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Facts
The Assessing Officer initiated reassessment proceedings for A.Y. 2019-20 against Swathi Communications due to substantial unexplained cash deposits/withdrawals totaling Rs. 31.87 crores in its bank accounts. The assessee challenged the validity of the Section 148A(d) order and subsequent Section 148 notice, arguing procedural non-compliance with the Finance Act, 2021 amendments, before the CIT(A) and the High Court.
Held
The Hon'ble High Court of Telangana quashed the Section 148A(d) order and Section 148 notice, finding the reassessment procedure adopted by the Department to be in contravention of the Finance Act, 2021, and Supreme Court directives. The CIT(A) allowed the assessee's appeal based on this High Court order. The ITAT upheld the CIT(A)'s decision, dismissing the Revenue's appeal, concluding that the issue of such notices after the Finance Act, 2021 modifications is settled by Supreme Court orders.
Key Issues
Whether the reassessment proceedings initiated under Section 148/148A of the Income Tax Act, 1961, were procedurally valid, especially after the amendments introduced by the Finance Act, 2021, and subsequent quashing by the jurisdictional High Court.
Sections Cited
147, 148, 144B, 148A, 133(6), 151A, 69A
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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
करदाता का प्रतततितित्व/ : Shri P. Murali Mohan Rao, Assessee C.A. Represented by राजस्व का प्रतततितित्व/ : Ms .U Mini Chandran, CIT-DR Department Represented by सुिवाई समाप्त होिे की ततति/ : 18.08.2025 Date of Conclusion of Hearing घोर्णध की तधरीख/ : 12.09.2025 Date of Pronouncement O R D E R 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, 2 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:
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.
Succinctly stated, the A.O. based on information that though the assessee firm during the subject year A.Y. 2019-20 had carried out certain substantial transactions in its bank account with State Bank Of India (SBI) and Andhra Bank, viz. (i) cash deposits (including through bearers cheques) in its current account with SBI: Rs.24,69,98,190/-; (ii) cash deposits (including through bearers cheques) in its current account with Andhra Bank:
3 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.
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)
4 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 Jurisdictional 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/-.
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 jurisdiction, 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 6 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.
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 :
7 Swathi Communications -left blank intentionally- 8 Swathi Communications 9 Swathi Communications
The Revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us.
Ms. U. Mini Chandran, the learned CIT-Departmental Representative (for short, “Ld. CIT, DR”) at the threshold of hearing of the appeal submitted that, as the Department has challenged the order passed by the Hon’ble High Court of Telangana in W.P. No. 22427 of 2024 by filing a Special Leave Petition (SLP) before the Hon’ble Supreme Court, which as on date is pending adjudication, therefore, the CIT(A) had failed to appreciate the said facts which could affect the final resolution of the subject issue. The Ld. CIT, DR submitted that the Department has filed the present appeal to keep the issue alive.
Per contra, Sri P. Murali Mohan Rao, C.A., the learned Authorized Representative (for short “Ld.AR”) for the assessee firm, submitted that as the order passed by the A.O. under Section 148A(d) and notice under Section 148 of the Act dated 27.03.2023 had been quashed by the Hon’ble High Court of Telangana while disposing of the W.P. No. 22427 of 2024 filed by the assessee firm, therefore the CIT(A), respectfully following the order of the Hon’ble 10 Swathi Communications Jurisdictional 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.
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.
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 11 Swathi Communications cannot sustain judicial scrutiny. Since notices are bad in law, the consequential orders are also bad in law.
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.
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.
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.
The preliminary objection raised by the petitioner is sustained and all these writ petitions stands allowed on this very jurisdictional issue. Since the impugned notices and orders are getting quashed on the point of jurisdiction, 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.
12 Swathi Communications
Since the Hon’ble Supreme Court had, in the case of Ashish Agarwal, supra, as a one-time measure exercising the powers under Article 142 of the Constitution of India, permitted the Revenue to proceed under the substituted provisions, and this Court allowing the petitions only on the procedural flaw, the right conferred on the Revenue would remain reserved to proceed further if they so want to from the stage of the order of the Supreme Court in the case of Ashish Agarwal, supra.
No order as to costs.” 6. In view of the consensus arrived, the impugned Show Cause notices and consequential orders passed in this batch of writ petitions are set aside. Liberty is reserved to both the parties to take respective stand and to proceed in accordance with law as per paragraph No.38 of the order dated 14.09.2023 in W.P.No.25903 of 2022. 7. The Writ Petitions are allowed. No costs. Interlocutory applications, if any pending, shall also stand closed.”
We thus, based on the aforesaid facts, herein conclude, that as the impugned order under passed by the A.O under Section 148A(d) and Notice issued under Section 148 of the Act, both dated 27.03.2023 have been quashed by the Hon’ble Jurisdictional High Court, vide its order passed while disposing of the Writ petition filed for the subject year by the present assessee firm, viz. M/s Swathi Communications Vs. Assessment Unit, WP No. 22427 of 2024, dated 20.08.2024, therefore, the Ld. CIT(Appeals) had rightly quashed the assessment order passed by the A.O assessment passed by the A.O. under Section 147 r.w.s. 144B of the Act, dated 27.03.2024. Also, as observed by us hereinabove, as the subject 13 Swathi Communications issue involved in the present appeal, i.e the notices issued under Section 148 of the Act by the J.A.Os. after the modification of the reassessment proceedings vide the Finance Act, 2021 cannot stand the judicial scrutiny is as on date squarely covered by the orders of the Hon’ble Supreme Court in the case of (a). ADIT(Intl. Taxation) 2 Hyderabad & Anr. Vs. Deepanjan Roy, SLP & IA No. 157271/2025, dated 16.07.2025 and (b). Income-Tax Officer, Ward 5 Panvel & Ors. Vs. Prakash Pandurang Patil, SLP (Civil) Diary No. 39689/2025, dated 18.08.2025, thus, the same is no more res integra.
Before parting, we may herein observe, that the Ld. CIT, DR has submitted that liberty be allowed to the Department to seek recalling of the order passed by the Tribunal while disposing of the present appeal in case the SLP filed by the Revenue before the Hon’ble Apex Court is allowed and decided in favour of the Revenue. We are of the view that as the lis in the present case is pending before the Hon’ble Supreme Court, therefore, the liberty sought for by the Ld. CIT, DR for recalling of this order in case the SLP filed by the revenue is allowed, merits acceptance.
We thus, in terms of our aforesaid observations dismiss the appeal filed by the Revenue.
14 Swathi Communications
Resultantly, the appeal filed by the Revenue is dismissed in terms of our aforesaid observations.