ADIMULAM SATYANARAYANA PROPRIETOR,VIZIANAGARAM vs. INCOME TAX OFFICER, WARD-2, VIZIANAGARAM

Also, I find that the assessee vide his letters, dated 10/11/2025 and 12/11/2025 has raised the following additional grounds of appeal: “The assessing officer is not justified in levying tax at increased rate of 60% u/s.115BRE of the Act and levying surcharge 25% amended provisions of section 115BBE of the Act are applicable only from AY 2018-19 onwards." “The assessment order passed without issue of notice under section 143(2) of the Act is invalid.”

As the assessee firm by raising the additional grounds of appeal has sought my indulgence for adjudicating a legal issue, which requires looking no further beyond the facts available on record, therefore, I have no hesitation in admitting the same. My aforesaid view is fortified by the judgment of the Hon'ble Supreme Court in the case of National

Succinctly stated, the AO based on information gathered during the phase of online verification under “Operation Clean Money” that the assessee had made substantial cash deposits in his bank accounts during the demonetization period, i.e., 09/08/2011 to 30/12/2016, but had not filed his return of income for the year under consideration, issued notice under section 142(1) of the Act, dated 13/02/2018, wherein the assessee was called upon to file his return of income within time period therein prescribed. However, the assessee failed to comply with the aforesaid notice and did not come forth with any return of income.

Thereafter, the AO issued notice under section 133(6) of the Act, to State Bank of India, Srugavarapukota Branch, Vizianagaram and called for the statement of the bank account held by the assessee with the said bank. In compliance, the aforesaid bank provided a copy of the bank account No.35227444724 of the assessee, which revealed that the assessee during the demonetization period made cash deposits of Rs.16,52,940/- in the said bank account.

As the assessee had failed to file his return of income in compliance to notice under section 142(1) of the Act, dated 13/02/2018, therefore, the AO taking cognizance of the fact that the assessee was a non-filer for the subject year, issued manually through speed post a notice under section 142(1) of the Act, dated 12/06/2019 along with an 4 Adimulam Satyanarayana Proprietor vs. ITO annexure containing certain queries, viz., (i) source for the cash deposits made in his bank account during the demonetization period; and (ii) to comply with the notice issued under section 13/02/2018 and furnish a return of income for the subject year in compliance thereto.

The assessee, in compliance to the aforesaid notice issued notice under section 142(1) of the Act, dated 12/06/2019 is stated to have put up an appearance before the AO and filed a return of income for the year under consideration under section 139(4) of the Act along with audited financial statements and audit report. Apart from that, it was stated by the assessee that as he was suffering from bad health, therefore, it was for the said reason he could not file his return of income for the year under consideration within the stipulated time period.

Apropos, the source of the cash deposits made in his bank account, it was the claim of the assessee that he was carrying on the business of wholesale food items of FMCG like MTR Bambinos, Haldirams etc., and the cash deposits made in his bank account were sourced out of his regular sale proceeds from the aforesaid stream of business which were duly accounted for in his audited books of accounts.

As is discernible from the record, the AO called upon the assessee vide notice under section 142(1) of the Act, dated 29/11/2019

The AO based on the aforesaid facts holding a conviction that the assessee had failed to come forth with any explanation regarding the source of the cash deposits of Rs.16,52,940/- made in his bank account during the demonetization period, thus, treated the entire amount as having been sourced out of his unexplained money under section 69A of the Act.

Aggrieved, the assessee carried the matter in appeal before the CIT(A). As the assessee had on all the six occasions when the matter was fixed for hearing before the CIT(A) either sought adjournment or failed to participate in the proceedings, therefore, the latter dealt with the specific grounds of appeal that were raised by the assessee before him and taking cognizance of the fact that the assessee had failed to prosecute the matter before him, upheld the order of the AO and dismissed the appeal.

The assessee aggrieved with the order of the CIT(A) has carried the matter in appeal before the Tribunal.

Elaborating further on his contention, the Ld. AR submitted that as the AO while framing the assessment had before him a return of income filed by the assessee for the year under consideration, therefore, he could not have dispensed with the statutory obligation that was cast upon him to issue a notice under section 143(2) of the Act. Accordingly, the Ld.AR submitted that the AO had wrongly framed the assessment by dispensing with the statutory requirement of issuing a notice under section 143(2) of the Act and erroneously passed the order under section 144 of the Act, dated 16/12/2019. The Ld. AR on the issue of validity of an assessment framed in the absence of a notice under section 143(2) of the Act, relied upon the judgment of the Hon’ble Accordingly, the Ld. AR submitted that as the AO had wrongly assumed juri iction and framed the impugned assessment vide his order passed under section 144 of the Act, dated 16/12/2019, thus the same cannot be sustained and is liable to be quashed.

Per contra, Shri Hema Bhupal, Learned Senior Departmental Representative (for short, “Ld. Sr-DR”) submitted that as the assessee had failed to either file his return of income on a suo motto basis under section 139(1) of the Act or in response to the notice issued under section 142(1) of the Act, therefore, the AO remaining well within his juri iction had rightly framed the assessment under section 144 of the Act. Apart from that, the Ld. DR submitted that as the assessee had failed to substantiate based on supporting documentary evidence the source of the cash deposits of Rs.16.52 lakhs (approx.) made in his bank account during the demonetization period, therefore, both the authorities below had rightly made/sustained the addition under section 69A of the Act.

I have given a thoughtful consideration to the contentions advanced by the Learned Authorized Representatives of both parties, in the backdrop of the orders of the authorities below.

As the Ld. AR has assailed the validity of the order passed by the AO under section 144 of the Act, dated 16/12/2019, for the two-fold

Admittedly, it is a matter of fact borne from the record that the assessee had failed to file his return of income under section 139(1) of the Act. Also, I find that though a notice under section 142(1) of the Act, dated 13/02/2018 was issued to the assessee calling upon him to file his return of income for the subject year, but he had failed to file the same within the time period therein prescribed.

The controversy involved in the present appeal lies in a narrow compass, i.e., as to whether or not the AO remained under any statutory obligation to have considered the return of income that was filed by the assessee in the course of the assessment proceedings on 29/01/2019, i.e., prior to the culmination of the assessment vide his order dated 16/12/2019. 22. Ostensibly, the AO in his assessment order had observed that the assessee had in the course of the assessment proceedings filed his

Be that as it may, I cannot remain oblivion of the fact that the AO in the course of the assessment proceedings had before him a return of income that was filed by the assessee on 29/01/2019, bearing e-filing acknowledgement No.414353741290119, disclosing an income of Rs.3,56,230/- (net income) accompanied with computation of income, financial statements and audit report under section 44AB of the Act, Page Nos. 01-20 of APB. Although, the AO had held the aforesaid return of income filed by the assessee as the one filed under section 139(4) of the Act, which though was belated, and thus non-est, but I am of a firm conviction that the same cannot be a justification for not taking cognizance of the same as well as the accompanying financial statements, audit report etc. I say so, for the reason that even where the “return of income” filed by the assessee is beyond the period stipulated under section 139(1) or section 139(4) or section 142(1) of the Act, the same can be accepted and acted upon provided further proceedings in such assessment are pending before the AO. I find that the aforesaid

Considering the aforesaid settled position of law as had been looked into by the Hon’ble High Court of Kerala in the case of The Chirakkal Service Cooperative Bank Ltd vs. CIT (supra), I am of the view that even if the “return of income” filed by the assessee with the AO in the course of the assessment proceedings was beyond the period stipulated under section 139(1) or section 139(4) or section 142(1) of the Act, the AO ought to have accepted and acted upon the same for framing the assessment.

Coming to the second aspect involved in the present case, i.e., the validity of the assessment order passed by the AO without issuing a notice under section 143(2) of the Act, which, as observed by me he ought to have issued by accepting and acting upon the aforesaid return of income, the said issue is clearly covered by the judgment of the Hon’ble Supreme Court in the case of ACIT and Anr. Vs. Botel Blue (2019) 417 ITR 325 (SC) and is no more res integra. The Hon’ble Apex Court in its aforesaid judicial pronouncements had held, that the AO pursuant to the return of income filed by the assessee remains under the statutory obligation to issue notice under section 143(2) of the Act for framing the assessment.

I thus, in terms of my aforesaid deliberations, am of a firm conviction that the AO ought to have taken cognizance of the return of income that was filed by the assessee in the course of the assessment proceedings on 29/01/2019 and thereafter based on the same was statutorily obligated to have issued a notice under section 143(2) of the Act and framed the assessment. As the AO had framed an assessment without issuing a notice under section 143(2) of the Act, therefore, in the backdrop of the aforesaid judgment of the Hon’ble Supreme Court, viz.,

Resultantly, the order passed by the CIT(A) is set aside and the assessment order passed by the AO under section 144 of the Act, dated 16/12/2019 is quashed for want of valid assumption of juri iction.

In the result, appeal filed by the assessee is allowed in terms of my aforesaid observations.

"वभागीय""त"न"ध, आयकरअपील"यअ"धकरण /DR,ITAT, Hyderabad.

The Commissioner of Income Tax 6. गाड"फ़ाईल / Guard file