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Facts
The assessee filed an appeal against an order of the Ld. CIT(A) that upheld the Ld. AO's assessment order. The assessee had failed to appear before the Ld. CIT(A), resulting in the dismissal of their appeal for non-prosecution. The assessee is now before the Tribunal challenging the validity of the reassessment proceedings.
Held
The Tribunal found the reassessment proceedings to be valid, rejecting the objections regarding factual inaccuracies and approval defects. However, due to principles of natural justice, the Tribunal set aside the Ld. CIT(A)'s order and restored the matter to the Ld. CIT(A)'s file for a decision on merits, granting the assessee a final opportunity.
Key Issues
Validity of reassessment proceedings and whether the assessee should be granted another opportunity to present their case on merits after dismissal for non-prosecution.
Sections Cited
147, 148, 148A, 144, 144B, 151, 69, 69A, 143(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad A Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
ORDER PER MADHUSUDAN SAWDIA, A.M.: This appeal is filed by Dayachary Ponnekanti, (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”) dated 08/10/2025 for the A.Y.2016-17.
The assessee has raised the following grounds of appeal:
1. 1. 1. 1. 1. vs. DCIT “1. Ld. AO failed to issue notice u/s 143 (2) of the Income Tax Act and thereby the proceedings are bad in law 2. On the facts and in circumstances of the case and in law, Ld. A.O. and Ld. CIT(A) failed to appreciate the undisputed fact that purchase deed was executed by a partnership firm namely D & S Associates and not by the assessee. The addition is made in wrong hands. 3 On the facts and in circumstances of the case and in law, the order passed by the Ld. AO and Ld. CIT(A) be held to be bad in law and in contrary to the facts of the case, which is passed exparte u/s 144 without appreciating the facts of the case.
4. On the facts and in circumstances of the case and in law, L.d. CIT(A) and Ld. AO erred in holding that the cash paid for purchase of property in the name of partnership firm, was paid by the appellant, particularly without appreciating that the appellant was not a party to the purchase deed and land stands in the name of M/s D & S Associates, partnership firm.
5. On the facts and in circumstances of the case and in law, Ld. CIT(A) and Ld. AO ought to have appreciated that there is no corroborative evidence to conclude that the cash paid as per the registered sale deed has been made by the appellant himself, in absence of which makes the addition made under section 69 as arbitrary. 6 On the facts and in circumstances of the case and in law, Ld. AO erred in law in passing the non-speaking order u/s 148A(d) holding that the income to the tune of Rs.3,60,00,000/- has escaped assessment within the meaning of section 147 of the Act. more particularly without referring to the contents of the document for purchase of immovable property. The appellant prays that the notice issued under section 148 be held invalid. The assessec denies having received the notices u/s 148A and u/s 148.
7. On the facts and in circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs.2,00,00,000/- made by the Ld. AO under section 69 as unexplained investment and failed to appreciate that a sum of Rs. 2 crores were paid through banking channels.
8. On the facts and in circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 1,06,00,000/- made by the Ld. AO under section 69A as unexplained money. The assessee borrowed from friends and relatives and loans are genuine 9. Without prejudice to above, the appellant requests for an epportunity of proving the loans with documentary evidence as at 31.03.2016 of Rs. 1,06,00,000/-.
10. The Appellant craves leave to add, alter and/or substitute any ground of appeal, at any time before or at the time of hearing of the appeal.”
Also, the assessee has raised the following additional ground of appeal:
Page 2 of 13 Dayachary Ponnekanti vs. DCIT “13. The assessee prays for the admission of the following additional grounds which were not raised inadvertently while filing the appeal. (A) Ld. A.O erred in reopening the assessment year vide his order U/s 148A(d) dated 29/07/2022 wherein the wrong facts for issue of notice U/s 148 dated 29/07/2022 were recorded. Ld. A.O erred in observing that the assessee purchased an immovable property for a sum of Rs.3.6Cr in F.Y 2014-15 and such transaction extended to A.Y 2016-17. (B) Ld. A.O's reasons recorded have no nexus between the material on record and belief formed for reopening of the assessment. (C) Ld. A.O failed to record the correct facts despite True and Correct facts were available on the record for A.Y 2015-16. (D) Ld. A.O reopened the assessment without application of mind and on wrong facts the assessment was reopened. (E) Ld. A.O failed in obtaining the correct competent authority for according approval for issue of notice U/s 148A/148.”
Learned Authorized Representative (“Ld. AR”) submitted that the additional grounds so filed are admissible in view of judgment rendered by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC). The Learned Departmental Representative (“Ld. DR”) did not make any objection for admission of the additional grounds. The prayer for admission of additional grounds noted above which are not in memorandum of appeal are being admitted for adjudication in terms of Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 owing to the fact that objections raised in additional grounds are legal in nature for which relevant facts are stated to be emanating from the existing records.
The brief facts of the case are that the assessee had filed an appeal before the Ld. CIT(A) against the assessment order passed by the Learned Assessing Officer (“Ld. AO”) under section 147 read with section 144 & 144B of the Income Tax Act, 1961 (“the Act”) dated 11.05.2023. However, before the Ld. CIT(A), the assessee did not respond to the notices issued. Consequently, the Page 3 of 13
Aggrieved by the order of Ld. CIT(A), the assessee is now in appeal before this Tribunal. By way of additional grounds, the assessee has challenged the validity of issuance of notice under section 148 of the Act on two counts:
(a) That the reasons recorded by the Ld. AO for issuance of notice under section 148 of the Act are factually incorrect; and (b) That the notice under section 148 of the Act has been issued without obtaining approval from the competent authority as required under section 151 of the Act.
With regard to the first objection, the Ld. AR invited our attention to the notice issued under section 148A(b) of the Act, placed at page nos. 2 and 3 of the paper book, and submitted that the Ld. AO had recorded that an immovable property was purchased during Financial Year 2014–15 and that the transaction extended to Assessment Year 2016–17. It was further submitted that the assessee had not purchased any immovable property in his individual capacity. Rather, the property was purchased by a partnership firm, namely M/s D & S Associates, in which the assessee was a partner, and that too in Financial Year 2015–16. Therefore, according to the Ld. AR, the reasons recorded by the Ld. AO were factually incorrect and the assumption of jurisdiction under section 148 of the Act by the Ld. AO was invalid.
Page 4 of 13 Dayachary Ponnekanti vs. DCIT 8. With regard to the second objection, the Ld. AR submitted that since the relevant assessment year is 2016–17 and the notice issued under section 148 of the Act dated 29.07.2022, placed at page nos. 8 & 9 of the paper book was issued beyond three years from the end of the relevant assessment year, approval ought to have been obtained from the Learned Principal Chief Commissioner of Income Tax (“Ld. PCCIT”) as per section 151 of the Act. However, on the face of the notice, approval was stated to have been taken from the Learned Principal Commissioner of Income Tax (“Ld. PCIT”). Hence, the Ld. AR submitted that the notice issued by the Ld. AO under section 148 of the Act was invalid. However, the Ld. AR, fairly conceded that in the order passed under section 148A(d) of the Act dated 29.07.2022, placed at page nos. 4 to 6 of the paper book, approval of the Ld. PCCIT had been recorded.
Per contra, the Learned Departmental Representative (“Ld. DR”) relied upon the orders of the lower authorities.
We have heard the rival submissions and perused the material available on record. As far as the first objection of the assessee is concerned, we have gone through page nos. 3 to 5 of the order of Ld. AO for assessment year 2015- 16 placed at page nos.67 to 69 of the paper book, which is to the following effect:
Page 5 of Dayachary Ponnekanti vs. DCIT Page 6 of Dayachary Ponnekanti vs. DCIT
On perusal of above, we find that the Ld. AO has extracted the submission of the assessee, wherein the assessee himself had admitted that the first payment of Rs.15 lakhs towards purchase of land was made on 28.11.2014. It is also found that the partnership firm M/s D & S Associates was constituted only on 03.07.2015 and the property was registered in its name on 30.07.2015. Thus, on the date of first payment, the firm was not in existence Page 7 of 13 Dayachary Ponnekanti vs. DCIT and the payment was made by the assessee. Therefore, the recording of reasons by the Ld. AO referring to Financial Year 2014–15 cannot be said to be factually incorrect. At the stage of initiation of proceedings under section 148 read with section 148A of the Act, the Ld. AO is required only to form a prima facie belief. The material available on record was sufficient for such formation of belief. Accordingly, we find no merit in the first objection.
With regard to the second objection, we have gone through the order passed under section 148A(d) of the Act dated 29.07.2022 placed at page nos. 4 & 5 of the paper book, which is to the following effect:
Page 8 of Dayachary Ponnekanti vs. DCIT Page 9 of 13 Dayachary Ponnekanti vs. DCIT 13. On perusal of above, we find that approval of the Ld. PCCIT has been recorded therein. We have also gone through the notice issued under section 148 of the Act placed at page nos. 8 and 9 of the paper book, which is to the following effect:
On perusal of above, it is evident that the notice under section 148 is also dated 29.07.2022. The mention of Ld. PCIT in the notice under section 148 of the Act, when both approvals were obtained on the same date and the order under section 148A(d) of the Act records approval of the Ld. PCCIT, appears to be a typographical or clerical error. The assessee has not brought any material to demonstrate that approval of the competent authority was not obtained. During the course of hearing, when this aspect was pointed out, the Ld. AR fairly
Page 11 of 13 Dayachary Ponnekanti vs. DCIT submitted that the assessee is not pressing this objection seriously and did not insist upon verification from the original records. In these circumstances, we hold that the reassessment proceedings are not vitiated on account of alleged defect in approval. Accordingly, the second objection of the assessee is also rejected.
Further, it is an undisputed fact that before the Ld. CIT(A), the assessee did not respond to the notices issued and failed to prosecute the appeal. Consequently, the Ld. CIT(A) dismissed the appeal of the assessee for non- prosecution and upheld the order of the Ld. AO. Thus, the appeal of the assessee before the Ld. CIT(A) could not be decided on merits and was dismissed for want of prosecution. Therefore, considering the totality of facts and circumstances of the case, and in the interest of justice, we are of the view that the assessee should be granted one more opportunity to prosecute the appeal on merits before the Ld. CIT(A). The principles of natural justice require that the issues raised by the assessee be adjudicated on merits rather than being dismissed for non-prosecution. Accordingly, while upholding the validity of initiation of reassessment proceedings, we set aside the impugned order of the Ld. CIT(A) and restore the matter to his file for adjudication of the appeal on merits after providing proper opportunity of being heard to the assessee. The assessee is directed to cooperate in the appellate proceedings and shall not seek any unnecessary adjournment before the Ld. CIT(A). In case of failure to cooperate, the Ld. CIT(A) shall be at liberty to proceed in accordance with law.
Order pronounced in the Open Court on 11th March, 2026.