sangeeta Reddy vs. DCIT, CC-3(2), Hyderabad in ITA.No.680/Hyd./ 2025, dated 24.09.2025 and submitted that this Tribunal on identical facts has considered and decided this issue in favour of the assessee. The learned Authorised Representative of the Assessee has also relied upon the Judgment of Hon’ble jurisdictional Telangana High Court in the case of Kalyan Chillara vs. Dy. CIT [2024] 465 ITR 729 (Telangana-HC).

8.

On the other hand, the learned DR has relied upon the Orders of the authorities below.

9.

I have considered the rival submissions as well as relevant material on record. The Assessing Officer has issued notice u/sec.148 of the Act on 27.04.2022 placed at Page no.22 of the paper book as under:

9.1. Thus, as per Para no.3 of the said notice the Assessing Officer has stated that the notice was being issued after obtaining prior approval from the PCIT, Hyderabad-2, Hyderabad. The Competent Authority u/sec.151 of the Act for grant the approval for issuing the notice u/sec.148 after three years from the end of the assessment year under consideration is CCIT/DGIT and not PCIT. An identical issue has been considered by this Tribunal in the case of Sama Sangeeta Reddy vs. DCIT, Central Circle-3(2), Hyderabad in ITA.No.680/Hyd./2025, dated 24.09.2025 in Para nos.10 to 12 as under:

“10. Coming back to the arguments of the Learned Counsel for the Assessee. Learned Counsel for the Assessee argued that, once notice issued under section 148 of the Act was held to be as per new regime of re-assessment under section 148 and 148A of the Income Tax Act, 1961, then, the approval for issue of such notice should be from the Pr. Chief Commissioner of Income Tax as per section 151 of the Income Tax Act, 1961, whereas in the present case, the Assessing Officer has obtained approval from the Pr. Commissioner of Income Tax, Hyderabad-4, Hyderabad for issuance of notice under section 148 of the Act, which invalidates the said notice. We find that, as per the provisions of section 151 of the Act as amended from 01.04.2021, the Component Authority for sanction of issue of notice under section 148 at the Act is Pr.

Chief Commissioner of Income Tax, if more than 3 years have elapsed from the end of the relevant assessment year. In the present case, there is no dispute with regard to the fact that, notice issued for the assessment year 2016-2017 on 01.04.2021 is beyond 3 years from the end of the relevant assessment year and consequently, the Assessing Officer ought to have taken sanction from the Pr. Chief Commissioner of Income Tax instead of Pr. Commissioner of Income Tax, Hyderabad-4, Hyderabad. Therefore, on this count also, notice issued under section 148 of the Income Tax Act, 1961 on 01.04.2021 is invalid and consequent assessment proceedings are bad in law and liable to be quashed. 11. The assessee has relied upon the decision of ITAT, Hyderabad Bench, Hyderabad in the case of Iqbal Ali Jaweed, Hyderabad vs., ITO [INT. TAXN]-1, Hyderabad (supra), in support of his contention. The Coordinate Bench of Hyderabad Tribunal on identical set of facts has held as under : “11. We have heard both the parties, perused the material on record and the orders of the authorities below. There is no dispute with regard to the fact that, reopening in the present case has been taken-up as per the amended provisions of sec.147, 148, 149, 151 of the Income Tax Act, 1961. As per the amended provisions of sec.148 of the Act which is evident from subsequent notices issued by the Assessing Officer u/sec.148 of the Act dated 27.07.2022 where the Assessing Officer in light of the decision of Hon’ble Supreme Court in the case of Union of India vs., Ashish Agarwal (supra), has considered the earlier notice issued u/sec.148, as fresh notice in light of provisions of sec.148A(d) of the Act. Therefore, it is necessary for us to examine the validity of notice issued by the Assessing Officer u/sec.148 of the Act, after obtaining prior approval of the Commissioner of Income Tax [International Taxation]-2, Mumbai accorded on 25.07.2022. Admittedly, the Assessing Officer issued notice u/sec.148 of the Act, after obtaining prior approval of the Commissioner of Income Tax [International Taxation]-2, Mumbai, dated 25.07.2022, but, as per the amended provisions of sec.151(ii) of the Act, the Competent Authority for granting sanction u/sec.151(ii) of the Act, in a case where the assessment has been reopened after 3 years from the end of the relevant assessment year is Pr. CCIT or Pr. Director General of Income Tax, but, not CIT as considered by the learned Assessing Officer. This legal principle is supported by the decision of ITAT, Hyderabad in the case of Raziulla Syed, Hyderabad vs., ITO [Intl. TAXN]-2, Hyderabad in ITA.No.986/Hyd./2024, dated 11.03.2025 for the assessment year 2017-2018, where under identical set of facts, the Tribunal by following certain judicial precedents including the decision of Hon’ble Bombay High Court in the case of Siemens Financial Services (P.) Ltd., vs., DCIT [2023] 457 ITR 647 (Bom.) held as under” “7. We have heard the rival submissions of both the parties and perused the material available on record. There is no dispute between the parties that the assessee is a Non-Resident Indian. Admittedly, in the instant case, the assessment has been reopened u/sec.147 of the Act by issuance of notice u/sec.148 of the Act dated 23.04.2021 and by virtue of the order of Hon’ble Supreme Court in the case of Union of India vs. Ashish Agarwal reported in 2022-SC-Online-SC-543, re-assessment notice issued has been treated as notice issued u/sec.148A of the Act and after due procedure final notice u/sec.148 of the Act dated 30.07.2022 was issued. The assessee contends that any re-assessment notice issued u/sec.148 of the Act after 1st April, 2021 falls under New Scheme of re-assessment proceedings and as per sec.151, the approval of the Specified Authority as specified therein should be obtained. According to the assessee, under New Scheme of re-assessment proceedings, the Specified Authority u/sec. 151(ii) of the Act, in case an assessment is reopened after a period of three years from the end of the relevant assessment year, the Principal Chief Commissioner or Principal Director General are the Specified Authority(ies). Since in the present case, the Assessing Officer has issued notice u/sec.148 of the Act dated 30.07.2022 after approval from Principal Commissioner of Income Tax-1, Hyderabad, the said approval is not in accordance with provision of sec.151(ii) of the Act and consequently, the notice issued by the Assessing Officer and assessment order passed u/sec.147 r.w.s.144C(13) of the Act dated 02.03.2024 is illegal, void abinitio and liable to be quashed.

7.1. There is no dispute with regard to the fact that the Assessing Officer issued original notice u/sec.148 of the Act for the assessment year in question on 23.04.2021 and as per new scheme of re-assessment procedure, the same has been treated as notice issued u/sec.148A of the Act in light of decision of Hon’ble Supreme Court in the case of Union of India vs. Ashish Agarwal (supra) and finally re-assessment notice u/sec.148 was issued to the assessee on 30.07.2022 after approval from the Principal Commissioner of Income Tax- 1, Hyderabad dated 27.07.2022. As per the provisions of sec.151(ii) of the Act, if the reopening of the assessment is after three years from the end of the relevant assessment year, then the Specified Authority for grant of approval is Principal Chief Commissioner of Income Tax or Principal Director General of Income Tax and this legal principle is supported by the decision of Hon’ble Supreme Court in the case of Union of India vs. Rajeev Bansal [2024] 167 taxmann.com 70 (SC) wherein the Hon’ble Supreme Court has analysed the issue in light of decision of Hon’ble Supreme Court in the case of Union of India vs. Ashish Agarwal (supra), relevant Circulars/Notifications issued by CBDT and provisions of Taxation and Other Laws Amendment Act, 2021 [in short “TOLA”] and after considering relevant facts held that after 01.04.2021, the New Regime has specified different authorities for granting sanction u/sec.151(ii) of the Act and in case the assessment is reopened after three years from the end of the relevant assessment year, then the Specified Authority to grant sanction is the Principal Chief Commissioner of Income Tax or Principal Director General of Income Tax. In the present case, there is no dispute with regard to the fact that the Assessing Officer issued notice u/sec.148 of the Act dated 30.07.2022 with the prior approval of Principal Commissioner of Income Tax-1, Hyderabad accorded on 27.07.2022 vide Ref.F.No.Pr.CIT- 1/Hyd/147/2022-23. Therefore, in our considered view, notice issued by the Assessing Officer u/sec.148 of the Act dated 30.07.2022 with the approval of Principal Commissioner of Income Tax-1, Hyderabad dated 27.07.2022 is not in accordance with the provisions of sec.151(ii) of the Act and consequently, the re-assessment order passed by the Assessing Officer u/sec.147 r.w.s.144C(13) of the Act is illegal, void abinitio and liable to be quashed.

7.2. The assessee has relied upon the decision of ITAT, Mumbai in the case of ACIT vs. Manish Financial ITA.No.5055/Mum./2024 wherein the Tribunal after considering the relevant provisions of law and also by following decision of Hon’ble Supreme Court in the case of Union of India vs., Rajeev Bansal (supra) held as under :

"In assessee's case from the perusal of para 3 of the notice issued under section 148 for AY 2016-17 we notice that the same is issued with the prior approval of Pr.CIT-19 Mumbai accorded on 29.07.2022 vide reference No.Pr.CIT-19/148/2022-23 and this fact is not contravened by the ld DR. For AY 2016-17, the period of three years have elapsed as of 31.03.2020 and the notice is issued beyond three years on 30.07.2022. Therefore as per the decision of the Hon'ble Supreme Court, the approval should have been obtained under the amended provisions of section 151(ii) of the Act i.e. the approval should have been obtained from the Principal Chief Commissioner whereas the approval has been obtained from Pr. CIT as stated in the notice under section 148 itself. Therefore we see merit in the contention of the assessee that the notice under section 148 for AY 2016-17 is issued without obtaining the prior approval from the appropriate authority. Accordingly we hold that the notice under section 148 is invalid and the consequent assessment under section 147 is liable to be quashed."

7.3. The assessee also relied upon the decision of ITAT, Mumbai Bench in the case of Manish Jagdish Joshi vs. CIT ITA.No.1617/Mum./2024 and the Mumbai Bench of the Tribunal by following the decision of Hon’ble Bombay High Court in the case of Siemens Financial Services (P.) Ltd., vs. DCIT [2023] 457 ITR 647 (Bom.) held as under :

“We find that while considering the similar issue and similar submissions the Hon'ble Jurisdictional High Court in Siemens Financial Services (P.) Ltd. v/s DCIT, (2023) 457 ITR 647 (Bom.) held that TOLA would not affect the scope of section 151 and sanction of Specified Authority was to be obtained in accordance with the law existing when the sanction was obtained. It was further held that where the Assessing Officer issued a reopening notice beyond the period of three years, approval was required to be taken as per provisions of amended section 151 from the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. Therefore, respectfully following the aforesaid decision of the Hon'ble Jurisdictional High Court we find no merits in the reliance placed by the Revenue on the provisions of TOLA. As, in the present case, the period of three years has elapsed from the end of the relevant assessment year and the order dated 23/05/2022 was passed under section 148A(d) of the Act after obtaining the approval of the Principal CIT-1, Mumbai vide letter dated 15/07/2022, we are of the considered view that the Revenue has not followed the mandatory provisions of the Act while initiating the reassessment proceedings and sanction of the Specified Authority is not in conformity with the law prevalent at the time of grant of sanction." 7.4. In this view of the matter and by respectfully following the decision of Hon’ble Supreme Court in the case of Union of India vs. Rajeev Bansal (supra) and also the decisions of ITAT, Mumbai Benches, Mumbai in the cases of ACIT vs. Manish Financial and Manish Jagdish Joshi vs. CIT (supra), we are of the considered view that the notice issued by the Assessing Officer u/sec.148 of the Act dated 30.07.2022 by obtaining prior approval from the Principal Commissioner of Income Tax-1, Hyderabad dated 27.07.2022 and consequential final assessment order dated 02.03.2024 passed by the Assessing Officer u/sec.147 r.w.s.144C(13) of the Act is illegal, void abinitio and thus, we quash the final assessment order dated 27.07.2022 passed by the Assessing Officer.” 12. In this view of the matter and considering the facts and circumstances of the present case and also by following the decision of ITAT, Hyderabad Bench, Hyderabad in the case of Raziulla Syed, Hyderabad vs., ITO [Int. TAXN]-2, Hyderabad (supra), we are of the considered view that the notice issued u/sec.148 of the Act dated 27.07.2022 by obtaining prior approval from the Commissioner of Income Tax [International Taxation]-2, Mumbai dated 25.07.2022 is not in accordance with sec.151(ii) of the Income Tax Act, 1961 as applicable from 01.04.2021 onwards. Therefore, we quash the notice issued u/sec.148 of the Act dated 01.04.2021 and 27.07.2022 and consequent Final Assessment Order dated 13.03.2024 passed by the Assessing Officer u/sec.147 r.w.s.144C(13) of the Income Tax Act, 1961. Accordingly, the grounds raised by the assessee for the assessment year 2016-2017 are allowed”.

12.

In this view of the matter and considering the facts of the case and also by following judicial precedents discussed hereinabove, we are of the considered view that, the notice issued under section 148 of the Income Tax Act, 1961 dated 01.04.2021 and consequent assessment order passed by the Assessing Officer under section 147 r.w.s.144B of the Income Tax Act, 1961 dated 29.03.2022 is bad in law, void abinitio and liable to be quashed. We, thus, quash the assessment order passed by the Assessing Officer.”

9.2. Accordingly, in the facts and circumstances of the case, when the notice issued by the Assessing Officer u/sec.148 of the Act on 27.04.2022 is beyond three years from the end of the assessment year under consideration then, taking approval from PCIT is not valid which renders the notice as illegal and liable to be set aside. I Order accordingly.

10.

Since I have quashed the notice issued by the Assessing Officer u/sec.148 of the Act as invalid which also vitiates the re-assessment order passed by the Assessing Officer. Therefore, the other grounds raised by the assessee are neither argued nor taken up for adjudication.

11.

In the result, appeal of the Assessee is allowed.

Order pronounced in the open court on 02.09.2026 Sd/- VIJAY PAL RAO VICE PRESIDENT Hyderabad, Dated 02nd day of September, 2026 VBP Copy to: SARCPL EMPLOYEES CO OPERATIVE CREDIT SOCIETY LIMITED, 1 POLICE LINES, AMBERPET, HYDERABAD-500013, TELANGANA ITO, WARD-9(1), O/O ITO, WARD-9(1), IT 2 TOWERS, HYDERABAD-500028, TELANGANA 3 THE PR. CIT, HYDERABAD 4 THE D.R., ITAT, HYDERABAD SMC-BENCH, HYDERABAD. 5 GUARD FILE TRUE COPY VADREVU Digitally signed by VADREVU PRASADA PRASADA RAO ASSISTANT REGISTRAR / Date: 2026.09.02 RAO I.T.A.T., HYDERABAD 10:48:04 +05'30'

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