Introduction
The Income Tax Appellate Tribunal (ITAT), Hyderabad ‘SMC’ Bench, in the case of Chandana Mereddy vs. ITO, Ward-9(1), Hyderabad (ITA No. 1237/Hyd/2026, dated 22-Jul-2026), delivered a significant ruling on two intertwined issues: condonation of a 258-day delay in filing an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], and the validity of a reassessment notice under Section 148 of the Income-tax Act, 1961, issued beyond the statutory limitation period. The Tribunal, comprising Vice President Vijay Pal Rao and Accountant Member Manjunatha G., quashed the reassessment order under Section 147, holding that the notice was barred by limitation under the unamended provisions of Section 149.
This commentary provides a deep legal analysis of the decision, focusing on the Tribunal’s reasoning regarding the retrospective application of amended limitation provisions, the importance of jurisdictional errors, and the balance between procedural delays and substantial justice. The case underscores the binding authority of the Supreme Court’s decision in Union of India vs. Rajeev Bansal (2024) 469 ITR 46 (SC) and the jurisdictional High Court’s ruling in Cyberabad Citizens Health Services Private Limited vs. DCIT & Anr. (WP.No.25121/2024, dated 17.11.2025).
Facts of the Case
The assessee, an individual, failed to file a return of income under Section 139(1) for Assessment Year (AY) 2015-16. Based on information from the Insight Portal, the Assessing Officer (AO) initiated proceedings under Section 148A after noting that the assessee had made term deposits aggregating Rs. 17,00,000 with the Telangana State Co-operative Apex Bank Ltd. After passing an order under Section 148A(d) on 06.04.2022, the AO issued a notice under Section 148 on 12.04.2022. The assessee did not respond to subsequent notices under Section 142(1) or the Section 133(6) inquiry. The AO treated the fixed deposits as unexplained investment under Section 69, added Rs. 1,06,500 as unexplained credits and cash deposits under Section 56, and included interest income of Rs. 1,02,798, thereby determining total income at Rs. 19,09,300 via an assessment order under Section 147 read with Section 144 and Section 144B.
Aggrieved, the assessee appealed before the CIT(A) with a 258-day delay. The CIT(A) rejected the condonation petition under Section 249(3), holding that the assessee failed to provide sufficient cause or supporting documentary evidence. Consequently, the appeal was dismissed in limine without adjudicating the merits. The assessee then appealed to the ITAT, raising both the delay condonation issue and the substantive legal ground that the Section 148 notice was time-barred.
Reasoning of the ITAT
1. Condonation of Delay: Balancing Substantial Justice and Diligence
The Tribunal first addressed the delay in filing the appeal before the CIT(A). It acknowledged a 258-day delay and noted the assessee’s explanation that it was neither intentional nor deliberate but due to unavoidable circumstances, supported by an affidavit. The Revenue opposed condonation, arguing absence of sufficient cause.
The ITAT adopted a liberal approach, emphasizing the legal issue raised by the assessee—challenging the very jurisdiction of the AO under Section 147. Citing that such jurisdictional errors go to the root of the assessment, the Tribunal held that the delay should be condoned in the interest of substantial justice. However, it also noted the assessee’s lack of diligence. Therefore, while condoning the delay, the Tribunal imposed nominal costs of Rs. 5,000, payable to the ITAT Bar Association, Hyderabad, within 15 days. This cost condition ensured that the condonation did not encourage negligence while allowing the substantive legal question to be examined.
2. Validity of Section 148 Notice: Limitation Under Unamended Provisions
The core legal issue was whether the Section 148 notice dated 12.04.2022 for AY 2015-16 was within the statutory limitation period. The Tribunal noted undisputed facts: the assessment year ends on 31.03.2016; under the unamended Section 149, a notice under Section 148 could be issued within six years from the end of the relevant assessment year, i.e., by 31.03.2022. The notice was issued on 12.04.2022, which is beyond that date.
The Revenue argued that the amended provisions of Section 149 (effective from 01.04.2021) extended the limitation to ten years in cases where income escaping assessment exceeded Rs. 50,00,000. The Revenue also relied on the Supreme Court’s judgment in Union of India vs. Rajeev Bansal and decisions of the Delhi High Court in Salil Gulati and the Madras High Court in Ramadoss Srikanthi, contending that the amended provisions apply where limitation was still available as on 01.04.2021.
The Tribunal, however, interpreted the first proviso to Section 149(1) as a saving clause. It held that no notice under Section 148 shall be issued at any time for a relevant assessment year beginning on or before 01.04.2021 if such notice could not have been issued at that time on account of being beyond the time limit specified under the pre-amendment provisions. In Rajeev Bansal, the Supreme Court clarified that the extended time limit under the amended provisions cannot be applied retrospectively to revive a time-barred case. Applying this principle, the Tribunal found that as on 01.04.2021, the limitation for AY 2015-16 under the unamended law expired on 31.03.2022. The notice issued after that date—12.04.2022—was therefore invalid. The Tribunal also relied on the jurisdictional High Court’s decision in Cyberabad Citizens Health Services Private Limited vs. DCIT & Anr., which held that limitation for issuing a Section 148 notice for assessment years ending before 01.04.2021 is six years, and the notice issued after that period is barred. Additionally, the coordinate bench decision in Peda Subbarao Unnam vs. ITO (ITA.No.1664/Hyd/2025, dated 28.01.2026) supported this view.
3. Consequence: Quashing of Reassessment Order
Since the Section 148 notice was invalid, the entire reassessment proceedings under Section 147 stood vitiated. The Tribunal quashed the assessment order, rendering other grounds (such as the additions under Sections 69 and 56) academic. This outcome reinforces the principle that a fundamental jurisdictional defect cannot be cured by later proceedings.
Conclusion
The ITAT Hyderabad’s decision in Chandana Mereddy vs. ITO is a textbook example of how courts harmonize procedural compliance with substantive justice. By condoning the 258-day delay with a cost penalty, the Tribunal ensured that the assessee’s jurisdictional challenge was heard, while also signaling that delays without valid explanation will not be lightly overlooked. On merits, the Tribunal strictly applied the Supreme Court’s ruling in Rajeev Bansal to hold that the amended limitation provisions cannot revive a time-barred case. The quashing of the reassessment order underscores the critical importance of adhering to statutory limitation periods, even in the context of facially large income escapement. This ruling provides clarity for taxpayers and assessing officers alike, emphasizing that procedural timelines—especially those governing reopening of assessments—must be meticulously followed.