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Facts
The assessee filed an appeal before the ITAT with a delay of 55 days, requesting condonation due to a stroke. The main contention on merits was that the addition of Rs. 3.75 crores withdrawn from a regular bank account for business purposes was wrongly treated as unexplained investment under Section 69. Additionally, the assessee raised a legal ground regarding the limitation and lack of proper authorization for issuing the notice under Section 148A.
Held
The Tribunal condoned the delay in filing the appeal after considering the medical reasons provided. The core of the decision revolved around the invalidity of the notice issued under Section 148A due to a lack of proper sanction from the prescribed authority, as per Section 151(ii) of the Income Tax Act, given that more than three years had elapsed since the end of the assessment year. The Tribunal relied on various High Court and Supreme Court decisions supporting this view.
Key Issues
Whether the notice issued under Section 148A was valid given the limitation period and the authority that granted the sanction. Whether the amount withdrawn from the bank account for business purposes could be considered unexplained investment.
Sections Cited
147, 144, 1961, 69, 148A, 151(ii), 156, 271, 254(1), 148, 144B
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Income Tax Appellate Tribunal, Visakhapatnam Bench, Visakhapatnam
सुिवाई समाप्त होिे की ततति/ : 17.12.2025 Date of Conclusion of Hearing घोर्णध की तधरीख/ : 13.02.2026 Date of Pronouncement O R D E R PER OMKARESHWAR CHIDARA, A.M : This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in DIN & Order No.ITBA/NFAC/S/250/ 2024-25/1065557416(1) dated 11.06.2024, arising out of penalty
In the above cited case, the appellant filed an appeal before ITAT with a delay of 55 days. During the hearing proceedings before ITAT, it is observed that the appellant filed an application to condone the delay as he was diagnosed with stroke in brain and undergoing treatment. Due to the same, it took some time for contacting the Authorised Representative and file appeal. The Ld.AR of appellant pleaded that the delay in filing of appeal may be condoned, because relevant evidences like medical prescriptions are also filed and hence, appeal be heard on merits. The Ld.DR opposed the condonation of delay. After hearing both sides, the Bench decides to condone the delay as there is sufficient cause and proceeds to adjudicate the matter on merits.
In this appeal, the main ground raised by appellant (on merits) is that Ld.AO added an amount of Rs.3.75 crores, which was withdrawn to utilise for his business purposes. The contention of Ld.AR of appellant is that Section 69,which deals with unexplained investment cannot be applied because there is no investment at all, not to speak “unexplained” because the money was withdrawn from their regular bank account and not deposited.
Venkat Rao Pogarthi 4. Apart from the grounds of appeal, the appellant has taken certain legal grounds as “Additional Grounds of Appeal” and emphasized on Para 7, Ground 3, which is reproduced below:
The Ld.AR of appellant pleaded that this additional legal ground be adjudicated first, as it goes to the root of matter. It was submitted that this legal ground is taken before ITAT for the first time and in view
Venkat Rao Pogarthi of the decision of Hon’ble Supreme Court in the case of NTPC Ltd. 229 ITR 383 (SC), additional ground can be raised before ITAT for the first time, as no factual issues are involved. Accordingly, the ground raised by the appellant is admitted by the Bench u/s 254(1) of the Act.
During the hearing proceedings, the Ld.AR of appellant has submitted that as per section 151(ii); if more than 3 years have elapsed from the end of relevant assessment year, then, the specified authority to sanction approval would be Principal Chief Commissioner of Income Tax, whereas in the impugned case, the sanction was accorded by the PCIT only. Reliance was placed on the batch petitions in the case of Adil Aspi Engineer Vs. ITO, WP.Nos.3606, 3691, 3782, 3791,3823, 3846, 3857, 3861, 3870, 3939, 3951, 3972, 3974, 3976, 3981, 3999. 4018, 4047, 4103, 4104, 4129, 4141, 4189, 4237, 4247, 4248, 4252, 4269 a/w Interim Application No.5019 of 2022, 4272, 4290, 4295, 4319, 4487, 4536, 4554, 4581, 4585, 4626, 4633, 4666, 4725, 4851, 4864, 4903, 4908, 4929, 5016, 5191, 5197, 5217, 5226, 5234, 5261 & 5263 of 2022, where it was held that notices should be quashed. The relevant paras of Hon’ble Bombay High Court are reproduced below :
It was also submitted that the above ratio was affirmed by Hon’ble Supreme Court by dismissing the SLP of appellant in the case of ITO Vs.Srichand Mandhyan, SLP Appeal No.1435/2025, which is reproduced below:
In view of the above, the notice as well as consequent assessment order should be quashed, argued the Ld.AR of appellant.
The Ld.DR relied on the orders of Ld.AO/Ld.CIT(A).
Heard both sides. There is sufficient force in the arguments of Ld.AR of appellant as they are based on the decisions of Hon’ble Bombay High Court and Hon’ble Apex Court. In the similar circumstances, in the case of Abhishek Sanjeev Nadgeri Vs. ITO, A.Y.2016-17 dated 21.02.2025, Coordinate Bench of Mumbai ITAT (in which I am also a co-signatory of the order), it was held that the notice issued u/s 148 as invalid and the consequent assessment order passed u/s 147 r.w.s. 144B is liable to be quashed. The approval for issuance of notice of escapement of income should be taken from the prescribed authority only. In other words, where a period of 3 years elapsed, approval to reopen the assessment should be taken from Principal Chief Commissioner of
In view of the above, the notice issued by Ld.AO is held invalid and the appeal of the appellant company is allowed. As the notice itself is held invalid, all the consequent proceedings like adjudicating the issues on merits becomes mere academic.
In the result, appeal of the assessee is allowed.
Order pronounced in the Open Court on 13th February, 2026.