BALAJI PATEL KOLA,HYDERABAD vs. DCIT, CENTRAL CIRCLE - 1(2), HYDERABAD

आदेश / O R D E R PER MANJUNATHA.G, AM:

These appeals filed by the assessee are directed against the order

of the Commissioner of Income Tax (Appeals), Hyderabad-11, dated

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 2 ::

14.10.2025 for AYs 2019-20, 2020-21, 2021-22 & 2023-24 and dated

17.10.2025 for AY 2019-20.

ITA No.2372/Hyd/2025 for AY 2019-20

No.2372/Hyd/2025 for AY 2019-20:

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 3 ::

grounds for AY 2019-20, which are as under:

3.1 The Ld. Counsel for the assessee referring to petition for admission

of additional grounds submitted that the assessee has taken additional

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 4 :: grounds challenging the validity of assessement order passed by the AO

u/s.143(3) r.w.s.147 of the Income Tax Act, 1961 (in short “the Act“) in

light of limitation provided for passing such assessement order u/s.153 of

the Act and the additional grounds taken by the assessee is purely on

legal ground which is covered by the decision of the ITAT Hyderabad

Bench and therefore, in view of the decision of the Hon’ble Supreme Court

in the case of National Thermal Power Co. Ltd. v. CIT reported in 229 ITR

383 (SC), the petition filed by the assessee should be admitted.

3.2 The Ld. Sr. AR for the Revenue opposed the petition filed by the

assessee for admission of additional grounds and submitted that the

assessee has failed to make out a case on relevant facts were already on

record and further, there is no need to verify the records to ascertain the

facts which is relevant to decide the legal ground taken by the assessee

and therefore, in the absence of relevant facts, the additional grounds

filed by the assessee at this stage should not be admitted. Therefore, she

submitted that the petition filed by the assessee should be rejected.

3.3 Having heard both the sides and after considering the relevant

petition filed by the assessee for admission of additional grounds, we find

that grounds taken by the assessee in their petition are purely on legal

issue which goes to the root of the matter for passing the order within the

time limit u/s.153 of the Act and since, grounds taken by the assessee

are purely on legal ground and facts with regard to the above legal

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 5 :: grounds are already on record and there is no need to verify the records

to ascertain the facts, in our considered view, in view of the decision of

the Hon’ble Supreme Court in the case of NTPC Ltd. (supra), petition filed

by the assessee deserves to be admitted and thus, we admit the

additional grounds filed by the assessee for adjudication.

filed his Return of Income (RoI) for AY 2019-20 on 29.09.2019 admitting

total income of Rs.33,11,250/-. A search & seizure operation u/s.132 of

the Act was carried out on 04.01.2023 in the case of M/s. Exel Rubber

Group and as apart of search, the case of the assessee was covered

u/s.132 of the Act and search was conducted in the residence of the

assessee on 05.01.2023. Consequent to search, notice u/s.148 of the Act

dated 20.03.2023 was issued which is duly served on the assessee. In

response to the notice issued, the assessee filed RoI on 29.06.2023

admitting total income of Rs.33,11,250/-. The assessement has been

completed u/s.143(3) r.w.s.147 of the Act on 26.09.2024 and assessed

total income at Rs.1,36,06,961/- by making addition of Rs.97.60 lakhs

u/s.69A of the Act towards cash payment for purchase of property,

professional receipts short admitted of Rs.3,85,711/- and disallowance of

deductions claimed u/s.80C of the Act for Rs.1,50,000/-.

appeal before the Ld.CIT(A) and challenged the additions made by the AO

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 6 :: towards cash payment for purchase of property of Rs.97.60 lakhs u/s.69A

of the Act, professional receipts short admitted of Rs.3,85,711/- &

disallowance of deductions claimed u/s.80C of the Act for Rs.1,50,000/-

and argued that the AO made addition towards unexplained investment

on the basis of dumb document without any reference or evidence for

payment of on-money. The assessee further submitted that the AO

made addition towards professional receipts on the ground that there is a

difference in professional receipts short admitted in the RoI and the

professional receipts as per the TDS, but fact remains that the assessee

has filed reconciliation and explained the difference. The assessee also

challenged addition of Rs.1,50,000/- towards deduction claimed under

Chapter-VIA on the ground that no addition can be made in the absence

of incriminating material. The Ld.CIT(A) after considering the relevant

submissions of the assessee and also taken note of various reasons

recorded by the AO, rejected the explanation of the assessee and

sustained the additions made by the AO towards unexplained investment

of Rs.97,60,000/- by holding that during the course of search on

05.01.2023, incriminating material in the form of receipts was found and

seized and as per the receipt, the details of transaction of land

admeasuring 32 acres at Sl.No.6 of the receipt and the total sale

consideration is mentioned at Rs.4.32 Crs. and advance amount has

mentioned as Rs.50 lakhs. The sale consideration per acre works out to

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 7 :: Rs.13,50,000/-, whereas the value reflected in the Sale Deed is

Rs.10,40,000/- and therefore, the AO was correct in holding that the

differential amount is paid as on-money for purchase of property and

thus, rejected the explanation of the assessee and sustained the additions

made by the AO. The Ld.CIT(A) had also sustained the additions made by

the AO towards differential professional charges on the basis of TDS

deducted u/s.194J of the Act by M/s. Maven Medical Care LLP and the

same has not been accounted for by the assessee. Likewise, the

Ld.CIT(A) also confirmed the additions made by the AO towards

disallowance of deduction u/s.80C of the Act in the absence of supporting

evidences.

appeal before this Tribunal.

submitted that the assessement for AY 2019-20 has been completed on

26.09.2024 and the assessement order passed by the AO is barred by

limitation u/s.153 of the Act and more particularly in light of Clause (xii)

of Explanation 1 to Section 153 of the Act, where the AO shall get

exclusion of period from the date of search to the date of handing over of

the books of accounts to the AO not exceeding ‘180’ days and to exclude

the above period, in the present case, the AO received the seized

materials on 22.08.2023 and the period to be excluded as per Clause

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 8 :: (xii) of Explanation 1 to Section 153 of the Act is the period included in

the limitation period i.e. from 01.04.2023 to 22.08.2023 i.e. 144 days

and if you exclude the above period, the limitation for passing the

assessement order would expire on 22.08.2024, whereas the AO has

passed the assessement order on 26.09.2024 which is beyond the

limitation provided under the Act. The Ld. Counsel for the assessee

further referring to letter of the AO dated 23.03.2024 submitted that

although the AO refers to Clause (xii) of Explanation 1 to Section 153 of

the Act and claims that the extended time available up to 27.09.2024, but

fact remains that the AO has considered the maximum period of ‘180’

days, even though, the time or period lost by the AO in the process of the

date of search to handover books of accounts to the AO is only ‘144’ days

as per the letter of the AO itself. Therefore, he submitted that the order

of the AO is barred by limitation and thus, to be quashed. In this regard,

he relied upon the decision of ITAT Hyderabad Bench in the case of

M/s.Exel Rubber (P) Ltd., in ITA No.1894/Hyd/2025 order dated

18.02.2026 and also the decision of the ITAT Hyderabad Bench in the

case of Srinivas Reddy Yeturu v. DCIT in ITA No.1898/Hyd/2025 order

dated 18.02.2026.

there is no merit in the legal ground taken by the assessee challenging

the validity of assessement order passed by the AO on 26.09.2024

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 9 :: because the order passed by the AO is well within the limitation period

provided u/s.153 of the Act, coupled with Clause (xii) of Explanation 1 to

Section 153 of the Act, where the period not exceeding ‘180’ days

commencing from the date on which the search is initiated u/s.132 of the

Act and on which the books of accounts are handed over to the AO having

jurisdiction over the assessee shall be excluded. In the present case,

search was conducted on 05.01.2023 and the AO has handed over the

seized material on 22.08.2023 and if you consider the above period, the

AO has taken more than ‘180’ days for handing over the seized material

to the AO of the assessee, but as per Clause (xii) of Explanation 1 to

Section 153 of the Act, it should not exceed ‘180’ days and if you add

‘180’ days to the normal time limit provided u/s.153(1) of the Act, then

the time limit available for the AO to complete the assessement was up to

27.09.2024 and the AO has passed assessement order on 26.09.2024

which is within the time limit provided under the Act. Therefore, he

submitted that the legal ground taken by the assessee should be rejected.

record and had gone through orders of the authorities below. Facts borne

out from the record show that a search and seizure operation u/s.132 of

the Act was carried out in the case of the assessee on 05.01.2023. It is

also an admitted fact that the seized materials are handed over to the AO

on 22.08.2023 which is evident from the letter of the DCIT, Central

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 10 ::

Circle-1(2), Hyderabad dated 23.03.2024. In the process of receiving

books of accounts from the date of search to the date of handing over the

books of accounts, the AO lost ‘230’ days and as per Clause (xii) of

Explanation 1 to Section 153 of the Act, the AO got exclusion of period

not exceeding ‘180’ days. Therefore, the AO has added ‘180’ days to the

normal time limit provided u/s.153(1) of the Act for completion of

assessement and assumed that time available for passing the

assessement order for the assessement year under consideration was up

to 27.09.2024 and therefore, passed the assessement order on

26.09.2024.

ordinate Bench of ITAT, Hyderabad Bench, in the case of Srinivas Reddy

Yeturu v. DCIT in ITA No.1898/Hyd/2025 order dated 18.02.2026 and on

identical set of facts and on the basis of very same search action

conducted in the case of Exel Rubber Group on 04.01.2023 held as under:

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 11 ::

present case, the Asst. Year involved is Asst. Year 2022-23 and time limit for completion of assessment is 12 months from the end of the A.Y 2022-23 i.e. up to 31/03/2024. However, the case of the assessee falls under clause (xii) of Explanation (1) to section 153 of the Act, because a search and seizure operation was conducted under section 132 of the Act on 4/1/2023 and as per clause (xii) of Explanation (1) to section 153, the period (not exceeding 180 days) commencing from the date of search initiated under section 132 of the Act and ending on the date on which the books of account or other document are handed over to the A.O having jurisdiction over the assessee shall be excluded. Therefore, from clause (xii) of Exp. (1) to section 153 of the Act, the A.O gets exclusion of 180 days for the purpose of computing the limitation provided under section 153(1) of the Act, towards the time taken by the A.O of the searched person to hand over the books of account or any other valuable articles or things to the A.O of the assessee up to a maximum of 180 days, even if the time taken by the A.O of the searched person is more than 180 days. If we carefully read clause (xii) of Exp.(1) to section 153 of the Act, it is not an extension of limitation provided for completion of assessment, but it is only exclusion of time taken by the A.O of the searched person which was lost by the A.O of the assessee for assessing the income of the assessee up to a maximum of 180 days. Therefore, while computing the limitation period, the period of 180 days starting from the date of search to ending on the date of handing over books of accounts should be excluded for computing period of limitation. Therefore, in our considered view, if the time taken by the A.O of the searched person covered during the limitation period, then the entire time taken by the A.O for handing over the books of account not exceeding 180 days can be excluded. In case, the time taken by the A.O for handing over the seized material partially goes under the limitation period and partially goes under the other financial year or non-limitation period, then only the time lapsed by the A.O during the limitation period alone should be excluded, because clause (xii) of explanation (1) to section 153 of the Act is only excludes period taken by the A.O for handing over the books of account but, it shall not extend the period up to 180 days. Therefore, it is necessary for us to examine the argument of the learned Counsel for the assessee, in the light of date of initiation of search and date of handing over of the books of account and other valuable materials and the date of the assessment order in light of clause (xii) of explanation (1) of section 153 of the Act.

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 12 ::

materials from 4/1/2023 to 22/08/2023 is 231 days. As per clause (xii) of explanation (I) of section 153, the period taken by the A.O shall not exceed 180 days. As we have already noted in the earlier paragraphs of this order, Exp.(1) of clause (xii) is only an exclusion clause and therefore, whatever time lost by the A.O in the limitation period alone can be excluded for the purpose of computation of limitation period. In other words, if the time taken by the A.O from the date of search to the handing over of the books of account does not fall under the limitation period, then obviously there is no inconvenience is caused to the A.O because of such proceeding and consequent handing over of the books of account and consequently, there is no question of exclusion of the period which is not covered in the limitation period. For example, if the search is conducted on 04/01/2022 and the books of account and other materials are handed over to the A.O on 22/08/2022, in such a situation, the A.O has lost the period from 04/01/2022 to 22/08/2022 and the entire period is not covered in the limitation period and therefore, the question of excluding the period not exceeding 180 days shall not arise. Suppose if the search is conducted on 25/03/2023 and the books of account are handed over on 30/09/2023, then the period not exceeding 180 days shall be excluded, because the entire period is covered under limitation period for the Assessment. Year 2022-23. However, in a situation like in the present case, if search is initiated on 4/1/2023 and the books of accounts are handed over on 22/08/2023, although the A.O had taken more than 180 days for handing over the books of accounts, but in view of clause (xii) of explanation (1) of section 153, the period not exceeding 180 days shall be excluded for the purpose of computing the limitation period. However, the fact remains that, in the present case, the period taken by the AO for handing over books of account is covered in two financial years, i.e. (1) from 4-1-2023 to 31-03-2023 in financial year 2022-23 and (ii) the period from 1-4-2023 to 22-08- 2023 in financial year 2023- 24. Further, in the present case, for the Assessment. Year 2022- 23, limitation period starts from 1-4-2023. The time taken by the AO for handing over books of accounts to the AO of the assessee starting from 4/1/2023 to 31/03/2023 is not included in the above limitation period. Since, in the present case, the time taken by the A.O for handing over the books of account is not fully included in the limitation period, in our considered view, the period lost by the A.O in the process of receiving the books of account from the A.O and included in the limitation period alone should be excluded. Therefore, if we exclude the period lost by the A.O in the process of search and handing over the books of account, which is covered in the limitation period, then only the period starting from 1/4/2023 and up to 22/08/2023 shall alone be excluded for computing the limitation period. In the present case, the time limit for completion of the assessment is up to 31/03/2024 and the time lost by the A.O in the process of handing over the books of account by the A.O is 144 days from 1/4/2023 to 22/08/2023 and if we add 144 days from 31/03/2024, then the A.O shall get the time limit for passing the assessment order up to 22/08/2024, whereas the AO passed Assessment order on 27-09-2024. Since the A.O passed the assessment order on 27/09/2024, in our considered view, the assessment order passed by the A.O is clearly barred by limitation in

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 13 :: view of specific provisions of clause (xii) of Explanation (1) to section 153 of the Act. Thus, we quash the assessment order passed by the A.O under section 143(3) of the I.T. Act, 1961 dated 27/09/2024. We order accordingly. 11. In the present case, search was conducted on 05.01.2023 and the

books of accounts and other seized material were handed over to the AO

of the assessee on 22.08.2023. Although, in the process of the date of

search to the date of handing over books of accounts and other seized

materials took ‘230’ days but in view of Clause (xii) of Explanation 1 to

Section 153 of the Act, the period can be excluded, shall not exceed ‘180’

days and therefore, the AO added ‘180’ days to the normal time limit

provided for passing the order u/s.153(1) of the Act dated 31.03.2024

and claimed that the available time for passing the assessement order is

up to 27.09.2024. But, as already held by Co-ordinate Bench of this

Tribunal in the case of Srinvias Reddy Yeturu (supra) what is to be

excluded is that the time lost by the AO in the process of receiving books

of accounts not exceeding ‘180’ days, if such time period lost by the AO is

included in the limitation period for passing the assessement order. In

the present case, the limitation period starts from 01.04.2023 for the

assessement year under consideration and if you consider the time lost by

the AO from 01.04.2023 to 22.08.2023, then the AO lost ‘144’ days in the

process of receiving books of accounts and if you add ‘144’ days to the

normal time limit provided for passing the assessement order on

31.03.2024, the outer time limit for completion of the assessement order

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 14 :: would expire on 22.08.2024, whereas the AO has passed assessement

order on 26.09.2024 which is barred by limitation. Therefore, by

following the decision of Co-ordinate Bench in the case of Srinivas Reddy

Yeturu (supra), we hold that the assessement order passed by the AO is

barred by limitation and liable to be quashed. Thus, we quashed the

assessement order passed by the AO u/s.143(3) r.w.s.147 of the Act

dated 26.09.2024.

for AY 2019-20 is allowed.

ITA No.2437/Hyd/2025 for AY 2019-20 (Kola Venkateshwara Patel)

and issues which we had considered in ITA No.2372/Hyd/2025 for AY

2019-20 in the case of Balaji Patel Kola. In the present case, the

assessement has been completed on 24.09.2024 in light of search

conducted on 04.01.2023 in the case of M/s.Exel Rubber Group of cases.

We find that an identical issue has been considered by us in the case of

Balaji Patel Kola (assessee) in ITA No.2372/Hyd/2025 for AY 2019-20,

where the Tribunal by following the decision of Co-ordinate Bench in the

case of Srinivas Reddy Yeturu v. DCIT in ITA No.1898/Hyd/2025 order

dated 18.02.2026, quashed the assessement order passed by the AO

u/s.143(3) r.w.s.147 of the Act dated 24.09.2024 as barred by limitation.

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 15 ::

The reasons given by us in preceding paragraph Nos.9 to 11 shall

mutatis-mutandis apply to this appeal as well. Therefore, for similar

reasons we quash the assessement order passed by the AO u/s.143(3)

r.w.s.147 of the Act dated 24.09.2024.

for AY 2019-20 is allowed.

ITA Nos.2373 & 2374/Hyd/2025 for AYs 2020-21 & 2021-22

No.2373/Hyd/2025 for AY 2020-21:

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 16 ::

grounds for AY 2020-21, which are as under:

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 17 :: 17. The Ld. Counsel for the assessee, referring to petition for admission

of additional grounds submitted that the assessee has taken additional

grounds challenging the validity of assessement order passed by the AO

u/s.143(3) r.w.s.147 of the Act, 1961 in light of reasons recorded by the

AO for issuing notice u/s.148 of the Act and claimed that the AO has

relied upon the third-party information for recording reasons and claimed

that the case of the assessee fall under Explanation 2(i) of Section 148 of

the Act. However, when the AO has relied upon the information found

during the course of search, in the third party case, the case falls within

the ambit of Explanation 2(iv) of Section 148 of the Act and the additional

grounds taken by the assessee is purely on legal ground which is covered

by the decision of the ITAT Hyderabad Bench and therefore, in view of the

decision of the Hon’ble Supreme Court in the case of National Thermal

Power Co. Ltd. v. CIT reported in 229 ITR 383 (SC), the petition filed by

the assessee should be admitted.

assessee for admission of additional grounds and submitted that the

assessee has failed to make out a case on relevant facts were already on

record and further, there is no need to verify the records to ascertain the

facts which is relevant to decide the legal ground taken by the assessee

and therefore, in the absence of relevant facts, the additional grounds

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 18 :: filed by the assessee at this stage should not be admitted. Therefore, she

submitted that the petition filed by the assessee should be rejected.

petition filed by the assessee for admission of additional grounds, we find

that grounds taken by the assessee in their petition are purely on legal

issue which goes to the root of the matter in light of reasons recorded by

the AO for issuing notice u/s.148 of the Act and claimed that the AO has

relied upon the third-party information for recording reasons and claimed

that the case of the assessee fall under Explanation 2(i) of Section 148 of

the Act. However, when the AO has relied upon the information found

during the course of search, in the third party case, the case falls within

the ambit of Explanation 2(iv) of Section 148 of the Act and since,

grounds taken by the assessee are purely on legal ground and facts with

regard to the above legal grounds are already on record and there is no

need to verify the records to ascertain the facts. In our considered view,

in view of the decision of the Hon’ble Supreme Court in the case of NTPC

Ltd. (supra), petition filed by the assessee deserves to be admitted and

thus, we admit the additional grounds filed by the assessee for

adjudication.

filed RoI for AY 2020-21 on 13.01.2021 admitting total income of

Rs.31,65,680/-. A search & seizure operation u/s.132 of the Act was

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 19 :: carried out on 04.01.2023 in M/s.Exel Rubber Group and as a part of

search, the case of the assessee was covered u/s.132 of the Act.

Consequent to search, the case was centralized and notice u/s.148 of the

Act dated 22.11.2023 was issued which was duly served on the assessee.

In response to the notice issued, the assessee filed RoI on 12.02.2024

admitting total income of Rs.31,65,680/-. The assessement has been

completed u/s.143(3) r.w.s.147 of the Act on 13.03.2025 and determined

total income of Rs.79,69,680/- by making addition of Rs.29,04,000/-

towards unsecured loan shown in the balance sheet u/s.68 of the Act as

unexplained cash credits. The AO has also made additions of Rs.19 lakhs

towards source for cash deposits into bank account.

appeal before the Ld.CIT(A) and challenged the additions made by the

AO. The Ld.CIT(A), for the reasons stated in their appellate order dated

14.10.2025 rejected the explanation of the assessee and sustained the

additions made by the AO.

before the Tribunal.

not justified in dismissing the ground taken by the assessee on the issue

of validity of assessment order passed by the AO in light of provisions of

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 20 :: Section 148 of the Act, without fulfilling the prescribed conditions and

consequently, the assessment order passed by the AO is void ab initio.

The Ld. Counsel for the assessee submitted that the AO invoked

Explanation (2) clause (i) of section 148 of the Act, on the presumption

that once a search is initiated under section 132 of the Act on or after the

1st day of April, 2021, in the case of the assessee, the AO shall be

deemed to have the information which suggests that the income

chargeable to tax has escaped the assessment in the case of the

assessee. However, Exp. (2) provides only a limited relaxation and the 1st

proviso to section 148 of the Act negated the condition that the AO with

the rider that the information which suggests that the income chargeable

to tax has escaped the assessment for the relevant assessment year.

Therefore, the correct interpretation can be that notice u/s.148 of the Act

cannot be issued automatically to the searched person and the AO needs

to apply his mind and while seeking approval u/s.151 of the Act from the

specified authority, demonstrate that the information obtained/discovered

during the search suggest that income has escaped, assessment under

Explanation (2) is for the relevant AY for which notice u/s.148 of the Act

is issued. In the present case, the AO without demonstrating as to how

the seized material found during the course of search suggest income

escaped the assessment for the relevant Asst. Years has simply issued

notice u/s.148 of the Act, on the basis of reasons recorded for reopening

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 21 :: of the assessment without there being an iota of discussion in the reasons

that the documents found during search suggest escapement of income.

In the absence of any material to indicate that the income has escaped

the assessment for the relevant AY, it may not be possible for the AO to

obtain the approval from the specified authority for the relevant AY for

which the notice u/s.148 of the Act intended to be issued. In the instant

case, the AO made addition on unsecured loss appeared in regular books

and source for cash deposits, however, on observation of the reasons

recorded, the A.O has not demonstrated the escapement of income as

envisaged in 1st proviso to Section 148 of the Act, which is evident from

the reasons recorded by the AO. Therefore, he submitted that, the notice

issued u/s.148 of the Act on the basis of reasons recorded by the AO

without demonstrating the escapement of income for the relevant AY is

void ab initio. In this regard, he has relied upon the decision of the

Hon'ble Bombay High Court in the case of Kartik Suresh Chandra Gandhi

v. Assistant Commissioner of Income Tax reported in (2023) 154

Taxmann.com 193 and the decision of the Hon'ble Delhi High Court in the

case of Divya Capital One Pvt. Ltd v. Assistant Commissioner of Income

Tax (TS-5518-HC-2022(DELHI)-O). The assessee had also relied upon the

decision of the Hon'ble Karnataka High Court in the case of Smt. Vasanthi

Ramdas Pai v. Income Tax Officer (TS-5059-HC-2024(Karnataka)-O). The

assessee also relied upon the decision of the Hyderabad Benches in the

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 22 :: case of M/s.ACE Tyres (P) Ltd v. Assistant Commissioner of Income Tax in

ITA Nos.1084 to 1088 and 1207/Hyd/2025.

by the Ld. Pr. CIT, Central for forwarding the proposal of initiation of

proceedings u/s.147 of the Act, for approval of the DGIT (Inv.) had given

elaborate reasons and satisfaction that during the course of search and

seizure action u/s.132 of the Act, it was found that incriminating material

shows income escaping assessement for relevant assessement years.

Therefore, from the reasons recorded by the AO for issuance of notice

u/s.148 of the Act, it is very clear that the AO had arrived at a satisfaction

regarding the undisclosed income in the case of the assessee for the AYs

2020-21 & 2021-22. Therefore, the arguments of the Ld.Counsel for the

assessee that the AO has not quantified income escaping assessment

before issuing notice u/s.148 of the Act is contrary to the scheme of re-

assessment proceedings provided in the case of search & seizure action

conducted u/s.132 of the Act.

record and had gone through orders of the authorities below. We have

also carefully gone through the relevant case laws relied upon by the Ld.

Counsel for the assessee in support of his arguments. There is no dispute

with regard to the fact that the assessement in the present case has been

completed u/s.143(3) rw.w.s.147 of the Act on the basis of search action

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 23 :: initiated u/s.132 of the Act in the case of the assessee along with search

in the case of M/s.Exel Rubber Group of companies. The assessement

has been reopened on the basis of reasons recorded for reopening in light

of search & seizure operations and the AO formed reasonable belief of

escapement of income by virtue of Clause (i) of Explanation 1 to Section

148 of the Act and observed that the AO shall be deemed to have

information which suggest that the income chargeable to tax has escaped

assessement in the case of the assessee for the assessement year under

consideration. However, if you go by the additions made by the AO in the

assessement order, the additions are not based on material found during

the course of search proceedings of the assessee, but based on material

found in the case of search in the case of M/s.Exel Rubber Group.

Further, if you go by the reasons recorded by the AO which is available in

the Paper Book filed by the assessee, we find that the AO had re-opened

the assessement only on the basis of search & seizure operation u/s.132

of the Act conducted in the case of M/s.Exel Rubber Group on 04.01.2023

without any identification as to income escaped assessement for the

relevant assessement year on the basis of any material found during the

course of search, which is pre-condition for reopening of assessement

even in the case of search u/s.132 of the Act, this is because as per the

provisions of Sec.148 of the Act, no notice under this section shall be

issued unless there is information with the AO which suggest that the

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 24 :: income chargeable to tax has escaped assessement in the case of

assessee for the relevant assessement year and the AO has obtained prior

approval of the specified authority to issue such notice. In other words,

for reopening of assessement even in the case of search the materials

must suggest escapement of income for the assessement year and such

escapement of income should be discernable from the reasons given by

the AO with reference to incriminating material found during the course of

search. The purpose and scope of explanation to Section 148 is only to

done away the procedure provided u/s.148A of the Act in a case where

assessement has been reopened u/s.148 of the Act up to three

assessement years in the case of search. However, for issuing notice

u/s.148 of the Act even up to three assessement years, the pre-condition

of material gathered during the course of search, which suggest

escapement of income for the relevant assessement year is must.

Therefore, in the absence of any escapement of income for the relevant

assessement year from the reasons given by the AO, in our considered

view, the reasons recorded for reopening of assessement for issuing

notice u/s.148 of the Act is bad in law and consequently, the assessement

order passed by the AO in light of invalid notice is liable to be quashed.

Bench in the case of M/s. Exel Rubber Private Ltd., Vs. DCIT (supra),

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 25 ::

wherein the Coordinate Bench of the Tribunal on identical set of facts in

para 14 has held as under:

“14. The A.O has recorded reasons for issuance of notice under section 148 of the Act on 21/11/2023. Upon perusal of the relevant reasons recorded for reopening of the assessment which is available in page 12 of the paper book filed by the assessee, we find that the A.O has considered information received in pursuant to the search & seizure action conducted under section 132 of the Act in the case of Excel Rubber Group of companies and quantification of undisclosed income of Rs.6,42,24,650/- for the A.Y 2020-2021 and formed a reasonable belief of escapement of income by virtue of clause (i) of explanation 2 of section 148 of the Act, on the ground that the A.O shall be deemed to have the information which suggest the income chargeable to tax has escaped the assessment in the case of the assessee for the relevant A.Y. From the reasons recorded by the A.O, it is undisputedly clear that the A.O while arriving at the undisclosed income harped on the material seized from the premises of Shri Ramesh Kumar Sanaka, Sr. Accounts Manager without following the procedures as envisaged in section 148 of the Act which is evident from the reasons recorded for the relevant A.Y. Further, on observations of the reasons recorded, we find that the A.O invoked clause (i) of explanation (2), whereas in the present clause (iii) and (iv) of explanation (2) of section 148 is applicable because, the A.O has quantified the escaped income on the basis of material found in the residential premises of Shri Ramesh Kumar Sanaka, Sr. Accounts Manager of the assessee company and therefore, the A.O should have arrived at a satisfaction that the said seized material belongs to the assessee which suggested escapement of income for the relevant A.Y. This is because, although there is a deeming provision of information for issuance of notice under section 148 of the Act where search is conducted under section 132 of the Act, but because of 1st proviso of section 148 of the Act, the A.O shall ascertain from the information gathered during the course of search that income chargeable to tax has escaped the assessment in the case of the assessee for the relevant A.Y. Going by the proviso to section 148 of the Act, Explanation 2 provides only a limited relaxation and the 1st proviso to section 148 put a negative condition on the A.O with the rider that information which suggests that income chargeable to tax has escaped the assessment for the relevant A.Ys. Therefore, from the above provisions of the Act, it is very clear that no notice under section 148 shall be issued automatically to the searched person and the A.O needs to apply his mind while seeking approval under section 151 from the specified authority and demonstrate that the information discovered/obtained during the search suggest that income has escaped assessment for the relevant A.Y for which notice under section 148 is issued. Further, the satisfaction of the A.O can be demonstrated from the reasons recorded. However, in the present case, going by the reasons recorded, there is no such demonstration by the A.O which is evident from the relevant reasons where the A.O simply relied upon

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 26 ::

the information submitted by the ADIT (Inv.), quantifying the undisclosed of Rs.6,42,24,650/- for the A.Y 2020-21 which is once again based on the material found in the possession of any other person. Therefore, in the absence of any satisfaction from the A.O, on the basis of information that income escaped the assessment for the relevant A.Y, issuance of notice under section 148 of the Act by considering clause (i) of Exp (2) of section 148 is contrary to the scheme of assessment as provided under section 148 of the Act, in pursuant to the search u/s 132 or requisition u/s 132A of the Act. Therefore, in our considered view, despite the deeming fiction provided under section 148, even in the case of searched person, the A.O may still be required to demonstrate that the income of the relevant A.Y has escaped the assessment before issuing notice under section 148 of the Act.”

High Court in the case of Sagar Mukesh Sheth Vs. ITO [TS 5681-High

Court-2026], wherein in para 17, the Hon'ble High Court had held as

under:

“17. It is true that the cash transactions are done in a clandestine manner using coded script, however, the revenue, before re-opening the assessment has to establish a live link of the assessee on the basis of seized material only. The expression “relates to” and “pertains to” used in Clause(iv) to Explanation 2 to Section 148 of the Act cannot be used in vacuum. The revenue after the seizure of incriminating material is under an obligation to analyze such material, in light of attendant circumstances and record relevancy and a prima facie opinion linking such material establishing escapement of income at the hands of the assessee. The information which is derived from the incriminating material in the instant case, does not establish live link. The information is absolutely vague and unspecific and the rate mentioned in the loose-paper is attempted to be imposed upon the petitioner after a period of four years on the basis of sale deed registered on 12.10.2021. The statement of Shri Bavadiya does not mention the name of the petitioner. There is no link, even remotely, found with Bsafal Group or City Estate Management India or City Procon Realtors Private Limited. All these aspects are very relevant, and are required to be examined before roping the petitioner in re- assessment. Thus, in our considered opinion, the provisions of Section 148 of the Act are not attracted, hence the action of the respondents in re-opening of the assessment requires to be quashed.”

the ratios of the case laws discussed herein above, it is very clear that no

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 27 :: notice under section 148 shall be issued automatically to the searched

person and the AO needs to apply his mind while seeking approval under

section 151 from the specified authority and demonstrate that the

information discovered/obtained during the search suggest income has

escaped assessment for the relevant AY for which notice under section

148 is issued. Further, the satisfaction of the AO can be demonstrated

from the reasons recorded. However, in the present case, going by the

reasons recorded, there is no such demonstration by the AO which is

evident from the relevant reasons where the A.O simply relied upon the

information submitted by the ADIT (Inv.), quantifying the undisclosed.

Therefore, in the absence of any satisfaction from the AO, on the basis of

information that income escaped the assessment for the relevant AY,

issuance of notice under section 148 of the Act by considering clause (i)

of Exp. (2) of section 148 is contrary to the scheme of assessment as

provided under section 148 of the Act, in pursuant to the search u/s.132

or requisition u/s.132A of the Act. Therefore, in our considered view,

despite the deeming fiction provided under section 148, even in the case

of searched person, the AO is required to demonstrate that the income of

the relevant AY has escaped the assessment before issuing notice under

section 148 of the Act. Therefore, the reasons recorded by the AO for

issuing notice u/s.148 of the Act contrary to Section 148 of the Act is

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 28 :: certainly invalid, void ab initio and vitiate the entire assessment

proceedings.

circumstances of this case and also by following the rations of case laws,

discussed herein above, we are of the considered view that notice issued

under section 148 of the Act, on the basis of reasons recorded for

reopening in light of search action conducted under section 132 of the Act

is bad in law and consequently, the assessment order passed by the AO

becomes void ab initio and liable to be quashed. Therefore, we quash the

assessment order passed by the AO under section 143(3) r.w.s. 147 of

the Act, for AYs 2020-21 & 2021-22.

2374/Hyd/2025 for AYs 2020-21 & 2021-22 are allowed.

ITA No.2375/Hyd/2025 for AY 2023-24

filed RoI for AY 2023-24 on 29.09.2023 admitting total income of

Rs.36,84,230/-. A search & seizure operation u/s.132 of the Act was

carried out on 04.01.2023 in M/s.Exel Rubber Group and as a part of

search, the case of the assessee was covered u/s.132 of the Act.

Consequent to search, the case was selected for scrutiny and notice

u/s.143(2) of the Act dated 19.06.2024 was issued which was duly served

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 29 :: on the assessee. In response to the notice issued, the assessee filed RoI

on 29.09.2023 admitting total income of Rs.36,84,230/-. The

assessement has been completed u/s.143(3) of the Act on 14.03.2025

and determined total income of Rs.80,84,230/- by making addition of

Rs.44,00,000/- towards unexplained cash credits u/s.68 of the Act.

order passed by the AO u/s.143(3) of the Act dated 14.03.2025 is bad in

law and liable to be quashed, because there is no approval u/s.148B of

the Act as required under the Law before passing the assessement order

from the Addl. Commissioner of Income Tax, which is evident from the

relevant order passed by the AO. Therefore, he submitted that in the

absence of approval, assessement proceedings become vitiated and liable

to be quashed. In this regard, he relied upon the decision of the Co-

ordinate Bench of ITAT Hyderabad Bench, in the case of Madhava Reddy

Baddevolu in ITA No.1552/Hyd/2025, order dated 27.03.2026 and also

the decision of the ITAT, Chandigarh Bench in the case of Homelife

Buildcon (P) Ltd. reported in 176 Taxmann.com 614, order dated

17.07.2025.

additions made by the AO towards cash deposits into bank account for

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 30 :: Rs.44,00,000/- is not sustainable in Law because the assessee has

explained the source out of gifts receied from his father & mother for Rs.8

lakhs and balance amount was out of past savings and income declared

for the assessement year under consideration. Therefore, he submitted

that the additions made by the AO should be deleted.

selected for scrutiny in light of CBDT guidelines for compulsory selection

of returns for complete scrutiny during the AY 2023-24 and as per the

said guidelines in Para No.2(ii) it is stated in respect of search & seizure

cases u/s.132 of the Act deducted on or after 01.04.2021, the returns

have to be selected for compulsory scrutiny. Therefore, there is no merit

in the arguments of the assessee on this aspect. He further submitted

that there is no merits in arguments of the assessee on the issue of

Section 148B of the Act, because as per newly inserted Section 292BC

vide Act No.4 of 2026 with retrospective 01.04.2021, the validity of

approval if any u/s.148 of the Act can’t be questioned on insufficient

reasons/defects in the form or manner or authentication, incorrection

communication of the approval etc. Therefore, he submitted that the

ground taken by the assessee should be rejected. In so far as additions

made by the AO towards cash deposits of Rs.44 lakhs, the assessee failed

to substantiate the source with relevant evidences except claiming that he

had received Rs.8 lakhs from his father & mother, however, not filed

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 31 :: relevant evidences. Therefore, he submitted that the additions made by

the AO should be upheld.

record and had gone through orders of the authorities below. The

assessee has challenged the validity of the assessement order passed by

the AO u/s.143(3) of the Act in light of approval u/s.148B of the Act and

claimed that the approving authority has issued approval on mechanical

manner without any application of mind which is evident from relevant

proposal submitted by the AO on 10.03.2025 and approval granted by the

authority on 12.03.2025. We find that from the date of proposal

submitted by the AO and from the date of approval, and time taken by

the approving authority, it can’t be decided that whether the approving

authority has accorded approval as provided u/s.148B of the Act by

applying his mind and the relevant materials considered by the AO for the

purpose of assessement but what is required to be seen is whether the

approval granted by the authority is as per law and further, the AO has

obtained such approval before passing the AO. In the present case, the

AO has obtained approval from the authority before passing the

assessement order vide approval dated 12.03.2025, where the authority

i.e. Addl. CIT has accorded approval to the draft assessement order

submitted by the AO and before according approval, considered various

evidences including correspondence between the authority and the AO

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 32 :: and therefore, in our considered view, merely for the reasons of approval

granted within two days, it can’t be said that the said approval has been

granted without any application of mind. Therefore, we reject the legal

ground taken by the assessee.

the AO made addition of Rs.44 lakhs towards cash deposits of

Rs.27,50,000/- into SBI and Rs.11,50,000/- into HDFC bank account.

The assessee has explained the source out of previous cash withdrawals,

his past savings and also gift of Rs.3 lakhs from his father and Shri Kola

Rajaiah and gift of Rs.5 lakhs from his mother Smt. Kola Kousalya. The

assessee has submitted ITR filed for AYs 2020-21 to 2022-23 and as per

the ITR filed by the assessee, the assessee has declared total income for

the last ‘3’ assessement years at Rs.1.30 Crs. and claimed that the source

for cash deposits was out of withdrawal of Rs.15 lakhs on previous

occasion from the very same bank. The assessee further explained that

cash deposits out of gift received from his mother & father of Rs.8 lakhs.

In so far as gift received from his father & mother, the assessee has filed

relevant evidences and claimed that out of natural love & affection,

parents have gifted Rs.8 lakhs on various occasions and the same has

been deposited into bank account. Since assessee has filed relevant

details, we direct the AO to accept source to the extent of Rs.8,00,000/-

gifts from parents. In so far as balance amount of Rs.36 lakhs, the

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 33 :: assessee claimed to have deposited Rs.15 lakhs out of previous

withdrawal from very same bank, for which, the assessee has filed

relevant bank account statement. From the bank account statement

which is extracted in the order of the Ld.CIT(A), it appears that the

assessee has withdrawn sum of Rs.15 lakhs from SBI account on

12.04.2022 and if you consider the above cash withdrawal and the

income declared by the assessee for the last three assessement years, it

appears that explanation of the assessee with regard to source for cash

deposits is out of past savings with known source of income and

withdrawn from the bank account on previous occasions is bona fide and

acceptable. Therefore, in our considered view, the assessee is able to

explain source to the extent of Rs.15 lakhs for cash deposits into bank

account out of previous withdrawals and known source of income. In

respect of balance amount of Rs.21 lakhs, there is no explanation from

the assessee, therefore, in our considered view, the assessee is unable to

explain the source for the balance amount of Rs.21 lakhs with any

evidences. To sum-up, out of the total addition of Rs.44 lakhs towards

cash deposits, the assessee is able to explain the source to the extent of

Rs.23 lakhs and therefore, we direct the AO to delete the addition of

Rs.23 lakhs towards cash deposits u/s.68 of the Act. In so far as balance

amount of Rs.21 lakhs, the assessee failed to explain the source with

known source of income and relevant evidences and therefore, we

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 34 :: sustained the addition to the extent of Rs.21 lakhs towards cash deposits

into bank account and addition made u/s.68 of the Act.

is partly allowed.

2374/Hyd/2025 & ITA No.2437/Hyd/2025 are allowed & appeal filed by

the assessee in ITA No.2375/Hyd/2025 is partly allowed.

Order pronounced on the 05th day of August, 2026, in Hyderabad.

Sd/- Sd/- (िवजय पाल राव) (मंजूनाथा. जी) (VIJAY PAL RAO) (MANJUNATHA.G) उपा�� /VICE-PRESIDENT लेखा सद�/ACCOUNTANT MEMBER Hyderabad, dated 05.08.2026. TLN आदेशकी �ितिलिप अ�ेिषत/ Copy of the order forwarded to: िनधा�रती/The Assessee 1 : Balaji Patel Kola, C/o. P. Murali & Co., Chartered Accountants, 6-3-655/2/3, Somajiguda, Hyderabad-500 082

Kola Venkateshwara Patel, C/o. P. Murali & Co., Chartered Accountants, 6-3-655/2/3, Somajiguda, Hyderabad-500 082. राज�/ The Revenue 2 : The DCIT / ACIT, Central Circle-1(2), Hyderabad. 3 The Principal Commissioner of Income Tax, Hyderabad. िवभागीय�ितिनिध, आयकर अपीलीय अिधकरण, हैदराबाद / DR, ITAT Hyderabad. 4 गाड�फ़ाईल / Guard file 5

ITA Nos.2372 to 2375/Hyd/2025 Balaji Patel Kola & ITA No.2437/Hyd/2025 Kola Venkateshwara Patel :: 35 ::

आदेशानुसार / BY ORDER

TUMMALACHARLA Digitally signed by TUMMALACHARLA LAKSHMI NARAYANA DN: cn=TUMMALACHARLA LAKSHMI LAKSHMI NARAYANA, c=IN, o=INCOME TAX APPELLATE TRIBUNAL, ou=INCOME TAX NARAYANA APPELLATE TRIBUNAL, CHENNAI BENCH Date: 2026.08.05 17:09:15 +05'30'

Sr. Private Secretary ITAT, Hyderabad