MUDUNURI VENKATA SUBBARAJU,WEST GODAVARI vs. INCOME TAX OFFICER, WARD-1, TANUKU
Facts
The assessee did not file an original return of income. The Assessing Officer initiated reassessment proceedings after finding a cash deposit of Rs. 64,00,000. The assessee claimed Rs. 15,00,000 as gifts from relatives, but the AO treated this as unexplained money under Section 69A and assessed the income at Rs. 15,12,930, which the CIT(A) upheld.
Held
The Tribunal ruled that the reassessment proceedings initiated for AY 2015-16 by a notice under Section 148 dated 06.04.2022 were without jurisdiction and invalid. It determined that the notice was issued beyond the statutory limitation period under the unamended Section 149(1)(b) and that the relaxations under the Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (TOLA) were not applicable to such notices for AY 2015-16 issued after April 1, 2021, relying on Supreme Court precedents.
Key Issues
Whether the reassessment notice issued under Section 148 of the Income Tax Act for the Assessment Year 2015-16, dated 06.04.2022, was barred by limitation under the pre-amended Section 149(1)(b) and the applicability of the relaxations provided by TOLA.
Sections Cited
147, 148, 148A, 148A(d), 143(2), 142(1), 69A, 149, 149(1)(a), 149(1)(b), 144, 144B, 130, 151A, 250, 3(1) (TOLA)
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Income Tax Appellate Tribunal, VISAKHAPATNAM “SMC” BENCH, VISAKHAPATNAM
Before: SHRI RAVISH SOOD, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
आदेश /O R D E R
PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER: 1. This appeal is filed by the assessee against order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal centre, Delhi [hereinafter in short “Ld.CIT(A)”] vide DIN & Order
I.T.A.No.284/VIZ/2025 Mudunuri Venkata Subbaraju No.ITBA/NFAC/S/250/2024-25/1073992729(1) dated 04.03.2025 for the A.Y.2015-16 arising out of order passed under section 147 r.w.s. 144 of Income Tax Act, 1961 (in short ‘Act’) dated 17.02.2024.
Brief facts of the case are that, the assessee is an individual and has not filed original return of income. As per the information received from “Risk Management Strategy” formulated by the CBDT, the assessee has carried out following transactions during the F.Y.2014-15, relevant to the A.Y.2015-16: Information Description Source Amount (Rs.) Cash deposit in a Saving bank Account Bank of India 64,00,000 Thereafter, Ld. Assessing Officer [hereinafter in short “Ld. AO"] issued notice under section 148A(d) of the Act on 06.04.2022. In response, assessee has filed return of income on 02.05.2022 declaring total income at Rs.12,930/- after claiming Net agricultural income for rate purpose at Rs.4,68,000/- of the Act. Notices under section 143(2) and 142(1) of the Act were issued and served on the assessee. In response, assessee provided translated copies of sale deeds and stated that assessee has purchased agriculture lands from the proceeds obtained from sale of agriculture lands. Further, assessee has submitted his reply on 08.07.2023, 09.07.2023, 13.07.2023, 01.08.2023, 11.08.2023, 14.08.2023 and 08.09.2023 and furnished translated sale deeds and bank statement etc. In reply, assessee has submitted that an amount of Rs.15,00,000/- has been received as gifts from his relatives. Further, on 06.11.2023, Ld. AO has issued notice calling to produce relevant evidences to substantiate his case.
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I.T.A.No.284/VIZ/2025 Mudunuri Venkata Subbaraju The assessee has furnished his reply on 09.12.2023 by submitting the translated sale deeds. Further, on 24.11.2023, a notice was asked to explain the nature and source of cash deposits appearing in the bank accounts along with documentary evidences. Assessee has not responded nor submitted any explanation. Therefore, Ld. AO being not satisfied with the submissions of the assessee, Ld.AO proceeded to complete the assessment by observing that genuineness of the transaction is not proved by the assessee as there is no corroborating evidentiary documents to support the claim of gift and treated an amount of Rs.15,00,000/- as un explained money under section 69A of the Act and determined the income of the assessee at Rs.15,12,930/-.
On being aggrieved by the order of the Ld. AO, assessee filed an appeal before Ld. CIT(A). After considering the submissions of the assessee, Ld.CIT(A)dismissed the appeal of the assessee.
Being aggrieved by the order of the Ld. CIT(A), assessee filed an appeal before the Tribunal by raising following grounds of appeal: -
“1. That under the facts and circumstances of the case, the order passed u/s147 r.w.s 144B of the I.T. Act dt: 17.02.2024, which was upheld by the Ld.CIT(A), NFAC vide order passed u/s 250 of the I.T. Act dt: 04- 03-2025, is not in accordance with the facts of the case and the provisions of law. 2. The learned CIT (A) upheld the assessment order where in the addition was made by Assessing officer in summary manner while so learned CIT(A)ignored when it was explained with cogent reasons that cash deposits ofRs.15,00,000/- made in the bank account were from out of the available funds with the assessee.
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I.T.A.No.284/VIZ/2025 Mudunuri Venkata Subbaraju 3. For these and other reasons that have to be urged at the time of hearing of the case the assessee prays that the addition made by the assessing officer and sustained by learned CIT(A) are to be deleted in the interest of Justice.”
Assessee also raised the following additional grounds and prayed for admitting the same, since it is legal in nature and goes to the root of the matter.
“1. The notice issued u/s 148 of the IT Act, 1961 dt. 06.04.2022 is barred by limitation in view of the provisions of section 149(1)(b) of the IT Act, 1961 read with the proviso thereto. Since the notice was issued beyond the prescribed time limit of six years, the subsequent assessment order passed u/s 147 r.w.s 144B of the IT Act 1961 Dt.17.02.2024 is bad in law, void ab initio, and liable to be quashed. 2. The impugned order passed under Sec 147 r.w.s 144B of the IT Act is in violation of the provisions of law. The notices issued by the jurisdictional assessing officer i.e., ITO ward -1 Tanuku, u/s 148A(d) dt.06.04.2022 and u/s 148 dt. 06.04.2022 are invalid and contrary to the provisions of statute as envisaged u/s 144B, sec 130 and Sec 151A of the IT Act. 3. The invalid notices issued by the assessing officer ITO ward - 1Tanuku, mentioned in ground no. 2, vitiate the subsequent proceedings, rendering the assessment null and void. Therefore, the impugned order passed u/s 147 r.w.s 144B of the IT Act is liable to be quashed.”
We admit the legal grounds raised by the assessee as additional grounds since it goes to the root of the matter.
At the outset, Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that notice under section 148 of the Act for the A.Y.2015-16 was issued on 06.04.2022 without following the procedure prescribed by the new provision inserted on 01.04.2021. Ld.AR also submitted that notice under section 148 of the Act dated 06.04.2022is barred by limitation as per the first proviso to section 149(1)(b) of the Act w.e.f 01.04.2021. Ld.AR pleaded that
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I.T.A.No.284/VIZ/2025 Mudunuri Venkata Subbaraju the legal ground raised by the assessee as above, shall first be addressed before adjudicating the other grounds raised on merits. On this issue, Ld.AR placed heavy reliance on the decision of Co-ordinate Bench in the case of Vaka Ghanta Nageswara Rao v. ITO in ITA No. 251/VIZ/2025 dated 10.07.2025.
Ld.AR by relying on the decision of the Hon’ble Supreme Court in the case of Union of India & Ors. v. Ashish Agarwal [(2002) 444 ITR 0001 (SC)] submitted that the new procedure prescribed under section 148(A) under Finance Act, 2021 was not followed by the Ld. AO prior to issuance of notice under section 148 of the Act. Ld.AR also submitted that after passing the order u/s.148(A)(d) of the Act, notice under section 148 of the Act was issued on 06.04.2022 for the A.Y. 2015-16 wherein the limitation expires on 31.03.2022 as per section 149(1)(b) of the un-amended provisions. Ld.AR further submitted that as held in the case of Union of India & Ors. v. Rajeev Bansal [(2024) 8 NYPCTR 1291 (SC)], that the relaxation under Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (“TOLA”) are not applicable for the A.Y. 2015-16 and are applicable in the case for the time limit for issuing notices expired between 20.03.2020 and 31.03.2021. Further, the Ld.AR also submitted that the time limit for the notice issued under the unamended provisions u/s. 149 of the Act expired on 31.03.2022 i.e., 6 years from the end of relevant assessment year for the escaped assessment amounts to or is likely to more than one lakh rupees or more for that year. Ld.AR also
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I.T.A.No.284/VIZ/2025 Mudunuri Venkata Subbaraju referred to Question No. 5 raised before the Hon’ble Karnataka High Court in the case of CIT v. Micro Labs Ltd., [(2012) 348 ITR 0075] wherein it was held that the matter cannot be remitted back to the file of the Ld. AO for passing fresh order of assessment by holding that the notice is invalid. Ld.AR therefore pleaded that notice issued under section 148 of the Act dated 06.04.2022 is invalid and consequently assessment order passed in accordance with the invalid reassessment notice issued under section 148 of the Act is void-ab-initio.
Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] submitted that the mere procedural mistake cannot invalidate the assessment proceedings.
We have heard both the sides and perused the material available on record. It is an undisputed fact that the assessment was reopened by issuance of notice under section 148 of the Act dated 06.04.2022. The grievance of the Ld.AR is since the notice has been issued after the commencement of new regime wherein the Finance Act, 2021 amended the provisions of section 147 to 151 of the Act, the Ld. AO ought to have followed the procedure prescribed as per the new regime. Ld.AR placed heavy reliance on the decision of the Hon’ble Supreme Court in the case of Union of India & Ors. v. Ashish Agarwal (supra) wherein the Hon’ble Supreme Court has directed vide its order dated 04.05.2022 to treat the notice issued under section 148 of the Act as per the amended provisions of the I.T.Act, r.w. section 3(1) of TOLA as deemed to be a
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I.T.A.No.284/VIZ/2025 Mudunuri Venkata Subbaraju show-cause notice under the provisions of section 148A of the Act. The Hon’ble Supreme Court concluded that section 3(1) of the TOLA overrides section 149 of the Act only to the extent of relaxing the time limit for issuance of the re-assessment notice under section 148 of the Act. TOLA will continue to apply to the Act after 01.04.2021 if any action or proceeding specified under the substituted provisions of the Act falls for completion between 20.03.2020 and 31.03.2021. In the instant case, the time limit as per the provisions of unamended Act for the A.Y.2015-16 as the income is considered as escaping assessment of more than Rs.1,00,000/-the term expires on 31.03.2022.
Further, we also observe that in the case of Vaka Ghanta Nageswararao v. ITO in ITA No. 251/Viz/2025 the Co-ordinate Bench of Visakhapatnam held as follows: -
“9. We have heard both the sides and perused the material available on record including the case laws cited by the Ld.AR. It is not in dispute that the date of the order u/s 148A(d) is 07.04.2022 and that of the consequential section 148 notice is also dated post 31.03.2022. In the instant case the notice under section 148 was issued on 07.04.2022 for the A.Y. 2015-16. It is the contention of the assessee that the said notice is barred by limitation as per the first proviso of the unamended proviso to section 149(1)(b) of the Act which has been confirmed by the Hon’ble Supreme Court in the case of UOI v. Rajeev Bansal (supra). The Hon’ble Supreme Court in the case of UOI v. Rajeev Bansal (supra) held as follows: - “19. Mr N Venkataraman, learned Additional Solicitor General of India, made the following submissions on behalf of the Revenue: (a) to (e)**
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I.T.A.No.284/VIZ/2025 Mudunuri Venkata Subbaraju (f). The Revenue concedes that for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA; ** 46. The ingredients of the proviso could be broken down for analysis as follows: (i) no notice under section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021; (ii) if it is barred at the time when the notice is sought to be issued because of the "time limits specified under the provisions of" 149(1)(b) of the old regime.” 10. The first proviso of section 149(1)(b) prescribed under section 149(1)(a) of the old regime continues to exist for the A.Y. 2021-2022 and before. Consequently, notice under section 148 of the Act as per amended provisions cannot be issued for the period beyond six years from the end of the relevant assessment year has expired at the time of issuance of notice. In the instant case, the time limit of six years expires on 31.03.2022 and the notice u/s 148 issued on 07.04.2022 is not valid notice for the re assessment proceedings. From the observations of the Hon’ble Supreme Court and also by the Co-ordinate Bench of the Tribunal, it is clear that for the purpose of checking of the validity of the notices issued under section 148 of the Act under the new regime for the A.Y. 2021-2022 or prior years is whether the period of six years has expired at the time of issuance of such notice as per the unamended section to determine the validity of the notice under section 148 of the Act under the amended section. In the assessee’s case, the period of six years expires on 31.03.2022 and therefore notice dated 07.04.2022 under section 148 of the Act for the A.Y. 2015-16 is invalid and barred by limitation. In view of the above findings and in light of binding judicial precedents, we hold that the reassessment proceedings initiated for AY 2015-16 are without jurisdiction, and hence the notice issued under section 148 and subsequent proceedings are quashed. Accordingly, the assessment completed under section 147 of the Act is liable to quashed. Thus the ground raised by the assessee is allowed.”
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I.T.A.No.284/VIZ/2025 Mudunuri Venkata Subbaraju 12. Further, the Hon’ble Supreme Court in the case of Deepak Steel and Power Ltd., v. Central Board of Direct Taxes [2025] 174 taxmann.com 144 (SC) held as follows: -
“4. The learned counsel appearing for the revenue with his usual fairness invited the attention of this Court to a three judge bench decision of this Court in Union of India and Ors. v. Rajeev Bansal, reported in 2024 SCC OnLine SC 2693, more particularly, paragraph 19(f) which reads thus:- “19. (f) The Revenue concedes that for the assessment year 2015- 2016, all notices issued on or after April 1, 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.” 5. As the revenue made a concession in the aforesaid decision that is for the assessment year 2015-2016, all notices issued on or after 1st April, 2021 will have to be dropped as they would not fall for completion during the period prescribed under the taxation and other laws (Relaxation and Amendment of certain Provisions Act, 2020). Nothing further is required to be adjudicated in this matter as the notices so far as the present litigation is concerned is dated 25.6.2021. 6. In view of the aforesaid, in such circumstances referred to above the original writ petition nos.2446 of 2023, 2543 of 2023 and 2544 of 2023 respectively filed before the High Court of Orissa at cuttack stands allowed.” 13. Respectfully following the decision of the Hon’ble Supreme Court in Deepak Steel and Power Ltd., v. Central Board of Direct Taxes (supra) and consistently following the view taken in ITA No. 251/VIZ/2025, we are of the view that re-assessment proceedings initiated for the A.Y. 2015-16 in the instant case are without jurisdiction and hence assessment completed u/s. 147 of the Act consequent to the notice issued u/s. 148 of the Act dated 06.04.2022 cannot be sustained and liable to be quashed. Since the legal grounds are adjudicated
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I.T.A.No.284/VIZ/2025 Mudunuri Venkata Subbaraju in favour of the assessee by quashing the re-assessment order the other grounds raised by the assessee on merits are not adjudicated.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 13th October, 2025.
Sd/- Sd/- (रिीश सूद) (एस बालाकृष्णन) (RAVISH SOOD) (S. BALAKRISHNAN) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER Dated 13.10.2025 Giridhar, Sr.PS आदेश की प्रतततलतप अग्रेतषत/ Copy of the order forwarded to:- तिर्ााररती/ The Assessee 1. : Mudunuri Venkata Subbaraju 5-205/2, Dommeru Near Reliance Tower Gowthaminagar S.O. Kovvur, West Godavari – 534350 Andhra Pradesh राजस्व/ The Revenue 2. : Income Tax Officer – Ward – 1 Aayakar Bhavan, 35-29-2 Sajjapuram, Tanuku – 534211 Andhra Pradesh 3. The Principal Commissioner of Income Tax 4. तिभागीयप्रतततितर्, आयकरअपीलीयअतर्करण, तिशाखापटणम /DR,ITAT, Visakhapatnam 5. The Commissioner of Income Tax 6. गार्ाफ़ाईल / Guard file आदेशािुसार / BY ORDER
Sr. Private Secretary ITAT, Visakhapatnam
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