ASST. COMMISSIONER OF INCOME TAX, CIRCLE-9(1), HYDERABAD vs. VEDULA VENKATA RAMANA,, HYDERABAD

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आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad ‘DB-B‘ Bench, Hyderabad

Before Shri Vijay Pal Rao, Vice-President
A N D
Shri Manjunatha, G. Accountant Member

आ.अपी.सं /ITA No.1555/Hyd/2017
(िनधाŊरण वषŊ/Assessment Year: 2014-15)
PAN:ABHPV1213E
(Appellant)

(Respondent)

राज̾ व Ȫारा/Revenue by::
Shri Narender Kumar Naik, CIT (DR)
िनधाŊįरती Ȫारा/Assessee by:
Shri P Murali Mohan Rao, CA

सुनवाई की तारीख/Date of hearing:
30/06/2025 & 18/07/2025
घोषणा की तारीख/Pronouncement: 25/07/2025

आदेश/ORDER

Per Vijay Pal Rao, Vice President

This appeal filed by the Revenue is directed against the order dated, 02/05/2017 of the learned CIT (A)-7, Hyderabad, for the A.Y.2014-15. 2. The revenue has raised the following grounds of appeal:

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no appearance on behalf of the assessee. Thereafter, the assessee filed M.A No.,44/Hyd/2023 and this Tribunal, vide order dated
23/08/2023 recalled the earlier order to give an opportunity to the assessee to participate in the proceedings. Finally, the appeal was heard on 30/06/2025 and thereafter on 18/07/2025. 4. The learned DR has submitted that the case of the assessee was initially selected for scrutiny under CASS on the issue of cash deposit in the Bank Account of the assessee. The Assessing Officer issued a show-cause notice dated 12/12/2016
calling for information about the source of cash deposit of Rs.4,35,58,500/- in assessee’s O.D Account with Bank of India.
Thus, the learned DR has submitted that this issue of cash deposit was the subject matter of limited scrutiny selected under CASS and which is also part of the individual transaction statement (ITS) of the assessee. The only difference was that at the initial stage, the Assessing Officer was having the information about the cash deposit of Rs.90.00 lakhs in the bank account of the assessee as per the AIR information and thereafter, when the assessee submitted the bank account statement on 26/08/2016, the Assessing Officer noted that there was a cash deposit in the bank account to the tune of Rs.4,35,58,500/- for which the Assessing Officer has issued a show cause notice which is not in dispute. Since the said cash deposit in the Bank Account was not recorded in the books of account of the assessee therefore, the Assessing Officer decided to convert the limited scrutiny to ITA No 1555 of 2017 VedITA No 1555 of 2017 Vedula Venkata Ramana
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complete scrutiny and sought the permission from the Pr. CIT vide letter dated 14/12/2016 which was granted vide order dated
22/12/2016. The learned DR has submitted that when the issue of addition made on account of cash deposit in the Bank Account is very much subject matter of scrutiny itself selected under CASS, then the conversion of limited scrutiny to complete scrutiny by the Assessing Officer does not affect the validity of the addition made by the Assessing Officer due to some technical reason of show cause notice after the conversion of the limited scrutiny to complete scrutiny. The learned DR has referred to the findings of the learned CIT (A) and submitted that the learned CIT
(A) has quashed the assessment order itself on the ground that after the approval of the conversion of limited scrutiny to complete scrutiny, the Assessing Officer has not issued a show cause notice to the assessee. He has thus submitted that non-issuance of show cause notice after the conversion of limited scrutiny to complete scrutiny can effect only the addition made by the Assessing
Officer other than the cash deposits in the bank account. The learned DR has referred to the CBDT Circulars Nos.20/2015 and No.5/2016 as well as instructions dated 30/11/2017. He has also relied upon the following judgments:

A)
Hon'ble Supreme Court in the case of Guduthur Bros vs.
Income Tax Officer (1960) 40 ITR 298
B)
Hon'ble Supreme Court in the case of Commissioner of Sales Tax & Ors vs. M/s. Subhash & Co.,(AIR 2003 S.C
1628, 2003 (3)

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C)
Hon'ble Supreme Court in the case of NFAC & Ors vs.
Automotive Manufacturers (P) Ltd in civil appeal
No.1829 of 2023 dated 21st Mach, 2023
D)
Hon'ble Madras High Court in the case of Home Finders
Hon'ble
6. On the other hand, the learned AR has submitted that as per instruction No.5 of 2016 as well as dated 30/11/2017, it is mandatory that after conversion of limited scrutiny to complete scrutiny, the Assessing Officer should issue a show cause notice to the assessee. The learned AR has submitted that the Assessing
Officer has not issued any show cause notice to the assessee after the limited scrutiny was converted into complete scrutiny and approval was granted by the competent authority. Therefore, the assessment order passed by the Assessing Officer is invalid for want of mandatory notice after the limited scrutiny is converted into complete scrutiny. In support of his contentions, he has relied upon the following judgements:
i)
Hon'ble Calcutta High Court in the case of PCIT vs.
No.1378/AHD/2019 dated 27/04/2022
iii)
Delhi Bench of the ITAT in the case of Sarvajit Bhatia vs. Income Tax Officer in ITA No.6695/Del/2018 dated
21/08/2019. iv)
Pune Bench of the ITAT in the case of Suresh Jugraj
Mutha vs. Addl.CIT in ITA No.05/PUN/2016 dated
4/5/2018. v)
Jaipur Bench of the ITAT in the case of Smt. Manoj
Kaushik vs. Dy.CIT in ITA No.1419/JP/2019 dated
9/12/2019. vi)
Delhi Bench of the Tribunal in the case of CBS
International Projects (P) Ltd vs. ACIT in ITA No.144/
Del/2019 dated 28/02/2019. vii)
ITAT
Hyderabad
Bench in the case of Garine
Chandramouli vs. Income Tax Officer in ITA No.429/
Hyd/2018. viii)
ITAT Guwahati Bench in the case of Prabir Das vs.
Income Tax Officer in Ita No.395/Gau/2019
ix)
Delhi Bench of ITAT in the case of Danone Asia Pte Ltd vs. ACIT in ITA No.376/Del/2021. 7. We have considered the rival submissions and also carefully perused the order of the Assessing Officer as well as the impugned order of the learned CIT (A). The Assessing Officer has recorded the fact that the return of income was selected for scrutiny under CASS on the issue of cash deposits worth of Rs.90.00 lakhs in the bank account with Bank of India as per the AIR information. The Assessing Officer issued a notice u/s 143(2) of the I.T. Act, 1961 on 03/05/2016 and also issued the show cause notice to the assessee. In response to the same, the CA representing the assessee appeared before the Assessing Officer on 26/08/2016 and filed the bank statement. The representative

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also sought time to submit other relevant information. The Assessing Officer further noted that there was no compliance from the assessee on the date of hearing fixed on 6/9/2016. The Assessing Officer then issued a show cause notice dated
12/12/2016 calling for information about the source of cash deposit of Rs.4,35,58,500/- which were found from the bank statement submitted by the assessee. Therefore, the case was selected for limited scrutiny on the issue of cash deposits in the bank account and the show cause notice dated 12/12/2016 was also issued by the Assessing Officer to the assessee about the source of cash deposit in the bank account though for a larger amount of Rs.4,35,58,500/-. There is no change in the subject matter of the scrutiny as taken up under CASS, however, since there are other discrepancies found by the Assessing Officer that there is no entry in the books of account of the assessee regarding the cash transactions as well as other income of the assessee which is not declared in the return of income. The Assessing
Officer decided to seek the permission for conversion of the scrutiny proceedings from limited to complete scrutiny which was granted by the learned Pr. CIT vide communication dated
22/12/2016. The Assessing Officer finally made 4 additions while completing the scrutiny assessment. Out of these 4 additions, 2
additions were regarding cash deposits in the bank account which was subject matter of the limited scrutiny and 2 other additions on account of interest income in the Savings Bank Account and interest income on the Fixed Deposits were made outside the ITA No 1555 of 2017 VedITA No 1555 of 2017 Vedula Venkata Ramana
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limited scrutiny scope. Therefore, in our considered view, the additions made by the Assessing Officer on account of cash deposits in the bank Account with the Bank of India, Bala Nagar
Branch is very much subject matter of the limited scrutiny and would not be affected by the conversion of the limited scrutiny to the complete scrutiny. Only, the other 2 additions made by the Assessing Officer on account of interest on the Savings Bank and interest on Fixed Deposits are made outside the limited scrutiny and under the ambit of complete scrutiny. The learned CIT (A) has quashed the assessment order in para 6.1 and 6.2 as under:

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violation of principle of natural justice. Thus, the non-issuance of show cause notice by the Assessing Officer may renders the additions made by the Assessing Officer which are beyond the scope of the limited scrutiny as not sustainable but will not render the entire assessment as invalid. Accordingly, in the facts and circumstances of the case, we found that the additions made by the Assessing Officer on account of deposits in the bank account are well within the scope of limited scrutiny undertaken by the Assessing Officer under CASS and only the remaining 2
additions on account of interest on savings bank account and fixed deposits are outside the scope of limited scrutiny and could be taken up only after the conversion of the limited scrutiny to complete scrutiny. Therefore, the additions made by the Assessing Officer on account of interest on term deposits and saving bank account without show cause notice are not sustainable and therefore, instead of quashing the assessment order, it is only the 2 additions made by the Assessing Officer without issuing show cause notice are not sustainable. The decisions relied upon by the learned AR also support the view that the additions made by the Assessing Officer without show cause notice are not sustainable. Since the learned CIT (A) has quashed the assessment order and not adjudicated the issue of additions on merits, therefore, the impugned order of the learned CIT (A) is set aside and the matter is remanded to the record of the learned
CIT (A) for adjudication of the issue of addition made by the Assessing Officer on account of cash deposits in the bank a/c on ITA No 1555 of 2017 VedITA No 1555 of 2017 Vedula Venkata Ramana
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merits after giving an appropriate opportunity of hearing to the assessee.

Order pronounced in the Open Court on 25th July, 2025. (MANJUNATHA, G.)
ACCOUNTANT MEMBER
(VIJAY PAL RAO)
VICE-PRESIDENT
Hyderabad, dated 25th July, 2025
Vinodan/sps
Copy to:

S.No Addresses
1
ACIT, Circle 9(1) Room No.245, Block D, 2nd Floor, IT Towers,
AC Guards, Masab Tank, Hyderabad
2
Shri Vedula Venkata Ramana, 17-1-388/60 Plolt No.60-A Laxminagar Colony, Saidabad, Hyderabad 500059
3
Pr. CIT - Hyderabad
4
DR, ITAT Hyderabad Benches
5
Guard File

By Order