PEDA SUBBA RAO UNNAM,ADDANKI vs. ITO , WARD-1, ONGOLE

Gross Violation of Principles of Natural Justice - Inadequate Opportunity for Ailing Senior Citizen & Mechanical Issuance of Notices Objection: The CITA glossed over the constraints of the appellant a senior citizen with diabetes and other ailments and who was undergoing personal distress. Multiple notices under Section 250 were identical in content merely changing dates without addressing appellant circumstances. No draft order was provided. Argument: While the department issued notices providing an opportunity is not merely procedural it must be meaningful. Case Law: State of Kerala vs KT Shaduli Yusuff 1977 39 STC 478 SC CIT vs JK Synthetics Ltd 2007 295 ITR 0567 SC.

Thereafter, on 09.01.2026, the assessee has raised the following additional grounds : “1. That on the facts and circumstances of the case and in law, the notice issued u/s 148 of the Act dt. 09-04-2022 for the AY 2015-16 is barred by limitation as prescribed u/s. 149(1)(a) of the Act since the alleged income escaped assessment was less than Rs.50 lakhs. 2. That, without prejudice to the additional ground no.1, even if the extended period of 6 years as prescribed u/s. 149(1)(b) of Act is taken 6 Peda Subba Rao into consideration, the notice issued u/s 148 of the Act dt. 09-04-2022 for the AY 2015-16 is barred by limitation, since the last date for issuing the said notice is 31-03-2022 only as per the first proviso to section 149(1)(b) of the Act and hence the impugned assessment order dt. 28-11-2023 is bad-in-law and is liable to be quashed.

That the impugned notice u/s. 148 of the Act dt. 09-04-2022 issued by the Jurisdictional Assessing Officer (ITO, Ward-1, Ongole) instead of Faceless Assessing Officer is bad-in-law, as the same was issued without following the automated allocation procedure specified by the CBDT vide its notification no.18/2022 dt. 29th March, 2022 and hence the impugned assessment order is also bad-in-law and is liable to be quashed.”

The brief facts of the case are that, the assessee, who is an individual, did not file his return of income for the assessment year 2015-16. Based on information available on the INSIGHT Portal, it was noticed that, the assessee had made cash deposits and time deposits in his bank accounts maintained with State Bank of Hyderabad (erstwhile State Bank of India) and Canara Bank (erstwhile Syndicate Bank) and had also earned interest income during the year under consideration. Therefore, following the procedure prescribed under Section 148A of the Income-tax 7 Peda Subba Rao Act, 1961, a show-cause notice under Section 148A(b) of the Act dated 15.03.2022 was issued to the assessee calling upon him to explain as to why notice under Section 148 of the Act should not be issued. As no reply was received, the A.O. passed an order under Section 148A(d) of the Act on 06.04.2022 and thereafter, issued notice under Section 148 of the Act on the same date. In response to notice issued under Section 148 of the Act, the assessee filed his return of income on 25.04.2022 declaring total income of Rs. 3,25,550/- after claiming deduction under Chapter VIA. During the course of reassessment proceedings, the A.O. noticed that, the assessee had made cash deposits aggregating to Rs. 12,90,000/- in his bank accounts and had also earned interest income of Rs. 31,807/- which was not offered to tax. The A.O. called upon the assessee to explain the source of cash deposits and interest income. In response, the assessee submitted that, he is a retired school teacher from the State Government of Andhra Pradesh and that the cash deposits were made out of past savings, withdrawals from bank accounts, and amounts received from two persons, namely, B. Veeraiah and U. Srinivasa Rao. The assessee further submitted that, the time deposits were made out 8 Peda Subba Rao of Provident Fund, Gratuity, and other retirement benefits received earlier. The assessee also stated that, the interest income was inadvertently not offered to tax.

The assessee had also filed a petition for admission of additional grounds by filing certain legal grounds and pleaded that, in view of the decision of Hon'ble Supreme Court in the case 11 Peda Subba Rao of National Thermal Power Co. Ltd. Vs. Commissioner of Income Tax, (1998) 229 ITR 383, the additional grounds filed by the assessee are purely legal grounds which can be admitted for adjudication.

The learned Senior A.R. for the Revenue, Ms. P. Sumitha, on the other hand, has not opposed the admission of additional grounds filed by the assessee.

Having heard both sides and considered the relevant grounds taken by the assessee in the petition filed on 09.01.2026 for admission of additional grounds, we find that, the assessee has taken certain legal grounds in light of notice issued under Section 148 of the Act dated 09.04.2022 and also the first proviso to Section 149(1)(b) of the Act, and argued that, the said notice is beyond the time limit provided under the Act and consequently the assessment order passed by the A.O. is bad in law and liable to be quashed. Since the legal grounds taken by the assessee are purely legal issues which go to the root of the matter and it can be taken at any point of time, including at the stage of the appellate proceedings, in our considered view, the petition filed by 12 Peda Subba Rao the assessee for admission of additional grounds should be accepted. Therefore, we admit the additional grounds filed by the assessee for adjudication.

The learned counsel for the assessee, Shri G. Srinivasa Rao, C.A. referring to the additional grounds filed by the assessee, submitted that, the notice under Section 148 of the Act dated 09.04.2022 for the assessment year 2015-16 is bad in law since the alleged income escaped assessment was less than Rs. 50 lakhs. In this regard, he relied upon the decision of the ITAT, Hyderabad Bench, in the case of Shree Aadiparashakti Boards Vs. I.T.T.O. in dated 03.04.2025.

The learned counsel for the assessee, further referring to additional ground No. 2 filed by the assessee, submitted that, the notice under Section 148 of the Act dated 09.04.2022 is barred by limitation since the last date for issuing the said notice as per the unamended provisions of Section 149 was 31.03.2022, and in view of the first proviso to Section 149(1)(b) of the Act, any notice issued on or after 01.04.2022 is barred by limitation. In this regard, he relied upon the decision of the Hon'ble High Court of 13 Peda Subba Rao Telangana in W.P. No. 25121 of 2024, in the case of Cyberabad Citizens Health Services Private Limited Vs. D.C.I.T., dated 17.11.2025. He also relied on the decision of the ITAT, Mumbai Bench, in the case of A.C.I.T. Vs. Manish Financial in ITA No. 5055/Mum/2024.

The learned counsel for the assessee, further referring to ground No. 3 of the assessee’s appeal, submitted that, the notice issued under Section 148 of the Act dated 09.04.2022 is invalid as it is not signed by the A.O. as required under Section 282A(1) of the Act and hence, the impugned assessment is bad in law and liable to be quashed.

The learned Senior A.R. for the Revenue, Ms. P. Sumitha, on the other hand, supporting the order of the A.O. and CIT(A), submitted that, there is no merit in all the legal grounds taken by the assessee because, as per the information available with the A.O., the income escaped assessment was more than Rs. 50 lakhs. She further submitted that, at the time of initiation of proceedings under Section 148 of the Act, what is required to be seen is the prima facie material available to the A.O., but the A.O. is not 14 Peda Subba Rao required to prove the escapement of income. In this regard, she relied upon the decision of Hon'ble Supreme Court in the case of Raymond Woollen Mills Ltd. Vs. ITO (1999) 236 ITR 34 (SC). The learned Senior A.R. further submitted that, there is no merit in the other legal grounds taken by the assessee because the A.O. had issued notice under Section 148 of the Act as per the amended provisions of Section 149(1)(a) of the Act and as per the said provision, where the income escaped assessment is more than Rs. 50 lakhs, the A.O. can issue notice up to ten assessment years.

Insofar as the third legal ground of the assessee regarding non-signing of the notice by the A.O. is concerned, the Ld. AR. For the Revenue submitted that, once the A.O. had initiated proceedings and opened the ITBA portal without signatures, he cannot upload the notice and therefore the arguments of the assessee are incorrect and cannot be accepted.

We have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered the relevant 15 Peda Subba Rao notice issued by the A.O. under Section 148 of the Act dated 09.04.2022 in the light of the first proviso to Section 149(1)(b) of the Act. The first proviso to Section 149(1)(b) of the Act states that, no notice under Section 148 of the Act shall be issued at any time in a case for the relevant assessment year beginning on or before 01.04.2021 if a notice under Section 148 of the Act could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of Section 149 of the Act, as it stood immediately before the commencement of the Finance Act, 2021.

In the present case, the assessment year involved is 2015-16 and as per the unamended provisions of Section 149, if the income escaped assessment is more than Rs. 1 lakh, then the assessment can be reopened up to six years from the end of the relevant assessment year. Accordingly, for the assessment year 2015-16, the assessment could have been reopened on or before 31.03.2022. Since the time limit available for issuance of notice under Section 148 of the Act, as per the old regime of reassessment, was up to 31.03.2022, in our considered view, the A.O. cannot issue reassessment notice under Section 148 of the 16 Peda Subba Rao Act for the assessment year 2015-16 on or after 01.04.2022. In the present case, it is an undisputed fact that the A.O. has issued notice under Section 148 of the Act on 09.04.2022, which is beyond six years from the end of the relevant assessment year. Therefore, the notice issued by the A.O. under Section 148 of the Act dated 09.04.2022 is barred by limitation in view of the first proviso to Section 149(1)(b) of the Act and consequently the impugned assessment order passed by the A.O. dated 28.11.2023 is bad in law and liable to be quashed.

This legal proposition is supported by the decision of the Hon'ble High Court of Telangana in the case of Cyberabad Citizens Health Services Private Limited Vs. D.C.I.T. (supra). A similar view has been taken by the Coordinate Bench in the case of A.C.I.T. Vs. Manish Financial in (supra), wherein the coordinate Bench, after considering the decision of the Hon'ble Supreme Court in the case of Union of India Vs. Rajeev Bansal, held as under :

The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under section 149(1)(b) of the old regime continues to exist for the assessment year 2021-2022 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed under section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012-2013, the ten year period would have expired on 31 March 2023, while the six year period expired on 31 March 2019. Without the proviso to Section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012-2013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses.

This issue of notice under section 148 issued for 2015-16 being time barred is considered by the coordinate bench in the case of Pushpak Realities Pvt. Ltd.(supra) and it is held that *****For the A.Y.2015-16, the Revenue itself has contended before the Hon'ble Supreme Court as noted above, all the notices issued on or after 01/04/2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA. Here notice w/s. 148 for the A.Y. 2015-16 has been issued on 28/07/2022 which is admittedly barred by limitation under the new provision of Section 149(1) and it is not covered under TOLA. Accordingly, all the notices are quashed being barred by limitation on the reasons given above and we are not going on the reasons given by the Id. CIT (A) for quashing the notice."

A combined reading of the above observations of the Hon'ble Supreme Court and the findings of coordinate bench makes it clear that the test for checking the validity of notices issued under section 148 under new regime for AYs 2021-22 or prior years is whether the period of six years has expired at the time of issue of such notice and in that case the notice under section 148 becomes invalid. These observations also makes it clear that the time limit of ten years as per the amended provisions of section 149(1)(b) can be applied only prospectively. In assessee's case when we apply this test for AY 2015-16, the period of six years has expired on 31.03.2022 and therefore the notice dated 29.07.2022 under section 148 of the Act for AY 2015-16 is invalid since it is barred by limitation. Accordingly the assessment completed under section 147 of the Act is liable to be quashed.

In view of the above discussion and respectfully following the ratio laid down by the Hon'ble High Court of Telangana, we hold 19 Peda Subba Rao that the notice issued under Section 148 of the Act dated 09.04.2022 is barred by limitation and therefore the consequent assessment order passed by the A.O. under Section 147 r.w.s. Section 144 of the Act dated 28.11.2023 is bad in law and liable to be quashed. Accordingly, we quash the assessment order passed by the A.O.

In the result, the appeal filed by the assessee is allowed.