SATISH KUMAR THATI ,HYDERABAD vs. ITO, WARD-15(1), HYDERABAD

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ITA 1200/HYD/2026Status: DisposedITAT Hyderabad04 November 2026AY 2018-1927 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the notices issued under section 148A(b) for both assessment years were invalid. For AY 2015-2016, the notice dated 17.03.2022, digitally signed on 18.03.2022, required a reply by 21.03.2022, providing only 3 days. For AY 2018-2019, the notice dated 21.03.2022, digitally signed on 23.03.2022, required a reply by 28.03.2022, also providing less than the mandatory 7 days. This was a clear violation of section 148A(b) of the Act. The Tribunal relied on the judgments of the Hon'ble Karnataka High Court and the ITAT Cuttack Bench, which held that such short notice renders the proceedings invalid. Consequently, the notices under section 148A(b) were quashed, vitiating the consequential notices under section 148 and the reassessment orders. As the reassessment orders were quashed, the other grounds, including the addition under section 69A and the penalty under section 272A(1)(d), were rendered infructuous and were not adjudicated on merits. The penalty under section 272A(1)(d) was deleted as it was consequential to the quashed reassessment order. The Tribunal admitted additional grounds raised by the assessee as they were purely legal and could be adjudicated on existing facts, following the Supreme Court's decision in CIT vs. NTPC.

What were the facts?

The assessee, Satish Kumar That, filed appeals against three orders dated 06.02.2026 passed by the CIT(A)-NFAC, Delhi. These orders arose from assessment orders passed under section 147 read with section 144B of the Income Tax Act, 1961, for assessment years 2015-2016 and 2018-2019, and a penalty order under section 272A(1)(d) for assessment year 2018-2019. The assessee's primary challenge pertained to the validity of notices issued under section 148A(b) and the subsequent reassessment orders. For AY 2015-2016, the notice dated 17.03.2022 was digitally signed on 18.03.2022, requiring a reply by 21.03.2022. For AY 2018-2019, the notice dated 21.03.2022 was digitally signed on 23.03.2022, requiring a reply by 28.03.2022. The assessee also challenged additions of Rs. 51,94,144/- under section 69A for AY 2015-2016.

What were the issues?

1. Whether the notices issued under section 148A(b) of the Income Tax Act, 1961, are invalid and liable to be quashed for failing to provide the mandatory minimum period of 7 days for the assessee to file a reply, thereby vitiating the consequential notice under section 148 and the reassessment order. (Question of law) 2. Whether the addition of Rs. 51,94,144/- under section 69A as unexplained money is valid, considering the assessee's contention that the deposits represent withdrawals from disclosed sources, accumulated savings, and business receipts already offered to tax. (Mixed question of law and fact) 3. Whether the penalty levied under section 272A(1)(d) for non-compliance with a notice under section 142(1) is sustainable when the reassessment order itself is quashed. (Question of law) Assessee's Contentions: - The notices under section 148A(b) were invalid as they provided less than the mandatory 7 days for reply, violating principles of natural justice and section 148A(b) of the Act. Reliance was placed on judgments of the Karnataka High Court in Doddagarudanahalli Vyavasaya Seva Bank Niyamitha vs. ITO and Panjos Builders (P.) Ltd. vs. ITO, and an ITAT Cuttack Bench order in Rashmi Ranjan Beura vs. ITO. - The addition under section 69A was unjustified as the cash deposits represented disclosed sources and accumulated savings. - The penalty under section 272A(1)(d) is consequential and should be deleted if the reassessment order is quashed. Revenue's Contentions: - The assessee did not file any reply to the notice under section 148A(b), and since the order under section 148A(d) was passed after more than 7 days, the period was available. Therefore, the short notice was not prejudicial and did not invalidate the notice. - The authorities below have upheld the addition and penalty.

Which sections of the Income-tax Act were involved?

Section 147,Section 144B,Section 148A,Section 148,Section 69A,Section 272A(1)(d),Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD

Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G.

Pronounced: 04.11.2026

आदेश / ORDER

PER VIJAY PAL RAO, VICE PRESIDENT:

This appeal by the Assessee is directed against three separate Orders all dated 06.02.2026 of the learned CIT(A)-National Faceless Appeal Centre [in short "NFAC"], Delhi, Ld. NFAC, Delhi, arising from assessment orders passed u/sec.147 r.w.s.144B of the Income Tax Act [in short "the Act"], 1961 for the assessment years 2015-2016 and 2018-2019 and penalty Order passed u/sec.272A(1)(d) of the Act, for the assessment year 2018-2019, respectively.

2.

For the assessment year 2015-2016, the Assessee has raised the following grounds of appeal:

“The order of the CIT(A) passed u/s 250 of the Act dated 6-2-2026 1) 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 dismissing the appeal without considering the facts and circumstances of the case, which is bad in law. 3) The Ld. CIT(A) failed to consider that the order passed u/s 148A(d) and the notice u/s 148 having been issued by the JAO, instead of the designated faceless authority, are without authority of law and void ab initio.

4) The Ld. CIT(A) failed to appreciate that under the amended provisions of the Act effective from 01.04.2021, the AO is required to record satisfaction, based on material evidence, that income has escaped assessment, however, in the present case, the AO has not done so. 5) The Ld. CIT(A) ought to have considered that the AO has not provided reasonable timeline as noted in the notice u/s 148A(b) for the notice 148A(b) as prescribed in the Act, which is invalid and against to the principle of natural justice.

The Ld. CIT(A) ought to have considered that the AO failed to follow the procedure u/s 148A(a) after obtaining the prior 6) approval of the Ld. PCIT/CIT concerned which is in violation of the provisions of section 148A of the Act. 7) The Ld. CIT(A) ought to have considered that the notice issued u/s 148(b), passing of order u/s 148A(d) were not conducted as per the provisions of section 148A(a) of the Act. The Ld. CIT(A) erred in upholding the addition of Rs.51,94,144/- 8) made under section 69A of the Income-tax Act, 1961 as unexplained money, without properly appreciating the facts and circumstances of the case, and the said addition is arbitrary, unjustified, invalid and bad in law. 9) The Ld. CIT(A) failed to appreciate that the cash deposits represent amounts withdrawn earlier from disclosed sources and accumulated savings from preceding years, and therefore, the same cannot be treated as unexplained money u/s 69A. 10) The Ld. CIT(A) erred in not considering that the cash deposits also include business receipts which are duly reflected in the return of income, on which appropriate profit has already been offered to tax.

11) The Ld. CIT(A) ought to have considered that the AO failed to consider the deposits in the bank account represented the turnover of the assessee and would have estimated the net profit at about 3-4 percent. 12) 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.”

3.

In Ground nos.3 to 7, the assessee has challenged the validity of the notice issued under section 148A of the Act and consequently notice under section 148A as well as re- assessment order on the ground that the Assessing Officer has not given the prescribed period of minimum 07 days to the assessee to file the reply in response to notice under section 148A(b) of the Act.

4.

The learned Authorised Representation of the Assessee has submitted that the Assessing Officer has issued notice under section 148A(b) dated 17.03.2022 which is digitally signed on 18.03.2022 whereby the assessee was asked to submit the response with the supporting documents, if any, on or before 21.03.2022 which is in contravention of the provisions of section 148A(b) prescribing minimum period of 07 days to be given to the assessee to file the reply to the show cause notice issued under section 148A(b) of the Act. The learned Authorised Representation of the Assessee has thus submitted that once the notice issued by the Assessing Officer under section 148A(b) is not in accordance with the provision subsection 148A(b) of the Act, the same is invalid and liable to be quashed and consequently, the notice issued by the Assessing Officer under section 148 of the Act as well as the re-assessment order passed by the Assessing Officer are vitiated. In support of his contention, he has relied upon the following decisions: i. Judgment of Hon’ble Karnataka High Court in the case of Doddagarudanahalli Vyavasaya Seva Bank Niyamitha vs. ITO [2025] 174 taxmann.com 864 (Karnataka); ii. Judgment of Hon’ble Karnataka High Court in the case of Panjos Builders (P.) Ltd. vs. ITO [2024] 161 taxmann.com 573 (Karnataka); iii. Order of ITAT, Cuttack Bench, Cuttack in the case of Rashmi Ranjan Beura, Odisha vs. ITO, Ward-5(1), Bhubaneswar in ITA.No.722/CTK/2025, dated 17.02.2026;

4.1. The learned Authorised Representation of the Assessee has thus submitted that Hon’ble Karnataka High Court has decided this issue by holding that notice issued by the Assessing Officer under section 148A(b) of the Act granting time to the assessee to submit his reply less than the minimum period of 07 days prescribed in the said provision is invalid and deserves to be quashed. Thus, the learned Authorised Representation of the Assessee has submitted that the Hon’ble Karnataka High Court has taken a consistent view on this issue. He has also relied upon the decision of Cuttack Bench of this Tribunal dated 17.02. 2026 in ITA.No.722/CTK/2025, (supra) and submitted that by following the Judgement of Hon’ble Jharkhand High Court, the Tribunal has also considered an identical issue and decided the same in favour of the assessee by holding that the note issued by the Assessing Officer under section 148A(b) not providing the minimum 07 days’ time to the assessee to file the reply, is in violation of the provisions of section 148A(b) of the Act and therefore, the same is held as invalid and consequently, quashed.

5.

On the other hand, the learned DR has submitted that the assessee has not filed any reply in response to notice under section 148A(b) of the Act and therefore, the Assessing Officer has passed Order under section 148A(d) of the Act on 31.03.2022 after a period of more than 07 days shows that the said period was available to the assessee to file the reply in response to the notice issued u/sec.148A(b) of the Act. The learned DR has thus submitted that once the assessee has not filed any reply to the notice under section 148A(b) of the Act then, the time period allowed in the notice is not prejudicial to the interests of the assessee and it would not render the notice as invalid. He has relied upon the orders of the authorities below.

6.

We have considered the rival submissions as well as relevant material on record. The Assessing Officer has initiated the proceedings under section 148A by issuing notice under section 148A(b) bearing dated 17.03.2022 however, digitally signed on 18.03.2022. A copy of the said Order is reproduced as under

6.1. Thus, it is clear that the said notice is digitally signed on 18.03.2022 and allowing only 03 days to the assessee to file reply in response to be said notice. The Assessing Officer has given the time to the assessee to file the response on or before 21.03.2022 which is in clear violation of the requirement of mandatory condition of giving 07 days’ time to the assessee to file reply as per the provisions of section 148A(b) of the Act. Since the time allowed by the Assessing Officer in the notice under section 148A(b) is in contravention of the minimum time prescribed section 148A(b) of the Act, therefore, the said notice suffers from an illegality and liable to be set aside. An identical issue has been considered by the Hon’ble Karnataka High Court in the case of Panjos Builders (P.) Ltd. vs. ITO (supra) in Para nos.6 to 9 as under:

6.2. Thus, the Hon’ble High Court has held that the notice issued by the Assessing Officer under section 148A(b) prescribing the period of 06 days which is less than the minimum prescribed period of 07 days as contemplated under section 148A(b) of the Act, the said notice along with Annexure as well as consequential proceeding, order/notice deserves to be quashed by giving liberty to the Department to take recourse to such remedies as available in law. The Hon’ble High Court has reiterated this view in the subsequent decision in the case of Doddagarudanahalli Vyavasaya Seva Bank Niyamitha vs. ITO (supra), in Para nos.7 to 10 as under:

6.3. Thus, the Hon’ble High Court has taken a consistent view that notice issued by the Assessing Officer under section 148A(b) of the Act providing an opportunity of being heard to the assessee and giving less than 07 days’ time for filing the reply is invalid and consequently, the said notice and consequential proceedings including the assessment order are also liable to be quashed. We further note that the ITAT, Cuttack Bench in the case of Rashmi Ranjan Beura, Bhubaneswar vs. ITO, Ward-5(1), Bhubaneswar (supra) has also considered an identical issue in Para no.7 as under:

“7. We have considered the rival submission. A perusal of the facts in the present case clearly shows that clear 7 days has not been granted to the assessee in respect of the notice issued u/s.148A(b) of the Act. This notice is directly in violation of the law as laid down by the Hon'ble High Court of Jharkhand in the case of Satish Kumar referred to supra. A perusal of the decision of the Hon'ble Delhi High Court in the case of Anuj Ghuliani (supra), shows that the issue therein was not a challenge to the time limit of 7 days. The issue was "conducting enquiry, providing opportunity before issue of notice initial notice allowing 5 days to reply - minimum 7 days required to be granted under the statue for the assessee to respond assessee filing reply after 5 days order and notice set aside with the direction to the AO to consider the reply filed by the assessee and passed appropriate orders." The issue before the Hon'ble Delhi High Court admittedly is not in respect of not granting the assessee the 7 days required under the statue in respect of the notice issued u/s. 148A(b) of the Act. That was a case where the assessee has claimed the adequate opportunity having not been provided. The Hon'ble Delhi High Court in the facts of that case has held that another opportunity should be granted to respond to the notice and the delayed response is to be considered. This view of the Hon'ble Delhi High Court has admittedly been upheld by the Hon'ble Supreme Court. These are admittedly not the facts in the appeal before us. As it is noticed that the issue of the limitation provided in the notice u/s.148A(b) of the Act of providing minimum 7 days has been violated and the issue is fully covered by the decision of the Hon'ble High Court of Jharkhand in the case of Satish Kumar, referred to supra, respectfully following the decision of the Hon'ble Jharkhand High Court in the case of Satish Kumar, referred to supra, the notice issued u/s.148A(b) of the Act is held to be invalid and consequently quashed and the assessment order based on the invalid notice also stands quashed.”

6.4. Accordingly, in the facts and circumstances of the case and by following the Judgements of Hon’ble Karnataka High Court as well as Order of ITAT, Cuttack Bench (supra), we hold that the notice issued by the Assessing Officer under section 148A(b) of the Act along with Annexure digitally signed on 18.03.2022 giving the time period to the assessee to file the reply on or before 21.03.2022 which is less than 07 days as prescribed under section 148A(b) of the Act is invalid and liable to be quashed. Since the notice under section 148A(b) of the Act is invalid, it also vitiates the consequential notice issued under section 148 of the Act as well as the re- assessment order passed by the Assessing Officer. Since we have quashed the notice under section 148A(b) of the Act and consequent re-assessment order being invalid therefore, we do not propose to go into the other grounds of the assessee’s appeal being infructuous.

7.

In the result, ITA.No.1197/Hyd./2026 of the Assessee is allowed.

ITA.No.1199/Hyd./2026 – A.Y. 2018-2019: 8. The assessee has raised the following grounds of appeal: 1. “The order of the CIT(A) passed u/s 250 of the Act dated 6-2-2026 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 dismissing the appeal without considering the facts and circumstances of the case, which is bad in law.

3.

The Ld. CIT(A) failed to appreciate the fact that the notice u/s 148 dated 31/03/2022 was issued by the Non Corp Ward 19(6) Chennai instead of National Faceless Assessment Centre (NFAC), Delhi, as mandated u/s 151A r.w.s 144B of the Act, which is invalid & without jurisdiction.

4.

The Ld. CIT(A) failed to consider that the order passed u/s 148A(d) and the consequent notice u/s 148 having been issued by the JAO, instead of the designated faceless authority, are without authority of law and void ab initio.

5.

The Ld. CIT(A) failed to appreciate that the notice u/s 148 is invalid and without jurisdiction as a valid from approval u/s 151 of the Act was obtained by the AO.

6.

The Ld. CIT(A) failed to consider that AO erred in calculating the Long term Capital Gain of Rs 33,57,378/- without considering the facts and circumstances of the case.

7.

The Ld. CIT(A) ought to have appreciated the fact that the assessee has property measuring 2074.5 sq. ft and cost of construction shown is only Rs 2700 per sq. ft which is lower than the prevailing market rate Rs 3300-3500 per sq. ft for arriving the indexation of cost of construction towards deduction in arriving the capital gains.

8.

The Ld. CIT(A) ought to have appreciated that the AO erred in making the impugned addition without referring the matter to the DVO for proper valuation, and instead relied upon third-party information, which is arbitrary, unjustified, and contrary to the provisions of law, and therefore the addition so made is liable to be deleted.

9.

The Ld CIT(A) ought to have considered the fact that AO wrongly assumed that the 50 percent of construction was completed without considering the facts which is invalid and bad in law.

10.

The Ld. CIT(A) ought to have considered that the AO failed to consider the expenditure of Rs 61,42,500/- for the development of the property, which was purchased in 2007-08, which includes in cost of construction and to be adopted as deduction for arriving capital gains.

11.

The Ld. CIT(A) failed to consider that the Ld. AO erred in adopting the plinth area rates issued on 01.10.2007 without taking into account the specific locality, nature of construction, and prevailing market rates, thereby making the valuation arbitrary, excessive, and bad in law, and the addition so made deserves to be deleted.

12.

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.”

9.

The assessee has raised additional grounds as under:

13.

“The Ld. CIT(A) ought to have considered that the AO has not provided reasonable timeline as noted in the notice u/s 148A(b) for the notice 148A(b) as prescribed in the Act, which is invalid and against to the principle of natural justice.

14.

The Ld. CIT(A) ought to have considered that the AO failed to follow the procedure u/s 148A after obtaining the prior approval of the Ld. PCIT/CIT concerned which is in violation of the provisions of section 148A of the Act.

15.

The Ld. CIT(A) ought to have considered that the notice issued u/s 148A(b), passing of order u/s 148A(d) were not conducted as per the provisions of section 148A(a) of the Act.”

10.

The learned Authorised Representative of the Assessee has filed a petition under Rule 11 of the ITAT Rules, 1963 for admission of additional grounds and submitted that the additional grounds raised by the assessee are purely legal in nature and that there is no necessity of fresh investigation into facts for adjudicating the additional grounds. He therefore pleaded that the additional grounds raised by the assessee may please be admitted for hearing and adjudication. In support of his contention, he has relied upon the Judgment of Hon’ble Supreme Court in the case of CIT vs. NTPC [1998] 229 ITR 383 (SC).

11.

On the other hand, the learned DR for the Revenue opposed the admission of the additional grounds raised by the assessee. He submitted that the assessee has not raised these grounds either during the assessment proceedings or before the learned CIT(A).

12.

We have considered the rival submissions on the admission of additional grounds. It is pertinent to note that for adjudication of the above additional grounds, no fresh material or record or facts are required to be investigated, verified or considered, but the same can be adjudicated on the basis of the material and facts already on record. Accordingly, by following the Judgment of Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd., vs., CIT [1998] 229 ITR 383 (SC), we admit the additional grounds raised by the assessee and take up the additional grounds first for hearing and adjudication.

13.

We have heard the learned Authorised Representation of the Assessee as well as learned DR who reiterated their respective arguments as made for the assessment year 2015-2016 hereinabove and considered the relevant material on record. The Assessing Officer has issued notice under section 148A(b) of the Act bearing dated 21.03.2022 digitally signed on 23.03.2022 calling the assessee to file reply on or before 28.03.2022. Copy of the said notice and Annexure are reproduced as under:

13.1. Thus, it is clear from the notice and Annexure that the said notice was digitally signed on 23.03.2022 and assessee was asked to file reply on or before 28.03.2022 which is less than minimum period of 07 days prescribed under section 148A(b) of the Act. An identical issue has been considered by us for the assessment year 2015-2016 in assessee’s own case hereinabove wherein we have quashed the notice issued u/sec.148A(b) of the Act on an identical facts that the Assessing Officer has not allowed minimum period of 07 days for filing reply to the notice issued u/sec.148A(b) of the Act and consequently, quashed the notice issued u/sec.148 of the Act as well as the re- assessment order passed by the Assessing Officer. Since, in the instant appeal also, the Assessing Officer has issued notice u/sec.148A(b) of the Act on 21.03.2022 digitally signed on 23.03.2022 calling the assessee to file reply on or before 28.03.2022 as emanated from the record and thereby, the Assessing Officer has not given the minimum period of 07 days as mandated u/sec.148A(b) of the Act therefore, we quash the notice issued by the Assessing Officer u/sec.148A(b) of the Act being invalid. Since the notice under section 148A(b) of the Act is invalid, it also vitiates the consequential notice issued by the Assessing Officer under section 148 of the Act as well as the re-assessment order passed by the Assessing Officer. Since we have quashed the notice under section 148A(b) of the Act and consequent re- assessment order being invalid therefore, we do not propose to go into the other grounds of assessee’s appeal being infructuous.

14.

In the result, appeal ITA.No.1199/Hyd./2026 of the Assessee is allowed.

ITA.No.1200/Hyd./2026 – A.Y. 2018-2019:

15.

This appeal is arising from the levy of penalty under section 272A(1)(d) of the Act for the assessment year 2018-2019 for non-compliance of notice issued by the Assessing Officer under section 142(1) of the Act. Since we have quashed the re-assessment order itself in the quantum appeal therefore, the consequential notice under section 142(1) and penalty levied under section 272A(1)(d) of the Act would not survive. The same is deleted.

16.

In the result, appeal ITA.No.1200/Hyd./2026 of the Assessee is allowed.

To sum up, all the three appeals of the Assessee are allowed. A copy of this common order is placed in the respective case files Order pronounced in the open court on 04.11.2026.

Sd/- Sd/- MANJUNATHA G VIJAY PAL RAO ACCOUNTANT MEMBER VICE PRESIDENT Hyderabad, Dated 04th day of November, 2026 VBP Copy to SATISH KUMAR THATI, C/O. P. MURALI & CO., CHARTERED 1 ACCOUNTANTS, 6-3-655/2/3, SOMAJIGUDA, HYDERABAD-500082, TELANGANA ITO, WARD-15(1), OFFICE OF THE ITO, WARD- 2 15(1), HYDERABAD-, TELANGANA 3 THE PR. CIT, HYDERABAD 4 THE D.R., ITAT, HYDERABAD A-BENCH, HYDERABAD. 5 GUARD FILE TRUE COPY VADREVU Digitally signed by VADREVU PRASADA PRASADA RAO ASSISTANT REGISTRAR / Date: 2026.11.04 RAO I.T.A.T., HYDERABAD 14:34:45 +05'30'

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