Nukarapu Surya Prakasa Rao Vs DCIT (ITAT Hyderabad)
Summary: The Hyderabad Bench of the Income Tax Appellate Tribunal allowed the appeal of Nukarapu Surya Prakasa Rao against the order dated 28.08.2025 of CIT(A)-11, Hyderabad, for assessment year 2007-2008. The decisive issue was whether the Revenue could establish that the Assessing Officer had obtained valid prior approval under section 151 before issuing the reassessment notice dated 21.08.2012. Since that notice was issued after four years from the end of the relevant assessment year, the assessee challenged the reassessment on the ground that the necessary statutory sanction had not been established.
The original grounds covered several jurisdictional and substantive disputes. The assessee questioned the territorial or legal jurisdiction of DCIT Circle-3(2), contending that his individual case had not been specifically notified to that officer. He also disputed the application of CBDT Notification No. 65/2010 and argued that information obtained through the survey dated 20.07.2011 and subsequent reports was already available before reopening. On the merits, he contested the treatment of lands in Survey Nos. 664 and 721 of Nadergul Village as capital assets under section 2(14). He relied on a Village Revenue Officer’s certificate recording a distance of 12.5 kilometres from the specified municipal limits, challenged the Inspector’s report, and objected to the application of section 50C without a valuation reference despite his dispute over stamp duty value. He further pleaded that sale proceeds had already been assessed in the hands of SPR Infrastructure (India) Ltd. and challenged an addition of Rs.26,68,750 under section 69, claiming accumulated savings and an advance of Rs.74,45,000 received in the preceding financial year as the source of investment.
The assessee raised additional grounds specifically challenging the absence of valid approval under section 151. Relying on National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 383 (SC), he submitted that these were purely legal grounds capable of adjudication from the existing assessment record. The Department opposed their admission because they had not been raised before the lower authorities. The Tribunal nevertheless admitted them, holding that a legal issue could be raised for the first time before it when no fresh factual investigation or verification was required.
The assessee submitted that no valid prior sanction had been obtained for the year under appeal. He also referred to the CIT(A)’s order dated 04.09.2025 for assessment year 2006-2007, in which the reassessment notice had been quashed for want of valid approval. The Revenue argued that both assessment years arose from the same survey background and were handled substantially simultaneously by the same officers and representatives. Although the record for assessment year 2007-2008 was unavailable, it sought to draw support from the connected year’s records and the assessment order’s statement that notice had been issued with the approval of the competent authority. It also cited several decisions concerning reopening, tangible material and jurisdictional objections.
The Tribunal held that a general recital in the assessment order was insufficient to establish actual statutory approval. Approval relating to another assessment year could not establish approval for the year under appeal. Once the assessee questioned the validity of the notice for want of sanction, the Assessing Officer had to produce the relevant record and establish that valid prior approval existed. After the hearing on 09.07.2026, the Department was allowed time to produce the approval. The matter was subsequently listed for clarification, but on 31.07.2026 the Departmental Representative stated that the record was not traceable or available.
In these circumstances, the Tribunal declined to presume that valid approval had been obtained. It quashed the notice issued under section 148 and held that the resulting reassessment order was vitiated. The remaining grounds became infructuous and were not adjudicated. Accordingly, the appeal was allowed; the Tribunal’s relief rested on the failure to establish valid prior sanction, without deciding the agricultural-land, valuation, jurisdiction or unexplained-investment disputes on their merits.
Cases Discussed
- National Thermal Power Co. Ltd. Vs Commissioner of Income Tax, (1998) 229 ITR 383 (Supreme Court) — Relied upon by the Tribunal to admit additional legal grounds arising from facts already available on record without requiring fresh investigation.
- Raymond Woollen Mills Ltd., [1999] 236 ITR 34 (Supreme Court) — Cited by the Department in support of its submissions concerning tangible material and the validity of reopening; the Tribunal nevertheless required proof of prior statutory approval.
- Yogendrakumar Gupta Vs ITO, [2014] 51 taxmann.com 383 (Supreme Court) — Cited by the Department in support of reopening and its objection to alleged technical challenges; no separate ruling on this precedent was recorded.
- Amit Polyprints (P.) Ltd. Vs DCIT, [2018] 94 (Gujarat High Court; citation incomplete in the supplied text) — Cited by the Department in support of reassessment based on tangible material; the appeal was decided on failure to produce the approval record.
- Home Finders Housing Ltd. Vs ITO, Corporate Ward-2(3), [2018] 94 taxmann.com 84 (Supreme Court) — Cited by the Department in support of its defence of reassessment; no separate application of the decision was recorded.
- Abhishek Jain Vs ITO, Ward-55(1), New Delhi, [2018] 405 ITR 1 (Delhi High Court) — Cited by the Department concerning jurisdictional objections; the Tribunal decided the appeal on the absence of evidence establishing valid approval.
- Venky Steels (P.) Ltd. Vs CIT-II, [2025] 475 ITR 148 (Supreme Court) — Cited by the Department in support of its submissions on sanction and reassessment; no separate ruling on this authority was recorded.
- Ankit Agrochem (P.) Ltd. Vs JCIT, Range-1, Bikaner, [2018] 89 taxmann.com 45 (Rajasthan High Court) — Cited by the Department to support reopening; the Tribunal held that presumptions could not establish the actual grant of approval for the relevant year.
- Sonia Goel Vs ITO, Ward-21(1), New Delhi, ITA.No.703/2017, dated 28.08.2018 (Delhi High Court, as stated in the supplied text) — Cited by the Department in support of its jurisdictional submissions; no separate treatment was recorded.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal by the Assessee against the Order dated 28.08.2025 of Ld. CIT(A)-11, Hyderabad for the assessment year 2007-2008.
2. The assessee has raised the following grounds of appeal:
1) “ The order of the CIT(A) passed u/s 250 of the Act dated 28-08- 2025 is erroneous both on facts and in law to the extent the order is prejudice to the interests of the appellant.
2) The Ld. CIT(A) erred in upholding the action of the AO without properly appreciating the facts and circumstances of the case and the legal precedents on the disputed issues, which is against the principles of natural justice.
3) (a) The Ld. CIT(A) erred in law and on facts in upholding the jurisdiction of the AO without considering the fact that the entire reassessment proceedings are void-ab- initio as the AO lacked territorial OR legal jurisdiction over the appellant, who is an individual assessee.
(b). The Ld. CIT(A) ought to have fairly appreciated that the assessee being individual, his case was never specifically notified to the DCIT Circle- 3(2) and that therefore, the AO has no jurisdiction to initiate re-assessment proceedings.
4) The Ld. CIT(A) ought to have appreciated that Range- 4) 3 had erred in applying CBDT Notification No. 65/2010 dated 28-07- the date of issuance of notice u/s 148 of the Act, the Appellant, an individual, was neither a Managing Director nor Whole- Time Director of M/s. SPR Infrastructure (India) Limited.
5) The Ld. CIT(A) failed to appreciate the fact that the information from the survey (conducted on 20-07- 2011) and the subsequent statements/inspectors report (dated 22-09-2011 & 25-07- 2012 were already in the possession of the department well before issuance of notice u/s 148 of the Act dated 21-08-2012 and thus the re- opening without any fresh tangible material is invalid and liable to be quashed.
6) The Ld. CIT(A) grossly erred in law and on facts in holding that lands in Survey Nos. 664 & 721 of Nadergul Village was a capital asset u/s 2(14) of the Act, ignoring the fact that the land was conclusively proven to be agricultural land, situated beyond 8 kms from the municipal limits.
7) (a) The Ld. CIT(A) erred in relying on the inconclusive report of the Inspector, who himself expressed his inability to identify the lands and unjustly disregarded the certificate issued by Village Revenue Officer (VRO), the competent authority under land re venue laws, which explicitly certified that the distance is 12.5 kms and is well beyond from specified municipal limits.
(b) The Ld. CIT(A) ought to have relied upon VROs report being the custodian of records and revenue collecting authority on the lands within their revenue area and not on the inconclusive report of inspector and held that the land is not a capital asset an d there is no capital gain tax on
8) (a) The Ld. CIT(A) erred in upholding the application of section 50C of the Act, without considering the legal position that the provisions of section 50C are applicable only to capital assets and the land in question is not a capital asset, the provisions of section 50C cannot be triggered.
(b) The Ld. CIT(A) ought to have fairly and judiciously consider that the agricultural land which is beyond 8 kms from the municipal limits is out of the ambit of capital assets that its transfer is not subject to tax under the head Capital Gains and that therefore there is no element of application of section 50C of the Act.
9) Without prejudice to the above objections, the Ld. CIT(A) ought to have appreciated the fact the AO failed to follow the mandatory procedure laid down u/s 50C(2) & (3) of the Act by not referring the valuation to the Departmental Valuation Officer (DVO) de spite the Appellant contestation for application of the stamp duty value and thus this procedural flaw vitiates the entire addition.
10) The Ld. CIT(A) has erroneously upheld the addition despite AO not providing the appellant with a copy of Inspectors report OR a meaningful opportunity to cross- examine the inspector regarding the distance, thereby violating the principles of natural justice.
11) The Ld. CIT(A) ignored the appellant contention that the proceeds from the sale of the very same land were offered to tax and assessed in the hands of M/s. SPR Infrastructure (India) Ltd and taxing the same income in the hands of the
12) The Ld. CIT(A) erred in confirming the addition of Rs.26,68,750/- u/s 69 as unexplained investment, ignoring the fact that the source of the investment was fully explained.
13) The Ld. CIT(A) failed to appreciate that the investment was made out of accumulated savings and an advance of Rs.74,45,000 received from M/s SPR Infrastructure (India) Ltd. in the preceding financial year, which was available as capital with the appellant.
14) Appellant may, add OR alter OR amend OR modify OR substitute OR delete and/OR rescind all OR any of the grounds of appeal at any time before OR at the time of hearing of the appeal.”
3. The assessee has also raised additional grounds which reads as under:
15) “ As per the ratio laid down by the Hon’ble Supreme Court of India in the case of National Thermal Power Co. Ltd. vs CIT (1998) 229 ITR 383 (SC), the Hon’ble ITAT has jurisdiction to examine the question of law which has been taken before the Hon’ble ITAT for the first time though not taken before the first appellate authority.
16) The Ld. CIT(A) failed to consider that the AO has erred in issuing notice u/s 148 without according prior approval of specified authority as per section 151 of the Act, which is invalid.
17) The Ld. CIT(A) ought to have appreciated the fact that such invalid and vitiates the subsequent assessment proceedings.
18) The Appellant may add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of appeal.”
4. The learned Authorised Representative of the Assessee has submitted that the issue raised by the assessee in the additional grounds is purely legal in nature and for adjudication of the same no fresh investigation of fact or evidence is required but the same can be adjudicated on the basis of the facts and material available on the assessment record on merits as held by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. Commissioner of Income Tax (1998) 229 ITR 383 (SC).
5. The learned DR objected to the admission of the additional grounds raised by the assessee at this stage and submitted that the assessee has not raised this issue either before the Assessing Officer in response to the show cause notice issued u/sec.148A(b) of the Act nor before the learned CIT(A).
6. We have considered the rival submissions as well as relevant material on record. There is no dispute that the issues raised by the assessee in the additional grounds of appeal is purely legal in nature and the same can be adjudicated on the basis of the facts and material already available on record before the Assessing Officer. Though the assessee did not raise this issue before the Assessing Officer in response to show cause notice issued u/sec.148A(b) of the Act as well as before the learned CIT(A), however, there is no bar for raising the legal issue before the Tribunal if for adjudication of the issue does not require any verification and investigation of any fact or record as held by the Hon’ble Supreme Court in the case of NTPC vs. CIT (supra). Accordingly, we admit the additional ground raised by the assessee for hearing and adjudication on merits.
7. The learned Authorised Representative of the Assessee has submitted that the Assessing Officer has reopened the assessment by issuing notice u/sec.148 of the Act dated 21.08.2012 which is beyond 04 years from the end Competent Authority to grant approval u/sec.151 of the Act is CCIT and therefore, in the absence of valid approval u/sec.151 the notice issued by the Assessing Officer u/sec.148 after the expiry of 04 years from the end of assessment year is not valid and liable to be quashed. The learned Authorised Representative of the Assessee submitted that for the year under consideration, the Assessing Officer has not taken prior approval u/sec.151 of the Act before issuing the notice u/sec.148 and therefore, the notice issued by the Assessing Officer is invalid and liable to be quashed. He has further submitted that for the assessment year 2006- 2007 the learned CIT(A) vide order dated 04.09.2025 has quashed the notice issued by the Assessing Officer u/sec.148 of the Act for want of valid approval u/sec.151 of the Act. The learned Authorised Representative of the Assessee has thus submitted that in the absence of valid approval u/sec.151 of the Act, the notice issued by the Assessing Officer u/sec.148 of the Act after 04 years from the end of the assessment year under consideration is not sustainable and liable to be quashed.
8. On the other hand, the learned DR has submitted that the issue under consideration relates to the approval under section 151 for issuance of notice under section 148 of the Act for the assessment year 2007-08. The reassessment proceedings for the assessment year 2006-07 and assessment year 2007-08 arose from the same factual background, following the survey proceedings under section 133A, and were conducted substantially simultaneously. The assessment as well as the subsequent appellate proceedings for both years involved the same Assessing Officer, the same CIT(A) and the same authorised representative of the assessee. In both the aforesaid Assessment Years, approval under section 151 of the Income-tax Act was obtained prior to initiation of proceedings under section 148. While the assessment records for assessment year 2006-07 are available, the assessment records for assessment year 2007- 08 are not readily available. Nevertheless, from the assessment records available for assessment year 2006-07 and the orders of the CIT(A) for assessment years 2006-07 section 151 had been duly obtained for both the assessment years. The learned DR submitted that each assessment year has to be examined on the basis of its own statutory record. However, the contemporaneous conduct of the assessee and the connected proceedings for assessment year 2006-07 constitute relevant surrounding circumstances for appreciating the factual position regarding approval under section 151 for assessment year 2007-08. He submitted that in assessment year 2006-07, the assessee specifically raised an objection regarding approval under section 151 and challenged the competence of the authority stated to have granted such approval before the authorities below and therefore, the non-availability of the record cannot be views as no valid approval u/sec.151 of the Act.
8.1. The learned DR further submitted that the Assessing Officer has stated in the assessment order that the notice u/sec.148 of the Act was issued to the assessee with the approval of the Competent Authority which means the Competent Authority is applicable for the year under has filed additional report contending, inter alia, that in response to the grounds raised by the assessee challenging the jurisdiction of the learned Assessing Officer in initiating reassessment proceedings u/sec.147/148 of the Act, the assessees have attempted to raise various technical objections on jurisdiction, validity of sanction and approval, and sufficiency of reasons recorded. He submitted that such objections are without merit and the legal position laid down by the Hon’ble Supreme Court as well as various High Courts clearly establishes that so long as the Assessing Officer has reason to believe, based on tangible material, that income has escaped assessment, the proceedings cannot be rendered invalid on basis of hyper-technical defects. In support of his contention, he has relied upon the following decisions:
i. Judgment of Hon’ble Supreme Court in the case of Raymond Woollen Mills Ltd. [1999] 236 ITR 34 (SC);
ii. Judgment of Hon’ble Supreme Court in the case of Yogendrakumar Gupta vs. ITO [2014] 51 taxmann.com 383 (SC);
iii. Judgment of Hon’ble Gujarat High Court in the case of Amit Polyprints (P.) Ltd. vs. DCIT [2018] 94
iv. Order of Hon’ble Supreme Court in the case of Home Finders Housing Ltd. vs. ITO, Corporate Ward-2(3) [2018] 94 taxmann.com 84 (SC);
v. Judgment of Hon’ble Delhi High Court in the case of Abhishek Jain vs. ITO, Ward-55(1), New Delhi [2018] 405 ITR 1 (Del.).;
vi. Order of Hon’ble Supreme Court in the case of Venky Steels (P.) Ltd. vs. CIT-II [2025] 475 ITR 148 (SC);
vii. Judgment of Hon’ble High Court of Rajasthan in the case of Ankit Agrochem (P.) Ltd. vs. JCIT, Range-1, Bikaner [2018] 89 taxmann.com 45 (Raj.);
viii. Judgment of Hon’ble High Court of Delhi in the case of Sonia Goel vs. ITO, Ward-21(1), New Delhi in ITA.No.703/2017, dated 28.08.2018;
8.2. The learned DR accordingly submitted that once the Assessing Officer records reasons based on tangible material, and obtains sanction as per statute, the sufficiency or correctness of such material is not justiciable at the notice stage and as such reassessment proceedings under Section 148 cannot be struck down on hyper-technical jurisdictional pleas. He submitted that defects relating to nomenclature, description of assessee, or brevity of reasoning are curable and do not go to the root of jurisdiction. In support of his Hon’ble Supreme Court and various High Courts (supra). The learned DR, therefore, pleaded that the assessees’ objections on jurisdiction are devoid of merit and that the reassessment proceedings are valid in law and need to be upheld.
9. We have considered the rival submissions as well as relevant material on record. The Assessing Officer has reopened the assessment for the year under consideration by issuing notice u/sec.148 of the Act on 21.08.2012 which emanates from the assessment order as under:
“ In view of assessee’s failure to admit the gain on sale of above properties in the return of income for the AY 2007-08, a notice u/s 148 was issued to the assessee on 21.08.2012 with the approval of competent authority. This notice was served on the assessee on 28.08.2012 in Central Prison, Hyderabad in the presence of Jailor. Reasons for reopening the assessment were communicated to the assessee vide this office letter dated 31.10.2012.”
9.1. Thus, the notice was issued after expiry of 04 years from the end of the assessment year under consideration. Though the Assessing Officer has stated in the order that the notice was issued with the approval of the Competent is the Competent Authority for taking the approval u/sec.151 of the Act. The provisions of sec.151 prescribes the Competent Authority for granting approval quoted as under:
“Sanction for issue of notice
151. (1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice.
(2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice.
(3) For the purposes of sub-section (1) and sub-section (2), the Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commissioner or the Joint Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself.”
9.2. Thus, the Assessing Officer was required to take prior approval of the Competent Authority being ACIT before has forcefully contended that once the Assessing Officer has taken approval u/sec.151 of the Act for the assessment year 2006-2007 from ACIT who is Competent Authority for the year under consideration however, despite several opportunities given by the Tribunal to the Department no record has been produced before the Tribunal to show that the Assessing Officer has actually taken approval u/sec.151 of the Act from the Competent Authority prior to issuing notice u/sec.148 of the Act for the year under consideration. In absence of any material to show that the approval was taken by the Assessing Officer u/sec.151 of the Act, the mere mention in the assessment order is not sufficient to reach to the conclusion that there was a valid approval u/sec.151 of the Act for the year under consideration. The approval taken by the Assessing Officer for the assessment year 2006-2007 would not be sufficient to hold that the approval was also taken by the Assessing Officer u/sec.151 for the year under consideration and particularly when the notice issued by the Assessing Officer u/sec.148 for the assessment year 2006-04.09.2025 then, it becomes necessary for the Revenue to produce the relevant record and particularly, the approval taken by the Assessing Officer u/sec.151 of the Act prior to issuing the notice u/sec.148 of the Act. The submissions of the learned DR are all stressing the presumption and inference and not establishing the fact of taking the approval u/sec.151 of the Act by the Assessing Officer for the year under consideration. Once the assessee has questioned the validity of the notice issued u/sec.148 for want of valid approval u/sec.151 of the Act then, the burden on the Assessing Officer to produce the record and prove that valid approval was taken u/sec.151 of the Act prior to issuing the notice u/sec.148 for the year under consideration. The matter was taken up for hearing on 09.07.2026 and after hearing the arguments of both the parties the hearing was concluded and it was kept for orders. The learned DR was allowed the time to file the relevant record in respect of the approval taken u/sec.151 of the Act however, no such record was filed by the learned DR and consequently, the matter was 27.07.2026 on the point – “Whether valid approval u/sec.151 of the Act was taken by the Assessing Officer or not which read as under:
“It transpires from record that the Department has not filed the approval u/s 151 prior to issue notice u/s 148 of the Act despite the time to file the same was allowed. Accordingly the matter is put up for clarification on the existence of a valid approval u/s 151 and fix for clarification on 31/07/2026. Parties be informed.”
9.3. On 31.07.2026 the matter was heard and the learned DR has expressed his inability to produce the relevant record and submitted that the record is not traceable/available. Thus, despite the repeated opportunities given to the department no record is produced before the Tribunal to show that the Assessing Officer has actually obtained approval u/sec.151 of the Act before issuing the notice u/sec.148 of the Act for the year under consideration. In the absence of any material to show the approval u/sec.151 it cannot be presumed that the Assessing Officer has taken valid approval for using notice u/sec.148 of the act for the year under consideration as Assessing Officer took the Accordingly, in the facts and circumstances of the case, when the department has failed to brought on record any material to show that the Assessing Officer actually taken a valid approval u/sec.151 of the Act prior to issuing the notice u/sec.148 of the Act for the year under consideration, the notice issued by the Assessing Officer is not valid and liable to be quashed. We Order accordingly.
10. Since, we have quashed the notice issued u/sec.148 of the Act of the Assessing Officer it vitiates the re- assessment order. Therefore, we do not propose to adjudicate the other grounds raised by the assessee as it becomes infructuous.
11. In the result, appeal of the Assessee is allowed.
Order pronounced in the open court on 02.09.2026.
