ITAT Hyderabad Nullifies Reassessment Additions Absent Core Foundational Material

1. Background of the Dispute

The Hyderabad Bench of the Income Tax Appellate Tribunal considered two connected appeals filed by Smt. Krishnaveni Vedula and Shri Bhasker Rao Vedula for Assessment Year 2020-21. Both appeals arose from separate but similar orders passed by the Commissioner of Income Tax (Appeals)-12, Hyderabad dated **07.08.2025`.

As both matters involved identical legal and factual issues, the Tribunal heard them together and issued a common consolidated order, applying its reasoning mutatis mutandis to both assessees.

The core controversy revolved around the validity of additions made in reassessment proceedings under Section 147 when:

  • The reassessment was triggered based on certain material leading to issuance of notice under Section 148; but
  • No addition was ultimately made on the very issue that formed the foundation for reopening; and
  • All actual additions were based exclusively on material collected and enquiries made during the reassessment, not on the material available at the time of issuing notice under Section 148.

The Tribunal, following the ratio of ATS Infrastructure Ltd. Vs. ACIT 166 taxmann.com 61 (Delhi), held that such additions are not legally sustainable and therefore deleted them in entirety.

2. Facts of the Case – Smt. Krishnaveni Vedula

  • The assessee is an individual.
  • She filed her original return of income for AY 2020-21 on 29.12.2020, declaring a total income of ₹4,72,570/-.
  • On 18.01.2023, a search and seizure operation under Section 132 of the Income Tax Act 1961 was conducted in the case of M/s. Oorjita Builders & Developers Pvt. Ltd. and its group cases.
  • The assessee’s case was also covered in the said Section 132 search action.

2.2 Initiation of Reassessment under Section 147

Following the search, the Assessing Officer initiated reassessment proceedings under Section 147 and issued notice under Section 148 on **29.11.2023`.

  • In response, the assessee filed a return to Section 148 notice on **13.01.2025`.
  • Thereafter, the Assessing Officer (AO) framed reassessment under Section 147 vide order dated **06.03.2025`.

2.3 Additions Made in Reassessment

In the reassessment order, the AO made the following disallowances and additions:

  • Disallowance under Section 80C: ₹69,226/-
  • Disallowance under Section 24(b): ₹13,889/-
  • Disallowance under Section 80D: ₹25,000/-
  • Addition towards speculative profit: ₹2,04,914/-

Consequently, the total income was reassessed at ₹7,85,599/- as against the originally returned income of ₹4,72,570/-.

3. First Appeal before CIT(A)

Aggrieved, the assessee carried the matter to the CIT(A)-12, Hyderabad. The first appellate authority partly allowed the appeal.

Still dissatisfied with the partial relief, the assessee preferred a second appeal to the ITAT, disputing the additions sustained by the CIT(A).

4.1 Admission of Additional Grounds

Before the Tribunal, the assessee raised additional legal grounds, including a crucial challenge under Ground No. 11 questioning the very legality of the additions made in reassessment.

The assessee relied upon the judgment of the Hon’ble Supreme Court in National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 383 (SC) to contend that purely legal grounds arising from facts already on record can be raised for the first time before the Tribunal.

The Tribunal: