ITAT Hyderabad Invalidates Reassessment Beyond Limitation Under Section 149

Background of the Dispute

The matter in Sudheer Parimala Vs ITO before the ITAT Hyderabad concerned a reassessment for Assessment Year 2015-16. The reassessment had been triggered on account of cash deposits of Rs.55,04,242 in the assessee’s bank account, which the Assessing Officer treated as unexplained money under Section 69A of the Income Tax Act 1961.

The assessee maintained that these deposits were nothing but business collections routed through bank accounts and disputed the additions both on facts and in law. In addition to the original grounds, the assessee later introduced further legal grounds directly challenging the jurisdiction and limitation of the reassessment initiated under Sections 147 and 148.

The central question that ultimately decided the fate of the appeal was:

Whether the notice issued under Section 148 on 15.04.2022 for AY 2015-16 was within the time limit prescribed by law, considering both the unamended and amended framework of Section 149.

Grounds Raised by the Assessee

Original Grounds

In the appeal against the order of the CIT(A)-National Faceless Appeal Centre, Delhi dated 25.02.2025, the assessee challenged:

  • The addition of Rs.55,04,242 under Section 69A, arguing that:
    • The deposits arose from genuine business activity.
    • The burden to prove “unexplained money” lay on the Department, and mere non-filing of return or lack of formal books did not automatically render such deposits as undisclosed income.
  • The rejection of explanations and partial evidence, such as recurring deposits from identified parties like Nagula Enterprises and SVR Electronics, without adequate appreciation.
  • The approach of treating the entire cash deposits as income, instead of estimating profit on a reasonable basis (for instance under Section 44AD or on the basis of GP/NP ratios), particularly when the assessee was a small trader without maintained books.
  • The validity of the proceedings completed under Section 147 read with Section 144, citing lack of proper consideration of submissions and breach of natural justice.
  • The consequential penalties initiated under Sections 271(1)(c) and 271F, contending that these could not survive in the absence of a sustainable addition.

Subsequently, the assessee sought to raise purely legal additional grounds, asserting that:

  1. The jurisdiction assumed under Sections 147/148 was invalid as the notice under Section 148 was issued beyond the permissible time.
  2. Under the unamended Section 149(1)(b), reassessment for AY 2015-16 could be initiated only within six years from the end of the relevant assessment year, which expired on 31.03.2022.
  3. Since the Section 148 notice was dated 15.04.2022, it was barred by limitation and, therefore, void.

The assessee reserved the right to raise any further legal grounds at the time of hearing.

The Authorised Representative argued that the additional grounds involved only questions of law concerning limitation and jurisdiction and could be decided on the basis of undisputed facts already on record. No further enquiry or fact-finding exercise was required.

Relying on the Supreme Court decision in National Thermal Power Co. Ltd. vs. CIT [1998] 229 ITR 383 (SC), it was contended that such legal grounds can be raised for the first time even at the Tribunal stage.

The Departmental Representative objected on the basis that: