LAKSHMANAN KRISHNAKUMAR,CHENNAI vs. ITO, NCW-5(1), CHENNAI

The Assessee raised the following grounds of appeal :

The appellant submits that the provisions of section 251(1)(a) permits the Commissioner of Income-tax (Appeals) to confirm, reduce, enhance or annul the assessment and not to set aside the assessment.

The appellant submits that the powers to the Commissioner of Income- tax(Appeals) to set aside the assessment was provided under the "Proviso" to section 251(1)(a) by Finance Act, 2024 and the learned NFAC has not invoked the proviso to section 251(1)(a) of the Act and therefore the setting aside the assessment by NFAC is not correct in law.

The learned NFAC has not considered the additional grounds of appeal filed during the course of appeal proceedings by the appellant at all.

The appellant had submitted that the notice u/s 148 was not served on the appellant and the notice was sent to the email address of the ex- accountant who has left the job and the assessing officer should have dispatched the notice through Speed Post by utilizing the services of the Verification Unit.

The appellant therefore submits that in the absence of valid notice issued u/s 148, the entire re-assessment is bad in law and void ab to initio.

The learned NFAC erred in not adjudicating the legal issue raised by the appellant through additional grounds of appeal in that the Jurisdictional Assessing officer is not empowered to issue notice u/s 148 after introduction of section 151A of the Act w.e.f. 1st April, 2021.

The appellant submits that the assessing officer erred in treating the cash deposited of Rs.3,14,90,000 as unexplained money u/s 69A of the Act.

The appellant submits that the cash of Rs. 3,14,90,000 was deposited out of sale receipts in his trading business in fruits and vegetables amounting to Rs.8.26 cr.

The appellant submits that various courts have held that the cash deposited out of sale of goods cannot be treated as unexplained money u/s 69A of the Act.

The appellant therefore prays that the addition of Rs. 3,14,90,000 made u/s 69A of the Act as unexplained money may be deleted and justice rendered.

The Assessing officer erred in treating the cash withdrawals of Rs.21,69,020/- as unexplained money under section 69A of the Act.

The Assessing officer should have appreciated that the cash withdrawals cannot be considered as income at all as there was no unexplained money involved in cash withdrawal as the cash is withdrawn from the bank.

The appellant submits that the cash withdrawal for expenses was out of cash deposited which was very much more than the cash withdrawal.

The appellant therefore prays that the addition of Rs. 21,69,020 being the cash withdrawal as unexplained money u/s 69A of the Act may be deleted and justice rendered.

The Assessing officer erred in invoking the provisions of section 69A to the appellant's case as there was no unexplained money involved in his case and all the cash deposited and cash withdrawals were duly accounted for in the books of accounts which were duly audited also u/s 44AB of the Act.

The appellant therefore prays that the order of the NFAC may be set aside and he may be directed to consider the additional grounds of appeal raised and decide the issues on merit and render justice.”

Briefly, the facts of the case are that the appellant is an Individual. The appellant had not filed Return of Income under the provisions of Section 139(1) of the Act for the A.Y.2018-19. However, based on the information that the Appellant made cash deposits to the extent of Rs.3,14,90,000/- and made cash withdrawal of Rs.21,69,020/- in the bank account maintained with The South Indian Bank Limited, the Assessing Officer formed an opinion that income got escaped assessment from tax. Accordingly, a notice u/s.148 of the Act was issued on 31.03.2022 after duly complying with the procedure laid down u/s.148A of the Act. However, the appellant neither complied with the notice u/s.148 nor the notices issued u/s.142(1) of the Income Tax Act. In the circumstances, the assessment was completed by the e-Assessment Unit of the Income Tax Department(hereinafter called ‘AO’) had proceeded to frame best judgement assessment vide order dated 28.02.2023 passed u/s.147 r.w.s 144 read with section 144B of the Act at a total income of Rs.3,36,59,020/-. While doing so, the Assessing Officer made an addition of Rs.3,36,59,020/- on account of unexplained investment and unexplained money u/s.69A of the Act

Being aggrieved, the appellant preferred appeal before the ld.CIT(A) challenging the additions made by the Assessing Officer.

Being aggrieved, the appellant is in appeal before us in the present appeal. The ld.AR contends that the Assessment Order is void ab initio, as the Jurisdictional Assessing Officer(JAO) have no jurisdiction to issue notice u/s.148 of the Act, in view of the provisions of section 151A of the Income Tax Act, 1961.

On the other hand, the ld. Sr. DR had opposed the submissions made on behalf of the appellant and relied on the order of ld.CIT(A).

We shall take up this Ground No.2 at first instance as it goes to very root of the matter. In this case, we find that the appellant is an Individual raised jurisdictional issue that the Jurisdictional Assessing Officer(JAO) have no jurisdiction to issue notice u/s.148 of the Act. The Jurisdiction to issue the above notice vests with the Faceless Assessing Officer(FAO) in accordance with the provisions of explanation inserted to Section 151A read with CBDT Notification dated 29.03.2022. The appellant cooperative society relied on the following decisions of Hon’ble Bombay High Court in Hexaware Technologies Ltd. Vs. ACIT [2023] 149 taxmann.com 451, Hon’ble Madras High Court in TVS Credit Services Ltd. vs. DCIT in WP No.14255 of 2023, 22.04.2025 and Hon’ble Telangana High Court in Kings Pride Infra Projects Pvt. Ltd. vs. DCIT [2024] 157 taxmann.com 134, wherein, it was held that the issuing notice u/s.148 by the Jurisdictional Assessing Officer(JAO) is ultra vires the notification no.18 of 2022 of CBDT and the consequently held that the notice issued u/s.148A(b) and 148A(d) and 148 are null and void.

The Hon’ble Supreme Court in the case of Income Tax Officer vs. Tej Partap Singh [2026] 185 taxmann.com 1007 (SC) vide order dated 0.04.2026 considering the insertion of provisions of section 147A inserted by the Finance Act, 2026 in the Income Tax Act, 1961 with retrospective effect from 01.04.2021 clarifying that Assessing Officer for purposes of Section 148 and 148A shall mean an Assessing Officer other than NFAC or any assessment unit referred to in Section 144(3)” and also decision of various jurisdictional High Courts on the issue remitted to the respective High Courts for fresh consideration with the following observations : “21. It appears to us that the assessees would be entitled to challenge the amending provisions as elaborated upon heretofore, for which it would only be appropriate to relegate them to the jurisdictional High Courts. All contentions raised before us, as well as any other grounds available to them to question the impugned notices, may be urged before the High Courts instead.

Since the High Courts have primarily quashed the reassessment notices on the ground that the JAOs lacked competence to initiate such proceedings, and the very foundation of that view now stands altered by the amending legislation, the impugned judgments in favor of the assessees are set aside on this limited ground. The matters are accordingly remitted to the respective High Courts for fresh consideration. Ordered accordingly.

The assessees are granted liberty to amend their writ petitions, if so advised, within a period of four (4) weeks from the date of uploading of this order, so as to enable them to lay challenge to Section 147A of the IT Act, as introduced by Act No. 4 of 2026, or to any other connected or consequential provision.

Similarly, the Appellant-Revenue shall be at liberty to file their written submissions and affidavits before the jurisdictional High Courts within a period of three (3) weeks thereafter.

No additional time shall be granted to the parties beyond what has been granted above.

We make it clear that we have not expressed any opinion on the merits of the controversy, including the validity, scope, effect, retrospectivity or applicability of the amended provisions, and all such questions are left open to be decided by the High Courts.

Finally, during the pendency of the writ petitions before the High Courts, there shall be an interim stay of further assessment/reassessment proceedings pursuant to the impugned notices, subject to such terms and conditions as may be imposed by the High Courts.”

In the light above, we are of the considered opinion that the matter is required to be remitted to be back to the file of ld.CIT(A) for fresh consideration after the decision rendered by Jurisdictional High Court in the case of TVS Credit Services Ltd. vs. DCIT in WP No.14255 of 2023, 22.04.2025 and other connected matters. Accordingly, appeal field by assessee stands remitted back to the file of ld.CIT(A) for denovo disposal of appeal on the above lines.

In the result, appeal filed by the Assessee stands Partly Allowed for statistical purpose. Order pronounced in the open Court on 6th July, 2026.