NANJUNDAIAH MUDDAIAH,BANGALORE vs. INCOME TAX OFFICER, WARD-3(3)(1), BANGALORE

PER KESHAV DUBEY, JUDICIAL MEMBER:

This appeal at the instance of the assessee is directed against the order of the ld.CIT(A)/NFAC dated 12.9.2025 vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1080663446(1) passed u/s 250 of the Income Tax Act, 1961 (in short “theAct”) for the assessment year 2015-16.

Page 2 of 22 2. The Assessment order passed by Assessment Unit u/s.147 is bad in law and null and void as the notices issued u/s.148A and u/s. 148 issued by Jurisdictional AO, Ward 3(3)(1), Bangalore and the order was passed by Assessment unit (NFAC), which is against the notifications issued by CBDT in respect of faceless assessment and change in jurisdiction is also not intimated in portal. In this regard, the Appellant relies on the decision of Hon'ble High Court decision in the case of Ramachandra Reddy Ravi Kumar vide order cit 28.06.2025 3. The Assessment order passed by JAO is bad in law as JAO has power to pass order under the NFAC scheme which can be passed only by NFAC. 4. The learned CIT (A) erred in upholding the addition of Rs.30,00,000/- made under section 69A of the Income Tax Act, 1961, without properly appreciating the facts and evidences placed on record. 5. The learned Assessing Officer and Commissioner (Appeals) erred in law in invoking section 69A of the Income-tax Act, 1961 to make an addition of Rs.30,00,000/- even though the appellant, being a salaried individual not engaged in any business, did not maintain any books of account. 6. The addition u/s. 69A was unjustified as the appellant had duly explained the source of cash used for purchase of property as loans from identifiable persons and confirmation letter were submitted before AO. The mere non-appearance of some lenders cannot automatically render the loans are unexplained. 7. The Appellant was a low-income retired employee who had purchased and sold the property for the same value, with no intention or evidence of income generation. The authorities erred in not considering the genuine nature of the transaction.

Wherefore on the above grounds and on such other grounds the Appellant prays the Appellate Authority to set aside the Assessment order and may pass such other as the Appellate Authority deems fit.

Page 3 of 22 3. Brief facts of the case are that the assessee was a class “D” employee of Bangalore University and also a member of Bangalore university Employees' House Building Cooperative Society Ltd. In the case of the assessee, specific information was flagged as per the Risk Management Strategy formulated by the CBDT through ITBA software under the head “NMS cases”. As per the specific information, the assessee had carried out the following transactions during the FY 2014-15 relevant to AY 2015-16:

1 Purchase of immovable property Rs.1,64,00,000/- 2 Sale of immovable property Rs. 82,00,000/-

Further, on perusal of the data available on e-filing portal, it was also found that the assessee did not file his return of income for the AY 2015-16 despite having such high value transactions during the FY 2014-15. The AO thereafter issued notice u/s 148A(b) of the Act on 17.3.2022 to show cause as to why it should not be held that there is an income chargeable to tax that has escaped assessment and as such why a notice u/s 148 of the Act should not be issued? The assessee was given time till 25.3.2022 to respond to show cause notice. As the assessee neither furnished any reply nor sought for any adjournment, the AO on the basis of material available on record, passed an order u/s 148A(d) of the Act on 29.3.2022 by holding that it is a fit case to issue notice u/s 148 of the Act. The AO also issued notice u/s 148 of the Act on the same day i.e. on 29.3.2022. As the assessee did not have any e-mail address and also the notices sent by the post were undelivered, the notice u/s 148 of the Act was served to the assessee by affixture on 16.2.2023 by giving 30 days’ time to furnish return of income for the AY 2015-16. In response to notice u/s 148 of the Act, the assessee filed his return of income on 29.3.2023. Accordingly, the notice u/s 143(2) of the Act dated Page 4 of 22 26.6.2023 as well as notices u/s 142(1) of the Act dated 8.11.2023 and 4.12.2023 was issued. In response to the said notices, the assessee furnished the required details.

3.1 During the course of assessment proceedings, the AO observed that the assessee had purchased a site at plot no.165E, Halagewadera Halli Layout, Bengaluru for Rs.81,18,000/- through an auction in Bangalore University Employees’ House Building Co- operative Society Ltd. The assessee was asked to explain the details and source for this transaction. The assessee in his reply submitted that he had only Rs.8,00,000/- which was kept for his daughter’s marriage. Further, he had taken cash loan from friends and relatives amounting to Rs.43,00,000/- and the balance of Rs.39,00,000/- was borrowed from Mr. Hanumantharaya received through RTGS which was credited to his saving account on 22.8.2014. Further, the assessee furnished identity and signed confirmations from 23 persons amounting to Rs.34,00,000/- received in cash. The AO, in order to verify the genuineness and credibility issued summons u/s 131 of the Act to some lenders randomly. However, only two lenders i.e. Shri D.N. Nataraju and Shri H.S. Chandrasekhar appeared and statement u/s 131 of the Act was recorded. In view of this, confirmations in respect of Rs.4 lakhs received from Shri D.N. Nataraju and H.S. Chandrasekhar was accepted and in the absence of plausible explanation Rs.30 lakhs was treated as unexplained money u/s 69A of the Act.

3.2 With regard to the sale of property amounting to Rs.82,00,000/-, the assessee during the course of assessment proceedings also submitted that he had to sale the same plot purchased vide No.165E, HalagewaderaHalli Layout, Bengaluru immediately due to personal issues for a price of Rs.82,00,002/- and has arrived at a capital loss of Rs.5,99,998/-. The AO verified Page 5 of 22 this submission and accepted the capital loss of Rs.5,99,998/- and concluded the assessment proceeding u/s 147 of the Act on a total assessed income of Rs.32,51,600/- as under:

Particulars Amount in (Rs.) Income returned Rs.2,51,600/- Add: Addition as above Rs.30,00,000/- Assessed income Rs.32,51,600/-

Page 6 of 22 7.1 With regard to ground No.1, the assessee submitted that the order passed u/s 147 r.w.s. 144B of the Act is null and void as the total escapement of taxable income does not exceed Rs.50 lakhs as contemplated u/s 148 of the Act. “In the order passed u/s.148A (d) dt 29/03/2022 that A.O has stated that "From the information within the meaning of the provisions of Explanation 1 (i) of Sec. 148 of the IT Act, 1961, it was seen that the assessee had purchased an Immovable property for a value of Rs.1,64,00,000/- also assessee had sold an immovable property foran amount of Rs. 82,00,000/-. As the assessee has failed to disclose toe said amount and the same needs to be brought to tax during theF. Y.2014-15 relevant to A. Y. 2015-16".

However, the AO has assessed the total income of Rs.32,51,600/-,by making an addition of Rs.30,00,000/- which is relating to Purchase of property. He submitted that the said addition relates to loans obtained from the relatives and friends.As per the provisions of section 149 read with section 148A and section 147 (as substituted by Finance Act, 2021), where notice under section 148 is issued beyond three years from the end of the relevant assessment year, the reassessmentcan be initiated only if the escaped income is represented in the form of asset and exceeds Rs.50,00,000/-. In the present case, the alleged escaped income is Rs.30,00,000/- only, which is much below the statutory threshold of Rs.50,00,000/-. Therefore, the very jurisdictional condition for assuming jurisdiction under section 147 is not satisfied.It is pertinent to note that the learned AO issued notice under section 148A(b) and passed the order under section 148A(d) of the Act mechanically and without any supporting documentary material, by alleging that the assessee had purchased an immovable property for Rs.1,64,00,000/- and sold a property for Rs.82,00,000/- without bringing any cogent evidence on record to substantiate such figures.However, in the assessment order subsequently passed under section 147 of the Act, the AO himself Page 7 of 22 has recorded that the assesseehad purchased the property for a consideration of Rs.81,18,000/- as per the registered sale deed. This clearly demonstrates that the figures of Rs.1,64,00,000/- mentioned in the order under section 148A(d) of the Act were factually incorrect and not based on any verified record.Hence, he submitted that from this it can be noted that, the AO has reported blindly Rs.1,64,00,000/- to make Rs.50 Lakhs as escapement of Income for reopening of assessment u/s.147 rws 148A of the Act.Further the assessee submitted that he has arrived short term capital loss of Rs. 5,99,998/-. As the escapement of income is not qualified for initiation of proceedings u/s.148A, the notice issued u/s.148A(b) and the consequential reassessment order passed under section 147 are bad in law and null and void. Hence the ld. A.R. for the assessee requested to quash the entire proceedings of section 148A rws 147 of the Act. 7.2 In this regard, the ld. A.R. for the assessee relied on the following decisions.

7.3 Hence, he requested to quash the assessment order by following the above decisions.

Page 8 of 22 7.4 With regard to ground No.2, the ld. A.R. for the assessee submitted that the AO Ward has issued notice u/s.148A 17/03/2022. However, the assessee could not reply to the said notice as he was not aware of the proceedings and notice issued in the portal. Accordingly, the AO has passedan order u/s.148A (d) on 29/03/2022 and issued notice u/s.148 of the Act on 29/03/2022.However the notices issued u/s.142(1) and order is passed by Assessment unit on 08.11.2023 u/s.147, which is against the CBDT notification issued in respect of faceless assessment. As per this notification, the assessment order should have been passed by AO 3(3)(1) who has issued the notice u/s.148 of the Act. However,in present case the assessment order is passed by Faceless Assessment unit and notice is issued by AO 3(3)(1).Hence the ld. A.R. for the assessee submitted that the entire proceeding u/s.147 is bad in law and null void as held by Hon'ble High Court of Telengana in the case of KankanalaRavindra Reddy Vs ITO, (2023) 156 taxmann.com 178 (Telengana HC).

7.5. With regard to ground Nos.4 to 7 the ld. A.R. for the assessee submitted that the assessee has purchased a site at Plot No.165E, HalagewaderaHalliLayout, Bangalore for Rs.81,18,000/- through an auction in BangaloreUniversity employees House Building Co- op Society Limited. During thecourse of assessment proceedings, the AO has asked the assessee to explain the sources for the purchase transaction. He submitted that the assessee had fully explained the sources and submitted the documentary evidences for the same. The assessee further submitted the confirmation letters, which were obtained from the respective lenders. Based on the confirmation letters, the AO has issued notice u/s.133(6) and sought information from some of the lenders randomly.The Only Two lenders namely Shri D N Nataraju and Shri H S Chandrashekar have appeared and given statement that they have Page 9 of 22 given cash loan. Accordingly, the AO has accepted those lenders loan amount to the extent of Rs. 4 Lakhs. Balance Rs. 30 Lakhs is disallowed for the nonappearance for the summons issued. The ld. A.R. submitted that it was not clear from the AO’s order as to how many persons out of balance 21 lenders, summons were issued.Further the AO has stated in the assessment order that signature of Mr. D N Nataraju is different in both the documents being confirmation letter and statement given. In this regard the ld. A.R. for the assessee submitted that if at any point of time, the loan transaction is not genuine, the said person could not have appeared and given statement before the AO. The transaction is genuine and hence the said person had appeared and given statement. Merely small changes in signature it cannot be said the all the confirmation letters are bogus confirmations. Further the AO has not established with any documentary evidence that the confirmation letters obtained along with their PAN and Aadhar Card copies are not genuine. He further submitted that the notices issued by the Assessing Officer to certain lenders under section 133(6) of the Act did not reach them in time, as some of the lenders had shifted from their registered places of residence prior to issuance/service of the notices. He submitted that a few of the lenders were earlier residing in the residential quarters of Bangalore University. Subsequently, the said quarters were demolished by the BBMP for development-laying works, as a result of which the concerned lenders had vacated the premises and shifted to other places.Due to change of address and non- availability at the old addresses, the notices issued by the learned AO could not be properly served upon them. Hence, he submitted that merely nonappearance and not giving statement before AO it cannot establish that loans are not genuine. Further, he submitted that the assessee does not have any other amount or any other Page 10 of 22 sources to treat the same as unexplained being assessee Class D employee of Bangalore University. He cannot do any other business. Further the AO has not provided an opportunity to the assessee after issue of notice u/s. 136(6) during the course of assessment proceedings, to rebut his findings. Further the assessee has submitted identity and confirmation letters from the all the lenders along with name, address and PAN.

7.6 Hence, he submitted that the assessee has repaid all the loans in November 2014 itself out of the sale proceeds of the said property. The said loans stood fully discharged during the year and there are no outstanding dues payable to any lender.Further, the repayment of the loans was made out of cash withdrawals from the assessee’s bank account, which were duly recorded. He submitted that since the loans have been fully repaid and there was no outstanding liability as on 31.03.2015, no addition can be made under section 69A of the Income-tax Act, 1961. Further the CIT (A) has not considered the assessee’s requests to remand the matter to the file of AO for establishing the genuineness of the loans received from the respective parties.

7.7 The ld. A.R. for the assessee further submitted that Section 69A can be invoked only where money, bullion, jewellery or other valuable article is found to be owned by the Assessee and the Assessee offers no explanation about the nature and source thereof, or the explanation is not satisfactory. In the case of a salaried employee, there is no statutory obligation to maintain books and therefore the provisions relating tounexplained cash credits / investments cannot be mechanically applied without any corroborative evidence to show that the amount represents undisclosed income.The Hon'ble High Courts and Tribunals have Page 11 of 22 consistently held that section 69A cannot be invoked merely because amounts are reflected in bank accounts of an Assessee who does not maintain books, unless there is independent evidence that the amount represents undisclosed income.The AO has not brought any material on record to establish that the assesseehas earned unaccounted money. The addition is made merely on assumptions and presumptions. In this regard the ld. A.R. for the assessee relied on decisions of various High Courts.

7.8 Ground No.8 is general in nature and hence no adjudication is required.

Page 13 of 22 9.1 We are of the considered opinion that the AO in the guise of the reopening of the assessment proceedings had simply made a fishing and roving enquiry based on unfounded suspicion only. The AO completely ignored the elementary aspect of purchase and sale of immovable property resulting in capital loss of Rs.5,99,998/- accepted by the AO himself during the course of assessment proceedings. We are of the considered opinion that merely because the assessee had purchased an immovable property and subsequently sold the same would not ultimately culminated into the income escaping assessment especially when the AO himself accepted the capital loss of Rs.5,99,998/-. We are completely surprised to note that the allegation in the order passed u/s 148A(d) of the Act was that the assessee had purchased an immovable property of Rs.1,64,00,000/- and sold the immovable property of Rs.82,00,000/- however, on perusal of the assessment order, the AO even did whisper about the alleged purchase figure of Rs.1,64,00,000/- and without any findings himself noted in the assessment order that assessee had purchased a site for Rs.81,18,000/- only. We are of the considered opinion that merely because there is a purchase and sale of the same property, the purchase amount and the sale amount cannot be held as escaped income. What is relevant as per provisions of the Act is escaped income and not the purchase and sale value of the immovable property. The provisions u/s 148A of the Act was inserted in the Act w.e.f. 1.4.2021 to render the power of the revenue of reopening cases to more transparent so as to avoid casual invocation of section 147-148 of the Act. The insertion of section 148A of the Act not only saves the assessee from casual commencement of proceedings u/s 147-148 of the Act but also saves the revenue of precious time and energy which may be vested pursuing fruitless, frivolous and vexatious cases.

9.2 The Hon’ble Madhya Pradesh High Court in the case of M/s. Amrit Homes Pvt. Ltd. Vs. DCIT & Anr. In WP No.15244/2023 dated 9.8.2023 has held as under:

“7.2 The object behind insertion of section 148A by the Legislature w.e.f. 01/04/2021 interalia appears as follows: - (a) To prevent rampant and casual issuance of notice u/s 148 by the Revenue; (b) To save unnecessary harassment to the assessee of being subjected to re- opening a case under section 148; (c) To save the Revenue of the time and energy which may be vested pursuing frivolous and fruitless proceedings u/s 148.”

9.3 Before proceeding further, it is also apposite here to take note of the erstwhile section 149 of the Act as applicable at the time of issuing notice u/s 148 of the Act for the purpose of this case, which reads as under:-

2 [Time limit for notice. 149. (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 asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:

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 such Page 15 of 22 notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of subsection (1) of this section, 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 the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per showcause 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 is less than 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.

(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.]

Page 16 of 22 Thus, as per Section 149(1) of the Act substituted by the Finance Act,2021 w.e.f 01/04/2021 “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 accounts or other documents or evidences which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year.

9.4 Thus, section 149 of the Act stipulates restrictions on issuance of notice u/s 148 of the Act & not on conducting any enquiry with respect to the information which suggests that the income chargeable to tax has escaped assessment by providing an opportunity of being heard to the assessee as per the provisions contained u/s 148A(b) of the Act. Thus, there is a clear distinction between 148A proceedings and 148-147 proceedings. The Revenue is free to conduct enquiry based on the information, but once during the course of 148A proceedings, the AO found that the income which has escaped assessment amounts to or likely to amount to less than fifty lakh rupees, the AO should restrain himself to proceed further & drop the proceedings if three years have already elapsed from the end of the relevant assessment year.In the present case, the assessee had purchased an immovable property of Rs.81,18,000/- and sold the same for Rs.82,00,002/- resulting in capital loss of Rs.5,99,998/-. Thus, the AO on the Page 17 of 22 basis of purchase amount of Rs.81,18,000/- and sale amount of Rs.82,00,002/- of immovable property cannot invoke the extended period on ground that the escaped assessment amounts to or likely to exceed Rs.50,00,000/-. Thus, the AO cannot invoke the extended period thereafter for reopening the assessment by issuing the notice u/s 148 of the Act. We are of the considered opinion that in order to grab the extended period of 10 Years as per clause (b) of the Section 149 (1) of the Act, the AO has to satisfy the conditions enumerated as below-

• AO has in possession--------- Books of Accounts or other documents or evidence • Which reveal------------- Income Chargeable to Tax in the Form of Asset/Expenditure/entry(s) in books of A/c. • Which escaped Assessment……… Amounts to or is likely to amount to 50 lakhs or more

As per clause (a) of section 149(1) of the Act, a notice issued u/s 148 of the Act dated 29.3.2022 could have been issued up to 31.3.2019. Thus, the time limit for issuing the notice u/s 148 of the Act for the assessment year 2015-16 was 31.3.2019 and have been time barred by virtue of clause (a) of section 149(1) of the Act. In the present case, the sole reason for the reopening of the case was based on the specific information that the assessee had purchased the immovable property of Rs.1,64,00,000/- and sales the immovable property amounting to Rs.82,00,000/-. The allegation of the assessee is that the AO had reported purchase of immovable property of Rs.1,64,00,000/- blindly in order to invoke the extended period u/s 149(1)(b) of the Act. In these circumstances, the AO himself during the course of assessment proceeding did not even whisper about the alleged purchase of Page 18 of 22 immovable property amounting to Rs.1,64,00,000/- and accepted the purchase and sale of property resulting in a capital loss of Rs.5,99,998/- in the assessment proceeding, we are of the considered opinion that the case of the assessee does not fall under the clause (b) of section 149 of the Act as no Income chargeable to tax, represented in the form of undisclosed assets, which has escaped assesment amounts to or is likely to amount to Fifty lakhs rupees or more for that year. Our view also gets support from the fact that the AO had initiated the proceedings based on a suspicion that entire purchase of immovable property worth Rs.1,64,00,000/- and sale of immovable property amounting to Rs.82,00,000/- had escaped assessment, however, finally ended with the conclusion by saying that in the absence of plausible explanation loan of Rs.30,00,000/- was treated as unexplained money u/s 69A of the Act. We are also of the considered opinin that AO was not in possession of any books of accounts or other documents or evidences which reveal that the income chargeable to tax has escaped assessment is likely to amount to Rs.50,00,000/- or more for that year and therefore, the AO grossly erred in invoking the extended time period provided u/s 149(1) (b) of the Act.

9.5 Further, we also rely upon the decision of Hon’ble Karnataka High Court in the case of Mr. Sanath Kumar Murali Vs. ITO reported in (2023) 455 IT 370, which is held as under:

“14. It is clear that the notice is issued in the context of sale consideration from sale of immoveable property for an amount of Rs.55,77,700/-. As noted above, the reply to the show cause notice, copy of which is enclosed at Annexure-'F1' would reveal the details of sale consideration and the cost of acquisition would be the indexed cost of acquisition in light of the sale leads to accrual of long term capital gain.

Page 19 of 22 15. In the present case on hand, clearly, the income that has escaped assessment is the proceeds from the sale as made out from perusal of the Annexure to the show cause notice at Annexure-'C'. In case of income arising from the sale of property which may fall within the purview of Section 48 so as to amount to capital gains, it is relevant to notice that Section 48 provides for mode of calculation of income chargeable under the head 'Capital Gains'. Section 48 reads as follows:-

"48. The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely:- (i) expenditure incurred wholly and exclusively in connection with such transfer, (ii) the cost of acquisition of the asset and the cost of any improvement thereto; (iii)in case of value of any money or capital asset received by a specified person from a specified entity referred to in sub-section (4) of section 45, the amount chargeable to income-tax as income of such specified entity under that sub-section which is attributable to the capital asset being transferred by the specified entity, calculated in the prescribed manner: ... Provided further that where long- term capital gain arises from the transfer of a long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an Indian company referred to in the first proviso, the provisions of clause (ii) shall have effect as if for the words "cost of acquisition" and "cost of any improvement", the words "indexed cost of acquisition" and "indexed cost of any improvement" had respectively been substituted:.... ..." 16. The words used in Section 149(1)(b) is that the 'income chargeable to tax' which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year. The income chargeable under the head of 'capital gains' which would arise in case of sale transaction is as provided under Section 48, which provides that income chargeable under the head of 'capital gains' shall be computed by deducting from the full value of the consideration, the cost of acquisition and in the event, the property purchased has been held for a period beyond three years in terms of second proviso to Section 48, the words, 'cost of acquisition' is to be substituted by the words, 'indexed cost of acquisition'. This material is pointed out in the reply at Annexure-'F1' furnished to the show cause notice, which ought to be taken note of prior to the issuance of notice under Section 148A of I.T. Act. 17. It must be noticed that before issuance of notice under Section 148 to re-open the proceedings with respect to the Assessment Year 2016-2017. Section 148A provides: "148A. The Assessing Officer shall, before issuing any notice under section 148, -- Page 20 of 22 (a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;

(b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);

(c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);

(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires: ..." Clearly when the procedure is followed culminating in an order passed under Section 148(A)(d), the Authority is required to apply its mind and consider the reply of the assessee and pass a considered order. In the present case, the respondent Authority has not applied its mind to the reply filed, nor noticed the legal position while deciding as to the application of the extended period under Section 149(1)(b) of the I.T. Act. 18. Accordingly, in the present case, the words found in Section 149 which is 'income chargeable to tax' must be read in terms of 'income' as arising out of the 'Capital Gains' as provided under Section 48 and this is the only manner of understanding the words, 'income chargeable to tax under Section 149(1)(b) of I.T. Act.

9.6 In view of the above, as well as relying upon the decision of the Hon’ble Karnataka High Court, the order passed u/s 148A(d) of the Act is hereby set aside and the notice issued u/s 148 of the Act for the AY 2015-16 is also quashed as barred by limitation and accordingly, the consequential assessment order passed u/s 147 of the Act dated 20.2.2024 is also qushed.

Order pronounced in the open court on 2nd July, 2026

Sd/- Sd/- (Waseem Ahmed) (Keshav Dubey) Accountant Member Judicial Member

Bangalore, Dated 2nd July, 2026. VG/SPS Copy to:

Asst. Registrar, ITAT, Bangalore.