SATHISH KOTHA,KARIMNAGAR vs. ITO, WARD-2, KARIMNAGAR

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ITA 2326/HYD/2026Status: DisposedITAT Hyderabad04 November 2026AY 2017-1816 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 reassessment proceedings initiated under Section 147 read with Section 148A and 148 of the Act were bad in law and liable to be quashed. The Tribunal noted that the assessee provided certificates from ICICI Bank and loan account statements, which clearly indicated that the two transactions of Rs. 25,26,000/- each were loan disbursements made on 24.11.2017. These transactions pertained to the Financial Year 2017-2018, relevant for Assessment Year 2018-2019, and not for the Assessment Year 2017-2018 under consideration. Furthermore, loan transactions cannot be treated as income assessable to tax. Therefore, the mandatory condition for initiating reassessment proceedings, that income assessable to tax has escaped assessment for the year under consideration, was not satisfied. Consequently, the notice issued under Section 148A(b), the order passed under Section 148A(d), and the notice issued under Section 148 were quashed. As the reassessment order was quashed, the consequential penalty levied under Section 271AAC(1) was also deleted. The Tribunal did not adjudicate the other grounds of appeal raised by the assessee, as the foundational reassessment order was vitiated.

What were the facts?

The assessee, Sathish Kotha, an agriculturist, did not file a return of income for Assessment Year 2017-2018. The Assessing Officer (AO) initiated reassessment proceedings under Section 147 read with Section 144 of the Income Tax Act, 1961, based on information suggesting escaped income due to two transactions of Rs. 25,26,000/- each with ICICI Bank. The AO issued a notice under Section 148A(b) on 25.01.2024 and passed an order under Section 148A(d) on 08.03.2024, followed by a notice under Section 148 on 08.03.2024. The assessee appealed to the CIT(A) against the reassessment order and a penalty order under Section 271AAC(1). The CIT(A) dismissed the appeal in limine for non-compliance with Section 249(4)(b). The assessee filed two appeals before the ITAT against the CIT(A)'s orders.

What were the issues?

1. Whether the reassessment proceedings initiated under Section 147 read with Section 144 of the Income Tax Act, 1961, were valid, considering the nature and financial year of the alleged transactions. - Assessee's contention: The reassessment was initiated on an erroneous factual premise. The transactions of Rs. 25,26,000/- each were vehicle loan disbursements made by ICICI Bank on 24.11.2017, pertaining to the Financial Year 2017-2018 (Assessment Year 2018-2019), not unexplained money for Assessment Year 2017-2018. The AO mechanically completed the reassessment without proper verification. The addition under Section 69A was unsustainable. - Revenue's contention: The learned DR submitted that the CIT(A) dismissed the appeal due to non-payment of advance tax and suggested remanding the matter to the CIT(A) for verification and decision on merits. 2. Whether the penalty levied under Section 271AAC(1) of the Act was sustainable. - Assessee's contention: The penalty is consequential to the reassessment order, which is challenged. Therefore, the penalty should not survive if the reassessment is quashed. - Revenue's contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 147,Section 144,Section 271AAC(1),Section 249(4)(b),Section 250,Section 69A,Section 154,Section 115BBE,Section 234A,Section 234B,Section 148A,Section 148

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: These two appeals by the Assessee are directed against two separate Orders dated 26.05.2026 and 02.06.2026 of the learned CIT(A)-National Faceless Appeal Centre [in short "NFAC"], Delhi, arising from assessment order passed u/sec.147 r.w.s.144 of the Income Tax Act [in short "the Act"], 1961 and penalty order passed u/sec.271AAC(1) of the Act respectively, for the assessment year 2017-2018.

2.

In the quantum appeal [ITA.No.2326/Hyd./2026], the assessee has raised the following grounds of appeal:

1.

“The learned Commissioner of Income Tax (Appeals) ["CIT(A)"] erred in law and on facts in dismissing the appeal in limine as not maintainable/infructuous on the alleged ground of non-compliance with section 249(4)(b), without properly appreciating the facts, the grounds raised, and the written submissions and evidence placed on record. 2. The learned CIT(A) erred in holding that the appeal was not liable to be admitted for alleged non-payment of an amount equal to advance tax under section 249(4)(b), without appreciating that the appellant had specifically disputed the very existence of taxable income and had sought appellate adjudication against an ex parte reassessment founded on a patently incorrect factual assumption. 3. The learned CIT(A) erred in law in not exercising the appellate jurisdiction vested under section 250 and in failing to adjudicate the grounds on merits, though the appeal memorandum, written submissions, and supporting documentary evidence had been filed before the National Faceless Appeal Centre. 4. The learned CIT(A) ought to have held that the reassessment order passed under section 147 read with section 144 was bad in law, void, and liable to be quashed, since the proceedings were initiated and completed on an erroneous factual premise regarding the nature and year of the alleged transactions. 5. The learned Assessing Officer ["AO"] erred in treating the reported amount of Rs.25,26,000/- as unexplained money under section 69A, even though the material on record showed that the entries related to bank loan disbursements and not to any unexplained cash, asset, or income of the appellant. 6. The learned AO failed to consider that, prior to the filing of the first appeal, the appellant had filed an application under section 154 before the Ld. AO pointing out that manifest error that the impugned transactions represented vehicle-loan disbursements made in the subsequent financial year and not unexplained money pertaining to the year under appeal.

7.

The learned authorities below failed to appreciate that the two entries of Rs.25,26,000/- each, aggregating to Rs.50,52,000/-, were stated by the appellant to be vehicle loan disbursements made by ICICI Bank on 24.11.2017 in F.Y. 2017-18 relevant to A.Y. 2018-19, and therefore could not form the basis of reassessment or addition for A.Y. 2017- 18. 8. The learned Assessing Officer erred in completing the reassessment ex parte and mechanically, solely on the basis of system-generated/Form 61 information, without conducting proper verification with the reporting bank and without bringing any material on record to establish that the appellant was the owner of unexplained money in the year under consideration. 9. The learned authorities below erred in invoking section 115BBE and in levying consequential tax, surcharge, cess, and interest under sections 234A and 2348, though the foundational addition under section 69A itself was unsustainable in law and on facts. 10. Without prejudice, the learned CIT(A) ought to have admitted the appeal by exercising the discretion available under the proviso to section 249(4)(b), or afforded an opportunity to file an exemption application, and thereafter decided the appeal on merits. 11. The appellant craves leave to add, alter, amend, or withdraw any of the above grounds at or before the time of hearing.”

3.

The learned Authorised Representative of the Assessee has submitted that the Assessing Officer has reopened the assessment in respect of the two transactions with ICICI Bank of Rs.25,26,000/- each by treating the same as cash transactions whereas the above two transactions are the loans taken by the assessee for purchase of vehicle and that too in the financial year 2017-2018. Therefore, these transactions do not pertain to the assessment year under consideration. He has further submitted that even otherwise the loan transactions for purchase of vehicle cannot be treated as income escaped assessment for initiation of the proceedings u/sec.148 of the Act. He has referred to the notice issued by the Assessing Officer u/sec.148A(b) and thereafter, the Order passed u/sec.148A(d) of the Act and submitted that the Assessing Officer has reopened the assessment on the basis of incorrect facts and therefore, the reopening of the assessment is not valid and liable to be quashed. He has also referred to the certificate issued by the ICICI Bank placed at Page nos.83, 84 and 91 of the paper book and submitted that the Bank Certificate as well as the loan account statement with ICICI Bank shows that these are two loan transactions on 24.11.2017 of Rs.25,26,000/- each and therefore, reopening of the assessment to assess the income on account of these transactions is not valid.

4.

On the other hand, the learned DR has submitted that the learned CIT(A) has dismissed the appeal of the assessee in limine due to non-payment of the self-assessed / advance tax. He has thus submitted that the matter may be remanded to the record of the learned CIT(A) to verify the relevant record and then decide the matter on merits.

5.

We have considered the rival submissions as well as relevant material on record. The is an individual and agriculturist by occupation having land measuring 1 acre 15 guntas. The assessee has stated that he derives income solely from agriculture operations and therefore, the assessee is not having any income assessable to tax and accordingly, did not file any return of income u/sec.139 of the Act for the year under consideration. The Assessing Officer has issued notice u/sec.148A(b) of the Act on 25.01.2024 placed at Page nos.71 to 73 as under:

5.1. Thus, the Assessing Officer proposed to reopen the assessment for the assessment year under consideration i.e., 2017-2018 based on the information which suggest that income chargeable to tax has escaped assessment on account of two transactions of Rs.25,26,000/- each with ICICI Bank. The details of the transactions as given in Annexure to notice u/sec.148A(b) shows that the Assessing Officer has just referred the transactions without even verifying the actual facts and nature of the transactions. The statement of the Assessing Officer in the annexure to notice u/sec.148(b) of the Act that by analyzing the information of transactions entered by the assessee suggest that income chargeable to tax has escaped assessment for the year under consideration is completely without any basis as the transactions as stated by the Assessing Officer in the notice u/sec.148A(b) as well as in the Order u/sec.148A(d) did not represent any financial transactions in the nature of income in the hand of the assessee and that too for the year under consideration. The assessee has filed the certificate issued by the ICICI Bank along with loan account statements placed at Page nos.83, 84 and 91 of the paper book as under:

5.2. Thus, the ICICI Bank has specifically stated that the assessee had two loans with loan accounts both were issued on 24.11.2017 and it is also specifically certified that the assessee did not have any loan in the financial year 2016- 2017. Thus, these transactions are loans taken by the assessee from the Bank do not constitute income assessable to tax. Further, when these transactions of loans took place in the financial year 2017-2018 then the same did not pertain to the assessment year 2017-2018 rather the transactions pertain to the assessment year 2018-2019. Accordingly, the facts and circumstances of the case emerging from the undisputed record establish that the Assessing Officer has initiated the proceedings u/sec.148 of the Act by issuing notice u/sec.148A(b) on wrong assumption of facts and without verifying the correct facts regarding the alleged transactions. Therefore, once the alleged transactions do not pertain for the assessment year under consideration and that too the transactions of loans taken by the assessee from the ICICI Bank cannot be regarded as income assessable to tax in the hand of the assessee. Therefore, the mandatory condition for initiating the proceedings u/sec.148 of the Act that the income assessable to tax has escaped assessment for the year under consideration is not satisfied. Consequently, the notice issued by the Assessing Officer u/sec.148A(b) of the Act dated 25.01.2024, Order passed by the Assessing Officer u/sec.148A(d) of the Act dated 08.03.2024 and the notice issued by the Assessing Officer u/sec.148 of the Act dated 08.03.2024 are bad in law and liable to be quashed. We Order accordingly.

6.

Since we have quashed the reopening of the assessment being bad in law which vitiates re-assessment order passed by the Assessing Officer therefore, we do not propose to adjudicate the other grounds of appeal.

7.

In the result, appeal ITA.No.2326/Hyd./2026 of the assessee is allowed.

8.

In the penalty appeal ITA.No.2327/Hyd./2026 the assessee has challenged the levy of penalty u/sec.271AAC(1) of the Act which is consequential in nature. In view of our findings on the quantum appeal and quashing of the re- assessment order, the penalty levied u/sec.271AAC(1) would not survive. The same is deleted.

9.

In the result, appeal ITA.No.2327/Hyd./2026 of the Assessee is allowed.

10.

To sum up, both the 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 November, 2026 VBP Copy to: SATHISH KOTHA, H.NO.2-12/1, PUTTAPAKA, 1 MANTHANI, KARIMNAGAR-505184, TELANGANA ITO, WARD-2, AAYAKAR BHAVAN, NEAR 2 NATRAJ THEATRE, KARIMNAGAR-505001, TELANGANA 3 THE PR. CIT, HYDERABAD. 4 THE D.R., ITAT, HYDERABAD SMC-BENCH, HYDERABAD. 5 GUARD FILE TRUE COPY VADREV Digitally signed U by VADREVU PRASADA RAO PRASAD Date: 2026.11.04 ASSISTANT REGISTRAR / 15:14:15 +05'30' I.T.A.T., HYDERABAD A RAO

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