COMFORT HOSPITALITIES,HYDERABAD vs. ACIT, CENTRAL CIRCLE-3(1), HYDERABAD

आयकर अपीलीय न्यायाधिकरण में, हैदराबाद ‘ए’ बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad श्री विजय पाल राि, माननीय उपाध्यक्ष एिं श्री मंजूनाथ जी, माननीय लेखा सदस्य SHRI VIJAY PAL RAO, HON’BLE VICE PRESIDENT AND SHRI MANJUNATHA G, HON’BLE ACCOUNTANT MEMBER Sl. आयकरअपीलसं./I.T.A.Nos.182 to 184/Hyd/2026 No. (निर्धारण वर्ा/ Assessment Years: 2021-22 to 2023-24) 1-3 Comfort Hospitalities, Vs. The Assistant R/o. Hyderabad. Commissioner of Income- Tax, PAN : AAFFC6698D Central Circle – 1(1), Hyderabad. आयकरअपीलसं./I.T.A.Nos.192 to 194/Hyd/2026 (निर्धारण वर्ा/ Assessment Years: 2021-22 to 2023-24) 4-6 Adithya Kollu, Vs. The Assistant R/o. Hyderabad. Commissioner of Income- Tax, PAN : AMDPK5637J Central Circle – 1(1), Hyderabad. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent)

करदाता का प्रतततितित्व/ : Shri M. V. Prasad, C.A. (Appeared through Hybrid Mode) Assessee Represented by Shri Mathivanan S.A., Sr. A.R. राजस्व का प्रतततितित्व/ : Department Represented by सुिवाई समाप्त होिे की ततति/ : 12.06.2026 Date of Conclusion of Hearing घोर्णध की तधरीख/ : 17.06.2026 Date of Pronouncement

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O R D E R PER BENCH :

The captioned appeals filed by the assessees i.e., “Comfort Hospitalities” and “Shri Aditya Kollu”, Managing Partner of M/s. Comfort Hospitalities LLP, a group entity of M/s. Vamsiram Builders, are directed against the separate, but identical orders of the learned Commissioner of Income Tax (Appeals), Hyderabad – 11, [for short “Ld. CIT(A)”] pertaining to the assessment years 2020-21 to 2023-24, respectively. Since facts are identical and common issues are involved in all the appeals, the same were heard together and are being disposed of by this single consolidated order for the sake of convenience and brevity.

“1. The learned CIT (Appeals) is erred in facts and law while passing the order. 2. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in not treating the assessment made u/s 143(3) r.w.s 147 of the Income Tax Act ("Act") is void ab initio as the re-assessment proceedings initiated by the issue of notice u/s 148 without due compliance with the

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requirements of sections 148 is without jurisdiction and unsustainable in law. 3. On the facts and circumstances of the case and in law, the Ld.CIT(A) ought to have appreciated that the assessment made u/s 143(3) r.w.s 147 of the Act is void ab initio, as the prior approval for the issue of notice u/s 148 was accorded by the specified authority u/s 151 in a mechanical manner without proper application of mind. 4. On the facts and circumstances of the case and in law, the Ld.CIT(A) is not correct in not appreciating that the assessment order passed u/s 143(3) r.w.s 147 is unsustainable in law, since the approval u/s 1488 has been accorded by the Range Head in a mechanical manner. 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) is not justified in upholding the addition made by the Assessing Officer in making addition of Rs.4,34,841/- towards undisclosed income arising out of unaccounted receipts of the appellant found in the bank accounts of two employees of the appellant firm. 6. On the facts and circumstances of the case and in law, the Ld.CIT(A) ought to have observed that the Assessing Officer erred on facts in excessively quantifying the unaccounted receipts of the appellant found in the bank accounts of two employees of the appellant firm at Rs.27,17,758/- by disregarding the detailed submission of the appellant that the same amounted to Rs.5,90,164/- only, without citing any reasons. 7. On the facts and circumstances of the case and in law, the Ld.CIT(A) ought to have observed that the Ld. Assessing Officer erred on facts and in law in the estimating the undisclosed income at 16% of the unaccounted receipts of Rs.27,17,758/- quantified by him as against the additional income offered by the appellant during the assessment proceedings at 10% of the admitted quantum of such receipts of Rs.5,90,164/-. 8. On the facts and circumstances of the case and in law, the Ld.CIT(A) ought to have observed that the Assessing Officer erred in making disallowance of interest on TDS of Rs.34,294/- though it represents expenditure laid out for the purpose of business. 9. On the facts and circumstances of the case the Assessment Order passed by the assessing officer dated 19.04.2025 is barred by limitation U/s 153 of Income Tax Act. 10. Any other legal grounds or factual grounds that may be urged at the time of hearing of the appeal.”

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rejected the estimation offered by the assessee firm. The A.O. estimated the income from unaccounted receipts at 16% of the receipts credited during the relevant assessment year amounting to Rs.27,17,758/- and worked out the income therefrom at Rs.4,34,841/-, which was added to the returned income. The A.O. further noticed that the assessee firm had claimed interest on TDS amounting to Rs.34,294/- and held that the same was not an allowable expenditure. Accordingly, the said amount was also disallowed and added to the income of the assessee firm. Thus, the A.O. completed the assessment under Section 143(3) r.w.s. 147 of the Act, determining the total income of the assessee firm at Rs.6,03,835/- as against the returned income of Rs.1,34,700/-.

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appreciating the explanations furnished during the course of assessment proceedings. The assessee firm submitted that the A.O. excessively quantified the unaccounted receipts at Rs.27,17,758/- by disregarding its submissions that the receipts attributable to the relevant assessment year amounted to Rs.5,90,164/- only. The assessee firm further submitted that the A.O. was not justified in estimating income at 16% of the unaccounted receipts as against 10% voluntarily offered by the assessee firm during the course of assessment proceedings. The assessee firm had also challenged the disallowance of interest on TDS amounting to Rs.34,294/- and raised legal grounds challenging the validity of the reassessment proceedings initiated under Sections 147 and 148 of the Act.

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unaccounted receipts and offered additional income thereon. However, the assessee firm submitted that, the unaccounted receipts attributable to the relevant assessment year were only Rs.5,90,164/- and that income should be estimated at 10% thereof. The Ld. CIT(A) held that the A.O. had examined the bank accounts and quantified the unaccounted receipts at Rs.27,17,758/- and estimated income at 16% thereof. The Ld. CIT(A) further observed that the unaccounted receipts and corresponding transactions were discovered only as a result of the search proceedings and that the estimation made by the A.O. was reasonable in the facts and circumstances of the case. Therefore, rejected the explanation of the assessee firm and sustained the addition of Rs.4,34,841/- made by the A.O. towards income arising from unaccounted receipts. The Ld. CIT(A) had also rejected the explanation of the assessee firm with regard to the disallowance of interest on TDS amounting to Rs.34,294/- on the ground that the same was not an allowable expenditure under the provisions of the Act. Therefore, the Ld. CIT(A) rejected the explanation of the assessee firm and sustained the addition made by the A.O.

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29.11.2023 i.e., 12 months from the end of the financial year commencing from 01.04.2024 and the A.O. will have time upto 31.03.2025 for completing assessment. However, the A.O. passed the assessment order on 19.04.2025, which is barred by limitation. The learned counsel for the assessee further submitted that, the issue involved in the present appeal is squarely covered by the decision of the Coordinate Bench of the Tribunal in the case of Shri Srinivasa Reddy Yeturu in ITA No.1898/Hyd/2025 dated 18.02.2026. Therefore, he submitted that following the said decision, the assessment order passed by the A.O. may be quashed.

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date of search and to the date of handing over of the books of accounts to the A.O. shall be excluded and in the present case, the seized material was handed over to the A.O. on 07.07.2023 and if we exclude the period of 180 days as per clause (xii) of explanation (1) of Section 153 of the Act, then the A.O. will get six months more from the due date for passing the assessment order and thus, the assessment order passed by the A.O. on 19.04.2025 is within the limitation provided under section 153 of the Act. Therefore, he submitted that, the legal ground taken by the assessee should be rejected.

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while computing the limitation period under Section 153 of the Act, only the period falling within the relevant assessment period can be excluded in terms of Explanation (1) thereto. The relevant observations of the Tribunal are as under :

“10. We have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. It is an admitted fact that a search & seizure operation under section 132 of the I.T. Act was carried out in the case of the assessee on 4/1/2023. It is also an admitted fact that the seized material is handed over to the A.O on 22/08/2023, which is evident from the letter of the A.O dated 22/03/2024. The normal time limit for completion of the assessment under section 153(1) of the Act is 21 months from the end of the A.Y in which the income was first assessable. Fourth proviso to section 153 inserted by the Finance Act, 2021 reduced the time limit from 21 months to 12 months in respect of an order of assessment relating to the A.Y commencing on or after 1/4/2022. In other words, as per section 153 and 4th proviso provided thereon, the time limit for completion of the assessment for the A.Y 2022-23 is 12 months from the end of the A.Y, in which the income is first assessable. In the present case, the Asst. Year involved is Asst. Year 2022-23 and time limit for completion of assessment is 12 months from the end of the A.Y 2022-23 i.e. up to 31/03/2024. However, the case of the assessee falls under clause (xii) of Explanation (1) to section 153 of the Act, because a search and seizure operation was conducted under section 132 of the Act on 4/1/2023 and as per clause (xii) of Explanation (1) to section 153, the period (not exceeding 180 days) commencing from the date of search initiated under section 132 of the Act and ending on the date on which the books of account or other document are handed over to the A.O having jurisdiction over the assessee shall be excluded. Therefore, from clause (xii) of Exp. (1) to section 153 of the Act, the A.O gets exclusion of 180 days for the purpose of computing the limitation provided under section 153(1) of the Act, towards the time taken by the A.O of the searched person to hand over the books of account or any other valuable articles or things to the A.O of the assessee up to a maximum of 180 days, even if the time taken by the A.O of the searched person is more than 180 days. If we carefully read clause (xii) of Exp.(1) to section 153 of the Act, it is not an extension of limitation provided for completion of assessment, but it is only exclusion of time taken by the A.O of the searched person which was lost by the A.O of the assessee for assessing the income of the

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assessee up to a maximum of 180 days. Therefore, while computing the limitation period, the period of 180 days starting from the date of search to ending on the date of handing over books of accounts should be excluded for computing period of limitation. Therefore, in our considered view, if the time taken by the A.O of the searched person covered during the limitation period, then the entire time taken by the A.O for handing over the books of account not exceeding 180 days can be excluded. In case, the time taken by the A.O for handing over the seized material partially goes under the limitation period and partially goes under the other financial year or non-limitation period, then only the time lapsed by the A.O during the limitation period alone should be excluded, because clause (xii) of explanation (1) to section 153 of the Act is only excludes the period taken by the A.O for handing over the books of account but, it shall not extend the period up to 180 days. Therefore, it is necessary for us to examine the argument of the learned Counsel for the assessee, in the light of date of initiation of search and date of handing over of the books of account and other valuable materials and the date of the assessment order in light of clause (xii) of explanation (1) of section 153 of the Act. 11. In the present case, search was conducted on 4/1/2023. The A.O of the assessee received seized material on 22/08/2023. As per clause (xii) of Exp. (1) to section 153 of the Act, the period commencing from 4/1/2023 to 22/08/2023 shall be excluded for the purpose of computing the limitation period. Admittedly, the period starting from 4/1/2023 and up to 22/08/2023 falls in two financial years i.e. (i) from 4/1/2023 to 31/03/2023 falls under financial year 2022-23 and (ii) date commencing from 1/4/2023 to 22/08/2023 falls in financial year 2023-24. In the present case, admittedly, the limitation period for completing the assessment starts from 1/4/2023 and in fact the A.O had issued notice under section 143(2) of the Act on 20/06/2023. The time taken by the A.O for handing over the books of account and other materials from 4/1/2023 to 22/08/2023 is 231 days. As per clause (xii) of explanation (I) of section 153, the period taken by the A.O shall not exceed 180 days. As we have already noted in the earlier paragraphs of this order, Exp.(1) of clause (xii) is only an exclusion clause and therefore, whatever time lost by the A.O in the limitation period alone can be excluded for the purpose of computation of limitation period. In other words, if the time taken by the A.O from the date of search to the handing over of the books of account does not fall under the limitation period, then obviously there is no inconvenience is caused to the A.O because of such proceeding and consequent handing over of the books of account and consequently, there is no question of exclusion of the period which is not covered in the limitation period. For example, if the search is conducted on 04/01/2022 and the books of account and other materials are handed over to the A.O on 22/08/2022, in

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such a situation, the A.O has lost the period from 04/01/2022 to 22/08/2022 and the entire period is not covered in the limitation period and therefore, the question of excluding the period not exceeding 180 days shall not arise. Suppose if the search is conducted on 25/03/2023 and the books of account are handed over on 30/09/2023, then the period not exceeding 180 days shall be excluded, because the entire period is covered under limitation period for the Assessment. Year 2022-23. However, in a situation like in the present case, if search is initiated on 4/1/2023 and the books of accounts are handed over on 22/08/2023, although the A.O had taken more than 180 days for handing over the books of accounts, but in view of clause (xii) of explanation (1) of section 153, the period not exceeding 180 days shall be excluded for the purpose of computing the limitation period. However, the fact remains that, in the present case, the period taken by the AO for handing over books of account is covered in two financial years, i.e. (1) from 4-1-2023 to 31-03-2023 in financial year 2022-23 and (ii) the period from 1-4-2023 to 22-08-2023 in financial year 2023- 24. Further, in the present case, for the Assessment. Year 2022-23, limitation period starts from 1-4-2023. The time taken by the AO for handing over books of accounts to the AO of the assessee starting from 4/1/2023 to 31/03/2023 is not included in the above limitation period. Since, in the present case, the time taken by the A.O for handing over the books of account is not fully included in the limitation period, in our considered view, the period lost by the A.O in the process of receiving the books of account from the A.O and included in the limitation period alone should be excluded. Therefore, if we exclude the period lost by the A.O in the process of search and handing over the books of account, which is covered in the limitation period, then only the period starting from 1/4/2023 and up to 22/08/2023 shall alone be excluded for computing the limitation period. In the present case, the time limit for completion of the assessment is up to 31/03/2024 and the time lost by the A.O in the process of handing over the books of account by the A.O is 144 days from 1/4/2023 to 22/08/2023 and if we add 144 days from 31/03/2024, then the A.O shall get the time limit for passing the assessment order up to 22/08/2024, whereas the AO passed Assessment order on 27-09-2024. Since the A.O passed the assessment order on 27/09/2024, in our considered view, the assessment order passed by the A.O is clearly barred by limitation in view of specific provisions of clause (xii) of Explanation (1) to section 153 of the Act. Thus, we quash the assessment order passed by the A.O under section 143(3) of the I.T. Act, 1961 dated 27/09/2024. We order accordingly,

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present case, the A.O. received books of accounts as claimed by the learned Sr. A.R. for the Revenue on 07.07.2023 much before the date when the A.O. issued notice under section 148 of the Act, on 29.11.2023. Therefore, in our considered view, the A.O. has not lost any time within the 12 months period available for completion of the assessment and thus, the question of extension of 180 days to the limitation provided under section 153 of the Act, does not arise. Since, the A.O. passed the order u/s 143(3) r.w.s. 147 of the Act, on 19.04.2025, in our considered view, the assessment order passed by the A.O. is clearly beyond limitation provided u/s 153 of the Act, and thus, barred by limitation. Insofar as the arguments of the learned Sr. A.R. for the Revenue in clause (xii) of explanation (1) of Section 153 of the Act, in our considered view, the above arguments does not hold good going by the facts of the present case, because clause (xii) of explanation (1) of Section 153 of the Act, excludes the period upto 180 days from the date of search to the date of handing over books of accounts and other material to the A.O. having jurisdiction over the assessee. In the present case, even if we apply the above provisions, the period lost by the A.O. in the process of receipt of books of accounts which is included in the limitation period alone

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could be excluded for the purpose of computing limitation, but if the period referred to under clause (xii) of explanation (1) of Section 153 of the Act, is not included in the limitation period, then the question of exclusion of above period does not arise. The A.O. received books of accounts and other information on 07.07.2023 and the A.O. issued notice under section 148 of the Act, on 29.11.2023 and as per section 153, the A.O. will get complete 12 months period from 01.04.2024 to 31.03.2025 for the purpose of assessment and the time taken for search proceedings and consequent handing over of books of accounts to the A.O. for a period upto 180 days is not included in the limitation period available for the A.O. for completion of the assessment, and thus, in our considered view, the argument of the learned Sr. A.R. for the Revenue in light of clause (xii) of explanation (1) of Section 153 of the Act, cannot be accepted. Since the A.O. has issued notice u/s 148 of the Act, on 29.11.2023, in our considered view, the A.O. has got complete 12 months period for passing assessment order and the period covered under clause (xii) of explanation (1) of Section 153 of the Act, is not included in the limitation period, in our considered view, the exclusion of 180 days considered by the A.O. for the purpose of limitation does not available to the A.O.

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Therefore, in our considered view, the arguments of the learned Sr.A.R. for the Revenue in light of clause (xii) of explanation (1) of Section 153 of the Act, is not applicable.

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ITA Nos.183 and 184/Hyd/2026 and ITA Nos.192 to 194/Hyd/2026

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ITA Nos.192 to 194/Hyd/2026 for A.Ys. 2022-23 and 2023-24 and A.Ys. 2021-22 to 2023-24, respectively.

Sd/- Sd/- श्री विजय पाल राि (मंजूनाथ जी) (VIJAY PAL RAO) (MANJUNATHA G.) उपाध्यक्ष /VICE PRESIDENT लेखा सदस्य/ACCOUNTANT MEMBER

Hyderabad, dated 17.06.2026. TYNM/sps आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : (1) M/s. Comfort Hospitalities, Plot No.38 and 39, Kavuri Hills, Road No.36, Jubilee Hills, Hyderabad. (2) Shri Aditya Kollu, Flat No.301, Survey No.47, Jyothi Lake View, Kavuri Hills, Jubilee Hills, Hyderabad. 2. रधजस्व/ The Revenue : The Assistant Commissioner of Income Tax, Central Circle – 1(1), Hyderabad. 3. The Principal Commissioner of Income Tax (Central), Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER TIRUPATI YAMINI Digitally signed by TIRUPATI YAMINI NAGA MALLESWARI NAGA Date: 2026.06.18 14:40:34 MALLESWARI +05'30' Sr. Private Secretary ITAT, Hyderabad