SASHI PARVATHA REDDI,USA vs. ADIT., INTL TAXATION -2, HYDERABAD

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ITA 1486/HYD/2025Status: DisposedITAT Hyderabad10 June 2026AY 2016-179 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that while the CIT(A) could proceed with the appeal in the absence of the assessee, he erred by not passing a speaking order with independent observations. The case was set aside to the CIT(A) for re-adjudication.

What were the facts?

The assessee, an NRI, filed a return declaring income and a long-term capital loss. The Assessing Officer made additions, and the CIT(A) dismissed the appeal due to the assessee's non-participation despite multiple opportunities.

What were the issues?

Whether the CIT(A) passed a valid speaking order when dismissing the appeal due to the assessee's non-appearance. Whether the CIT(A) properly adjudicated the grounds of appeal on merits.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 250,Section 48,Section 112(1)(c)(iii),Section 271(1)(c),Section 144C,Section 2(47)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad

For Appellant: Shri Waseem UR Rehman, CIT-DR

PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals)-10, Hyderabad (for short, “CIT(A)”), dated 21/08/2025, which in turn arises from the order passed by the Assessing Officer (for short, “AO”) under section 143(3) of the Income Tax Act, 1961 (for short, “the 2 Act”), dated 27/12/2018 for the AY 2016-17. The assessee has assailed the impugned order of the CIT(A) on the following grounds of appeal:

1.

General ground

1.

1 The Ld. ADIT (INT TAXN)-2, Hyderabad ('Ld. AO') erred in passing the order under section 143(3) of the Income Tax Act, 1961 ('the Act') and the Honourable CIT(A)-10, Hyderabad ('Hon'ble CIT(A)') further erred in upholding such an invalid assessment order, thereby rendering both the assessment and appellate order bad in law and liable to be quashed.

2.

Grounds relating to order under section 250 and 143(3) of the Act On the facts and in the circumstances of the case and in law:

2.

1 The order passed by the Ld. AO is bad in law and void ab initio, as no draft assessment order was issued to the Appellant in terms of section 144C of the Act, despite the Appellant being an 'eligible assessee', and the Hon'ble CIT(A) further erred in upholding such an invalid assessment order, thereby rendering both the assessment and the appellate order unsustainable in law and liable to be annulled.

2.

2 The Hon'ble CIT(A) erred in law in not passing a speaking order as mandated under section 250(6) of the Act, and in not deciding the appeal on merits even though the Appellant did not appear thereby rendering the appellate order bad in law and unsustainable.

2.

3 The Hon'ble CIT(A) has erred in confirming the assessment order without properly appreciating the true facts and circumstances of the case and in upholding false allegations made by the Ld. AO with respect to the investments made through Sashi Reddi Investment Capital Fund ('SRI Capital Fund).

2.

4 The Hon'ble CIT(A) has erred in confirming the action of the Ld. AO in holding that there was no transfer of capital assets within the meaning of section 2(47) of the Act, and in treating the losses claimed as notional, ignoring that the redemption of units constituted a valid transfer giving rise to capital gains/ capital losses.

2.

5 The Hon'ble CIT(A) has erred in confirming the action of the Ld. AO in not considering the actual investment made by SRI Capital Fund in Fx Labs Studio Private Limited, which was duly evidenced and on record, and in wrongly holding that the transactions were colourable or sham.

3

2.

6 The Hon'ble CIT(A) has erred in confirming the action of the Ld. AO in considering realization proceeds from the investments in Fx Labs Studio Private Limited and Big Dosa Private Limited, without appreciating the fact that both companies were under liquidation and hence no amount was realized by the Fund.

2.

7 The Hon'ble CIT(A) has erred in confirming the action of the Ld. AO in denying the statutory benefit of indexation under section 48 while computing long-term capital gains, and in wrongly applying section 112(1)(c)(iii) of the Act.

2.

8 The Hon'ble CIT(A) has erred in confirming the action of the Ld. AO of ignoring the long-term capital loss computed by the Appellant on the exchange of units of SRI Capital Fund for rights in Mr. Lakshmi Narayan, Cacruz Ventures Private Limited, and INVNTN Wireless Solutions Pvt Ltd on the incorrect contention that no information was provided regarding these investments.

2.

9 The Hon'ble CIT(A) has erred in confirming the action of the Ld. AO of ignoring the short-term capital loss computed by the Appellant on the investment in Hello Curry Private Limited, failing to appreciate that Rs. 6,00,00,000/- advanced as optionally convertible debt was written off as non-recoverable during the year.

2.

10 The Hon'ble CIT(A) has erred in confirming the action of the Ld. AO without appreciating that 92.03% of the investments of SRI Capital Fund belonged to the Appellant, and hence the resultant capital gains should have been computed proportionately in the hands of the Appellant.

2.

11 The Hon'ble CIT(A) has erred in confirming the action of the Ld. AO in initiating penalty proceedings under section 271(1)(c) of the Act by alleging that inaccurate particulars of income were furnished by the Appellant. The grounds mentioned above are independent and without prejudice to the other grounds preferred by the Appellant. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or, at the time of hearing of the appeal, so as to enable Income Tax Appellate Tribunal to decide the appeal according to law.”

2.

Succinctly stated, the assessee, a Non-Resident Indian (NRI), had e-filed her return of income for AY 2016-17 on 29/07/2016, declaring an income of Rs.3,81,46,460/- along with a Long term capital loss (LTCL) of Rs.43,16,80,048/-. Subsequently, the assessee's case was selected for 4 Sashi Parvatha Reddi vs. ADIT scrutiny assessment under section 143(2) of the Act. Thereafter, the AO vide his order passed under section 143(3) of the Act, dated 27/12/2018 determined the income of the assessee at Rs.14,99,79,057/- after making certain additions/disallowances, viz., (i) re-determining of long term capital gain (LTCG) on sale of securities: Rs.7,55,59,385/-; (ii) re- computation of income from short term capital gains (STCG) on sale of securities/equity oriented Mutual Fund: Rs.4,34,68,841/-; and (iii) income from other sources: Rs.3,09,51,029/-.

3.

Aggrieved, the assessee carried the matter in appeal before the CIT(A).

4.

Ostensibly, as the assessee, despite having been afforded 14 opportunities, failed to participate in the proceedings before the First Appellate Authority, the latter approved the view taken by the AO and dismissed the appeal. For the sake of clarity, we deem it apposite to cull out the observations of the CIT(A), as under:

“6. Decision: The assessee is an individual and a non-resident Indian during the FY 2015-16 relevant to AY 2016-17. The assessee filed his return for the AY 2016-17 on 29.07.2016 declaring total income of Rs.3,81,46,460/ offering Income from Long Income from Other Sources and the assessee claimed Short Term Capital gain Term Capital Loss of Rs.43,16,80,048. Subsequently, the assessee's case was selected for scrutiny under CASS. Later, in the course of assessment, notices u/s 143(2) and 142(1) of the Income Tax Act, 1961 were issued and replies were received from time to time. The AO after considering the assessee's reply investments and the companies are under the control of and management of the assessee and the facts that the investments made by the assessee were redeemed at cost, hence there is no loss on investment and held the same to be colorable device and treated the claim of loss on 5 Sashi Parvatha Reddi vs. ADIT account of write-off of debt and premium advanced to these companies is devoid of merit. Accordingly, the AO recomputed the LTCG and SCTG and arrived at total assessed income of Rs. 14,99,79,057/-. Aggrieved by the above assessment order dated 27.11.2019 the appellant filed the present appeal before CIT (Appeal)-10, Hyderabad with the grounds of appeal mentioned in Para 03 above. I have gone through the facts of the case. After perusal of the assessment order, written submission, information available in the record, grounds of appeal, the appeal is being decided ground wise herewith:

6.

1 Ground No 8 and 9: The grounds raised being consequential and general in nature are not adjudicated.

6.

2 Ground No 1 to 7: The appellant in these grounds claims that the AO completed the assessment without considering the facts of the case and appreciating the replies and information furnished in the course of assessment. The appellant further contends and claims that the AO disallowed the Long Term Capital Loss on the ground that no information was furnished regards the investments/financials of the companies. It is pertinent to mention here that the following opportunities were afforded to the assessee in the course of assessment:

On perusal of the of the above, it is a fact that several opportunities have been given to the appellant however, the assessee had submitted only part information and the AO also made a specific mention that only part information was provided. The AO after considering the appellant's submission completed the assessment u/s 143(3) of the Income Tax Act, 1961 on 27.12.2018. 6 The appellant filed an appeal on 24.01.2019. The appellant in the appeal papers submitted facts of the case along with Grounds of Appeal, it is pertinent to mention here that no attachments/Documents were filed along with his appeal papers. In the course of appeal proceedings, the appellant was given numerous opportunities and reminders the details of opportunities are tabulated as under:

It is pertinent to mention here that the appellant had replied only on two occasions and that too only to seek time/adjournment and had not filed any reply in the course of appeal proceedings. The approach of the appellant being non responsive even after continued opportunities shows that he is not interested in pursuing the appeal any further. Further with regard to the facts and merit of the assessment also, the findings of the AO are elaborate and self-spoken, hence no interference is warranted. In view of the above facts and the appellant's non-compliance in the course of appeal proceedings and order of the AO is confirmed and accordingly, the Ground Nos 1 to 7 are dismissed.

7.

To sum up the appeal is dismissed.”

5.

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

7 Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal submitted that the CIT(A) has erred in law by not passing a speaking order as required per the mandate of section 250(6) of the Act. Elaborating on her contention, the Ld.AR submitted that though the assessee had failed to participate in the proceedings before the CIT(A), the latter remained under a statutory obligation to have disposed of the appeal considering the merits of the case, which he had failed to do. The Ld. AR submitted that the matter, in all fairness, be set aside to the file of the CIT(A) with a direction to dispose of the same by passing a speaking order.

8.

Per contra, Shri Waseem UR Rehman, Learned CIT, Departmental Representative (for short, “Ld. CIT-DR”) relied upon the orders of the authorities below.

9.

Having given thoughtful consideration, we principally concur with the CIT(A) that in case an assessee appellant, despite having been afforded sufficient opportunities, fails to participate in the proceedings before the First Appellate Authority, then the latter cannot keep the proceedings in abeyance and remain well within his juri iction to 8 Sashi Parvatha Reddi vs. ADIT proceed with and dispose of the appeal. However, in the case before us, we find that the CIT(A) had in the absence of any participation in the appellate proceedings by the assessee proceeded with to dispose of the appeal, but thereafter had grossly erred in not passing a speaking order based on his independent observations qua the specific grounds of appeal based on which the impugned order of assessment passed by the AO under section 143(3) of the Act, dated 27/12/2018 was assailed before him. Rather, we find that the CIT(A) had simply observed that, as the assessee had not prosecuted the appeal before him, he found no infirmity in the observations of the AO, which were elaborate and self- speaking, and refrained from dislodging the same. In our view, the CIT(A) had grossly erred in not recording his independent observations on the specific issues based on which the impugned order was challenged before him. Although the CIT(A) might have concurred with the view taken by the AO, he remained under the statutory obligation to record his independent observations while upholding the assessment order.

10.

We thus, based on our aforesaid observations, are of firm conviction that, as the CIT(A) has failed to dispose of the appeal based on a speaking order, the matter, in all fairness and in the interest of justice, merits to be set aside to his file with a direction to re-adjudicate the same based on a speaking and reasoned order. Needless to say, the CIT(A) shall, in the course of the set aside proceedings, afford a 9 Order pronounced in the open court on 10th June, 2026. S (मधुसूदन साव"डया) (रवीश सूद) (MADHUSUDAN SAWDIA) (RAVISH SOOD) लेखासद"य/ACCOUNTANT MEMBER "या"यकसद"य/JUDICIAL MEMBER d/- Hyderabad, dated 10/06/2026. **OKK/sps आदेशक"""त"ल"पअ"े"षत/ Copy of the order forwarded to:-

1.

"नधा"रती/The : Sashi Parvatha Reddi Plot no. 1056H, Road No. 45, Jubilee Hills, Assessee Hyderabad – 500033, Telangana-500033. 2. राज"व/ The Revenue : ADIT(INT TAXN)-2, Aayakar Bhavan, Opposite LB Stadium, Basheer Bagh, Hyderabad - 500004, Telangana-500004

3.

The Principal Commissioner of Income Tax, Hyderabad.

4.

"वभागीय""त"न"ध, आयकरअपील"यअ"धकरण /DR,ITAT, Hyderabad.

5.

The Commissioner of Income Tax 6. गाड"फ़ाईल / Guard file

आदेशानुसार / BY ORDER KAMALA KUMAR KUMAR ORUGANTI ORUGANTI Date: 2026.06.10 18:38:13 +05'30' Sr. Private Secretary ITAT, Hyderabad.

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