ITAT Hyderabad Restores Appeal to CIT(A): Claim of No Advance Tax Liability Must Be Examined Before Rejecting Appeal Under Section 249(4)(b)

Background and Context

The Hyderabad Bench of the Income Tax Appellate Tribunal delivered an instructive ruling in the case of Aneemoni Naga Raju Vs ITO (ITAT Hyderabad) concerning Assessment Year 2020-21. The order was pronounced on 20 March 2026 and arose from a challenge to the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, dated 30 September 2025. That CIT(A) order, in turn, originated from an assessment framed by the Assessing Officer under Section 147 read with Section 144 and Section 144B of the Income Tax Act, 1961.

The case raises a significant procedural question: can a first appellate authority summarily dismiss an appeal filed by an assessee who did not file a return of income, without examining whether the assessee had any advance tax liability in the first place? The Tribunal's answer, while acknowledging lapses on the assessee's part, tilted in favour of granting a fresh hearing.

Facts Giving Rise to Assessment

The Assessing Officer came across information indicating that the assessee had undertaken significant financial transactions during AY 2020-21, specifically:

  • Credit card payments (Kotak Mahindra Bank Ltd): Rs. 1,31,230/-
  • Sale of immovable property: Rs. 65,00,000/-
  • Cash deposits in ICICI Bank account No. 236401500040: Rs. 20,77,000/-
  • Cash withdrawals from the same ICICI Bank account: Rs. 19,00,000/-

Despite this financial activity, the assessee had not filed a return of income for the relevant year. Consequently, the AO issued a notice under Section 148 of the Income Tax Act, 1961 on 27 March 2024. The assessee neither responded to this notice nor complied with subsequent notices issued under Section 142(1) on 30 July 2024 and 8 October 2024, nor with the show cause notices that followed.

Given complete non-cooperation, the AO proceeded to frame the assessment to the best of judgment under Section 144. Two additions were made:

  1. Rs. 1,10,93,131/- as unexplained money under Section 69A of the Income Tax Act, 1961
  2. Rs. 48,345/- as income from other sources

This brought the total assessed income to Rs. 1,11,41,480/-, with a resultant tax demand of Rs. 1,80,07,451/- under Section 156.

Grounds of Appeal Before the Tribunal

The assessee raised multiple grounds before the ITAT, which included the following:

  1. The order of the CIT(A) dated 30.09.2025 dismissing the appeal solely under Section 249(4)(b) without affording an opportunity to seek exemption and without issuing a show-cause notice is not correct and is mechanical and violates natural justice.

  2. The assessment under Section 147 read with Section 144 and Section 144B is invalid due to non-consideration of detailed information, explanations and submissions, and violation of natural justice.

  3. The AO erred in making an addition of Rs. 1,11,41,476/- as unexplained money under Section 69A, by treating all bank credits in the appellant's savings account (No. 236401500040) as unexplained money, thereby classifying the entire amount as income from other sources.

  4. Regarding the credit of Rs. 25,00,000/-, the appellant had explained that it was a hand loan extended by his friend, Mr. Mahipal Reddy, which was repaid on 21.08.2019. The AO, without conducting proper inquiry or verifying the evidence submitted, erroneously treated the said sum as unexplained.

  5. The AO treated deposits of Rs. 33,00,000/- and Rs. 4,00,000/- as unexplained money under Section 69A. The assessee explained that he had sold property on 30/07/2019 and received Rs. 49,77,220/- vide cheque no. 738275 dated 30/7/2019, credited to savings account no. 236501000386 on 02/08/2019, and thereafter transferred Rs. 33,00,000/- and Rs. 4,00,000/- to his other savings account no. 236401500040 on 16/08/2019 and 04/11/2019 respectively. Hence, the AO considering Rs. 47,00,000/- as unexplained money under Section 69A is not correct.