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Facts
The assessee, an NRI, challenged an assessment order for A.Y. 2016-17, which included an addition of Rs.25,00,000/- under Section 69A concerning payments from a joint bank account with her mother, claiming these were her mother's funds. The Dispute Resolution Panel (DRP) rejected the assessee's objections to the draft assessment order on the technical ground that they were not filed in the prescribed Form 35A, without offering an opportunity to rectify the defect.
Held
The Tribunal found that the DRP's rejection of objections on technical grounds without providing an opportunity to rectify the defect violated principles of natural justice. Consequently, the Final Assessment Order and DRP Directions were set aside, and the matter was remanded to the DRP to allow rectification of defects and decide the objections on merits after a proper hearing.
Key Issues
Whether the DRP's rejection of the assessee's objections on a technicality without an opportunity to rectify violated principles of natural justice, and the validity of the addition made under Section 69A.
Sections Cited
147, 144C, 148A, 148, 144B, 151A, 149, 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G
आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B’ Bench, Hyderabad BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER आ.अपी.सं /ITA No.513/Hyd./2024 िनधा�रण वष�/Assessment Years 2016-2017 Kapa Sindhu Mitra, 20148, Holly Hock Terrace, The Income Tax Officer – Ash Burn, V A, vs. [INT. TAXN)-1, Hyderabad – 500 004. United States of America. PAN AZCPK8030D (Appellant) (Respondent) िनधा�रती �ारा/Assessee by : Sri Sashank Dundu, Advocate राज� व �ारा/Revenue by : Dr. Narendra Kumar Naik, CIT-DR सुनवाई की तारीख/Date of hearing: 29.10.2025 घोषणा की तारीख/Pronouncement: 31.10.2025 आदेश/ORDER PER VIJAY PAL RAO, VICE PRESIDENT :
This appeal by the Assessee is directed against the assessment order dated 13.03.2024 passed u/sec.147 r.w.s.144C(13) of the Income Tax Act, 1961 [in short "the Act"] in pursuance to the Directions of the Disputes Resolution Panel-1 [in short “DRP”], Bengaluru, dated 2 ITA.No.513/Hyd./2024 23.02.2024 passed u/sec.144C(5) of the Income Tax Act, 1961, for the assessment year 2016-2017.
The Registry has reported delay of 01 day in filing the present appeal. We have heard the learned Authorised Representative of the Assessee as well as learned DR for the Revenue and considered the relevant material on record. At the outset, we find that the assessee has paid appeal fees vide challan dated 12.05.2024 which is within the period of limitation. The uploading of the appeal was on 13.05.2024 which resulted in 01 day delay due to an inadvertent mistake on the part of the learned Authorised Representative of the Assessee. Therefore, the assessee has explained a reasonable cause for delay of 01 day. Accordingly, in the facts and circumstances of the case and in the interest of justice, we condone the delay of 01 day in filing the appeal before the Tribunal and admit the appeal for adjudication on merits.
The assessee has raised the following grounds in the instant appeal :
3 ITA.No.513/Hyd./2024
“On the facts and in the circumstances of the case the order passed by the Assessing Officer [ITO(Int. Taxn.)-1] dt. 13.03.2024 u/s 147 r.w.s. 144C is erroneous both on facts and in law.
2. The ITO(Int. Taxn.)-1 ought to have appreciated that the Jurisdictional Assessing Officer i.e. Income Tax Officer Ward-1, Warangal initiated proceedings u/s 148A(b) without the authority of law-in as much as the provisions of section 151A r.w. CBDT Notification No. 18/2022/F.No.370142/16/2022 dt. 29.03.2022 mandates that there should not be any interface between the Assessing Officer and the Assessee whereas the notice issued by the JAO, without following the randomised selection process of the authority who should record satisfaction to reopen the Assessment results in the notice issued u/s 148A(b), order passed u/s 148A(d) and the notice issued u's 148 of the Act as void ab initio and any proceedings continued thereafter either by the FAQ and by the ITO(Int. Taxn.) are also bad in law.
3. The ITO(Int. Taxn.)-1 erred continuing the reassessment proceedings without issuance of any notice u/s 148 independently to assume jurisdiction since in the instant case, the notice u/s 148 dt. 29.07.2022 was issued by the Jurisdictional Assessing Officer(Income Tax Officer Ward-1, Warangal) and hence the procedure prescribed u/s.148A/148/144B/151A of the Act for initiating reassessment proceedings was not followed. 4. The Income Tax Officer Ward-1, Warangal erred in issuing the notice u/s 148 dt. 29.07.2022 and thereafter passing on the file to the Faceless Assessing Officer and adding to the comedy of errors, the Jurisdictional Assessing Officer who is authorised to deal with international taxation matters passes a final assessment order without either initiating the proceedings as mandated u/s 151A or issued a notice u/s 148 of the Act and thus the Assessment order passed u/s 147 r.w. 144C is void ab initio. 5. The Assessing officer ought to have noticed that in respect of the A.Υ. 2016-17, reassessment proceedings are permissible beyond a period of 3 years only when the alleged income, which has escaped assessment, is more than 50 lakhs, as could be noticed from section 149 of the Act whereas, in the instant case, the reassessment proceedings, though initiated without following the procedure mandated under the Act, the alleged escapement of income was only Rs.25,00,000/- in which event the proceedings ought to have been dropped by the authority who has initiated 4 ITA.No.513/Hyd./2024 the proceedings and even the PCIT-1 has granted approval without application of mind, making the entire proceedings a nullity.
The Assessing Officer erred in passing the Assessment Order dt. 13.03.2024 without properly considering the reply filed by the petitioner and without proper verification of information available with the department, thereby violating the principles of natural justice.
The Dispute Resolution Panel(DRP-1) erred in not considering the objections raised only on the ground that the said objections were not raised in the prescribed form and not providing another opportunity to file the same objections in the proper format thereby not providing a proper opportunity of being heard and violating the principles of Natural Justice.
8. The AO erred making an addition of Rs.25,00,000/-u/s 69A of the Act even though the actual deposits during the year are only Rs.15,00,000/- and the amount of Rs.10,00,000/- pertains to the earlier Assessment year i.e. A.Y. 2015-16 and thus the application of provisions of section 69A as well as non- consideration of the basic facts makes the Assessment order arbitrary and capricious.
The AO erred making an addition of Rs.25,00,000/- u/s 69A of the Act even though the amounts were explained to be receipts from mother supported by confirmation letter from the appellant's mother.
For these and other grounds that may be urged at the time of hearing, appellant prays that the Hon'ble Tribunal may be pleased to delete the arbitrary additions made and upheld by the lower authorities”.
The learned Authorised Representative of the Assessee has submitted that the assessee is an NRI and does not have any income assessable to tax in India for the year under consideration. The Assessing Officer has reopened the assessment based on the payment made to 5 ITA.No.513/Hyd./2024 Ujwala Developers Pvt. Ltd., from the joint bank account of the assessee with her mother at Rs.25 lakhs which is highly arbitrary and unsustainable when the assessee already explained the fact that all these payments/investments were made by the mother of the assessee from that joint account and from the funds of the mother and not of the assessee. The assessee has also reported the income from other sources in the return of income at Rs.2,30,000/- and, therefore, the addition made by the Assessing Officer is liable to be deleted. The learned Authorised Representative of the Assessee further submitted that against the Draft Assessment Order dated 29.05.2023, the assessee filed objections before the DRP on 27.06.2023. However, the DRP has rejected the objections of the assessee on technical ground that the assessee has not filed objections in Form- 35A. The learned Authorised Representative of the Assessee has submitted that the assessee has given all the details which are necessary for filing the objections against the Draft Assessment Order, but, the DRP without even giving an opportunity to the assessee to rectify the defects, 6 ITA.No.513/Hyd./2024 straightaway dismissed the objections. Thus, there is a gross violation of the principles of natural justice when the assessee was not given an opportunity to rectify the defect, if any, in the objections filed by the assessee against the Draft Assessment Order. The learned Authorised Representative of the Assessee further contended that on merits when the assessee has already explained the facts and real nature of the transactions that all these payments were made by the mother of the assessee from the joint bank account with the assessee and not by the assessee herself, then, the question of addition on account of undisclosed investment made by the Assessing Officer does not arise.
5. On the other hand, learned DR for the Revenue has relied upon the orders of the authorities below and submitted that the assessee has not disputed the fact that the objections filed before the DRP are not in Form-35A as required as per the Rules prescribed for filing the objections before the DRP.
7 ITA.No.513/Hyd./2024 6. We have considered the rival submissions as well as relevant material on record. The assessee filed objections against the Draft Assessment Order before the DRP on 27.06.2023. The DRP has rejected the objections of the assessee in Paras-4 and 5 as under :
“4. The Panel is of the considerate view that the DRP gets jurisdiction over a case when an eligible assessee files objection in prescribed Form 35A as per Rule 4 of Income Tax (Dispute Resolution Panel) Rules 2009 and within the time prescribed u/s, 144C(2) of the Act. As per Section 144C(2) the assessee has to file objections before the DRP within 30 days of receipt of the Draft order. The relevant paragraphs of the section 144C are reproduced here as under :
"(2) On receipt of the draft order, the eligible assessee shall within thirty days of the receipt by him of the draft order, - (a) file his acceptance of the variations to the Assessing Officer: or (b) file his objections, if any, to such variation with,- (i) the Dispute Resolution Panes and (ii) the Assessing Officer (5) The Dispute Resolution Panel shall in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment. (Emphasis supplied)
8 ITA.No.513/Hyd./2024 4.1. The assesse has submitted the submissions vide her letter dated 24.06.2023 which has been received in this office on 27.06.2023 and it is seen that the objections against the Draft Assessment Order was not filed in the prescribed Form 35A. The prescribed due date to file objection in Form 35A before Dispute Resolution Panel is within 30 days from the date of passing the Draft Assessment Order. However, the Form 35A was not enclosed with the aforementioned submission which is prescribed as per Rule 4 of the Income Tax (Dispute Resolution Panel) Rules 2009 and relevant para of the same is reproduced here as under:
Procedure for filing objections 4.(1) The objections if any, of the eligible assessee to the draft order may be filed in person or through his agent within the specified period in Form No. 35A.
4.2. In view of the above, it is evident that the objections in Form 35A have not been filed in this case, hence the objections, as narrated by the assessee in her submissions, are not maintainable and the same are hereby dismissed. Hence, the Panel has not gone into the merits of the additions made.
The directions of this Panel, as per the discussions above, are hereby issued as per the provisions of section 144C(5) of Income Tax Act. The same is also being communicated to the assessee and to the Assessing Officer in terms of Rule 11 of the INCOME TAX (DISPUTE RESOLUTION PANEL) RULES, 2009. It may also be noted that the DIN being allotted to these directions upon uploading the same to the ITBA portal is being mentioned at the first page and the communication of the Directions to the assessee is as per the ITBA generated Intimation Letter which is separately attached herewith.”
9 ITA.No.513/Hyd./2024 7. Thus, it is manifest from the directions of the DRP that the objections were rejected on technical ground of not filing in Form-35A as per Rule 4 of Income Tax (DRP) Rules, 2009. It is pertinent to note that before rejecting the objections, the DRP has not even issued a notice to the assessee either to clarify it or to rectify the defect in the objections filed other than in Form-35A. Therefore, it is a case of clear violation of principles of natural justice on the part of the DRP while passing the impugned Directions dated 23.02.2024 culminating the Final Assessment Order dated 13.03.2024. Accordingly, in the facts and circumstances of the case, the Final Assessment Order as well as the DRP Directions are set-aside and the matter is remanded to the record of the DRP for allowing the assessee to rectify the defects in the objections filed against the Draft Assessment Order and then, decide the objections on merits, after giving proper opportunity of hearing to the assessee.
In the result, appeal of the Assessee is allowed for statistical purposes.
10 ITA.No.513/Hyd./2024 Order pronounced in the open Court on 31.10.2025.