ITO., WARD-6(1), HYDERABAD vs. SWATHI COMMUNICATIONS, HYDERABAD

प्रनत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M.

The present appeal filed by the Revenue is directed against the order passed by the Commissioner of Income-Tax (Appeals),
National Faceless Appeal Center (NFAC), Delhi, dated 28.03.2025,

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Swathi Communications which in turn arises from the order passed by the Assessing Officer under Section 147 r.w.s. 144B of the Income Tax Act, 1961 (for short, “Act”), dated 23.12.2024 for A.Y. 2019-20. The Revenue has assailed the impugned order on the following grounds of appeal before us:
1. The Ld.CIT(A) has not decided the issue on merits but passed the appellate order in compliance to the directions of the Hon'ble High Court.
The Ld.CIT(A) has not considered the fact that Department has already filed SLP before the Apex Court and the same is pending for adjudication at present.
2. The Ld. CIT(A) has passed the order without taking into account the fact that the SLP filed by the Department before the Apex Court in this case is still pending and could potentially affect the final resolution of the issue.
3. The Department is filing an appeal before the Hon'ble ITAT, in order to keep the issue alive and ensure that it is adjudicated at the apex court, subject to the outcome of the decision of the Hon'ble Supreme Court in respect of the SLP filed in assessee's own case.
4. Any other ground that may be urged at the time of hearing.

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Swathi Communications

Rs.1,44,88,000/-; and (iii). Cash withdrawals (including through bearer cheques) in its current account with SBI: Rs.32,50,000/-, but had not filed his return of income for the subject year, initiated proceedings under Section 148A(a) of the Act. Order under Section 148(d) of the Act, dated 27.03.2023 was passed by the A.O.
Thereafter, the notice under Section 148 of the Act, dated
27.03.2023 was issued to the assessee firm. In compliance, the assessee firm filed its return of income in compliance to the notice issued under Section 148 of the Act on 31.10.2023, declaring nil income.
3. During the course of the assessment proceedings, the A.O., considering the substantial amount of cash deposits/withdrawals made by the assessee firm in its current accounts with the aforementioned banks issued notices under Section 133(6) of the Act to State Bank of India on 17.11.2023, 15.12.2023, 17.01.2024, and to Union Bank of India (earlier Andhra Bank) on 17.11.2023
and 17.01.2024. In compliance, part reply along with copies of the bank details of the assessee firm were provided by SBI. On a perusal of the details made available by SBI, the A.O., observed that there were credit entries of Rs. 31,87,45,502/- (including cash deposits)

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Swathi Communications in the two current accounts of the assessee firm, viz. (i). credits in current account No.38194755334 with SBI: Rs.3,30,83,344/-
(including cash deposits of Rs.2,84,27,500/-); and (ii). credits in current account no. 34488190843 with SBI: Rs.28,56,62,158/-
(including cash deposits of Rs.21,85,70,690/-.).
4. Thereafter, the Juri ictional Assessing Officer (for short, “JAO”) issued notice (through speed post) to the assessee firm under Section 148A(b) of the Act dated 27.03.2023. As the aforesaid notice under Section 148A(b) could not be delivered, therefore, the same was got served by way of affixture by the Inspector of Income Tax on 07.03.2023. Also, the notice under Section 148A(b) was delivered by dropping the same in the e-mail account of the assessee firm. In response, Sri Prudhvi Manepalli, partner of the assessee firm, furnished his reply on 14.03.2023 and 18.03.2023, wherein it was claimed that the income of the assessee firm for the subject year was offered in the hands of its partners. However, the A.O. observed that as the assessee firm was a separate and a distinct entity from its partners, therefore, the claim that the income of the assessee firm was offered in the hands of its partners did not merit acceptance. Accordingly, the J.A.O issued notice under Section 5
Swathi Communications

148A(d) of the Act, dated 27.03.2023. Thereafter, the J.A.O. issued a notice under Section 148 of the Act, dated 27.03.2023. 5. On a perusal of the record, we find that, as the JAO held a firm conviction that the assessee firm had failed to discharge the onus that was cast upon it to explain the credit entries and cash deposits aggregating to Rs. 31.87 crores (approx.) in its bank accounts, therefore, he held the entire amount as having been sourced out of the unexplained money of the assessee firm under Section 69A of the Act. Accordingly, the J.A.O. vide his order passed under Section 147 r.w.s. 144B of the Act, dated 27.03.2024, determined the income of the assessee firm at Rs. 31,87,45,502/-.
6. Aggrieved, the assessee firm carried the matter in appeal before the CIT(A) wherein it was, inter alia, submitted that, as the notice under Section 148 of the Act, dated 27.03.2023, was issued by the J.A.O., i.e., JCIT, Ward - 6, Hyderabad, and not by the A.O., NFAC,
New Delhi, as required by the mandate of the provisions of Section 151A of the Act, therefore, in the absence of valid assumption of juri iction, the assessment order passed under Section 147 r.w.s.
144B of the Act, dated 27.07.2024, being devoid and bereft of any force of law was liable to be quashed. The assessee firm had further

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Swathi Communications submitted before the CIT(A) that it had assailed the order passed by the A.O. under Section 148A(d) of the Act by filing a Writ Petition i.e W.P. No. 22427 of 2024 before the Hon’ble High Court of Telangana, which had quashed the impugned order passed under Section 148A(d) and the notice issued under Section 148 of the Act, both dated 27.03.2023. Accordingly, it was the claim of the assessee firm that now when the order passed under Section 148A(d) and the notice under Section 148 of the Act, both dated 27.03.2023 had been quashed by the Hon’ble High Court, therefore, the impugned reassessment order passed under Section 147 r.w.s. 144B of the Act, dated 27.03.2024 could not be sustained and liable to be quashed.
7. We find that the CIT(A), considering the fact that the Hon’ble
High Court of Telangana had quashed the order passed by the A.O.
under Section 148A(d) of the Act, dated 27.03.2023, therefore, concluded that the subsequent notices issued and the order of assessment passed by the A.O. under Section 147 r.w.s. 144B of the Act, dated 27.03.2024, did not survive. Accordingly, the CIT(A) allowed the appeal filed by the assessee firm by observing as under :

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Juri ictional High Court had rightly quashed the order passed by the A.O. under Section 147 r.w.s. 144B of the Act dated 27.03.2024. 11. We have heard the learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.
12. We find on a perusal of the record that the Hon’ble High
Court of Telangana, vide its order passed while disposing off the Writ petition filed by the present assessee firm, viz. M/s Swathi
Communications Vs. Assessment Unit, WP No. 22427 of 2024, dated 20.08.2024, had followed its earlier order passed in the case of Kankanala Ravindra Reddy Vs. ITO & 2 Others in W.P No. 25903
of 2022, dated 14.09.2023, and had quashed the impugned order passed by the A.O under Section 148A(d) and the Notice issued under Section 148 of the Act, both dated 27.03.2023 for the subject year, i.e A.Y 2019-20, observing as under :
“3. It is common ground taken by the learned counsel for the petitioner(s) that in furtherance of Finance Act, 2021, reassessment process stood modified but the respondents have not taken care of it and therefore notices issued under Section 148 of the Income Tax Act, 1961

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Swathi Communications cannot sustain judicial scrutiny. Since notices are bad in law, the consequential orders are also bad in law.
4. During the course of hearing, learned counsel for the parties agreed that curtains on this issue are finally drawn by this Court in a batch of writ petitions, W.P.No.25903 of 2022 and other connected matters, decided by common order dated 2 14.09.2023. The parties agreed that this matter may be disposed of in terms of the Common Order dated 14.09.2023. 5. This Court in the said order dated 14.09.2023 in W.P.No.25903 of 2022, held as under:
“35. In view of the aforesaid discussions, it is by now very clear that the procedure to be followed by the respondent-Department upon treating the notices issued for reassessment being under Section 148A, the subsequent proceedings was mandatorily required to be undertaken under the substituted provisions as laid down under the Finance Act, 2021. In the absence of which, we are constrained to hold that the procedure adopted by the respondent-Department is in contravention to the statute i.e. the Finance Act, 2021, at the first instance. Secondly, it is also in direct contravention to the directives issued by the Hon’ble
Supreme Court in the case of Ashish Agarwal, supra.
36. For all the aforesaid reasons, the impugned notices issued and the proceedings drawn by the respondent-Department is neither tenable, nor sustainable. The notices so issued and the procedure adopted being per se illegal, deserves to be and are accordingly set aside/quashed. As a consequence, all the impugned orders getting quashed, the consequential orders passed by the respondent Department pursuant to the notices issued under Section 147 and 148 would also get quashed and it is ordered accordingly. The reason we are quashing the consequential order is on the principles that when the initiation of the proceedings itself was procedurally wrong, the subsequent orders also gets nullified automatically.
37. The preliminary objection raised by the petitioner is sustained and all these writ petitions stands allowed on this very juri ictional issue. Since the impugned notices and orders are getting quashed on the point of juri iction, we are not inclined to proceed further and decide the other issues raised by the petitioner which stands reserved to be raised and contended in an appropriate proceedings.

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- (श्री रवीश सूद)
(RAVISH SOOD)
न्यायिक सदस्य/JUDICIAL MEMBER Hyderabad, dated 12.09.2025. *TYNM/sps

आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:-

आदेशधिुसधर / BY ORDER

Sr. Private Secretary
ITAT, Hyderabad