ABILASH RAO JOSEPH,USA V. INCOME TAX OFFICER (INTERNATIONAL TAXATION)-1, HYDERABAD

ITA 105/HYD/2024

AI Insights

The case involves an appeal by Sri Abilash Rao Joseph against the Final Assessment Order passed by the Income Tax Officer, [International Taxation]-1, Hyderabad, concerning the assessment year 2015-2016. The primary contention was the validity of the assessment order, which was argued to be barred by limitation. The assessee, a non-resident, had not filed a return for the relevant assessment year, leading to a reopened assessment under section 147 of the Income Tax Act, 1961. The Assessing Officer made additions to the assessee's income based on the difference between the consideration paid for a property and its Sub-Registrar Office value, and unexplained investments. The Dispute Resolution Panel upheld these additions, but the Tribunal focused on the procedural aspect of the assessment's timeliness, ultimately finding it to be beyond the permissible period for completion, thus quashing the order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 706998 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2015-2016
• Appeal Filed On: 05-02-2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDER KUMAR NAIK
• Assessee Lawyers: A V RAGHURAM
• Keywords: Additional evidence; Unexplained investment
• Section: 147; 148; 142(1); 56(2)(vii)(b); 69

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD “B” BENCH: HYDERABAD BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER ITA.No.105/Hyd./2024 Assessment Year 2015-2016 Sri Abilash Rao Joseph, USA. PIN - 94568 PAN AKZPJ1922D vs. The Income Tax Officer, [International Taxation]-1, Hyderabad. (Appellant) (Respondent) For Assessee : Shri A V Raghu Ram For Revenue : Sri Narender Kumar Naik, CIT-DR Date of Hearing : 01.07.2025 Date of Pronouncement : 09.07.2025 ORDER PER MANJUNATHA G. : The above appeal has been filed by the Assessee against the Final Assessment Order dated 29.12.2023 passed by the Assessing Officer u/sec.147 r.w.s.144 of the Income Tax Act, 1961 [in short “the Act”], relating to the assessment year 2015-2016. 2. The assessee has raised the following grounds in the instant appeal : 2 ITA.No.105/Hyd./2024 1. “On the facts and in the circumstances of the case, the assessment order passed consequent to the directions issued by the Dispute Resolution Panel (DRP) is incorrect and unsustainable on facts and in law. 2. The AO/DRP erred in making addition of Rs.26,37,000 by invoking provisions of section 56(2)(vii)(b)(il) of the Income Tax Act which was introduced by Finance Act, 2013, w.e.f. 1.4.2014. The authorities below failed to appreciate that the Appellant, admittedly, paid the consideration spanning over 5 years and the first of the payments was made in the Fy 2010-11 and AOS was entered into on 21.03.2012, during which period, the provision of section 56(2)(vii)(b)(ii) was not on the Income Tax Act. 3. Without prejudice to the above ground, the authorities below failed to appreciate that since the part payment of consideration admittedly was made in the FY 2010-11, the stamp duty rates applicable to the said period ought to have been considered even if the provisions of section 56(2)(vii) (b) of the Act are invoked. 4. Without prejudice to the above grounds, the AO/DRP failed to appreciate that since the AOS of flat was entered into on 21.03.2012, the stamp duty rates applicable to the said period ought to have been considered even if the provisions of section 56(2)(vii)(b) of the Act are invoked. 5. Without prejudice to any of the above grounds, the AO/DRP ought to have referred the matter to valuation cell as the Appellant is not agreeing for applying the provisions of section 56(2)(vii)(b) of the Act. 3 ITA.No.105/Hyd./2024 6. The AO/DRP erred in making addition of Rs.49,62,000 under section 69 of the Act as unexplained investment made by the Appellant. The AO/DRP failed to appreciate the evidences filed by the Appellant before them explaining the sources for the consideration of Rs.49,62,000 paid. 7. Without prejudice to the above ground, the AO/DRP having admitted the factual position that the Appellant admittedly paid only Rs.10,09,937 during the previous year relevant to asst. year under consideration, should not have made addition of Rs.49,62,000 as unexplained investment under section 69 of the Act. For these and other grounds that may be urged at the time of hearing, it is prayed that the appeal may be allowed”. 2.1. The assessee has also pleaded the following additional ground of appeal in the instant appeal : “The assessment order dated 29.12.2023 passed by the Assessing Officer under section 147 r.w.s. 144 of the Act is barred by limitation and non est in law, as the same is passed beyond the period of ONE YEAR from the end of the financial year in which the notice under section 148 of the Act was issued”. 3. Brief facts of the case are that, the assessee is an individual and non-resident for the assessment year under consideration. The assessee has not filed his return of income for the assessment year 2015-2016. The assessment 4 ITA.No.105/Hyd./2024 has been subsequently reopened u/sec.147 of the Income Tax Act, 1961 for the reasons recorded, as per which, income chargeable to tax has escaped assessment on account of purchase of immovable property. Therefore, notice u/sec.148 of the Act dated 30.03.2021 was issued. Notice u/sec.142(1) of the Act and show cause notice were issued on 20.01.2023. However, in response to notices u/sec.148 and 142(1) of the Act, no compliance were made from the assessee apart from filing return of income declaring total income of Rs.1,08,000/-. The case of the assessee was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer noticed that the return of income filed by the assessee is invalid because, the same has been filed beyond the due date provided u/sec.139 of the Act and notice issued u/sec.148 of the Act. The Assessing Officer further noted that, during the financial year relevant to assessment year under consideration, the assessee has purchased immovable property admeasuring 2235 sq. feet for a consideration of Rs.69,62,000/-, whereas, the Sub-Registrar Office [in short 5 ITA.No.105/Hyd./2024 “SRO”] value of the said property was at Rs.75,99,000/-. Since there is a difference between the SRO value and consideration paid for purchase of property, the Assessing Officer observed that, the difference in value of Rs.26,37,000/- is assessable u/sec.56(2)(vii)(b) of the Income Tax Act, 1961. Since the assessee could not file any evidence and offered explanation, the Assessing Officer made addition of Rs.26,37,000/- u/sec.56(2)(vii)(b) of the Act towards difference in consideration paid for purchase of property and SRO value of the property. The Assessing Officer further noted that, assessee has paid consideration of Rs.49,62,000/- for purchase of property, but, could not explain the source. Therefore, made addition of Rs.49,62,000/- u/sec.69 of the Income Tax Act, 1961 as unexplained investment. Since the assessee is a non- resident and an eligible assessee in terms of sec.144C(15) of the Income Tax Act, 1961, the Assessing Officer has passed Draft Assessment Order dated 02.03.2023 u/sec.144C(1) of the Income Tax Act, 1961 and assessed the total income of the assessee at Rs.77,67,000/-. 6 ITA.No.105/Hyd./2024 4. Aggrieved by the above Draft Assessment Order, the assessee has opted for filing objections before the learned Disputes Resolution Panel-1, Benguluru [in short “DRP”] vide his application dated 28.03.2023. The DRP-1, Bengaluru has called-upon remand report from the Assessing Officer on the additional evidences filed by the assessee. The learned Assessing Officer after examining the submissions of the assessee, submitted his remand report to the DRP on 03.11.2023. The DRP vide it’s Directions dated 08.12.2023, rejected the objections filed by the assessee and sustained the additions made by the Assessing Officer towards purchase of property u/sec.69 and u/sec.56(2)(vii)(b) of the Income Tax Act, 1961. In pursuance to the Directions of the DRP-1, Bengaluru, the Assessing Officer has passed his Final Assessment Order dated 29.12.2023 u/sec.144 r.w.s.147 of the Income Tax Act, 1961 and assessed the total income of the assessee at Rs.77,67,000/-. 7 ITA.No.105/Hyd./2024 5. Aggrieved by the Final Assessment Order passed by the Assessing Officer, the assessee is now in appeal before the Tribunal. 6. Sri A.V. Raghu Ram, Learned Counsel for the Assessee, referring to additional grounds of appeal filed by the assessee submitted that, the assessment order passed by the Assessing Officer u/sec.144 r.w.s.147 of the Act dated 29.12.2023 is barred by limitation goving by the provisions of sec.153(2) of the Act. Learned Counsel for the Assessee further submitted that, in a case of reopening of the assessment, the assessment shall be completed within one year from the end of the financial year, in which, such notice u/sec.148 was issued. In the present case, notice u/sec.148 of the Act was issued on 30.03.2021 and in the ordinary course, the assessment should be completed on 31.03.2022. Although, the assessee is considered as an eligible assessee in terms of sec.144C(15) of the Act, but, still the Assessing Officer shall pass a Draft Assessment Order before one month from the due date for passing the assessment order in terms of sec.153(2) of the Act and 8 ITA.No.105/Hyd./2024 further, in case, the assessee opted to file objections before the DRP, then, the Assessing Officer will get 12 months extended period for completion of assessment. In the present case, going by the date of notice issued u/sec.148 of the Act dated 30.03.2021, the Final Assessment Order passed by the Assessing Officer u/sec.144 r.w.s.147 of the Act dated 29.12.2023, it is beyond limitation and thus, liable to be quashed. 7. Shri Narender Kumar Naik, learned CIT-DR, on the other hand, supporting the Final Assessment Order passed by the Assessing Officer in pursuance to the Directions of the DRP submitted that, although, notice u/sec.148 was issued on 30.03.2021, but, the same has been served on the assessee on 16.04.2021, which is evident from the remand report submitted by the Assessing Officer in light of details provided by the Postal Department. Further, if we consider the date of service of notice to the assessee i.e., on 16.04.2021, then, the Assessing Officer will have 2 years time from the end of the financial year, in which, such notice was issued. In the present case, since 9 ITA.No.105/Hyd./2024 the notice u/sec.148 was issued on 16.04.2021, the Assessing Officer will have time for passing the assessment order up-to 31.03.2024. Since the Assessing Officer has passed Final Assessment Order on 29.12.2023 which is within the time provided under the Act and thus, the arguments of the Counsel for the Assessee fails. Learned DR further referring the arguments of the assessee on the issue of passing of Draft Assessment Order submitted that, once the assessee is an eligible assessee, then, provisions of sec.144C applies and the upper time limit provided therein should be considered, but, not the time limit for passing Draft Assessment Order as claimed by the Counsel for the Assessee. Since the Final Assessment Order passed by the Assessing Officer is well within the time, there is no merit in the legal ground taken by the assessee and thus, the same needs to be rejected. 8. We have heard both the parties, perused the material on record and the orders of the authorities below. There is no dispute with regard to the fact that, notice u/sec.148 of the Act was issued on 30.03.2021, which is 10 ITA.No.105/Hyd./2024 evident from the assessment order passed by the Assessing Officer where the Assessing Officer has referred to notice u/sec.148 dated 30.03.2021. Further, as claimed by the Assessing Officer only one notice u/sec.142(1) of the Act was issued on 20.01.2023. It means, the Assessing Officer has passed the Draft Assessment Order after expiry of one year from the end of the financial year, in which, notice u/sec.148 was issued. Going by the date of notice issued u/sec.148 and the Draft Assessment Order passed by the Assessing Officer, in our considered view, the Draft Assessment Order passed by the Assessing Officer itself is barred by limitation because, in ordinary course, where the assessment has been reopened u/sec.147 of the Act, the assessment order shall be passed within one year from the end of the financial year, in which, such notice was issued on the assessee. If we consider the date of notice and the time limit provided for completion of the assessment, the Assessing Officer should have passed the Draft Assessment Order on or before 31.03.2022. In the present case, the arguments of the Department’s Counsel was that, the 11 ITA.No.105/Hyd./2024 assessee is an eligible assessee and is subjected to proceedings u/sec.144C of the Act and in fact, the assessee has undergone the process by filing objections before the DRP and, therefore, the time limit for completion of assessment is 2 years from the end of the financial year in which notice u/sec.148 of the Act was issued. In our considered view, even assuming for a moment, the assessee is an eligible assessee in terms of sec.144C(15) of the Act, still the Final Assessment Order passed by the Assessing Officer dated 29.12.2023 is barred by limitation because, in the present case, notice u/sec.148 of the Act was issued on 30.03.2021 and if we count 2 years from the end of the financial year in which notice u/sec.148 was issued i.e., 31.03.2021, then, the Assessing Officer ought to have passed the Final Assessment Order on or before 31.03.2023. Since the Assessing Officer has passed Final Assessment Order on 29.12.2023, in our considered view, the Final Assessment Order passed by the Assessing Officer is beyond the time limit provided u/sec.153 of the Act and thus, invalid, void abinitio and liable to be quashed. 12 ITA.No.105/Hyd./2024 Therefore, we quash the Final Assessment Order dated 29.12.2023 passed by the Assessing Officer u/sec.144C r.w.s.147 of the Income Tax Act, 1961. Accordingly, the grounds of appeal of the assessee are allowed. 9. In the result, appeal of the Assessee is allowed. Order pronounced in the open Court on 09.07.2025. Sd/- Sd/- [VIJAY PAL RAO] [MANJUNATHA G] VICE PRESIDENT ACCOUNTANT MEMBER Hyderabad, Dated 09th July, 2025 VBP Copy to 1. Sri Abilash Rao Joseph, 5508 Stout Street, Dubli, CA, USA PIN – 94568. C/o. Sri A.V. Raghu Ram, Advocate & Tax Consultant, Flat No.610, 6th Floor, Babukhan Estates, Basheerbagh, Hyderabad – 500 001. 2. The Income Tax Officer, [International Taxation]-1, Aaykar Bhawan, Basheerbagh, Hyderabad – 500 004. 3. The Pr. CIT, Hyderabad. 4. The DR ITAT “B” Bench, Hyderabad. 5. Guard File. //By Order// //True Copy// "