SRIKANTH BADIGA,HYDERABAD vs. ACIT, CENTRAL CIRCLE-2(3), HYDERABAD

आदेश / ORDER PER MANJUNATHA G., A.M :

This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals) – 12, Hyderabad, dated 01.09.2025, pertaining to the assessment year 2022-23.

“1. The order of the CIT(A) passed u/s 250 of the Act dated 25-08-2025 is erroneous both on facts and in law to the extent the order is prejudice to the interests of the appellant. 2. The Ld. CIT(A) erred in upholding the action of the AO without properly appreciating the facts and circumstances of the case, which is against the principles of natural justice. 3. The Ld. CIT(A) erred in law and on facts in confirming the addition of Rs. 47,31,282/- u/s 69A of the Act, ignoring the fact that the appellant had discharged the initial onus by explaining the nature and sources of credits through banking channels and confirmation letters. 4. The Ld. CIT(A) erred in confirming the additions of Rs. 55,00,000/- u/s 69A and Rs. 60,00,000/- u/s 69C of the Act, based on inadmissible evidence, which is against the principles of Natural Justice. 5. The Ld. CIT(A) ought to have fairly and judiciously appreciated the fact that the statements recorded u/s 132(4) from a third person cannot be solely used as substantive evidence for income additions without independent corroboration viz., tangible documentary evidence. 6. The Ld. CIT(A) failed to consider that the AO did not establish any nexus between the seized material found during the search proceedings and the additions made to the income of appellant for the impugned assessment year. 7. The Ld. CIT(A) erred by not taking into consideration the objections filed by the appellant to the remand report, which contained detailed counter-objections to the remarks made by the AO.

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7.1 The Ld. CIT(A) ought to have fairly and judiciously considered that the addition made for unaccounted hand loans taken in cash and hand loans repaid on the basis of appellant's failure to file any documentary evidence is not as per law. 7.2 The Ld. CIT(A) erred in judiciously considering hat the additions made for not providing any documentary evidence to show that the transactions do not belong to assessee is injudicious as no evidence can be produced for non-existent thing. 8. Without prejudice to our objections for the above additions, The Ld. CIT(A) erred in law by not allowing telescoping effect of alleged unexplained receipts of Rs. 55,00,000/- as against the alleged unexplained expenditure of Rs. 60,00,000/-, as both the additions stem from the same set of alleged transactions and are not independent on their own. 8.1 The Ld. CIT(A) ought to have fairly considered and held both the unaccounted cash receipts and unaccounted cash payments cannot constitute the escapement of income, as the unexplained cash receipts forms appellant's income and the repayments take form of expenditure. 8.2 The Ld. CIT(A) ought to have held that of there are unexplained cash receipts and unexplained repayment of hand loans, contemplated to make as addition to income then the unexplained cash payments have to be adjusted against the unexplained cash receipts. 9. Appellant may, add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.”

“10. The Ld. CIT(A) erred in appreciating that the AO has failed to follow the procedure as laid down in the provisions of section 153(1) of the Act which is against the law and is bad in law. 11. The Ld. CIT (A) failed to appreciate that AO erred in completing the assessment beyond the time period prescribed u/s 153(1) of the Act, without any valid extension or exclusion of time permissible under the Act, and therefore the impugned assessment order is barred by limitation and deserves to be annulled.

4 ITA No.1849/Hyd/2025 12. The Ld. CIT(A) erred in upholding the assessment completed u/s 143(3) of the Income-tax Act, 1961, instead of appreciating that, pursuant to the search conducted on or after 01.04.2021, the assessment in respect of the relevant preceding assessment years was required to be initiated and completed u/s 147 of the Act. 13. Appellant may, add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.”

5 ITA No.1849/Hyd/2025 assessed at Rs. 2,87,19,758/- by making additions towards credits in the bank account under Section 69A of the Act for Rs. 47,31,282/-, addition under Section 69C of the Act, towards cash receipts and payments for Rs. 60,00,000/-, and addition under Section 69A of the Act, for Rs. 55,00,000/- towards hand loans.

6 ITA No.1849/Hyd/2025 the procedure laid down under Section 153(1) of the Act and completed the assessment beyond the time limit prescribed therein, without any valid extension or exclusion of time permissible under the Act. He further submitted that the assessee has also challenged the validity of completing the assessment under Section 143(3) of the Act, instead of initiating and completing the assessment under Section 147 of the Act, pursuant to the search conducted on or after 01.04.2021. He submitted that the said grounds are purely legal grounds, which go to the root of the matter and can be raised for the first time before the Tribunal. Further, to adjudicate the above legal grounds, there is no necessity to re-look into the facts, as the same can be adjudicated on the basis of the facts already available on record. Therefore, relying 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), he submitted that the additional grounds filed by the assessee may be admitted for adjudication.

7 ITA No.1849/Hyd/2025 by the assessee and submitted that the assessee has raised the said grounds for the first time before the Tribunal. Therefore, he submitted that the additional grounds raised by the assessee should not be admitted.

8 ITA No.1849/Hyd/2025 adjudicate the above legal grounds, there is no necessity to re-look into the facts, as the same can be adjudicated on the basis of the facts already available on record. Therefore, respectfully following the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. CIT (supra), we admit the additional grounds filed by the assessee for adjudication.

9 ITA No.1849/Hyd/2025 period and liable to be quashed. In this regard, he relied upon the decision of the ITAT, Hyderabad Bench, in the case of Sri Srinivasa Reddy vs. DCIT in ITA No. 1898/Hyd/2025 dated 18.02.2026.

10 ITA No.1849/Hyd/2025 18.03.2023. The limitation period of 12 months shall commence from 01.04.2023 and, therefore, the period of 180 days is not included in the limitation period and, therefore, the question of exclusion does not arise. Therefore, the A.O. ought to have passed the assessment order within 12 months from the end of the relevant assessment year, i.e., on 31.03.2024, whereas the Assessing Officer passed the assessment order on 27.04.2024, which is beyond the limitation period and liable to be quashed.

11 ITA No.1849/Hyd/2025 in the arguments of the learned counsel for the assessee and the same need to be rejected.

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assessment order passed by the A.O. on 27.04.2024 is well within the limitation period.

“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

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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 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

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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 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.”

15 ITA No.1849/Hyd/2025 15. In the present case, there is no dispute with regard to the fact that the search was conducted on 23.08.2022 and the case was centralized to the A.O. of the assessee on 13.01.2023. Further, there is no reference to any date of handing over of the books of account and other materials to the Assessing Officer. However, going by the date of centralization of the case on 13.01.2023 and the consequent notice issued under Section 143(2) dated 24.06.2023, we presume that, the A.O. had received the books of account and relevant materials along with the order passed under Section 127 of the Act, for centralization of the case. Further, assuming for a moment, even if the A.O. had received the books of account on or after 01.04.2023, but fact remains that, as per clause (xii) of Explanation (1) to Section 153 of the Act, the maximum period of 180 days shall be excluded for the purpose of computing limitation, and if we exclude 180 days from the date of search on 23.08.2022, the period of exclusion shall be completed on 18.03.2023. Therefore, in our considered opinion, going by the facts of the present case, the limitation period for passing the assessment order for the assessment under consideration shall commence from 01.04.2023 and end on 31.03.2024 and, therefore, the period to be excluded as per clause (xii) of

16 ITA No.1849/Hyd/2025 Explanation (1) to Section 153 shall end before the limitation period commences and, therefore, the question of extension of the period by up to 180 days does not arise. Therefore, in our considered view, the A.O. ought to have passed the assessment order within 12 months from the end of the relevant assessment year, i.e., on 31.03.2024, and, thus, the assessment order passed by the A.O. on 27.04.2024 is clearly barred by limitation and liable to be quashed. Thus, we quash the assessment order passed by the A.O.

17 ITA No.1849/Hyd/2025 the issue, and the learned Senior A.R. for the Revenue has also made his submissions, in our considered view, the other grounds taken by the assessee become academic in nature, because the assessee succeeded on Ground Nos. 10 and 11 on the issue of limitation, and the assessment order has been quashed as being barred by limitation. Therefore, we dismiss the other grounds taken by the assessee as infructuous.

Order pronounced in the Open Court on 14th October, 2026.

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

Hyderabad, dated 14.10.2026. TYNM/sps

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आदेशकी प्रतिलिपि अग्रेषित/ Copy of the order forwarded to:- 1. निर्धारिती/The Assessee : SRIKANTH BADIGA, C/O., 6-3-655/2/3, P. MURALI & CO., CHARTERED ACCOUNTANTS, SOMAJIGUDA, HYDERABAD-500082, TELANGANA 2. राजस्व/ The Revenue : ACIT, CENTRAL CIRCLE-2(3), OFFICE OF THE ACIT CENTRAL CIRCLE-2(3), HYDERABAD-, TELANGANA 3. The Principal Commissioner of Income Tax (Central), Hyderabad. विभागीयप्रतिनिधि, आयकर अपीलीय अधिकरण, हैदराबाद / DR, ITAT, Hyderabad 4. गार्डफ़ाईल / Guard file 5.

आदेशानुसार / BY ORDER TIRUPATI YAMINI Digitally signed by TIRUPATI YAMINI NAGA MALLESWARI NAGA Date: 2026.10.14 13:14:58 MALLESWARI +05'30' Senior Private Secretary, ITAT, Hyderabad.