RADHA KRISHNA MARINGANTI,HYDERABAD vs. ITO, WARD -1(3), TIRUPATI

The additional grounds raised by the assessee read as under :

The brief facts of the case are that the assessee is an individual. The assessee did not file return of income for the A.Y. 2015-16. Based on information available with the department regarding cash deposits in bank account and salary income earned by the assessee during the relevant financial year, the case was reopened under Section 147 of the Income-tax Act, 1961. Accordingly, notice under Section 148 of the Act was issued and served on the assessee. In response thereto, the assessee filed return of income declaring total income of Rs.7,68,140/-. Thereafter, notices under Sections 143(2) and 142(1) of the Act were issued calling upon the assessee to furnish details and explanations in respect of various transactions including cash deposits made in bank accounts. The assessee furnished details from time to time and explained the sources for cash deposits with supporting documents.

During the course of assessment proceedings, the A.O. examined the explanation furnished by the assessee with regard to cash deposits made in his bank accounts. Although the withdrawals, gifts and other receipts, the A.O. was not convinced with the explanation furnished in respect of certain cash deposits. According to the A.O., the assessee failed to satisfactorily establish the source for cash deposits aggregating to Rs.13,43,000/-. Therefore, the A.O. treated the said amount as unexplained money under Section 69A of the Act and completed assessment under Section 147 r.w.s. 144 r.w.s. 144B of the Act on 18.03.2024 determining total income at Rs.21,11,140/- as against the returned income of Rs.7,68,140/-.

Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee challenged the addition made towards unexplained cash deposits and contended that all the relevant evidences explaining the sources for cash deposits were furnished before the A.O. The assessee further contended that the A.O. completed the assessment without properly appreciating the evidences and explanations furnished during the course of assessment proceedings. The assessee also filed a petition seeking demand and also on account of non-availability of the Auditor, who was out of the country for personal reasons. The assessee, therefore, requested the Ld. CIT(A) to condone the delay and admit the appeal for adjudication on merits.

The Ld. CIT(A) after considering the submissions of the assessee observed that the appeal was filed with a delay of 181 days. The Ld. CIT(A) further observed that the reasons explained by the assessee did not constitute sufficient and reasonable cause for condonation of delay. The Ld. CIT(A), after referring to various judicial precedents governing condonation of delay, held that the assessee failed to establish sufficient cause for the delay in filing of appeal. The Ld. CIT(A) further observed that the assessee had actively participated in the assessment proceedings and had furnished response to the show-cause notice issued by the A.O. Therefore, according to the Ld. CIT(A), the assessee had no valid ground to explain the delay in filing of appeal. Accordingly, the Ld. CIT(A) declined to condone the delay of 181 days and dismissed assessee on merits.

Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.

The learned counsel for the assessee, Shri C. Maheswar Reddy, C.A., submitted that, the additional grounds raised by the assessee are purely legal in nature and go to the root of the matter challenging the validity of reassessment proceedings. The learned counsel for the assessee further submitted that the issue raised in the additional grounds can be adjudicated on the basis of facts already available on record and does not require any further investigation into facts. Therefore, he submitted that, the additional grounds raised by the assessee may be admitted for adjudication. In support of his contention, he relied upon the decision of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT reported in [1998] 229 ITR 383 (SC).

On the other hand, the learned Sr. A.R. for the Revenue, Shri B. Laxmi Kanth, objected to the admission of additional issues either before the A.O. or before the Ld. CIT(A). The learned Sr. A.R. further submitted that the reassessment proceedings have been validly initiated in accordance with law and therefore, the additional grounds raised by the assessee are not maintainable. Accordingly, he submitted that the additional grounds raised by the assessee should not be admitted for adjudication.

We have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that the additional grounds raised by the assessee are purely legal in nature and go to the root of the matter challenging the validity of reassessment proceedings. Further, the issue raised in the additional grounds can be adjudicated on the basis of facts already available on record and does not require any further verification or investigation into facts. Therefore, following the decision of the Hon’ble Supreme Court in the case of National of the Act dated 05.04.2022 is barred by limitation in view of the first proviso to Section 149 of the Income-tax Act, 1961. The learned counsel for the assessee further submitted that the assessment year involved is A.Y. 2015-16 and therefore, as per the unamended provisions of Section 149 of the Act, the limitation for issuance of notice under Section 148 of the Act expired on 31.03.2022. The learned counsel further submitted that although the proceedings under the new regime were initiated by the Assessing Officer, the notice under Section 148 of the Act admittedly came to be issued only on 05.04.2022, which is beyond the limitation period prescribed under the provisions of the Act as it stood prior to amendment. Therefore, he submitted that the notice issued under Section 148 of the Act is invalid and Section 147 r.w.s. 144B of the Act are liable to be quashed. In support of his contention, the learned counsel relied upon the judgment of the Hon'ble Telangana High Court in the case of Cyberabad Citizens Health Services Society and submitted that the Hon'ble High Court has held that the limitation for issuance of notice under Section 148 of the Act for assessment years prior to 01.04.2021 is governed by the first proviso to Section 149 of the Act and therefore, notice issued beyond the period prescribed under the erstwhile provisions is barred by limitation. Thus, the learned counsel for the assessee submitted that the notice issued by the Assessing Officer under Section 148 of the Act dated 05.04.2022 is invalid being barred by limitation and the same is liable to be quashed.

The learned Sr. A.R. for the Revenue, Shri B. Laxmi Kanth, on the other hand, submitted that, after amendment of the provisions relating to reopening with effect from 01.04.2021, the limitation for issuance of notice under Section 148 of the Act has been extended up to ten years in cases where the income escaping assessment exceeds Rs.50,00,000/- and therefore, the notice issued by the Assessing Officer is within the time limit. The learned Sr. A.R. further submitted that, the proviso to Section 149(1) of the Act is applicable only in cases where limitation had expired before 01.04.2021 and where limitation was still available as on 01.04.2021, the amended provisions would apply. In support of his contention, he relied upon the decision of the Hon'ble Supreme Court in the case of Union of India vs. Rajeev for the assessment year 2015–16 which is beyond the period of six years from the end of the relevant assessment year. As per the unamended provisions of Section 149 of the Act, the notice under Section 148 of the Act, could have been issued within six years limitation expired on 31.03.2022. 16. We further find that, though as per the amended provisions of Section 149 of the Act, the limitation for reopening of assessment has been extended up to ten years in cases where income escaping assessment exceeds Rs.50,00,000/-, however, the first proviso to Section 149 clearly provides that no notice under Section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 01.04.2021 if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of the Act, as it stood prior to amendment. The scope and applicability of the said proviso has been considered and interpreted by the Hon’ble Supreme Court in the case of Union of India vs. Rajeev Bansal reported in (2024) 469 ITR 46 (SC), wherein it has been held that, the extended time limit under the amended provisions cannot be applied retrospectively to revive a time barred case.

We also find that, the Hon’ble Juri ictional Telangana High Tax Act, 1961 amounting to Rs.4,17,801/- on the addition made towards unexplained cash deposits in bank account under Section 69A of the Act, in the assessment completed under Section 147 r.w.s. 144B of the Act for the A.Y. 2015-16. Aggrieved by the penalty order dated 19.09.2024, the assessee preferred appeal before the Ld. CIT(A). The Ld. CIT(A), after considering the facts of the case, upheld the action of the A.O. and confirmed the penalty levied under Section 271(1)(c) of the Act. Aggrieved by the penalty order dated 19.09.2024, the assessee preferred appeal before the Ld. CIT(A). The Ld. CIT(A), after considering the facts of the case, upheld the action of the A.O. and confirmed the penalty levied under Section 271(1)(c) of the Act.

Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. We find that, on identical set of facts for the assessment year 2015-2016 in ITA No.790/Hyd/2025, we have quashed the assessment order on the ground that the notice issued under Section 148 of the Act, dated 05.04.2022 is barred by limitation. Since the penalty levied under Section 271(1)(c) of the Act, is consequential in nature and arises out of the additions made in the said assessment order, in our considered view, the penalty levied by the A.O. under Section 271(1)(c) of the Act, cannot survive. Once the assessment order itself has been quashed, the very foundation for levy of penalty ceases to exist. Therefore, the penalty order passed by the A.O. has no legs to stand. Thus, we set aside the order of the Ld. CIT(A) and direct the A.O. to delete the penalty levied under Section 271(1)(c) of the Act.

In the result, the appeal filed by the assessee is allowed.

To sum-up, both the appeals filed by the assessee are allowed.

The Principal Commissioner of Income Tax, Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file