RAMA KRISHNA YADAV,HYDERABAD vs. ITO, WARD-12(1), HYDERABAD

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ITA 425/HYD/2026Status: DisposedITAT Hyderabad10 July 2026AY 2016-1710 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the CIT(A) erred in not adjudicating the jurisdictional grounds raised by the assessee before remanding the matter to the AO. The Tribunal restored the matter to the CIT(A) with a direction to adjudicate the specific grounds challenging the assumption of jurisdiction.

What were the facts?

The assessee filed an appeal against the order of the CIT(A) which arose from an order passed by the AO under section 147 r.w.s 144 r.w.s 144B. The assessee raised several grounds challenging the assumption of jurisdiction by the AO, including limitation, violation of faceless assessment scheme, invalid sanction, and non-compliance with section 148A.

What were the issues?

Whether the CIT(A) properly adjudicated the jurisdictional grounds raised by the assessee challenging the assumption of jurisdiction by the AO before remanding the matter for fresh assessment.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 148A,Section 149,Section 151,Section 151A,Section 251

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCHES, HYDERABAD

Before: SHRI RAVISH SOOD, HON’BLE & SHRI MADHUSUDAN SAWDIA, HON’BLE

PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, New Delhi, dated 11/12/2025, which in turn arises from the order passed by the Assessing Officer ("AO") under section 147 r.w.s 144 r.w.s 144B of the Income- tax Act, 1961 (for short, "the Act"), dated 29/12/2023, for the Assessment Year ("AY") 2016-17. The assessee has assailed the impugned order on the following

grounds of appeal before us:

“The Appellant respectfully submits the following Grounds of Appeal, each of which is independent of and without prejudice to the others.

GROUND NO.1 - BAR OF LIMITATION UNDER SECTION 149 The Ld. Commissioner of Income Tax (Appeals) erred in law and on facts in not adjudicating the specific ground raised by the Appellant that the notice issued under section 148 dated 24.03.2023 for Assessment Year 2016-17 was barred by limitation under section 149 of the Act, inasmuch as the extended period beyond three years could not have been invoked in the absence of fulfilment of the statutory condition prescribed under section 149(1)(b), namely that income chargeable to tax represented in the form of an asset amounts to or is likely to amount to ₹50,00,000 or more, and in the absence of any specific jurisdictional satisfaction recorded to that effect in the order passed under section 148A(d); consequently, the assumption of jurisdiction under section 147 is without authority of law and liable to be quashed. GROUND NO.2 - VIOLATION OF SECTION 151A & FACELESS REASSESSMENT SCHEME The Ld. Commissioner of Income Tax (Appeals) erred in not adjudicating the specific ground raised by the Appellant that the notice issued under section 148 was not in conformity with the procedure mandated under section 151A of the Act read with the Faceless Assessment/Reassessment Scheme notified thereunder, inasmuch as the initiation of proceedings was not carried out strictly in accordance with the prescribed faceless mechanism and jurisdictional requirements, thereby rendering the assumption of jurisdiction under section 147 invalid in law. GROUND NO.3-INVALID SANCTION UNDER SECTION 151/DIN IRREGULARITY The Ld. Commissioner of Income Tax (Appeals) erred in not adjudicating the specific ground raised by the Appellant that the initiation of reassessment proceedings is vitiated for want of valid prior sanction under section 151 of the Act, inasmuch as the alleged approval preceding issuance of notice under section 148 suffers from jurisdictional defects Including absence of demonstrable valid approval on the purported date, irregularities relating to Document Identification Number (DIN), and issuance/communication on a non- working day, thereby rendering the notice under section 148 invalid and the consequent proceedings void ab initio. GROUND NO.4-MECHANICAL ASSUMPTION OF JURISDICTION ABSENCE OF INDEPENDENT APPLICATION OF MIND The Ld. Commissioner of Income Tax (Appeals) erred in not examining that the assumption of jurisdiction under section 147 was made without independent application of mind to the material relied upon and without formation of a bona fide belief that income chargeable to tax had escaped assessment, thereby vitiating the initiation of proceedings under section 147. GROUND NO.5 PROCEDURE NON-COMPLIANCE WITH SECTION 148A The Ld. Commissioner of Income Tax (Appeals) erred in not holding that the initiation of proceedings under section 147 is vitiated for non-compliance with the mandatory procedural requirements of section 148A of the Act, inasmuch as the material relied upon was not duly furnished and effective opportunity as contemplated under section 148A(b) was not provided prior to issuance of notice under section 148, thereby violating the principles of natural justice. GROUND NO.6 - INVALID SERVICE OF NOTICE The Ld. Commissioner of Income Tax (Appeals) erred in not adjudicating the specific ground that the notice issued under section 148 and the preceding proceedings under section 148A were not validly served upon the Appellant in accordance with section 282 read with section 282A of the Act and Rule 127 of the Income Tax Rules, 1962, inasmuch as the initial enquiry letter, show cause notice, order under section 148A(d) and notice under section 148 were neither communicated to the registered email address of the Appellant nor sent to the correct and updated address, thereby vitiating the assumption of jurisdiction and rendering the entire reassessment proceedings void. GROUND NO.7 - FAILURE TO ADJUDICATE JURISDICTIONAL GROUNDS & IMPROPER REMAND The Ld. Commissioner of Income Tax (Appeals) erred in law and on facts in setting aside the reassessment order without adjudicating the specific jurisdictional grounds relating to limitation and validity of assumption of jurisdiction and thereby failed to discharge the mandatory obligation cast under section 250(6) of the Act to state the points for determination and the decision thereon; the invocation of the proviso to section 251(1)(a) to restore the matter without first determining the legality of the reassessment is unsustainable in law. GROUND NO.8 - JURISDICTIONAL CONSOLIDATION GROUND Without prejudice to the foregoing grounds, the Appellant submits that the initiation and continuation of reassessment proceedings under sections 147 and 148 for Assessment Year 2016-17 suffer from multiple jurisdictional infirmities including limitation, absence of statutory satisfaction, procedural non-compliance and defective service of notice, and are therefore liable to be quashed in entirety. GROUND NO.9-CAPITAL GAINS ADDITION Without prejudice to the jurisdictional grounds raised hereinabove, the Ld. Commissioner of Income Tax (Appeals) erred in not adjudicating that the addition made towards capital gains by treating the cost of acquisition as Nil, without examining the development agreement, nature of rights transferred and the computation mechanism prescribed under section 48 of the Act, is erroneous and unsustainable in law. GROUND NO.10 - ADDITION UNDER SECTION 69A Without prejudice to the jurisdictional grounds raised hereinabove, the Ld. Commissioner of Income Tax (Appeals) erred in not adjudicating that the addition made under section 69A of the Act in respect of time deposits and bank credits is unsustainable in law, inasmuch as the Assessing Officer failed to examine the complete bank trail including fixed deposit transactions, made additions without establishing ownership of unexplained money, and ignored settled principles relating to peak credit, resulting in arbitrary and excessive taxation. GROUND NO.11 SALARY ADDITION & FAILURE TO ADJUDICATE MATERIAL Without prejudice to the jurisdictional grounds raised hereinabove, the Ld. Commissioner of Income Tax (Appeals) erred in not adjudicating that the addition made towards salary income is erroneous and unsustainable, the income having already suffered tax deduction at source and duly reflected in Form 26AS, and in failing to examine the evidentiary material and submissions placed on record before him on merits, thereby resulting in impermissible double taxation and failure to exercise appellate jurisdiction vested under section 251 of the Act. GROUND NO.12 - CONSEQUENTIAL LEVY OF INTEREST AND PENALTY Without prejudice to the foregoing grounds, the Appellant submits that the levy of interest under sections 234A and 234B of the Act and the initiation and consequential levy of penalty pursuant to the impugned reassessment are wholly dependent upon the validity of the reassessment proceedings under section 147; in the event the assumption of jurisdiction is held to be invalid and the reassessment is quashed, the consequential interest and penalty proceedings are liable to be deleted or treated as non est in law.”

2.

Succinctly stated, the AO, based on information that the assessee during

the subject year had carried out substantial financial transactions, viz., (i)

purchased time deposits with State Bank of Hyderabad, Old Bowenpally Branch:

Rs.50,20,500/-; and (ii) sale of immovable property: Rs.17,40,000/-, but had not

filed his return of income for the year under consideration, initiated proceedings

under section 147 of the Act. Thereafter, the AO passed an order under section

148A(d) of the Act, dated 24/03/2023. A notice under section 148 of the Act,

dated 24/03/2023, was issued by the AO. Thereafter, the AO vide his order passed under section 147 r.w.s 144 r.w.s. 144B of the Act, dated 25/01/2024, determined the assessee's income at Rs. 48,59,992/- after making certain additions, viz., (i) an addition for salary received by the assessee from M/S. Metmox Software Solutions: Rs.2,86,189/-; (ii) addition of amount accrued in Savings Bank/STDR account held with State Bank of India: Rs.36,25,218/-; (iii) short-term capital gains (STCG) on sale of property: Rs.8,70,000/-; and (iv) interest income on deposits/savings bank account: Rs.78,515/-.

3.

Aggrieved, the assessee carried a matter in appeal before the CIT(A), who, in exercise of the powers vested with him as per the “Proviso” to section 251(1)(a) of the Act, set aside the matter to the file of the AO for fresh adjudication and allowed the appeal for statistical purposes.

4.

The assessee, aggrieved with the order of the CIT(A), has carried the matter in appeal before us.

5.

We have heard the Learned Authorised Representatives of both parties, perused the orders of the authorities below and considered the material available on record.

6.

Shri Yadagiri Bhoopathi, Chartered Accountant, Learned Authorized Representative (for short, “Ld. AR”) for the assessee, at the threshold of the hearing of the appeal, submitted that the CIT(A) had grossly erred in law and facts of the case in summarily setting aside the matter to the file of the AO for fresh assessment in garb of the powers vested with him as per the “Proviso” to section 251(1)(a) of the Act, despite the fact that the assessee had on multi-facet grounds assailed the validity of the jurisdiction assumed by the AO for framing the impugned assessment vide his order passed under section 147 r.w.s. 144 r.w.s. 144B of the Act, dated 25/01/2024. Elaborating on his contention, the Ld.AR submitted that CIT(A) ought to have adjudicated the legal issues on which the AO had assumed jurisdiction and framed the impugned assessment, rather than summarily setting the matter aside for fresh assessment, as doing so would otherwise divest the assessee of the right to assail the validity of the assessment.

7.

Ostensibly, the primary grievance of the assessee before us is twofold, viz. (i) the CIT(A) had erred in upholding the validity of reassessment proceedings despite serious jurisdictional defects; and (ii) having done so, the CIT(A) further erred in setting aside the assessment to the file of the AO instead of adjudicating the issues and annulling the assessment.

8.

At the threshold, we find substantial force in the contention of the Ld. AR that the CIT(A) had adopted a legally untenable approach. In our view, the assessee had though specifically raised jurisdictional grounds challenging the validity of reopening on the basis of specific multi facet grounds as were raised before him, but the CIT(A), instead of adjudicating these jurisdictional issues in accordance with law, had summarily set aside the assessment to the file of the AO by invoking the “Proviso” to Section 251(1)(a) of the Act. In our considered view, such an approach is not sustainable in law. Our aforesaid view is supported by the order of the ITAT, Hyderabad Bench “A” in the case of Eyegear Optics India (P) Ltd. Vs. Dy. CIT (2025) 174 taxmann.com 1060 (Hyderabad), wherein the Tribunal had observed that though the CIT(A) pursuant to the insertion of the “Proviso” to Section 251 of the Act vide the Finance (No.2) Act 2024 w.e.f. 01.10.2024, now stands vested with the jurisdiction to set-aside and refer back a best judgment assessment order passed u/s 144 of the Act to the file of the AO for framing a fresh assessment, but the same cannot justify the refraining on his part from adjudicating the legal issues based on which the validity of the jurisdiction assumed by the A.O for framing the assessment or reassessment has been assailed before him, to the extent the same could safely be adjudicated based on the facts available on the record. For the sake of clarity, we deem it apposite to cull out the observations of the Tribunal in Eyegear Optics India (P) Ltd. Vs. Dy. CIT (supra), as under: “10. We have heard the learned authorized representatives of both parties, perused the orders of the lower authorities as well as considered the judicial pronouncements that were pressed into service by the Ld.AR. 11. Ostensibly, it is a matter of fact apparent from the record that the assessee company in the course of assessment proceedings had adopted an evasive approach, wherein, it had neither complied with the notice issued u/s 148 of the Act; nor replied/furnished the details as were called for by the AO in the course of the reassessment proceedings. Also, the conduct of the assessee company was no better before the Ld.CIT(A), wherein, it had once again adopted an evasive approach and not participated /filed the requisite details before him. 12. Be that as it may, it is however a matter of fact borne from record that the assessee company in its "Ground of appeal No.2" before the Ld.CIT(A), had specifically assailed the validity of jurisdiction that was assumed by the AO for initiating the reassessment proceedings, on the ground, that the same was beyond the time limit prescribed under the "1st proviso" to section 147 of the Act. For the sake of clarity, the "Ground of appeal No.2" raised by the assessee company before the CIT(A) is being culled out as under: "2. Initiating the reassessment proceedings beyond the time-limit prescribed under the first proviso to section 147 of the Act.

13.

Admittedly, the legislature in all its wisdom had vide the Finance (No.2) Act 2024 w.e.f. 01.10.2024 inserted the "Proviso" to section 251(1)(a) of the Act, as per which the CIT(A) has been vested with the power to set-aside the assessment and refer the case back to the AO for making afresh the assessment, in a case, where the appeal filed before him is against the order of assessment made u/s 144 of the Act. For the sake of clarity, section 251(1) is culled out as under: "251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers - (a) In an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment. Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment." (emphasis supplied by us) 14. We are of the firm conviction that though the CIT(A) pursuant to the aforesaid amendment in Section 251 of the Act, now stands vested with the jurisdiction to set- aside and refer back a best judgment assessment order passed u/s 144 of the Act to the file of the AO for framing a fresh assessment, but the same cannot justify the refraining on his part from adjudicating the legal issues based on which the validity of the jurisdiction assumed by the A.O for framing the assessment or reassessment has been assailed before him. Rather, we find that as per Section 251(1) of the Act, the CIT(A) in disposing of an appeal is vested with the power to confirm, reduce, enhance or annul the assessment. We, thus, are of the firm conviction that in case an assessee appellant, based on the facts available on record, has assailed before the CIT(A) the validity of the jurisdiction that was assumed by the A.O for framing the impugned assessment or reassessment, then, if the said claim is found to be in order, the CIT(A) in the exercise of the powers vested with him under sub-section (1) of Section 251 of the Act is obligated to annul the assessment or reassessment rather than adopting an evasive approach, and in the garb of the powers vested with him as per the "Proviso" to Section 251(1) of the Act set aside and refer back the impugned best judgment assessment order passed u/s 144 of the Act for framing of fresh assessment by the AO. To sum up, the CIT(A) is obligated to address and adjudicate the grievance of the assessee appellant, as regards the validity of the jurisdiction assumed by the A.O for initiating the assessment or reassessment proceedings to the extent the same can safely be done based on the facts discernible from the record before him. Our aforesaid conviction can safely be gathered from the "Memorandum Explaining the Provisions in the Finance Bill, 2024", which to the extent relevant to the "Proviso" to Section 251(1) of the Act, reads as under: "4. Considering the huge pendency of appeals and disputed tax demands at the Commissioner (Appeals) stage, it is proposed that the cases where assessment order was passed as best judgement case under section 144 of the Act, Commissioner (Appeals) shall be empowered to set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment.". Although the "Proviso" to Section 251(1) is an enabling proviso that further vests jurisdiction with the CIT(A) to set-aside a best judgment assessment order, but, the same cannot be construed in a manner that the same, inter alia, takes away his power to annul an assessment or reassessment which is framed de hors valid assumption of jurisdiction by the A.O. As a word of caution, if a best judgment assessment or reassessment framed u/s 144 of the Act, despite an invalid assumption of jurisdiction by the A.O is set aside and referred back to his file by the CIT(A) for framing of a fresh assessment, then, impliedly the lack of jurisdiction by the A.O will be given a go by and the challenge of the assessee-appellant to the validity of the assumption of jurisdiction would stand frustrated. We are of the firm conviction that the purpose of insertion of the "Proviso" to Section 251(1) by the legislature vide the Finance (No.2) Act, 2024 w.e.f 01.10.2024 can by no means be stretched to the extent of using it for validating an assessment or reassessment framed de hors valid assumption of jurisdiction by the A.O. 15. Adverting to the facts pertaining to the challenge thrown by the assessee company, qua the validity of the jurisdiction assumed by the AO for initiation of the reassessment proceedings, on the ground that the same was beyond the prescribed time limit as contemplated under the "1st Proviso" to section 147 of the Act, we are of the view that the Ld.CIT(A) ought to have adjudicated the same instead of adopting an evasive approach in the guise of exercise of the extended jurisdiction vested with him vide the "Proviso" to section 251(1)(a) of the Act as made available on the statute by the Finance (No.2) Act 2024 w.e.f. 01.10.2024. We find substance in the Ld. AR's contention that in case the lack of jurisdiction on the part of the A.O for framing the assessment is not addressed by the CIT(A), but, in the garb of the powers vested with him as per the "Proviso" to Section 251(1) of the Act the matter is referred back to the file of the AO for fresh adjudication, then, it would afford a second inning to the A.O who would simply give effect to the directions of the CIT(A) and reframe the re- assessment order despite lack of valid assumption of jurisdiction which was the very foundation for initiating the impugned proceedings. 16. Be that as it may, we are of the firm conviction that in the totality of the facts involved in the present appeal before us, the CIT(A) instead of summarily setting aside the matter to the file of the AO for making a fresh assessment, ought to have taken a call as regards the specific ground based on which the validity of the jurisdiction that was assumed by the AO for framing the reassessment was assailed by the assessee- appellant before him. Our aforesaid conviction that it is not obligatory on the part of the CIT(A) to set aside all best judgment assessment orders passed u/s 144 of the Act to the file of the AO is further fortified on looking at the language used by the legislature in the "Proviso" to Section 251(1) of the Act, i.e, ".may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment." which, thus, does not compulsorily require the CIT(A) to set aside and refer the assessment in every case where it is made u/s 144 of the Act. 17. We thus, in terms of our aforesaid deliberations set aside the order of the CIT(A), and restore the matter to his file with a direction to adjudicate the specific "Ground of appeal No.2" based on which the jurisdiction assumed by the A.O for framing the impugned reassessment order u/s 147 r.w.s 144 of the Act dated 16.12.2019 was assailed by the assessee appellant before him. 18. Before parting, we may herein clarify, that as we have in terms of our aforesaid observations set aside the matter to the file of the CIT(A), therefore, we have refrained from expressing any view, regarding the issues based on which validity of jurisdiction assumed by the AO for initiating the reassessment proceedings, and also the merits of the addition have been assailed by the assessee appellant before us. The Ground of appeal No.3 is allowed for statistical purposes in terms of our aforesaid observations.”

9.

In our view, the CIT(A) could not have bypassed the aforesaid foundational issues based on which the validity of the jurisdiction assumed by the AO for framing the assessment was assailed before him and summarily remanded the matter to the AO, thereby effectively sustaining a potentially invalid reassessment.

10.

In our considered view, the CIT(A) ought to have adjudicated the legal issues based on which the validity of the jurisdiction assumed by the AO for framing the assessment was assailed by the assessee before him, instead of summarily setting aside the matter to the file of the AO for fresh adjudication in exercise of the powers vested with him as per the “Proviso” to Section 251(1)(a) of the Act. We, thus, in the backdrop of the totality of facts and circumstances of the case, are of the considered view that the matter requires to be restored to the file of the CIT(A), with a direction to adjudicate the legal issues based on which the assumption of jurisdiction and the validity of the assessment framed by the AO have been assailed by the assessee before him. Needless to say, the CIT(A), in the course of the set-aside proceedings, shall afford the assessee a reasonable opportunity of being heard. In view of the aforesaid observations, the order of the CIT(A) is set aside, and the matter is restored to his file for de novo adjudication in terms of our above directions.

11.

As the Ld. AR has confined his contentions regarding the validity of the jurisdiction assumed by the CIT(A) in summarily setting aside the assessment order to the file of the AO in the garb of the powers vested with him as per the “Proviso” to Section 251(1)(a) of the Act; we have restricted our adjudication to the said extent.

12.

In the result, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations.

Order pronounced in the open court on 10th July, 2026.

Sd/- Sd/- MADHUSUDAN SAWDIA RAVISH SOOD ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad Dated: 10th July, 2026. *OKK/SPS Copy to: RAMA KRISHNA YADAV, DOOR NO.3-6-195/B, FLAT NO-101, GOURI APARTMENT, STREET NO.20, URDU GALLI, 1 NEAR LAKHSMI HOSPITAL & RESEARCH CENTER, HIMAYAT NAGAR, HYDERABAD-500029, TELANGANA ITO, WARD-12(1), HYDERABAD. O/o. INCOME TAX OFFICER, WARD-12(1), 2 AAYKAR BHAWAN, OPPOSITE LB STADIUM, BASHEER BAGH, HYDERABAD-500004, TELANGANA 3 THE PCIT, HYDERABAD. 4 THE D.R., ITAT, HYDERABAD BENCH 5 GUARD FILE

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