Marri Usha Vs ACIT (ITAT Hyderabad Bench)
Signed in March but Sent in April: Notice u/s 148 Misses the Limitation Train & ₹50-Lakh Property Addition Gets Quashed
Property Purchased Below Stamp-Duty Value
The assessee was an individual & non-resident residing in the USA. She purchased a plot situated at Shankar Hills Colony, Vattinagulappaly Village, Ranga Reddy District, Telangana, through a registered sale deed dated 07.01.2016.
The consideration stated in the sale deed was ₹20 lakh, whereas the property’s value adopted for stamp-duty purposes was ₹70 lakh. The assessee had not filed her return of income for AY 2017-18.
Based on information received from the Investigation & Criminal Investigation Wing, the assessment was reopened u/s 147. The Department claimed that notice u/s 148 dated 29.03.2021 had been issued & served upon the assessee.
Assessee Denies Receipt of Reopening Notice
Subsequently, notice u/s 142(1) dated 29.11.2022 was sent to the assessee’s email address. In her reply dated 10.02.2023, the assessee specifically stated that she had never received the alleged notice u/s 148, either physically or through email.
She further pointed out that the notice was not available on the income-tax portal & requested the AO to furnish its copy. Despite this request, the AO did not provide the alleged reopening notice.
Instead, the AO issued a show-cause notice proposing an addition for the difference between the purchase consideration & stamp-duty value u/s 56(2)(vii)(b).
Only Litigated Title Purchased
On merits, the assessee submitted that she had paid the actual consideration of ₹20 lakh recorded in the sale deed. Although stamp duty had been paid on a value of ₹70 lakh, she had acquired only the title to a disputed property without physical possession.
Several disputes concerning the property were pending before civil courts. According to the assessee, the pending litigation materially depressed the property’s fair market value.
She therefore objected to the adoption of the stamp-duty value & requested the AO to refer the valuation to the DVO, relying upon the valuation mechanism contemplated u/s 50C(2).
The AO rejected the explanation & passed a draft assessment order u/s 143(3) r/w Section 144C(1), adding the difference of ₹50 lakh as income from other sources u/s 56(2)(vii)(b)(ii).
The DRP upheld the addition vide directions dated 29.12.2023. Consequently, the AO passed the final assessment order u/s 147 r/w Section 144C(13) on 10.01.2024, determining total income at ₹50 lakh.
Postal Tracking Exposes the Timeline
Before the Tribunal, the assessee challenged the very validity of the reassessment.
Although the notice was digitally signed on 29.03.2021, the India Post tracking details showed that the postal article bearing the relevant consignment number was booked at Begumpet Sub-Office only on 05.04.2021. It was allegedly delivered later on 25.04.2021.
The Department’s ITBA records also did not establish that the notice had left its control or had been validly transmitted on or before 31.03.2021, the last permissible date.
The assessee relied upon the Telangana High Court’s decision in Kalyan Chillara v. DCIT, [2024] 465 ITR 729 & the Hyderabad ITAT ruling in Sama Sangeeta Reddy v. DCIT.
Revenue Invokes Section 292BB
The Revenue argued that the notice had been digitally signed on 29.03.2021 & dispatched under the India Post BNPL Scheme on 30.03.2021. Once the notice was issued within the limitation period, its subsequent delivery was said to be merely procedural.
It was further contended that since the assessee participated in the proceedings, she was precluded by Section 292BB from subsequently disputing service of notice.
Timely Signing Is Not Timely Issuance
The Tribunal examined the notice, the AO’s dispatch records, postal tracking report & ITBA screenshots.
The evidence conclusively established that the notice was booked with India Post only on 05.04.2021. The Revenue’s claim of dispatch on 30.03.2021 was unsupported by contemporaneous evidence.
Following Kalyan Chillara, the ITAT held that “issuance” of notice u/s 148 does not mean its mere preparation or digital signing by the AO. The notice must be transmitted to the proper person within the limitation prescribed u/s 149.
In an electronic transmission, dispatch occurs when the communication enters a computer resource beyond the originator’s control, namely when the ITBA email system is triggered & the email leaves its servers. Similarly, for physical service, the Department must establish that the notice was dispatched within time.
A notice signed within limitation but retained within the Department until after limitation does not constitute a validly issued notice.
Section 292BB Offers No Shelter
The Tribunal also rejected reliance on Section 292BB. The assessee had expressly objected to non-service during assessment proceedings itself through her reply dated 10.02.2023.
Section 292BB could not cure the defect when a timely objection had already been raised. More fundamentally, the provision could not validate a notice that was issued beyond the statutory limitation.
The notice dated 29.03.2021 was therefore held time-barred & quashed. The consequential reassessment order was also quashed.
Since the assessment failed on jurisdiction, the grounds challenging the ₹50-lakh addition u/s 56(2)(vii)(b) became academic & were dismissed as infructuous. The appeal was allowed.
Author’s Comments
The decision draws a decisive distinction between signing a notice & issuing it. A digital signature records when the AO approved the notice; it does not prove when the notice left the Department’s control.
The ruling also confirms that Section 292BB cures certain defects in service after participation, but cannot resurrect a jurisdictional notice dispatched after limitation—particularly where the assessee objected during assessment itself.
Thus, the ₹50-lakh addition disappeared without examination of valuation because a notice may bear a March date, but postal tracking can still reveal an April jurisdiction.
Cases Discussed
- Kalyan Chillara v. DCIT, [2024] 465 ITR 729
- Sama Sangeeta Reddy v. DCIT, ITA No.680/Hyd/2025, order dated 24.09.2025
FULL TEXT OF THE JUDGMENT/ORDER OF INCOME TAX APPELLATE TRIBUNAL
1. This appeal filed by the assessee is directed against the final Assessment Order passed by the AO u/s.147 r.w.s.144C(13) of the Income Tax Act, 1961 (in short “the Act“) dated 10.01.2024, in pursuant to directions of the Dispute Resolution Panel-1, Bengaluru, u/s.144C(5) of the Act dated 29.12.2023 and pertains to AY 2017-18.
2. The brief facts of the case are that the assessee is an individual & non-resident, presently residing in USA, purchased a plot situated at Shankar Hills Colony of Vattinagulappaly Village & Gramapanchayat, Rajendra Nagar Mandal, Serlingampalli, Ranga Reddy District, Telangana, registered vide document bearing No.5695/2016 dated 07.01.2016 for a total sale consideration of Rs.20 lakhs whereas the stamp duty value of the property was determined at Rs.70 lakhs. The assessee has not filed any Return of Income (RoI) for the impugned assessment year under consideration. The assessment has been reopened u/s.147 of the Income Tax Act, 1961 on the basis of information disseminated by the I & CI Wing and notice u/s.148 of the Act dated 29.03.2021 was claimed to be issued and served on the assessee. Subsequently, notice u/s.142(1) of the Act dated 29.11.2022 was issued and served on the assessee in her e-mail [email protected]. In response to the notice, the assessee vide reply dated 10.02.2023 submitted that, she has not received any notice u/s.148 of the Act, either physically or by e-mail and it was further stated that the alleged notice is not available in the IT portal also. The assessee also requested the AO to provide copy of such notice. The AO has not given copy of notice claimed to have been issued u/s.148 of the Act, however, issued a show cause notice and called upon the assessee to explain ‘as to why’ addition shouldn’t be made in view of difference between consideration and fair market value of the property as per Section 56(2)(vii)(b) of the Act. In response, the assessee submitted that, she had purchased a property for consideration of Rs.20 lakhs and paid relevant consideration as per the Sale Deed, however, as per the fair market value of the property, stamp duty has been determined at Rs.70 lakhs. She further claimed that, she had purchased only title of the property without any physical possession and in this regard filed relevant details of litigation pending before various Courts. The assessee also requested to refer the matter to the DVO as per Section 50C(2) of the Act.
3. The AO after considering the relevant submissions of the assessee and also taken note of facts and observed that although, the assessee purchased property for a consideration of Rs.20 lakhs but the fair market value as per the SRO was at Rs.70 lakhs and as per Section u/s.56(2)(vii)(b) of the Act, the difference amount of Rs.50 lakhs is assessable as income of the assessee. Therefore, passed draft assessment order u/s.143(3) r.w.s.144C(1) of the Act on 29.09.2023 and made addition of Rs.50 lakhs under the head ‘income from other sources’ u/s.56(2)(vii)(b)(ii) of the Act.
4. Aggrieved by the draft assessment order, the assessee filed objections before the DRP and raised various contentions including non-service of alleged notice u/s.148 of the Act dated 29.03.2021. The DRP issued directions u/s.144C(5) of the Act on 29.12.2023 and upheld the additions made by the AO towards difference in stamp value and consideration paid for purchase of property u/s.56(2)(vii)(b) of the Act. In pursuant to the directions of the DRP dated 29.12.2023, the AO passed final assessment order u/s.147 r.w.s.144C(13) of the Act on 10.01.2024 and determined the total income at Rs.50 lakhs.
5. Aggrieved by the order of the Ld.CIT(A), the assessee is now in appeal before this Tribunal.
6. The Ld. Counsel for the assessee, Mr. Mohd Afzal, Advocate, referring to so-called notice issued u/s.148 of the Act dated 29.03.2021 submitted that the above notice has not been served on the assessee either physically or through the e-mail on or before the time limit available for issue of such notice which is evident from relevant copy of notice and the consignment track details of India Post downloaded from the website portal, where it has been clearly shown that the notice u/s.148 of the Act has been booked on 05.04.2021 at Begumpet S.O. and the same was claimed to have been served on the assessee on 25.04.2021. Further, as per the ITBA portal, the Department claims to have served the notice issued u/s.148 of the Act on 28.06.2021. However, there is no such service of notice to the assessee. Therefore, he submitted that in the absence of service of notice as required u/s.282 r.w.r.127 of the Income Tax Rules, 1962 (in short “the Rules“), the assessment order passed by the AO on the basis of notice issued beyond the due date is bad in law and liable to be quashed. In this regard, he relied upon the decision of the Hon’ble Telangana High Court in the case of Kalyan Chillara v. DCIT reported in [2024] 465 ITR 0729. The assessee had also relied upon the decision of the Co-ordinate Bench of this Tribunal in the case of Sama Sangeeta Reddy v. DCIT in ITA No.680/Hyd/2025 order dated 24.09.2025.
7. The Ld. Counsel for the assessee further referring to the additions made by the AO submitted that the assessee had purchased only a title of the property without any physical possession which is evident from the relevant litigation pending before the Civil Court where many people have challenged the issue before the Civil Court and as per the details, it is very clear that there is no physical property available as per the registered Sale Deed. Further, the assessee has raised objection u/s.56(2)(vii)(b) of the Act in view of the relevant litigation and also requested the AO to refer to the DVO for determining fair market value in terms of Section 50C(2) of the Act. However, the AO without considering the relevant request simply made addition u/s.56(2)(vii)(b) of the Act and thus, the additions made by the AO should be deleted.
8. The Ld.Sr.AR for the Revenue, on the other hand, supporting the order of the Ld.CIT(A) submitted that notice issued u/s.148 of the Act dated 29.03.2021 was served on the assessee by e-mail and also through physical delivery which is evident from the relevant notice where the details of dispatch of notice on 30.03.2021 was evidenced from relevant digital sign notice copy and also postal stamp. Further, once the notice has been issued within the due date provided u/s.149 of the Act, then subsequent delivery of notice is only a procedure and therefore, the assessee can’t question the service of notice once the assessee has not raised any objection before the AO. Since the documents in the possession of the Department clearly shows the service of notice to assessee, the assessee can’t question the service of notice subsequently in view of Section 292BB of the Act, where it has been clearly stated that when the assessee has appeared in any proceedings, it shall be deemed that notice issued under the provisions of this Act which is required to be served upon him has been duly served upon him in time in accordance with provisions of the Act and therefore, subsequently, the assessee can’t question service of notice, etc. Therefore, he submitted that there is no merit in legal ground taken by the assessee and the same should be rejected.
9. The Sr.AR for the Revenue, further submitted that the AO has rightly made addition of Rs.50 lakhs u/s.56(2)(vii)(b) of the Act and difference in sale value as per registered Sale Deed and fair market value of the property as per stamp duty payment and the same has not been properly explained by the assessee. The Ld.CIT(A) after considering relevant facts has rightly sustained the additions made by the AO and therefore, he submitted that the order of the Ld.CIT(A) should be upheld.
10. We have heard both the parties, perused the materials available on record and had gone through orders of the authorities below. The assessee has challenged the notice claimed to have been issued u/s.148 of the Act on 29.03.2021 and submitted that the alleged notice u/s.148 of the Act dated 29.03.2021 was neither physically or through e-mail served on the assessee. The claim of the Department that the so-called notice was served on 30.03.2021 by dispatch from the Office of the AO is incorrect going by the consignment track statement downloaded from website of India Post where it has been clearly stated that the item was booked on 05.04.2021 at Begum pet SO. The assessee also took support of ITBA portal screenshot where the Department claims that the alleged notice u/s.148 of the Act was served on the assessee on 25.04.2021. We have gone through the relevant details including copy of notice issued u/s.148 of the Act dated 29.03.2021 which is available in the Paper Book filed by the assessee as well as the Department. Although, the notice issued u/s.148 of the Act dated 29.03.2021 was digital sign by the AO, but going by the dispatch details including the logbook available in the office of the DCIT (International Taxation), Hyderabad, the speed post no. EN409748627IN has been booked on 05.04.2021 at Begumpet S.O. and the same was sent to domestic location on 25.04.2021. Further as per the ITBA portal screenshot, the Department claims that the above notice was served to the assessee on 25.04.2021. From the dispatch details of the Office of the AO and consignment track details of India Post, it is undisputedly clear that notice u/s.148 of the Act dated 29.03.2021 was not dispatched from the Office of the AO on or before 31.03.2021 which is due date for issuing notice u/s.148 of the Act for the impugned assessment year. Although, the Department claims that once the notice has been dispatched from the Office of the AO on or before due date subsequent service of notice at a later date will not invalidate or notice issued by the AO and for this purpose, the Revenue took support from the provisions of Sec.292BB of the Act, but, in our considered view, the above arguments of the Revenue doesn’t hold good for the simple reason that the assessee has questioned non-service of notice u/s.148 of the Act, in response to the notice issued by the AO u/s.142(1) of the Act dated 29.11.2022 and claimed that no notice u/s.148 of the Act was served on the assessee either physically or by e-mail. Since the assessee has raised object of non-service of notice at the time of assessment proceedings, in our considered view, the Revenue can’t take shelter under the provisions of Sec.292BB of the Act and therefore, to this extent, the arguments of the Revenue is rejected.
11. Having said so, let us come back, whether the AO has served the notice on the assessee within the due date provided u/s.149 of the Act. Admittedly, the last date of service of notice u/s.148 of the Act for the impugned assessment year was 31.03.2021. The Revenue claims to have issued notice on 29.03.2021 and further stated that the said notice was digitally signed by the AO on 29.03.2021 itself and dispatched through India Post BNPL Scheme on 30.03.2021. However, going by the details of India Post including consignment track record, it clearly shows that the item containing the alleged notice u/s.148 of the Act was booked on 05.04.2021 and therefore, the arguments of the Revenue that the notice has been dispatched on 30.03.2021 is not supported by any contemporary evidences and thus, can’t be accepted. At this stage, it is necessary to refer to the decision of the Hon’ble Telangana High Court in the case of Kalyan Chillara (supra), where it has been clearly held that the requirement of issuing notice u/s.148 of the Act as contemplated u/s.149 of the Act is not mere signing of notice, but it should be sent to the proper person within the end of the relevant to assessment year. The Hon’ble Telangana High Court further held that “in order to determine when does “despatch”, i.e., the transmission of electronic record or the notices in the present case, from the Department occurred, we may first note the precedence set by several High Courts in the context of Income Tax Business Application portal. Under section 13 of the Act of 2000, various High Courts have concluded that, the despatch of an electronic record occurs when it enters a computer resource outside the control of the originator, i. e, when the Income Tax Business Application’s email system is triggered and the e-mail leaves the Income Tax Business Application servers”.
12. In the present case, since notice u/s.148 of the Act was booked on 05.04.2021, in our considered view, the claim of the Department that the impugned notice was signed on 29.03.2021 and dispatched to the assessee on 31.03.2021 is incorrect and not in accordance with section 282 r.w.r.127 of the Income Tax Rules, 1962. Since, the notice u/s.148 of the Act was not served on the assessee within the time limit u/s.149 of the Act, in our considered view, the above notice issued u/s.148 of the Act dated 29.03.2021 is barred by limitation and liable to be quashed. Thus, we quashed the notice issued u/s.148 of the Act dated 29.03.2021 and consequent assessment order passed by the AO u/s.147 r.w.s.144C(13) of the Act.
13. The assessee has raised various grounds on merits of the issue in respect of addition made towards differential amount of Rs.50 lakhs u/s.56(2)(vii)(b) of the Act. Since we have quashed the order passed by the AO on legal issues, other grounds taken by the assessee challenging addition made u/s.56(2)(vii)(b) of the Act becomes academic in nature and thus, other grounds taken by the assessee are dismissed as ‘infructuous’.
14. In the result, appeal filed by the assessee is allowed.
Order pronounced on the 02nd day of September, 2026, in Hyderabad.
