SANTHANAM RAMESH BABU,BENGALURU vs. INCOME TAX OFFICER (IT), WARD - 2(1), , BENGALURU

ITA No.39/Bang/2026 Santhanam Ramesh Babu, Bengaluru

IN THE INCOME TAX APPELLATE TRIBUNAL “C’’BENCH: BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI KESHAV DUBEY, JUDICIAL MEMBER ITA No. 39/Bang/2026 Assessment Year: 2015-16 Santhanam Ramesh Babu C/o Fiscal Law Partners Advocates #32/2 ITO 18th Cross, Sadashivanagar International Taxation Vs. Bengaluru 560080 Ward-2(1) Karnataka Bengaluru PAN : APMPR8979M APPELLANT RESPONDENT Appellant by : Sri Hemanth Pai, Advocate & Sri Srinath L., Advocate, A.Rs Respondent by : Sri Sandeep Kumar H.S., Addl. CIT-DR Date of Hearing : 23.07.2026 Date of Pronouncement : 21.10.2026 O R D E R PER KESHAV DUBEY, JUDICIAL MEMBER: This appeal at the instance of the assessee is directed against the order of the ld. CIT(A), Bengaluru-12 dated 24.11.2025 vide DIN & Order No. ITBA/APL/S/250/2025-26/1082937734(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2015-16.

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ITA No.39/Bang/2026 Santhanam Ramesh Babu, Bengaluru Page 3 of 14 11. The notice issued under section 143(2) of the Act is non est and bad in law on the facts and circumstances of the case. 12. Learned Assessing Officer erred in law and on facts in not issuing a Draft Assessment Order as contemplated under section 144C of the Act which renders the entire reassessment proceedings and the impugned assessment order as bad in law on the facts and circumstances of the case.

ITA No.39/Bang/2026 Santhanam Ramesh Babu, Bengaluru Page 4 of 14 21. The learned CIT(A) erred in law and on facts in upholding the disallowance of Rs. 1,50,000/- deductions claimed under chapter VI-A of the Act on the facts and circumstances of the case.

The Appellant craves to add, alter, modify, substitute, change and delete any or all of the grounds and to file a paper book at the time of hearing the appeal.

In the view of the above and other grounds that may be urged at the time of the hearing of appeal, the Appellant prays that the appeal may be allowed in the interest of justice and equity.

ITA No.39/Bang/2026 Santhanam Ramesh Babu, Bengaluru Page 5 of 14 3.1 During the course of assessment proceedings, the AO had categorically asked the assessee to explain the source of cash deposits amounting to Rs.46,50,000/- as in the opinion of the AO, the assessee failed to discharge the source for the cash deposits made and declared in the said income. The assessee contended that the sale price (sale date 10/12/2014) of Rs.34,32,000/- along with business receipts of Rs.12,18,000/- by providing telecommunication & networking services to some friends & relatives while his stay in India was only deposited in cash. The AO did not accept the contentions of the assessee for the following reasons: - (i) The submission of the assessee appears to be after thought. (ii) The Business receipts of Rs.12,18,000/- by providing some telecommunication & networking services to some friends & relatives while his stay in India was not believed as it is not supported by any documentary evidences. (iii) The assessee failed to correlate the cash deposits with the sale proceeds received and the assessee had also not submitted any documentary proof in support of the claim that the sale proceeds of the said property were received in cash only. (iv) The business receipts of Rs.12,18,000/- during the short period of stay appears to be incorrect and accordingly not acceptable as not substantiated with any supporting documents.

As the assessee had categorically failed to discharge proving the source for the cash deposits made, the AO had no other alternative but to treat the entire cash deposits of Rs.46,50,000/- as unexplained money u/s 69A r.w.s 115BBE of the Act.

ITA No.39/Bang/2026 Santhanam Ramesh Babu, Bengaluru Page 6 of 14 3.2 Further, it was noticed from the working of capital gains furnished by the assessee that the resulting capital gain of Rs.31,86,495/- had been claimed as exempt u/s 54 of the Act. However, in the opinion of AO, the assessee is not eligible for the said exemption as the assessee cannot make a fresh claim in the ROI filed in response to notice u/s 148 of the Act when he had not filed any original return u/s 139(1)/139(4)/139(5) of the Act. Similarly, in the opinion of AO, the assessee is not entitled for the current year loss of Rs.2,00,000/- and refund of Rs.1,40,670/- as claimed in the ROI filed in response to notice u/s 148 of the Act. In the opinion of AO, the reassessment proceedings are for the benefit of the Revenue and not for the benefit of the assessee. If the assessee had not staked any claim by filing return u/s 139, the assessee cannot make a claim for his benefit u/s 148 of the Act. Further, the AO by relying certain judicial decisions had also held that the ROI filed u/s 148 is not a ROI filed u/s 139 of the Act. In view of the above, the AO concluded that in response to notice u/s 148 of the Act, the assessee had claimed a deduction u/s 54 of the Act of Rs.31,86,495/-, current year loss of Rs.2,00,000/- and refund of Rs.1,40,670/- which was not made by him originally by filing ROI u/s 139 of the Act and accordingly by heavily relying on the decision of the Hon’ble Supreme Court in the case of CIT v. M/s Sun Engineering Works (P.) Ltd. dated 17.09.1992 reported in 1992 Supp 1 SCR 732 rejected the claim of the assessee. Thus, the AO completed the assessment proceeding on a total assessed income of Rs.83,00,968/- vide order dated 26.03.2023 passed u/s 143(3) r.w.s 147 of the Act. 4. Aggrieved by the assessment completed u/s 143(3) r.w.s 147 of the Act dated 26.03.2023, the assessee preferred an appeal before the ld. CIT(A).

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5.1 Further, with regard to cash deposits of Rs.46,50,000/-, the ld. CIT (A) observed that as per the remand report submitted by the AO, the assessee had explained the source of cash deposits and also submitted a copy of sale deed executed on 10.12.2014 wherein it had been stated that Rs.34,32,000/- was received by the assessee in cash. In view of the above, the ld. CIT (A) was of the view that the unexplained money of Rs.34,32,000/- is explained and accordingly directed the AO to delete the same. However, with regard to balance of Rs.12,18,000/- in respect of freelance income, the ld. CIT(A) also held to be remained unexplained as the assessee had not submitted relevant documents in support of his claim and hence the addition made by the AO of Rs.12,18,000/- was sustained. Thus, the appeal filed by the assessee was partly allowed by the ld. CIT(A).

ITA No.39/Bang/2026 Santhanam Ramesh Babu, Bengaluru Page 8 of 14 7. Before us, at the outset the ld. AR of the assessee by raising the ground No.12 & ground No. 15 which are purely legal in nature vehemently submitted that the AO erred in law and in facts in not issuing a draft assessment order as contemplated u/s 144C of the Act in the case of the assessee being a non resident individual which renders the entire reassessment proceedings and the impugned assessment order non-est and bad in law and liable to be quashed. Further, the ld. AR of the assessee submitted that the AO while framing the assessment has undisputedly admitted that the assessee is a non resident individual and the same is evident from bare perusal of the assessment order. Lastly, the ld. AR submitted that the final assessment order passed without providing an opportunity to the assessee to file his objections before the ld. DRP is contrary to the provision of section 144C of the Act which contains the terms ‘shall’ and ‘not withstanding to the contrary contained in the act’. Further with regards to the merits of the case, the ld. AR submitted that if a return is filed u/s 148 of the Act, the provisions of this Act shall apply accordingly as if such return required to be furnished u/s 139 of the Act & therefore the assessee can validly claim exemption u/s 54 of the Act, Loss from the House Property as well as TDS credits as per the provisions of the Act. Further, the ld. AR also submitted that the case of Sun Engineering (Supra) heavily relied upon both the authorities are quite distinguishable from the facts & circumstances of the case. Lastly, the ld. AR submitted that the ld. CIT(A) grossly erred in upholding the addition of Rs. 12,18,000/- being cash deposits made out of the income earned from freelancing u/s 69A of the Act.

ITA No.39/Bang/2026 Santhanam Ramesh Babu, Bengaluru Page 9 of 14 the relevant year was an inadvertent error as confirmed by the report called for from the AO. The ld. DR also filed a written submission dated 10.08.2026 along with the comment/report of the AO wherein the AO has clearly stated that the assessee had stayed in India for 200 days during the relevant financial year and accordingly was a resident for the relevant year. Therefore, there was no requirement to pass a Draft Assessment Order. Further, the ld. DR in his written submission has also submitted the copy of the passport of the assessee along with the date wise chart of number of days stay in India by the assessee during the F.Y.2014-15 which is reproduced below for ease of reference and convenience: -

ITA No.39/Bang/2026 Santhanam Ramesh Babu, Bengaluru Page 10 of 14 defined u/s 144C(15)(b) of the Act and passed the final assessment order without providing an opportunity to the assessee to file his objections before the ld. DRP. The ld. DR on the other hand, vehemently submitted that the assessee had stayed in India for 200 days during the relevant financial year and accordingly the assessee was a resident for A.Y.2015- 16 and therefore there was no requirement to pass a draft assessment order in the present case. On perusal of the number of days stayed by the assessee in India as per the above tabular form submitted by the ld. DR along with the copy of the passport of the assessee, we observed that the assessee had stayed 200 days during F.Y.2014-15 relevant for A.Y.2015- 16 and therefore we have no hesitation to hold that the assessee was resident during the F.Y.2014-15 relevant for A.Y.2015-16. We completely agree with the contentions of the ld. DR that the recording by the AO in the assessment order that the assessee was a non-resident during the relevant year was an inadvertent error. In our considered opinion, in reply to the notice issued u/s 142(1) of the Act dated 14.02.2023, the assessee himself misrepresented before the AO by stating that the he had settled in USA and that his residential status was NRI from F.Y.2013-14 and onwards. Further, in our view, the assessee had wrongly mentioned his number of days stay in India during the F.Y.2014-15 relevant for A.Y.2015-16 as only 180 days and claimed to be Non Resident whereas we find that the assessee had stayed 200 days during the relevant period and therefore in our opinion, the AO had rightly passed the assessment order without first issuing the draft assessment order and accordingly we dismiss this grounds of appeal raised by the assessee. 9.1 Now coming to another contention of the assessee that the ld. CIT(A) grossly erred in upholding the addition of Rs. 12,18,000/- being

ITA No.39/Bang/2026 Santhanam Ramesh Babu, Bengaluru Page 11 of 14 cash deposits made out of the income earned from freelancing u/s 69A of the Act. We observed that the assessee before the AO had contended that the cash deposits of Rs. 12,18,000/- were from the Business receipts by providing some telecommunication & networking services to some friends & relatives while his stay in India. The authorities below did not accept this contention of the assessee as it is not supported by any documentary evidences. Even before us, the assessee could not produce any documentary evidences such as name, address & PAN of his friends & relatives along with the dates of providing the service as well as dates of receipts of cash from such relatives & friends. Accordingly, we also find no merits in the arguments of the ld. AR of the assessee and dismiss this ground of appeal of the Assessee.

9.2 Lastly, with regard to the denial of the exemption claimed u/s 54 of the Act amounting to Rs. 31,86,495, Current year loss of Rs. 2,00,000/- as well as TDS credit of Rs. 1,40,670/-, we are of the considered opinion that section 148(1) of the Act as applicable for the A.Y. 2015-16 categorically states that the AO shall serve a notice requiring the assessee to furnish within such period as may be specified in the notice, a return of his income, in the prescribed form & verified in prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 of the Act. Undisputedly, the assessee had not filed any return u/s 139 of the Act. Further, it is also an undisputed fact that while filing the return u/s 148 of the Act, the assessee had claimed the exemption claimed u/s 54 of the Act amounting to Rs. 31,86,495, Current year loss of Rs. 2,00,000/- as well as TDS credit of Rs. 1,40,670/-. We

ITA No.39/Bang/2026 Santhanam Ramesh Babu, Bengaluru Page 12 of 14 observed that, both the authorities below by heavily relying upon the decision of the Hon’ble Supreme Court in the case of Commissioner of Income-tax v. Sun Engineering Works (P.) Ltd. reported in (1992) 198 ITR 297 have held that the proceedings under section 148 of the Act can only be used for the benefit of the Revenue & accordingly denied the claim of exemption u/s 54 of the Act amounting to Rs. 31,86,495, Current year loss of Rs. 2,00,000/- as well as TDS credit of Rs. 1,40,670/-. We are of the opinion that considering the facts & ratio decidendi in the above case, the present facts of the case are quite distinguishable. In our considered opinion, the Apex court has principally held as under: - (1) On reassessment, original assessment is not wiped off but it remains. (2) Matters disallowed in the original assessment & which have since acquired finality (i.e. no appeal, revision or rectification filed by the assessee against disallowance) cannot be claimed in the reassessment proceedings. (3) Expenses not claimed in the original assessment can not be claimed in the reassessment. However, the expenses relating to the escaped income can be claimed as deduction against the escaped income. (4) Reassessment proceedings are for the benefit of Revenue & not for the benefit of the assessee. In reassessment, the income cannot be reduced below the original income assessed.

Thus, in the present case, the assessee had filed his return only in response to notice u/s 148 of the Act for the first time. Even previously no assessment was made by the AO for the A.Y. 2015-16. The assessee

ITA No.39/Bang/2026 Santhanam Ramesh Babu, Bengaluru Page 13 of 14 filed his return & claimed the exemption/deduction/TDS Credits as per the provisions of the Act i.e. in accordance with law. Section 54 of the Act is part of computing the capital gain & therefore it isn’t a fresh claim outside the escaped income. Further, as per Section 199 and Rule 37BA, the credit follows the year in which the related income is offered and assessed. Since the assessee declared the income in his return, in our considered opinion, the credit cannot be denied. Similarly, the loss from the head “Income from House Property” can be set off against other heads u/s 71(3A) of the Act up to Rs.2 lakhs. Set off doesn’t depend upon the filing of return u/s 139(1) of the Act. Furthermore, the provisions as enumerated u/s 148 of the Act clearly prescribed that the provisions of this Act shall, so far as may be, apply accordingly as if such return filed u/s 148 of the Act were a return required to be furnished under section 139 of the Act. Therefore, the contention of the AO that the ROI filed u/s 148 of the Act is not a ROI filed u/s 139 of the Act is not at all tenable. We are of the considered opinion that while entertaining the exemption u/s 54 of the Act amounting to Rs.31,86,495/- , loss from the House Property amounting to Rs. 2,00,000/- & TDS credits of Rs.1,40,670/-, the AO should have verified each of the conditions stipulated under the respective provisions of the Act rather than rejected outrightly by stating that the assessee cannot claim the same in the return filed u/s 148 of the Act. Accordingly, we direct the AO to verify the claim of exemption u/s 54 of the Act, claim of loss from house property as well as TDS Credit as per the provisions of the Act and if the assessee satisfies the conditions, then the AO must grant the exemption/deduction/ TDS Credit after due verification in accordance with law as claimed by the assessee in his return of income filed in response to notice u/s 148 of the Act. Needless to say, a reasonable

ITA No.39/Bang/2026 Santhanam Ramesh Babu, Bengaluru Page 14 of 14 opportunity of being heard must be granted to the assessee. It is ordered accordingly.

Order pronounced in the open court on 21st Oct, 2026

Sd/- Sd/- (Waseem Ahmed) (Keshav Dubey) Accountant Member Judicial Member Bangalore, Dated 21st Oct, 2026. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order

Asst. Registrar, ITAT, Bangalore.

P G Digitally signed by P G RAJANI RAJANI Date: 2026.10.30 16:33:10 +05'30'