Radhakishan Potharajula Vs ITO (ITAT Hyderabad)
Duplicate deposits cannot satisfy ₹50 lakh reopening threshold; ITAT quashes time-barred reassessment
Legal principle and decision
The Income Tax Appellate Tribunal, Hyderabad, held that the statutory monetary threshold for reopening beyond three years cannot be satisfied by counting the same cash deposits twice. A demonstrably duplicate entry in the computation of alleged escaped income cannot confer reassessment jurisdiction.
After excluding duplication, the alleged escaped income fell from ₹57,57,235 to ₹40,56,735, below the ₹50 lakh threshold under section 149(1)(b) applicable when the notice was issued. The Tribunal consequently held the section 148 notice time-barred and quashed the reassessment as without jurisdiction. The assessee’s appeal was allowed.
Background of the reassessment
The assessee, a non-resident Indian, had not filed a return under section 139 for assessment year 2016-17. Based on information available, the AO initiated reassessment proceedings and issued a section 148 notice dated 27.03.2023.
In response, the assessee filed a return declaring income of ₹5,26,235. The AO subsequently issued a draft assessment order under section 144C(1), dated 18.03.2024, proposing an addition of ₹21,80,500 under section 69A for unexplained bank cash deposits.
The assessee did not approach the Dispute Resolution Panel against the draft order. The AO therefore passed the final assessment on 06.05.2024 under section 147 read with section 144C(3), assessing total income at ₹27,06,740. The CIT(A) sustained the addition.
Limitation challenge based on duplicate entries
Before the Tribunal, the assessee challenged the validity of reopening under section 149. The argument focused on the computation recorded in the section 148A(d) order dated 27.03.2023.
The AO had separately included ₹26,30,500 and ₹17,00,500 as cash deposits in the assessee’s ICICI Bank account while arriving at alleged escaped income of ₹57,57,235.
The assessee submitted that there was only one relevant ICICI Bank account and its total cash deposits were ₹26,30,500. The separately included ₹17,00,500 was already contained within that total. Its addition again therefore inflated the jurisdictional computation through duplication.
Assessment records confirmed double counting
The Tribunal examined both the section 148A(d) order and paragraph 4 of the assessment order. It found that the AO himself had recorded total cash deposits of ₹26,30,500 in the ICICI Bank account.
The documents supported the assessee’s contention that ₹17,00,500 formed part of those deposits. The same amount had therefore been counted twice.
Excluding ₹17,00,500 reduced the alleged escaped income to ₹40,56,735. The Tribunal observed that even if every remaining amount in the AO’s computation was accepted entirely for examining jurisdiction, the aggregate would still remain below ₹50 lakh. No determination of the ultimate taxability of those remaining amounts was necessary to resolve this objection.
Extended limitation required statutory conditions
The Tribunal applied section 149 as it stood on the notice date. Under section 149(1)(a), a section 148 notice could not ordinarily be issued beyond three years from the end of the relevant assessment year.
Proceedings beyond that period required compliance with section 149(1)(b), including prescribed material revealing escaped taxable income amounting to, or likely to amount to, ₹50 lakh or more.
For AY 2016-17, the assessment year ended on 31.03.2017, and the ordinary three-year period expired on 31.03.2020. The notice issued on 27.03.2023 therefore depended upon valid invocation of the extended period.
Initially recorded figure did not confer jurisdiction
The Revenue argued that the AO possessed information indicating escaped income of ₹57,57,235 when issuing the notice. It also relied on the extended ten-year framework, subject to the first proviso to section 149(1), to support issuance before 31.03.2023.
The Tribunal rejected this reasoning. The correctness of the jurisdictional amount must be tested against the underlying material, rather than accepted merely because the AO recorded a figure exceeding ₹50 lakh.
A duplicate entry could not create statutory jurisdiction. Nor could issuance before 31.03.2023 overcome failure to satisfy the monetary condition governing reopening beyond three years.
Distinction from a lower final addition
The Tribunal expressly clarified that its conclusion rested on duplication apparent from the documents underlying the escaped-income computation.
It was not merely treating the notice as invalid because the final addition of ₹21,80,500 happened to fall below ₹50 lakh. This distinction mattered: the defect existed in the basis used to invoke extended limitation itself.
Once the duplication was removed, the recorded material did not satisfy the applicable monetary condition. The AO therefore lacked a valid foundation for proceeding beyond the ordinary period.
Reassessment quashed; merits left open
Holding that a valid, timely section 148 notice is essential to reassessment jurisdiction, the Tribunal quashed the assessment order dated 06.05.2024.
The grounds concerning the cash deposits’ explanation became academic and were not adjudicated. Although additional jurisdictional grounds concerning transfers under section 127 were admitted, the decisive relief arose from limitation.
The appeal was allowed, establishing that demonstrable double counting cannot be used to cross the statutory reopening threshold.
Cases Discussed
- National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 383 (SC) — Cited in support of admission of additional legal grounds; the Tribunal admitted the grounds under Rule 11.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT HYDERABAD
This appeal is filed by Shri Radhakishan Potharajula (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals)- 10, Hyderabad (“Ld. CIT(A)”) dated 08.10.2025 for the A.Y. 2016-17.
2. The assessee has raised the following grounds of appeal:
“1. In the facts and circumstances of the case, the respected CIT(A) ought to have considered that the assessment order is not sustainable on facts or in law.
2. In the facts and circumstances of the case, the respected CIT(A) ought to have considered the fact that the notice issued u/s 148 was issued beyond the time limit specified u/s 149, and held that the notice as well as the consequent proceedings are bad in law.
3. In the facts and circumstances of the case, the respected CIT(A) ought to have considered that the assessee owned agricultural land and that the cash deposits were made out of agricultural income.
4. In the facts and circumstances of the case, the respected CIT(A) ought to have seen that the assessee had sufficient source to explain the cash deposits.
5. The assessee may be permitted to add, delete, amend or modify any ground of appeal at the time of hearing with the leave of the Honourable ITAT.”
3. The assessee has also raised the following revised additional grounds before us:
“1. In the facts and circumstances of the case, the assessment proceedings conducted by the Income Tax Officer (International Taxation)-2, Hyderabad are bad in law, since she issued the mandatory notice under section 143(2) without there being an order under section 127 transferring the case from the Income Tax Officer Ward-1 Adilabad to the Income Tax Officer (International Taxation)-2 Hyderabad.
2. In the facts and circumstances of the case, the order passed under section 148A(d) dated 27.03.2023 by the Income Tax Officer Ward-1, Adilabad and the notice under section 148 dated 27.03.2023 issued by the Income Tax Officer Ward-1 Adilabad were without jurisdiction as there was no order under section 127 transferring the case from the Income Tax Officer Ward-2 Karimnagar to the Income Tax Officer Ward-1 Adilalabad.”.
4. The Learned Authorized Representative (“Ld. AR”) submitted that additional grounds so filed are admissible in view of judgment rendered by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 383 (SC). The Learned Departmental Representative (“Ld. DR”) also did not raise any objection for admission of the additional grounds. The prayer for admission of additional grounds noted above which are not in memorandum of appeal are being admitted for adjudication in terms of Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 owing to the fact that objections raised in additional grounds are legal in nature for which relevant facts are stated to be emanating from the existing records.
5. The brief facts of the case are that the assessee is a non-resident Indian who had not filed any return of income under section 139 of the Income-tax Act, 1961 (“the Act”) for the Assessment Year 2016-17. On the basis of the information available, the Assessing Officer (“AO”) initiated reassessment proceedings and issued a notice under section 148 of the Act dated 27.03.2023. In response thereto, the assessee filed her return of income declaring a total income of Rs. 5,26,235/-. After considering the submissions of the assessee, the AO passed a draft assessment order under section 144C(1) of the Act dated 18.03.2024, proposing an addition of Rs. 21,80,500/- under section 69A of the Act on account of unexplained cash deposits in the bank account of the assessee. The assessee did not file any objections before the Ld. DRP against the draft assessment order. Accordingly, the AO passed the final assessment order under section 147 read with section 144C(3) of the Act dated 06.05.2024, making the addition of Rs. 21,80,500/- under section 69A of the Act and assessing the total income at Rs. 27,06,740/-.
6. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A), who sustained the addition made by the AO and dismissed the appeal.
7. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal. At the outset, the Learned Authorized Representative (“Ld. AR”) submitted that, under Ground No. 2, the assessee has challenged the validity of the notice issued under section 148 of the Act on the ground that it was barred by limitation. Inviting our attention to the order passed under section 148A(d) of the Act dated 27.03.2023 placed at page nos. 66 to 68 of the paper book, the Ld. AR submitted that the AO had computed the alleged income escaping assessment at Rs. 57,57,235/-. He further submitted that while arriving at this amount, the AO had separately included sums of Rs. 26,30,500/- and Rs. 17,00,500/- as cash deposits in the assessee’s account maintained with ICICI Bank Limited. The Ld. AR submitted that the assessee maintained only one bank account with ICICI Bank Limited and that the total cash deposits in that account during the relevant previous year were Rs. 26,30,500/-. The amount of Rs. 17,00,500/- separately included by the AO was already subsumed in the total cash deposits of Rs. 26,30,500/- and, therefore, represented a duplicate entry. In support of this submission, the Ld. AR invited our attention to para no. 4 of the assessment order, wherein the AO had categorically recorded that the total cash deposits in the assessee’s ICICI Bank account during the year under consideration amounted to Rs. 26,30,500/-. The Ld. AR further submitted that, upon excluding the duplicate amount of Rs. 17,00,500/- from the alleged escaped income of Rs. 57,57,235/-, the amount would stand reduced to Rs. 40,56,735/-, which is below the statutory threshold of Rs. 50 lakhs. Consequently, the conditions prescribed under section 149(1)(b) of the Act for issuing a notice beyond three years from the end of the relevant assessment year were not satisfied. Referring to section 149(1)(a) of the Act, the Ld. AR also submitted that the relevant Assessment Year 2016-17 ended on 31.03.2017 and that the period of three years from the end of that assessment year expired on 31.03.2020. The Ld. AR also invited our attention to the copy of the notice under section 148 of the Act dated 27.03.2023, placed at page no. 65 of the paper book, and submitted that the notice was issued after the expiry of the applicable limitation period. Accordingly, it was contended that the notice was invalid and that the consequential assessment order was without jurisdiction and liable to be quashed.
8. Per contra, the Learned Departmental Representative (“Ld. DR”) relied on the orders of the lower authorities. It was submitted that, at the time of issuing the notice under section 148 of the Act, the AO had information indicating escapement of income amounting to Rs. 57,57,235/-. The Ld. DR contended that the AO had ten years from the end of the relevant assessment year to issue the notice under section 148 of the Act. However, considering the provisions of first proviso to section 149(1) of the Act, the limitation period would, therefore, expire on 31.03.2023. Since the notice was issued on 27.03.2023, the Ld. DR submitted that it was within limitation and prayed for rejection of the legal ground raised by the assessee.
9. We have heard the rival submissions and perused the material available on record. The issue requiring adjudication is whether the notice issued under section 148 of the Act dated 27.03.2023 for the Assessment Year 2016-17 was within the limitation prescribed under section 149 of the Act. For deciding this issue, it is necessary to examine whether the amount of income alleged to have escaped assessment satisfied the statutory threshold permitting issuance of a notice beyond three years from the end of the relevant assessment year. In this regard, we have verified the copy of the order passed under section 148A(d) of the Act relied upon by the Ld. AR, placed at page nos. 66 to 68 of the paper book. On perusal thereof, we find that the AO computed the alleged escaped income at Rs. 57,57,235/- by separately including amounts of Rs. 26,30,500/- and Rs. 17,00,500/- towards cash deposits in the assessee’s account maintained with ICICI Bank Limited. Thus, the computation referred to by the Ld. AR is borne out by the said document.
10. We have also verified para no. 4 of the assessment order relied upon by the Ld. AR. On perusal thereof, we find that the AO has categorically recorded the total cash deposits in the assessee’s ICICI Bank account during the relevant previous year at Rs. 26,30,500/-. On examination of the aforesaid documents, we find that the amount of Rs. 17,00,500/- separately included in the computation of alleged escaped income forms part of the total cash deposits of Rs. 26,30,500/-. Its separate inclusion, therefore, resulted in counting the same deposits twice. Accordingly, the submission of the Ld. AR regarding duplication is supported by the documents referred to above. Upon excluding the duplicate amount of Rs. 17,00,500/- from Rs. 57,57,235/-, the alleged escaped income works out to Rs. 40,56,735/-. Even if the remaining amounts included in the AO’s computation are taken into account in their entirety for the limited purpose of examining jurisdiction, the aggregate remains below Rs. 50 lakhs. The statutory threshold cannot be satisfied by including the same cash deposits more than once.
11. We have also gone through the provisions of section 149(1)(a) of the Act, as applicable on the date of issuance of the impugned notice. As per the said provision, a notice under section 148 of the Act could not be issued after three years from the end of the relevant assessment year unless the case fell within section 149(1)(b) of the Act. The latter provision permitted issuance of a notice beyond three years, subject, inter alia, to the requirement that the AO possessed the prescribed material revealing income chargeable to tax which had escaped assessment amounting to, or likely to amount to, Rs. 50 lakhs or more. In the present case, after removing the duplicate entry, the amount relied upon by the AO is Rs. 40,56,735/-. Therefore, the monetary condition necessary for invoking the extended period is not fulfilled.
12. Therefore, we are unable to accept the contention of the Ld. DR that the notice is valid merely because the AO initially recorded the alleged escaped income at Rs. 57,57,235/-. The correctness of the amount relied upon for invoking the extended period must be examined with reference to the underlying material. Where that amount includes a demonstrably duplicate entry, such duplication cannot confer jurisdiction upon the AO. The present conclusion rests on the duplication apparent from the documents relied upon for determining the alleged escaped income, and not merely on the amount ultimately added in the assessment. The contention of the Ld. DR regarding availability of a ten-year period also does not overcome the requirement of satisfying section 149(1)(b) of the Act, as applicable when the notice was issued. Mere issuance of the notice before 31.03.2023 would not render it valid when the statutory condition for proceeding beyond three years was not fulfilled.
13. We have further verified the copy of the notice issued under section 148 of the Act, placed at page no. 65 of the paper book. On perusal thereof, we find that the notice is dated 27.03.2023, as submitted by the Ld. AR. The relevant Assessment Year 2016-17 ended on 31.03.2017, and the ordinary period of three years from the end of that assessment year expired on 31.03.2020. Since the conditions for invoking the extended period under section 149(1)(b) of the Act were not satisfied, the notice dated 27.03.2023 was barred by limitation. A valid notice under section 148 of the Act, issued within the limitation prescribed by the Act, is a prerequisite for assumption of jurisdiction to make a reassessment. Since the impugned notice was barred by limitation, the AO did not validly assume jurisdiction to complete the reassessment. Accordingly, we hold that the notice issued under section 148 of the Act dated 27.03.2023 is barred by limitation. Consequently, the assessment order dated 06.05.2024 passed under section 147 read with section 144C(3) of the Act is without jurisdiction and is hereby quashed.
14. Since the assessment order has been quashed on the aforesaid legal ground, the remaining grounds challenging the addition on merits have become academic and do not require adjudication.
15. In the result, the appeal of the assessee is allowed. Order pronounced in the Open Court on 16th October, 2026.
Order pronounced in the Open Court on 16th October, 2026.
