Case Law Details
Kumar Cherka Vs ITO (ITAT Hyderabad)
The appeal before the Income Tax Appellate Tribunal (ITAT), Hyderabad Bench, arose from an order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), for Assessment Year 2020-21. The assessee had not filed a return of income for the relevant assessment year. Based on information available with the Assessing Officer (AO), it was noticed that an amount of Rs. 89,12,572 was received from Southern Power Distribution Company of Telangana Limited. The AO reopened the assessment under section 147 and issued a notice under section 148 on 30.03.2024. As there was no response to the notices issued during the assessment proceedings, the AO completed the assessment under sections 147, 144 and 144B on 24.12.2024, treating the entire amount reflected in Form 16 as taxable salary income.
The assessee challenged the assessment before the CIT(A). However, the appeal was dismissed in limine on the ground that the assessee had not complied with section 249(4)(b) by paying advance tax allegedly payable in a case where no return of income had been filed.
Before the Tribunal, the assessee contended that the amount shown in Form 16 represented retirement benefits received upon retirement from service, including gratuity, pension, leave encashment, provident fund and other terminal benefits, which were exempt under section 10 of the Income-tax Act. It was further submitted that the assessee had died on 30.05.2020 due to the Covid-19 pandemic, prior to the due date for filing the return of income. Consequently, the return could not be filed and the notices issued during reassessment proceedings remained unanswered. The assessee sought restoration of the matter to the AO for verification of the nature and taxability of the receipts.
The Departmental Representative stated that there was no objection to restoring the matter to the AO for fresh adjudication.
The Tribunal examined section 249(4)(b) and observed that the provision applies where no return has been filed and advance tax payable by the assessee remains unpaid. In the present case, the assessee had consistently maintained that no taxable income arose because the receipts comprised exempt retirement benefits. Therefore, according to the Tribunal, liability to pay advance tax did not arise on the facts of the case, rendering section 249(4)(b) inapplicable. The Tribunal accordingly set aside the order of the CIT(A).
The Tribunal further held that the AO had treated the entire amount reflected in Form 16 as taxable without examining the nature of each receipt. Considering the contention that the receipts constituted exempt retirement benefits and noting the circumstances relating to the assessee’s death, the Tribunal held that proper verification was necessary. The matter was restored to the AO for fresh adjudication in accordance with law after examining the taxability of each amount reflected in Form 16 and after granting adequate opportunity of hearing to the assessee’s legal representative.
The appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
The present appeal has been filed by Shri Kumar Cherka (Rep. by Shri Cherka Bhargav) (“the assessee”), against order passed by Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”) 12.11.2025 for the A.Y.2020-21.
2. The assessee has raised the following grounds of appeal:
“1. The impugned reassessment order passed u/s 147 r.w.s. 144 & 144B dated 24.12.2024 is wholly without jurisdiction, ilegal and void ab initio, having been passed in the name of a deceased person, who ceased to exist on 30.05.2020.
2. The notice u/s 148 dated 30.03.2024 and all subsequent notices and proceedings issued in the name of the deceased Late Shri Kumar Cherka are null and unenforceable in law, and therefore the entire assessment framed pursuant thereto is liable to be quashed.
3. The mandatory provisions of section 159, regarding bringing legal representatives on record upon the death of the assessee, were completely disregarded, resulting in invalid initiation and continuation of proceedings.
4. The Hon’ble NFAC erred in dismissing the appeal solely on the technical ground u/s 249(4)(b), without adjudicating the fundamental jurisdictional illegality, which vitiates the entire proceedings and goes to the very root of the assessment.
5. The impugned assessment proceedings are in violation of the principles of natural justice, as no proper or valid opportunity of hearing was granted to the legal heirs, who were never served any notice during assessment.
6. The addition of 89,12.512/- made as Salary Income” is factually incorrect and contrary to the provisions of the Act, since the said amount represents exempt retirement and terminal benefits, eligible for exemption u/s 10(10), 10(10AA), 10(10A), 10(12) & 10(12A).
7. The Assessing Officer erred in ignoring the Form 16 issued by TSSPDCL and proceeded to complete assessment ex-parte without verifying the nature of the receipts, thereby rendering the conclusion arbitrary, perverse and unjustified.
8. Without prejudice, the computation of tax and interest are excessive, erroneous and unjustified on facts and in law.
9. The appellant craves leave to add, alter, amend, modify or withdraw any of the above grounds at the time of hearing.”
3.The brief facts of the case are that the assessee is an individual who had not filed any return of income for Assessment Year 2020-21. On the basis of information available with the Learned Assessing Officer (“Ld. AO”), it came to his notice that during the year under consideration, the assessee had received salary income of Rs.89,12,572/- from Southern Power Distribution Company of Telangana Limited. Accordingly, the Ld. AO reopened the assessment under section 147 of the Income Tax Act, 1961 (“the Act”) and issued notice under section 148 of the Act dated 30.03.2024 to the assessee. During the course of assessment proceedings, there was no compliance on the part of the assessee to the notices issued by the Ld. AO. Consequently, the Ld. AO completed the assessment under section 147 r.w.s. 144 and 144B of the Act on 24.12.2024 assessing the total income of the assessee at Rs.89,12,572/-.
4. Aggrieved by the order passed by the Ld. AO, the assessee preferred appeal before the Ld. CIT(A). However, the Ld. CIT(A) dismissed the appeal of the assessee holding that the assessee failed to comply with the provisions of section 249(4)(b) of the Act by not paying advance tax payable by him. Accordingly, the appeal of the assessee was dismissed in limine.
5. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal. During the course of hearing, the Learned Authorized Representative (“Ld. AR”) submitted that the only effective issue arising out of the present appeal is with regard to the addition of Rs.89,12,572/- made in the hands of the assessee. In this regard, the Ld. AR submitted that the assessee was employed with Southern Power Distribution Company of Telangana Limited and retired from service during the relevant financial year. On retirement, the assessee had received terminal retirement benefits such as gratuity, pension, leave encashment, provident fund and other retirement benefits, which are exempt under section 10 of the Act. The Ld. AR further submitted that prior to the due date of filing of return of income, the assessee expired on 30.05.2020 due to the Covid-19 pandemic and therefore the return of income for the year under consideration could not be filed. It was further submitted that for the same reason, notices issued during the assessment proceedings also could not be responded to, due to which the Ld. AO treated the entire amount reflected in Form No.16 as taxable income in the hands of the assessee. Accordingly, the Ld. AR submitted that the amounts received by the assessee during the year under consideration represented retirement benefits which are exempt under section 10 of the Act and therefore the issue requires proper verification by the Ld. AO in accordance with law. The Ld. AR therefore prayed before the Bench to set aside the issue to the file of the Ld. AO for fresh adjudication after examining the taxability of the amounts reflected in Form No.16.
6. With regard to dismissal of appeal by the Ld. CIT(A) under section 249(4)(b) of the Act, the Ld. AR submitted that the assessee had not accepted any taxable income in his hands and therefore no liability to pay advance tax arose in the present case. Accordingly, it was submitted that provisions of section 249(4)(b) of the Act are not applicable in the case of the assessee. Finally, the Ld. AR therefore prayed that one more opportunity may be granted to the assessee for proper adjudication of the issue on merits.
7. Per contra, the Learned Departmental Representative (“Ld. DR”) fairly submitted that he has no objection if the issue is restored to the file of the Ld. AO for fresh adjudication in accordance with law.
8. We have heard the rival submissions and perused the material available on record. As regards the dismissal of appeal by the Ld. CIT(A) by invoking the provisions of section 249(4)(b) of the Act, we have gone through the provisions of section 249(4)(b) of the Act, which is to the following effect:
“Section 249………
1………..
2………..
3………..
(4) No appeal under this Chapter shall be admitted unless at the time of filing of the appeal,—
(a)……………
(b) where no return has been filed by the assessee, the assessee has paid an amount equal to the amount of advance tax which was payable by him:
Provided that, in a case falling under clause (b) and on an application made by the appellant in this behalf, the Commissioner (Appeals) may, for any good and sufficient reason to be recorded in writing, exempt him from the operation of the provisions of that clause. 49. See rules 45 and 46 and Form No. 35 for form of appeal to Commissioner (Appeals)”
9. On perusal of the above, it is evident that the provision of section 249(4)(b) of the Act applies in a case where no return of income has been filed by the assessee and the assessee has failed to pay advance tax payable by him. In the present case, the assessee has not accepted any taxable income in his hands and the stand of the assessee is that the amounts received are exempt retirement benefits under section 10 of the Act. Therefore, under the facts of the present case, liability to pay advance tax does not arise and accordingly, in our considered opinion, provisions of section 249(4)(b) of the Act are not attracted in the case of the assessee. Accordingly, the order passed by the Ld. CIT(A) dismissing the appeal under section 249(4)(b) of the Act is set aside.
10. Further, we find that the Ld. AO completed the assessment under section 147 r.w.s. 144 and 144B of the Act treating the entire amount reflected in Form No.16 at Rs.89,12,572/- as taxable income in the hands of the assessee. We further find that the specific contention of the assessee before us is that the amounts received during the year under consideration represented retirement terminal benefits such as gratuity, pension, leave encashment, provident fund and other retirement benefits which are exempt under section 10 of the Act. We also find force in the contention of the assessee that due to death of the assessee on 30.05.2020 due to the Covid-19 pandemic, the return of income could not be filed and notices issued during the course of assessment proceedings also remained uncomplied with. Under these facts and circumstances, in our considered opinion, the issue requires proper verification by the Ld. AO with regard to taxability of the amounts reflected in Form No.16 in accordance with law after examining the nature of each receipt. Therefore, considering the facts and circumstances of the case and in the interest of substantial justice, we restore the issue to the file of the Ld. AO for fresh adjudication in accordance with law after examining the taxability of the amounts reflected in Form No.16 and after providing adequate opportunity of being heard to the assessee/legal representative of the assessee.
11. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 29th May, 2026.
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