INCOME TAX OFFICER, WARD-1(1), MYSURU, MYSURU vs. HINKAL PAPANNA RAKESH, MYSURU

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ITA 794/BANG/2026Status: DisposedITAT Bangalore21 July 2026AY 2015-1610 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the notice under Section 148 was issued beyond the limitation period as per Section 149 read with its first proviso. Consequently, the entire reassessment proceedings were quashed.

What were the facts?

The Revenue appealed an order that quashed reassessment proceedings initiated by the Jurisdictional Assessing Officer (JAO). The assessee argued that the notice under Section 148 was issued beyond the limitation period prescribed by Section 149.

What were the issues?

Whether the notice under Section 148 was issued within the prescribed limitation period. The validity of reassessment proceedings initiated by the JAO in light of faceless assessment schemes was also a point of contention.

Which sections of the Income-tax Act were involved?

Section 148,Section 149,Section 147,Section 144B,Section 148A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: PRASHANT MAHARISHI & SHRI SANDEEP SINGH KARHAIL

For Respondent: Shri. Balusamy. H, JCIT

PER SANDEEP SINGH KARHAIL, JUDICIAL MEMEBR: The Revenue has filed the present appeal against the impugned order dated 15.12.2025 passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], for the assessment year 2015-16.

2.

In this appeal, the Revenue has raised the following grounds: -

1) i. The order of the Ld. CIT(A) dated 15/12/2025 for A.Y. 2015-16 is opposed to law and facts of the case. 2) ii. The Ld. CIT(A) was not justified in holding that the issuance of notice under Section 148A(b) and the order under Section 148A(d) read with notice under Section 148 of the Income Tax Act, 1961, by the Jurisdictional Assessing Officer (JAO) is without jurisdiction and void ab initio, merely on the ground that the Faceless Assessment of Income Escaping Assessment Scheme, 2022 (notified under Section 151A) mandates exclusive faceless proceedings through the NFAC, whereas under Sections 147, 148, and 148A, the JAO is empowered to initiate re-assessment proceedings. 3) iii. The Ld. CIT(A) erred in law by interpreting Section 151A of the Income Tax Act, 1961, by holding that the Jurisdictional Assessing Officer (JAO) did not have authority under Sections 147, 148, and 148A, thereby rendering the broad reference to “Assessing Officer” in these provisions surplus and otiose, contrary to the principles of harmonious construction and the procedural intent of the 2022 Faceless Scheme (Notification No. 18/2022) to enable hybrid initiation by JAO followed by NFAC adjudication, as clarified in CBDT Instruction No. 1/2022 dated 11.05.2022. 4) iv. The Ld. CIT(A) was not justified in quashing bona fide notices issued under Section 148A(b)/order passed under Section 148A(d) read with Section 148, thereby disregarding the concurrent jurisdiction framework under Section 151A and binding CBDT guidelines which permit JAO to issue the notice u/s 148A(b), order u/s 148A(d), and notice u/s 148 of the Act. 5) v. The Ld. CIT(A) erred in not considering the issues on merits as the assessee has substantial cash deposits in 8 bank accounts, the sources of which remained unexplained.

3.

During the hearing, the learned Authorised Representative (“learned AR”), at the outset, by invoking the provisions of Rule 27 of the ITAT Rules, 1963 submitted that the notice issued under section 148 of the Act in the present case is beyond the limitation period prescribed under section 149 read with first proviso to the said section, and thus, the assessment order passed under section 147 r.w.s. 144 read with section 144B of the Act is void ab initio. We find that the Hon’ble Delhi High Court in Sanjay Sawhney vs. PCIT, reported in [2020] 116 taxmann.com 701 (Delhi), found the order passed by the Tribunal to be perverse as the Tribunal refused to allow the taxpayer to urge the jurisdictional grounds by way of an oral application under Rule 27 of the ITAT Rules, 1963. Therefore, in light of the aforesaid decision of the Hon’ble Delhi High Court, the jurisdictional plea raised by the learned AR was admitted, and both parties were heard. Since this is a jurisdictional issue that goes to the root of the matter, we are considering it at the outset.

4.

The brief facts of the case, pertaining to this issue, as emanating from the record are: The assessee is an individual and for the year under consideration did not file his return of income under section 139(1) of the Act. On the basis of specific information flagged as per the Risk Management Strategy formulated by the CBDT, it was noticed that the assessee had entered into a transaction of the sale of immovable property during the year under consideration. Accordingly, after conducting necessary enquiries as stipulated under section 148A(a) of the Act with prior approval of the specified authority, a show-cause notice under section 148A(b) of the Act was served on the assessee on 26.03.2022, granting opportunity to the assessee. Vide this notice, the assessee was also provided the details/documents for issuing the notice under section 148A(b) of the Act. The assessee was asked to furnish his reply with cogent and corroborative documentary evidence, on or before 05.04.2022. However, the assessee 3 neither submitted any reply to the show cause notice nor sought any additional time to comply with the notice. Since the amount of income chargeable to tax amounting to Rs. 84,35,000, represented in the form of an asset, has escaped assessment, an order under section 148A(d) of the Act was passed declaring that it is a fit case for issuance of notice under section 148 of the Act. On 01.05.2022, a notice under section 148 of the Act was issued to the assessee. In response to the said notice, the assessee filed its return of income on 24.04.2023 declaring a total income of Rs. 29,280 and claiming a loss of Rs. 9,99,400.

5.

Vide order dated 21.12.2023 passed under section 147 r.w.s. 144 read with section 144B of the Act, the Assessing Officer (“AO”), after taking into consideration the details filed by the assessee in response to the statutory notices issued during the assessment proceedings, arrived at the conclusion that the assessee failed to properly explain with cogent documents/evidence about the source of the transaction of Rs. 17,95,330. Accordingly, the said amount was treated as unexplained income of the assessee and added to the total income of the assessee.

6.

The learned CIT(A), vide impugned order, allowed the appeal filed by the assessee on the jurisdictional ground that the notice under section 148 of the Act was issued by the Jurisdictional Assessing Officer instead of the Faceless Assessing Officer following the decision of the Hon’ble Jurisdictional High Court of Karnataka in Ramachandra Reddy Ravi Kumar vs. DCIT, reported in [2025] 178 taxmann.com 491 (Karnataka). Being aggrieved, the Revenue is in appeal before us.

7.

During the hearing, the learned AR supporting the order passed by the learned CIT(A) submitted that even though the jurisdictional issue regarding the validity of the notice issued under section 148 of the Act by the Jurisdictional Assessing Officer instead of the Faceless Assessing Officer is currently pending consideration before the Hon’ble Karnataka High Court pursuant to the directions of the Hon’ble Supreme Court in Income Tax Officer vs. Tej Partap Singh, reported in [2026] 185 taxmann.com 1007 (SC), the notice issued in the present case under section 148 of the Act is barred by limitation period prescribed under section 149 read with first proviso to the said section. The learned AR submitted that the year under consideration is the assessment year 2015–16, and therefore, the limitation period available with the AO under section 149, read with the first proviso to the said section, for issuance of notice under section 148 of the Act expired on 31.03.2022. Thus, the notice issued under section 148 of the Act, in the present case, on 01.05.2022, is barred by limitation. Hence, it was submitted that the entire reassessment proceedings culminating in the order passed under section 147 r.w.s 144 read with section 144B of the Act are void ab initio.

8.

On the other hand, the learned Departmental Representative vehemently relied upon the order of the lower authorities.

9.

We have considered the submissions of both sides and perused the material available on record. We find that a similar issue came up for consideration before the Hon’ble Bombay High Court in Hexaware Technologies Limited vs. ACIT, reported in [2024] 464 ITR 436 (Bom.). The Hon’ble High Court, after careful consideration of the provisions of section 149 and the first proviso to the said section, held that if, on the date of issuance of notice under section 148 of the Act, the said notice could not have been issued under the erstwhile provisions of section 149(1)(b) of the Act, i.e., prior to its substitution by the Finance Act, 2021, such notice cannot be issued even under the new provisions for any assessment year beginning on or before 01.04.2021. Accordingly, the Hon’ble Bombay High Court held that in respect of assessment year 2015–16, since the period of six years as per the erstwhile provisions of section 149(1)(b) expired on 31.03.2022, any notice issued thereafter under section 148 of the Act is time-barred. The relevant findings of the Hon’ble Bombay High Court in Hexaware Technologies Ltd. (supra) are reproduced as follows: -

“24. As regards issue no. 2, Section 149 of the Act reads as under : 149. Time limit for notice.—(1) No notice under section 148 shall be issued for the relevant assessment year,— (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); [(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in 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 or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amounts to or is 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 1st day of April, 2021, if 28[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 further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021: [Provided also that for cases referred to in clauses (i), (iii) and (iv) of Explanation 2 to section 148, where,— (a) a search is initiated under section 132; or (b) a search under section 132 for which the last of authorisations is executed; or (c) requisition is made under section 132A, after the 15th day of March of any financial year and the period for issue of notice under section 148 expires on the 31st day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under section 148 in such case shall be deemed to have been issued on the 31st day of March of such financial year: Provided also that where the information as referred to in Explanation 1 to section 148 emanates from a statement recorded or documents impounded under section 131 or section 133A, as the case may be, on or before the 31st day of March of a financial year, in consequence of,— (a) a search under section 132 which is initiated; or (b) a search under section 132 for which the last of authorisations is executed; or (c) a requisition made under section 132A, after the 15th day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under clause (b) of section 148A in such case shall be deemed to have been issued on the 31st day of March of such financial year:] 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 or injunction of any court, shall be excluded: 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 30[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. Explanation.—For the purposes of clause (b) of this sub-section, "asset" shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. [(1A) Notwithstanding anything contained in sub-section (1), where the income chargeable to tax represented in the form of an asset or expenditure in relation to an event or occasion of the value referred to in clause (b) of sub-section (1), has escaped the assessment and the investment in such asset or expenditure in relation to such event or occasion has been made or incurred, in more than one previous years relevant to the assessment years within the period referred to in clause (b) of sub-section (1), a notice under section 148 shall be issued for every such assessment year for assessment, reassessment or recomputation, as the case may be.] (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.] The first proviso to Section 149 of the Act provides that no notice under section 148 shall be issued at any point of time in a case for a relevant assessment year beginning on or before the 1st day of April 2021, if a notice under section 148 could not have been issued at that time on account of being beyond the time limit specified under the provision of clause (b) of sub-section (1) of this Section, as it stood immediately before the commencement of the Finance Act, 2021. The term 'at that time' in the first proviso refers to the date on which notice under section 148 is to be issued by the Assessing Officer. The term 'at that time' has to refer to the term 'at any time' used earlier in the said proviso. The reference to 'at any time' is to the date of the notice to be issued by the Assessing Officer and, therefore, 8 the term 'at that time' would also refer to the said date. On the said date, if a notice could not have been issued under the erstwhile provision of Section 149(1)(b) of the Act, for any assessment year beginning on or before the 1st day of April 2021, the notice cannot be issued even under the new provisions. 25. Section 149(1)(b) of the erstwhile provisions provided a time limit of six years from the end of the relevant assessment year for issuing notice under section 148 of the Act. For the relevant assessment year, being Assessment Year 2015-2016, 6th year expired on 31st March 2022. The notice under section 148 of the Act, in the present case, is issued on 27th August 2022, i.e., clearly beyond the period of limitation prescribed in Section 149 read with the first proviso to the said section. This is squarely covered by paragraphs 36 and 37 of New India Assurance (supra) which has been reproduced above in paragraph 23.” (Emphasis supplied) 10. We find that similar findings were rendered by the Hon’ble Rajasthan High Court in Shree Cement Ltd. vs. ACIT, reported in [2025] 177 taxmann.com 538 (Raj.) and notice issued under section 148 of the Act beyond the limitation period prescribed under section 149 read with the first proviso to the said section was quashed.

11.

As in the present case, the year under consideration is the assessment year 2015–16, and the notice under section 148 of the Act was issued on 01.05.2022, respectfully following the decision of the Hon’ble Bombay High Court in Hexaware Technologies Ltd. (supra) and the Hon’ble Rajasthan High Court in Shree Cement Ltd. (supra), we are of the considered view that the said notice is barred by limitation, and thus, the same is quashed. Consequently, the entire reassessment proceedings culminating in the assessment order passed under section 147 r.w.s. 144 read with section 144B of the Act are also quashed. Accordingly, the plea of the learned AR raised vide oral application under Rule 29 of the ITAT Rules, 1963 is allowed.

As a result, the grounds raised by the Revenue are rendered infructuous and therefore are dismissed.

12.

In the result, the appeal by the Revenue is dismissed.

Order pronounced in the open court on 21-July-2026.

Sd/- Sd/- (PRASHANT MAHARISHI) (SANDEEP SINGH KARHAIL) VICE PRESIDENT JUDICIAL MEMBER Bangalore,

Dated, the 21-July-2026. *VM*

Copy to: INCOME TAX OFFICER, WARD-1(1), MYSURU, 21/16, AAYAKAR BHAVAN, 1 RESIDENCY ROAD, NAZARBAD, MYSURU, 570010, MYSORE-570010, KARNATAKA HINKAL PAPANNA RAKESH, 150-K, HUNDI BEEDI, HINKAL, 2 MYSURU, 570017, MYSORE-570017, KARNATAKA 3 THE PCIT / CIT, 4 THE D.R., ITAT, BANGALORE BENCH 5 GUARD FILE BY ORDER

ASSISTANT REGISTRAR I.T.A.T., BANGALORE

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