Pedaveeti Swathi vs ITO: ITAT Hyderabad on Section 148 Reassessment Validity

The judgment in Pedaveeti Swathi, Hyderabad v. ITO, Ward 9(1), Hyderabad (ITA No. 1785/Hyd/2025) brings into focus a cluster of recurring challenges to post-Finance Act 2021 reassessment proceedings: whether the Jurisdictional Assessing Officer (JAO) had authority to issue a notice under section 148, whether the mandatory pre-notice inquiry under section 148A was followed, whether section 149's limitation bar was respected, and whether an ex-parte assessment adding Rs. 63.74 lakhs as unexplained cash deposits under section 69A can survive. The Income Tax Appellate Tribunal, Hyderabad remanded the matter for fresh consideration — a disposition that has direct relevance for practitioners advising on the validity of reassessment notices issued in the transitional period following the 2021 overhaul of the reassessment regime.

This page is a research summary of one specific Indian tax judgment, NOT legal advice. Always verify against the full judgment and consult a professional for case-specific guidance.

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The case at a glance

• Parties: Pedaveeti Swathi, Hyderabad vs ITO, Ward 9(1), Hyderabad, Hyderabad
• Bench: Income Tax Appellate Tribunal - Hyderabad
• Date: 4 March 2026
• Court level: Tribunal (ITAT)
• Sections engaged: 147, 148A, 149
• Outcome: Remanded for fresh consideration

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Facts of the case

For Assessment Year 2016-17, the AO sourced information from the Insight portal under the CBDT's Risk Management Strategy indicating that the assessee, Pedaveeti Swathi, had carried out substantial financial transactions during the subject year but had not filed a return of income. On the basis of this information, the AO issued a notice under section 148 of the Income Tax Act, 1961, dated 25 March 2023. The assessee did not comply with the notice and did not file a return of income.

During assessment proceedings, the AO initially noted cash deposits of Rs. 55.74 lakhs in the assessee's ICICI Bank savings account. The assessee claimed these deposits were sourced from agricultural income from family agricultural lands measuring 36.25 acres, and also challenged the validity of the AO's jurisdiction to issue the section 148 notice. When the assessee failed to respond to a subsequent notice under section 142(1) dated 26 September 2023, the AO issued a notice under section 133(6) to ICICI Bank Limited to obtain the assessee's bank statement directly. The bank statement revealed that the total cash deposits during the subject year were Rs. 63.74 lakhs. With no explanation forthcoming from the assessee regarding the source of these deposits, the AO treated the entire sum as unexplained money under section 69A and completed the assessment ex-parte. The CIT(A), National Faceless Appeal Centre, Delhi, upheld the assessment order by its order dated 3 June 2025, again ex-parte.

The assessee then filed a Writ Petition before the High Court of Telangana (W.P. No. 28421 of 2025). The High Court, by its order dated 22 September 2025, declined to exercise its discretionary writ jurisdiction on the ground that an alternative statutory remedy — an appeal before the Tribunal — was available. The High Court additionally observed that any delay in filing the Tribunal appeal attributable to the period spent pursuing the writ petition would be excluded for computing the limitation period. The assessee thereafter filed ITA No. 1785/Hyd/2025 before the Tribunal on 29 October 2025, accompanied by an application for condonation of the 59-day delay, supported by an affidavit dated 25 February 2026.

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Issues raised

• Whether the delay of 59 days in filing the appeal before the Tribunal was liable to be condoned, given that the assessee had pursued a Writ Petition before the High Court of Telangana during the intervening period and the High Court had directed that such period be excluded.
• Whether the notice under section 148 issued by the Jurisdictional Assessing Officer (JAO) dated 25 March 2023 was valid for AY 2016-17, or whether, as per the amended regime introduced by the Finance Act 2021 and CBDT Circular No. 18/2022, a Faceless Assessing Officer (FAO) was required to issue such notice.
• Whether the mandatory procedural steps under section 148A(a) to (d) — including the pre-notice inquiry, show cause notice, and approval from the specified authority — were properly followed before issuance of the section 148 notice.
• Whether the addition of Rs. 63.74 lakhs under section 69A on account of cash deposits in the assessee's ICICI Bank account was justified, given the assessee's claim that the deposits represented agricultural income, and whether the assessment and appellate proceedings were conducted in violation of principles of natural justice by proceeding ex-parte.

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What the court held

The Tribunal restored the matter to the file of the Assessing Officer for re-adjudication; the appeal was allowed for statistical purposes. This operative disposition — a remand — is confirmed by both the outcome reasoning recorded in the source order and the procedural narrative in the text.

On the threshold question of delay condonation, the assessee's representative placed before the Tribunal the High Court of Telangana's order in W.P. No. 28421 of 2025 dated 22 September 2025, which had expressly observed that the period consumed in pursuing the writ petition would be excluded by the Tribunal when computing the limitation period for the appeal. The assessee's representative submitted that after excluding this period, the appeal filed on 29 October 2025 fell within the 60-day limitation window. The Revenue's representative, Dr. Sachin Kumar, Sr. AR, presented the opposing submissions on this point (the text preview captures the Revenue's position only up to the point of Dr. Sachin Kumar being named, and the Tribunal's detailed reasoning on all grounds, including the merits of the jurisdictional challenge and the section 69A addition, sits in the portion of the order beyond the preview window). The ultimate disposition — remand for fresh consideration — indicates the Tribunal found sufficient cause to send the matter back rather than adjudicate the substantive grounds at this stage.

The grounds of appeal before the Tribunal encompassed a broad jurisdictional attack: the JAO's authority to issue the section 148 notice was questioned under section 149 as amended by the Finance Act 2021; the non-compliance with section 148A's mandatory inquiry and approval procedure was separately raised; the issuance of the notice by the JAO rather than the FAO contrary to the E-Assessment of Income Escaping Assessment Scheme 2022 and CBDT Circular No. 18/2022 was flagged; and on merits, the ex-parte nature of both the assessment and the CIT(A) proceedings and the agricultural income explanation for the cash deposits were pressed. The remand to the AO for re-adjudication means all these grounds remain open before the AO at the fresh hearing stage.

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Strategy observations

1. Writ petition period excluded from delay computation: An additional ground was raised before the Tribunal that the period spent litigating before the High Court of Telangana (W.P. No. 28421 of 2025) should be excluded when computing the delay. The High Court's own order dated 22 September 2025 had expressly sanctioned this approach, providing a documented basis for the condonation application. The Tribunal's decision to allow the appeal (for statistical purposes, reflecting a remand) suggests the delay condonation was addressed in favour of the assessee.

2. Jurisdictional challenge as a threshold ground: Among the thirteen grounds of appeal, grounds 3, 4, and 5 raised jurisdictional objections — the JAO's authority to issue the section 148 notice, the failure to follow the section 148A(a)-(d) procedure, and non-compliance with the CBDT Circular No. 18/2022 framework for faceless reassessment. These procedural grounds were placed before the Tribunal as threshold challenges to the entire reassessment, meaning that if accepted, the addition under section 69A would fall away without needing to be examined on merits.

3. Natural justice as a parallel track: Grounds 6, 7, and 11 independently assailed both the assessment order and the CIT(A) order on natural justice grounds — the assessment was completed ex-parte without effective service of statutory notices, and the CIT(A) disposed of the appeal ex-parte without providing an effective hearing. The Tribunal's remand to the AO for re-adjudication (rather than quashing the proceedings outright) is consistent with a finding that procedural defects warranted a fresh opportunity rather than straight deletion of the addition.

4. Agricultural income explanation preserved on remand: The assessee's claim that the cash deposits of Rs. 63.74 lakhs were sourced from agricultural income earned from 36.25 acres of family agricultural land was rejected at both the AO and CIT(A) levels because the assessee did not participate in proceedings and did not furnish supporting material. With the matter remanded, this explanation — along with documentary evidence regarding ownership and revenue records — becomes available for consideration before the AO afresh, per the source order's disposal.

5. Outcome classified as remand, not full relief: The appeal being allowed "for statistical purposes" is a standard ITAT formulation indicating that the Tribunal is not granting substantive relief on merits at this stage; rather, the matter is being sent back. Researchers reviewing this judgment should note that the final outcome on both the jurisdictional challenge and the section 69A addition remains to be decided at the AO level on remand.

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Why this case matters

This judgment sits within a large and active body of litigation concerning the validity of reassessment proceedings initiated after the Finance Act 2021 restructured sections 147, 148, 148A, and 149. The specific combination of challenges here — JAO versus FAO authority, section 148A procedural compliance, section 149 limitation, and ex-parte completion — represents the standard multi-layered attack on reassessments opened in the transitional period of 2022-2023, and the ITAT Hyderabad's decision to remand rather than decide these on merits reflects judicial caution in restoring opportunity to the assessee at the primary adjudication level before the Tribunal rules on jurisdictional invalidity.

The case is also notable for the interplay between writ jurisdiction and the Tribunal's appellate jurisdiction. The High Court of Telangana's decision in W.P. No. 28421 of 2025 to decline writ interference and redirect the assessee to the Tribunal, with the express direction on delay exclusion, illustrates the courts' consistent approach of preserving the statutory appeal hierarchy in reassessment challenges. For researchers tracking how post-2021 reassessment disputes navigate across the writ and appellate forums, and how the limitation clock is managed when litigants transition from writ petitions to Tribunal appeals, this order provides a concise procedural illustration.

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Source

This case is drawn from the TaxNoticeAI structured legal corpus (16,101 Indian tax judgments, CBIC circulars, ITAT rulings, AAR rulings, GSTAT rulings), sourced from indiankanoon.org and official court portals. Original document: https://indiankanoon.org/doc/197821993/