GANAPATHY KOMMINENI,TIRUPATI vs. ITO, WARD-1(3), TIRUPATI

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ITA 2001/HYD/2025Status: DisposedITAT Hyderabad15 July 2026AY 2016-1714 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the non-issuance of a mandatory Section 143(2) notice vitiates the assessment proceedings. The penalty appeal was also restored to the CIT(A) pending the outcome of the quantum appeal.

What were the facts?

The assessee's original return was treated as a response to a Section 148 notice, but no Section 143(2) notice was issued before reassessment. The addition under Section 69B was confirmed by the CIT(A). A separate appeal concerned a penalty under Section 271(1)(c).

What were the issues?

Whether the reassessment proceedings are invalid due to the non-issuance of a Section 143(2) notice. Whether the penalty proceedings are sustainable when based on a potentially invalid assessment.

Which sections of the Income-tax Act were involved?

Section 143(2),Section 147,Section 148,Section 69B,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad ‘A‘ Bench, Hyderabad

Before: Shri Ravish SoodShri Madhusudan Sawdia

Hearing: 08/07/2026

आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A‘ Bench, Hyderabad �ी रिवश सूद,�ाियक सद� एवं �ी मधुसूदन साविड़या लेखा सद� सम� | Before Shri Ravish Sood, Judicial Member A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA Nos.2001 & 2002/Hyd/2025 (िनधा�रण वष�/Assessment Year: 2016-17) Shri Ganapathy Vs. Income Tax Officer Kommineni, TIRUPATI Ward 1(3) PAN: ANOPK1156A Tirupati (Appellant) (Respondent) िनधा�रती �ारा/Assessee by: Shri K.A. Sai Prasad, CA राज� व �ारा/Revenue by: Shri Mohan Babu, Sr. AR सुनवाई की तारीख/Date of hearing: 08/07/2026 घोषणा की तारीख/Pronouncement: 15/07/2026 आदेश/ORDER Per Madhusudan Sawdia, A.M.:

These two appeals are filed by Shri Ganapathy Kommineni (“the assessee”), feeling aggrieved by the separate orders passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) (“Ld. CIT(A)”) dated 10.09.2025 and 22.09.2025 for the A.Y. 2016- 17. Since the issues raised by the assessee in these two appeals are inter-related, for the sake of convenience, these were heard together and are being disposed of by this common and consolidated order.

ITA NO. 2001/HYD/2025 : 2. The assessee has raised the following grounds of appeal:

“1. The Order of the learned Commissioner of Income Tax (A), NFAC is not correct either on facts or in law and in both. 2. The Learned CIT(A), NFAC failed to appreciate that no statutory notice under section 143(2) was ever issued or served after treating the original return filed on 13.09.2017 as the return in response to notice issued under section 148 and the failure to issue such mandatory notice is a jurisdictional defect rendering the reassessment framed under section 147 r.w.s 144B invalid and liable to be quashed. 3. The Learned CIT(A), NFAC failed to appreciate that the Assessing Officer assumed jurisdiction under section 147 on assumption of wrong facts as the reasons to believe were based on alleged loan of Rs. 35,00,000 to Shri Dampuri Bhaskar whereas the amount was towards purchase of land from Sai Chaitanya Real Estates represented by Shri Dampuri Bhaskar duly evidenced by registered sale deed and hence the reopening based on such incorrect premise is liable to be quashed. 4. The Learned CIT(A), NFAC failed to appreciate the source of Rs. 35,00,000 utilized for purchase of land was fully explained through banking channels and supported by documentary evidence and when the funds were clearly identifiable and verifiable invocation of section 69B alleging unexplained investment is incorrect unjustified and liable to be deleted. 5. The Learned CIT(A) travelled beyond the scope of assessment and introduced a wholly different issue by invoking Section 69A though the Assessing Officer had made the addition u/s 69B treating it as unexplained investment and further proceeded on the premise that the amount received and repaid to Smt. S Shakila Proprietor of "V V Ambigai Adds" represented unexplained money which change of section and issue without any basis or opportunity to the assessee is beyond jurisdiction arbitrary and contrary to law. 6. The appellant craves leave to add, amend, modify, rescind, supplement or alter any or more grounds of appeal stated herein above either before or at the time of hearing of this appeal.”

3.

The brief facts of the case are that the assessee is an individual who filed his original return of income for Assessment Year 2016-17 on 13.09.2017 declaring total income of ₹4,56,190/-. Subsequently, reassessment proceedings under section 147 of the Income-tax Act, 1961 (“the Act”) were initiated by the Learned Assessing Officer (“Ld. AO”) and notice under section 148 of the Act dated 31.03.2021 was issued to the assessee. In response thereto, vide letter dated 17.03.2022, the assessee requested the Ld. AO to treat the original return of income filed earlier as the return filed in response to the notice issued under section 148 of the Act. After considering the submissions of the assessee, the Ld. AO completed the assessment under section 147 read with section 144B of the Act vide order dated 23.03.2022, making an addition of ₹35,00,000/- under section 69B of the Act. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) confirmed the addition made by the Ld. AO and dismissed the appeal of the assessee. 5. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal. At the outset, the Learned Authorized Representative (“Ld. AR”) submitted that the assessee has raised a legal ground in Ground No. 2 of the appeal challenging the validity of the assessment order on the ground that no notice under section 143(2) of the Act was issued by the Ld. AO. It was submitted that once the assessee had requested the Ld. AO to treat the original return of income as the return filed in response to notice issued under section 148 of the Act and the said return was accepted by the Ld. AO,

issuance of notice under section 143(2) of the Act became mandatory. Since no such notice was issued, the assessment framed by the Ld. AO is without jurisdiction and liable to be quashed. In support of the aforesaid contention, reliance was placed on the decision of this Tribunal in the case of Nisha Kapistalamchetlur Vs. ITO in ITA Nos. 1935 & 1936/Hyd/2025 for Assessment Years 2013-14 and 2014-15 dated 30.03.2026. 6. Per contra, the Learned Departmental Representative (“Ld. DR”) relied upon the orders of the lower authorities. 7. We have heard the rival submissions and perused the material available on record including the case law relied upon. We have gone through para no. 4 of the order of the Ld. CIT(A), wherein the grounds raised by the assessee before him have been reproduced, which is to the following effect:

8.

On perusal of the above, we find that in Ground No. 2, the assessee had specifically challenged the validity of the assessment on the ground that no notice under section 143(2) of the Act was issued by the Ld. AO. We have also carefully perused the adjudication made by the Ld. CIT(A) in para nos. 7.2 and 7.2.1 of his order, which is to the following effect:

9.

On perusal of the above, we find that the findings recorded by the Ld. CIT(A) are without any proper reasonings and are completely silent on the specific issue whether the Ld.AO has actually issued any notice under section 143(2) of

the Act or not. We further find that the assessee, vide letter dated 17.03.2022, had specifically requested the Ld. AO to treat the original return of income filed by him as the return filed in response to notice issued under section 148 of the Act. Once such a request was accepted by the Ld. AO, the said return assumed the character of a return filed in response to notice under section 148 of the Act. Further, from the computation of income table reproduced at page no. 6 of the assessment order, which is to the following effect:

10.

On a perusal of the above, it is evident that the Ld. AO has considered the returned income of the assessee while computing the assessed income. Thus, the conduct of the Ld. AO clearly demonstrates that the return furnished by the assessee was accepted and acted upon for the purpose of framing the reassessment. In such circumstances, the issuance of notice under section 143(2) of the Act assumes significance and the same is required to be examined in accordance with law. We also find that an identical issue came up for consideration before this Tribunal in the case of Nisha Kapistalamchetlur Vs. ITO (supra). In para nos. 14 to 17 of the said order, the Tribunal held as under:

11.

On perusal of the above, we find that the Tribunal has categorically held that where the Assessing Officer proceeds to frame an assessment, issuance of notice under section 143(2) of the Act is mandatory and failure to do so vitiates the assessment proceedings. The Tribunal further observed that even in a case where the return was filed beyond the period specified in the notice issued under section 148 of the Act, non-issuance of notice under section 143(2) of the Act would render the assessment unsustainable in law. Considering the facts and circumstances of the present case and respectfully following the ratio laid down by the Coordinate Bench in the case of Nisha Kapistalamchetlur Vs. ITO (supra), we are of the considered view that the non-issuance of notice in the present case under section 143(2) of the Act will render the assessment unsustainable in law. However, the issue relating to issuance of notice under section 143(2) of the Act requires verification at the end of the Ld. CIT(A). Accordingly, in the interest of justice, we set aside the impugned order of the Ld. CIT(A) and restore the matter to his file with a direction to verify whether any notice under section 143(2) of the Act was

issued by the Ld. AO after the assessee requested that the original return of income be treated as the return filed in response to notice under section 148 of the Act. If upon such verification it is found that no notice under section 143(2) of the Act was issued by the Ld. AO, the Ld. CIT(A) shall quash the assessment order passed by the Ld. AO. Needless to say, the assessee shall be afforded adequate opportunity of being heard.

12.

Since we have set aside the appeal of the assessee to the file of the Ld. CIT(A) on the basis of legal ground raised by the assessee challenging the validity of the assessment order passed by the Ld. AO without issuing any notice under section 143(2) of the Act, we do not propose to adjudicate the other grounds of the appeal of the assessee. The same are kept open.

13.

In the result, the appeal of the assessee in ITA No. 2001/Hyd/2025 is allowed for statistical purposes.

ITA No. 2002/Hyd/2025: 14. The assessee has raised the following grounds of appeal:

“1. The Order of the learned Commissioner of Income Tax (A), NFAC confirming the penalty u/s 271(1)(c) of the Act is not correct either on facts or in law and both. 2. The Learned CIT(A), NFAC failed to appreciate that the Assessing Officer had not recorded any clear or specific satisfaction in the assessment order as to whether the penalty was for concealment of income or furnishing of inaccurate particulars, rendering the initiation itself void ab initio. 3. The Learned CIT(A),NFAC erred in upholding the penalty order dated 26.09.2022 passed by the Jurisdictional ITO, Ward-1(3), Tirupati, even though after 29.03.2022, all penalty proceedings were required to be conducted in a faceless manner under CBDT Notification

Nos. 18 of 2022; hence, the order is without jurisdiction and liable to be quashed. 4. The Learned CIT(A), NFAC is not justified in confirming the levying of penalty u/s 271(1)(c) of Rs. 11,02,238/-, ignoring the fact that the appellant is having explainable sources. 5. The appellant craves leave to add, amend, modify, rescind, supplement or alter any or more grounds of appeal stated herein above either before or at the time of hearing of this appeal.” 15. The present appeal relates to the levy of penalty arising from the quantum addition which is the subject matter of appeal in ITA No. 2001/Hyd/2025. While adjudicating the quantum appeal in ITA No. 2001/Hyd/2025, we have already set aside the matter to the file of the Ld. CIT(A) for fresh adjudication in accordance with our specific observations. Since the penalty under consideration is based upon the quantum addition, the fate of the penalty proceedings is intrinsically linked to the outcome of the quantum appeal. Therefore, in our considered view, the issue involved in the present appeal cannot be adjudicated independently at this stage and is liable to be restored to the file of the Ld. CIT(A) for fresh consideration. Accordingly, we set aside the impugned penalty order and restore the matter to the file of the Ld. CIT(A) with a direction to adjudicate the issue afresh after the finalization of the quantum proceedings in ITA No. 2001/Hyd/2025. It is further clarified that in the event the quantum assessment is ultimately held to be invalid on account of non-issuance of notice under section 143(2) of the Act resulting in the quashing of the assessment order, the very foundation of the penalty proceedings would cease to exist and, consequently, the penalty order shall also not survive. The Ld. CIT(A) shall decide the penalty appeal in accordance with the

final outcome of the quantum proceedings and in accordance with law after providing adequate opportunity of being heard to the assessee.

16.

In the result, the appeal of the assessee in ITA No.2002/Hyd/2025 is allowed for statistical purposes.

17.

To sum up, both the appeals of the assessee are allowed for statistical purposes.

Order pronounced in the Open Court on 15th July, 2026. Sd/- Sd/- (RAVISH SOOD) (MADHUSUDAN SAWDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 15th July, 2026. Vinodan/sps Copy to: S.No Addresses 1 Shri Ganapathy Kommineni C/o Katrapati & Associates, 1-1- 298/2/B/3 Sowbhagya Avenue Apartments, 1st Floor, Ashoknagar, Street No.1 Hyderabad 500020 2 Income Tax Officer Ward-1(3) Tirupati 3 Pr. CIT Tirupati 4 DR, ITAT Hyderabad Benches 5 Guard File

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: 2026.07.15 12:21:14 +05'30'

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