SREEVEENA VADDIREDDY,ANANTHAPUR vs. ADIT, (INT TAXN)-2, HYDERABAD

ITA 1946/HYD/2025Status: DisposedITAT Hyderabad23 September 2026AY 2020-2114 pages
AI SummaryAllowed

What were the facts?

The assessee, Sreeveena Vaddireddy, is appealing an assessment order dated 15.10.2025, passed by the ADIT (International Taxation)-2, Hyderabad, under Section 147 read with Section 144C(13) of the Income-tax Act, 1961. This order was issued pursuant to directions from the Dispute Resolution Panel-1, Bengaluru, dated 26.09.2025. The assessment year in question is 2020-21. The assessee, a non-resident for the relevant year, had initially filed a return of income and later a revised return. Proceedings under Section 147 were initiated based on information regarding substantial financial transactions, specifically cash deposits of Rs. 60 lacs and sale of immovable property of Rs. 60 lacs. A draft assessment order proposed an addition of Rs. 55 lacs for unexplained cash credit and disallowance of indexed cost of improvement of Rs. 70,18,571. The DRP upheld the addition for cash deposits but directed it to be assessed under Section 69, and rejected the cost of improvement claim. The final assessment order, however, made the addition under Section 68 and rejected the cost of improvement claim.

What did the Tribunal hold?

The Tribunal held that the assessment order was bad in law as it was passed contrary to Section 151A of the Act read with CBDT Notification No. 18/2022, which mandates prior approval for issuing notice under Section 148. The AO failed to obtain such approval, rendering the entire reassessment proceedings invalid. Consequently, the addition of Rs. 55 lacs under Section 68 and the disallowance of the cost of improvement claim were quashed. The Tribunal found that the AO had made the addition under Section 68 in the final assessment order, despite the DRP directing it to be assessed under Section 69. Furthermore, the AO did not give effect to the DRP's direction regarding the source of funds. The Tribunal also noted that the DRP had rejected the assessee's claims regarding foreign income and ex-husband's capital gains on the ground that they were not part of the variations proposed in the draft assessment order. However, since the entire assessment proceedings were vitiated due to the lack of proper approval under Section 151A, these issues were not adjudicated on merits. The Tribunal did not decide the issue regarding the cost of improvement claim on merits due to the quashing of the assessment order.

What were the issues?

The Tribunal had to decide the following issues: 1. Whether the assessment order passed by the ADIT (Int Tax) pursuant to the notice u/s 148 is non-est and bad in law as it was passed contrary to Section 151A of the Act read with CBDT Notification No. 18/2022 (mixed law and fact). 2. Whether the DRP/Assessing Officer erred in rejecting the assessee's explanation on the sources of cash deposits totaling Rs. 55,00,000/- and making an addition under Section 68 of the Act (mixed law and fact). 3. Whether the DRP/AO ought to have considered that the cash deposits were partly out of agricultural income from lands gifted by parents and partly from previous cash withdrawals held as cash on hand by parents (mixed law and fact). 4. Whether the DRP/AO erred in invoking Section 68 of the Act when the assessee was not maintaining books of account and was not required to do so under Section 44AA as she was not carrying on any business or profession (law). 5. Whether the DRP/AO erred in disregarding details filed by the assessee on the cost of improvement of Rs. 25,50,000/- (indexed cost Rs. 70,18,571) claimed while computing long-term capital gains from sale of land (mixed law and fact). 6. Whether the DRP/AO erred in rejecting the claim to exclude foreign income earned from a house property abroad, which was erroneously admitted in the return when the assessee was a non-resident (mixed law and fact). 7. Whether the DRP/AO erred in rejecting the claim to exclude long-term capital gains of the ex-husband, which was inadvertently admitted in the return (mixed law and fact). Assessee's Contentions: - Addition of Rs. 55 lacs under Section 68 is unsustainable as the assessee was not carrying on business and not maintaining books of account. Bank statements/passbooks are not books of account for Section 68 purposes, relying on CIT v. Bhai Chand H. Gandhi (Bom.) (law). - Alternatively, the sources of deposits were explained from accumulated agricultural income over years from lands gifted by parents/brother and previous cash withdrawals held by parents (facts). - The cost of improvement claim was supported by land pass books, gift deeds, and bank statements (facts). - Section 68 was wrongly invoked as the assessee was not carrying on business and not required to maintain books under Section 44AA (law). - The indexed cost of improvement was correctly claimed based on cost inflation index (facts). - Foreign income and ex-husband's capital gains were inadvertently included and should be excluded (facts). Revenue's Contentions: - Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 147,Section 144C(13),Section 144C(5),Section 148,Section 151A,Section 68,Section 44AA,Section 69

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCHES, HYDERABAD

Before: SHRI MANJUNATHA G, HON’BLE & SHRI RAVISH SOOD, HON’BLE

For Respondent: Ms Seema Meena, CIT-DR

PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the assessment order passed by the ADIT (International Taxation)-2, Hyderabad (for short, “AO”), dated 15.10.2025 under Section 147 r.w Section 144C(13) of the Income-tax Act, 1961 (in short, “the Act”), pursuant to the directions dated 26.09.2025 issued by the Dispute Resolution Panel-1, Bengaluru (“DRP”). The assessee has raised before us the fo

The order continues below.

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