Leeladhara Rao Marupudi vs Ito Int Taxn 1
2025 Latest Caselaw 6648 Tel

Telangana High Court

Leeladhara Rao Marupudi vs Ito Int Taxn 1 on 21 November, 2025

Author: P.Sam Koshy

Bench: P.Sam Koshy

              THE HON'BLE SRI JUSTICE P.SAM KOSHY

                                        AND

     THE HON'BLE SRI JUSTICE NARSING RAO NANDIKONDA


                  WRIT PETITION No.32442 of 2024


ORDER:

(per the Hon'ble Sri Justice P.Sam Koshy)

Heard Mr. Mohd. Mukhairuddin, learned counsel for the

petitioner / assessee; Mr. Vijhay K. Punna, learned Senior Standing

Counsel for the Income Tax Department appearing on behalf of

respondent Nos.1 and 2, and the learned Deputy Solicitor General

of India appearing on behalf of respondent No.3.

2. The instant writ petition under Article 226 of the Constitution

of India has been filed by the petitioner assailing the assessment

order dated 06.05.2022 passed by respondent No.2 / Assessing

Officer holding that since the petitioner has failed to disclose the

cash deposits to the tune of Rs.1,52,10,000/-, the same was added

as unexplained cash credits in the hands of the petitioner and it

was also held that the petitioner shall be liable to pay penalty

under Section 271(1)(c) of the Income Tax Act, 1961 (briefly the

'Act' hereinafter) for concealment of income.

3. The primary challenge by the petitioner while assailing the

impugned order of assessment rather than preferring an statutory

appeal was that:-

a) The proceedings are in violation of the principles of natural

justice; and

b) The proceedings are being initiated without proper service of

notice on the petitioner as is otherwise prescribed under

Section 148 of the Act.

4. The whole case of the petitioner is that he is a non-resident

Indian who is settled and obtained a citizenship of USA since 1994

onwards. According to the petitioner, he did not have any source of

income in India and therefore he was not filing any income tax

returns in India. According to the petitioner, he has a bank account

in HDFC Bank, S.R. Nagar Branch, Hyderabad. According to the

petitioner, recently when he visited India and went to his bank

account, he came to know that the Income Tax Department has

issued a recovery notice dated 22.05.2024 under Section 226(3) of

the Act in respect of the aforementioned unexplained cash credits

to the tune of Rs.1,52,10,000/-, and for which petitioner is due to

pay income tax along with interest and penalty for the assessment

year 2016-17. The petitioner immediately approached his

Chartered Accountant and got the details of the proceedings

initiated against him and has approached this Court by way of

present writ petition.

5. The contention of the petitioner is that the address at which

the notices were issued under Section 148 of the Act was already

sold by the petitioner way back in May, 2007, and thereafter the

petitioner is not residing at the said address. Therefore, the service

of notice under Section 148 of the Act could not be effectively

served upon the petitioner.

6. So far as the non-service of notice under Section 148 of the

Act is concerned is not in dispute, as this fact was admitted by the

Assessing Officer himself in the course of passing the impugned

assessment order, wherein in paragraph Nos.4, 5 and 6 it has been

held as under:

"4. Further, notices under section 142(1) of the Income Tax Act, 1961 were issued to the assessee on 21/11/2021 and 30/12/2021 to the assessee calling for information.

5. However, there was no response from the assessee till date.

6. Subsequently, the Inspector of this office is deputed for Serving Notice to the assessee but the inspector failed to trace the assessee and the inspector served the notice by Affixture."

7. Another aspect which needs to be considered is that all the

notices and correspondences which were made by the Department

upon the petitioner was at the address i.e. 22 Doctors Colony,

Madhapur, Hyderabad - 500033 which was already sold by the

petitioner long back and is presently residing at a different location

and address altogether. Thus, it stands proved that the notices

issued by the Department could not be effectively served upon the

petitioner.

8. Yet another aspect which is glaringly visible from the

impugned assessment order and the notices those were issued

including the draft orders is that the Department is itself agreeing

to the fact that the petitioner is a non-resident Indian and is

residing overseas. This would be reflected in the first line of each of

the correspondences and orders including the draft assessment

order passed by the Department.

9. The admission on the part of the respondents that the

petitioner being a non-resident Indian and only comes to India

occasionally he could not have access to the notices issued or the

affixture of notice made by the Department, has not been properly

appreciated and considered by the Assessing Officer.

10. The learned Senior Standing Counsel for the Income Tax

Department appearing on behalf of respondent Nos.1 and 2 tried to

emphasize the fact that notices and summons have all been issued

at the known and registered address of the petitioner, therefore the

findings arrived at by the Assessing Officer does not warrant

interference. It was also contended that if there was a change of

address on the part of the petitioner / assessee, it was his duty to

have intimated the respondents in respect of the same and ought

to had amended the address so that the subsequent notices could

had been sent to the changed address. Even messages by e-mail

was also sent, which too the petitioner could not make much use

of.

11. Moreover, the learned Senior Standing Counsel argued that

since there is a remedy of appeal available to the petitioner under

the statute, the instant writ petition under Article 226 of the

Constitution of India assailing an appeal order is not justified and

the writ petition deserves to be dismissed.

12. A plain reading of the provisions of Section 148 and 148(3) of

the Act would go to show that the proceedings initiated under

Section 148 must be proceeded with only after proper service of

notice and there cannot be any proceedings drawn without proper

service of notice.

13. It would be relevant at this juncture to take note of a

judgment of the Madras High Court in the case of Smt. S. Nachiar

vs. Income-tax Officer an Others 1, wherein in paragraph Nos.8,

9, 10, 12 and 13, it has been held as under:

"8. The undisputed fact remains that the petitioner has suffered an ex parte order of assessment and as against the same, the petitioner has preferred a revision under section 264 of the Act and the said revision was dismissed through the impugned order dated February 23, 2005. However, it is stated in the counter-affidavit to the effect that the petitioner was served with the notice of the third respondent dated April 26, 2006 under section 221 of the Act asking the petitioner to pay the arrears of tax for the assessment year 1994-95 and the same is available on record and in spite of the same, the petitioner has not appeared, resulting in passing an

2010 SCC OnLine Mad 6205 : (2010) 326 ITR 177

ex parte assessment order. It is also stated in the counter that it is not the fault of the respondents for necessitating the authority to pass an ex parte order.

9. The crux of the question involved in this matter is to the effect that whether the assessment order could be passed without serving the notice under section 148 of the Act.

10. In respect of such question, it is categorically stated by the petitioner in the affidavit and also contended by the learned counsel for the petitioner that the notice contemplated under section 148 of the Act was not served on the petitioner. On the other hand, it is stated in the counter filed by the respondents and also contended by the learned standing counsel that the notice contemplated under section 148 was issued on September 17, 1999 and duly despatched on September 22, 1999 as per the despatch register. It is also further stated in the counter that subsequently on October 16, 2000, a reminder letter was issued calling for the return of income for the assessment year 1994-95 in response to notice under section 148. The abovesaid statement made in counter makes it crystal clear that though the notice said to have been issued under section 148 of the Act, the fact remains that the said notice was not served on the petitioner. Therefore, this court has no hesitation to hold that the respondents have not complied with the requirements contemplated under section 148 by serving a notice on the assessee, viz., the petitioner herein. It is also pertinent to point out that though it is claimed by the respondents that subsequently a reminder letter dated October 16, 2000 was issued to the petitioner and the same was also duly served on the petitioner on October 20, 2000, the said reminder

letter is only for calling the petitioner to submit the return of income and by no stretch of imagination the said letter could be construed to be a notice under section 148 of the Act.

xxx xxx xxx

12. The abovesaid decision was also subsequently followed by a Division Bench of this court in Thangam Textiles v. First ITO reported in [1973] 90 ITR 412 wherein the Division Bench has held in paragraph 7 which reads here under (page 415) :

"In Y. Narayana Chetty v. ITO [1959] 35 ITR 388, the Supreme Court held that the service of requisite notice on the assessee, is a condition precedent to the validity of any reassessment made under section 34 of the Income-tax Act, 1922 (which corresponds to section 147 of the Income-tax Act, 1961), and if a valid notice was not issued as required, the proceedings taken by the Income-tax Officer in pursuance of an invalid notice and consequent orders of reassessment passed by him would be void and inoperative."

13. Section 34 of the old Act referred in the decision cited supra, is equivalent to section 148 of the Act, 1961. The principles laid down by the hon'ble apex court as well as this court, are squarely applicable to the facts of the instant case as in this case also, the notice contemplated under section 148 of the Act was not served on the petitioner. As a result, the entire proceedings culminating into the present impugned order dated February 23, 2005, passed by the first respondent is vitiated."

14. Thus, from the aforesaid facts discussed in the preceding

paragraphs and also taking note of the Madras High Court's

judgment in Smt. S. Nachiar (supra), this Bench is of considered

opinion that a strong case quashing the impugned assessment

order has been made out by the petitioner holding it to be in

violation of the principles of natural justice resulting in remitting

the matter back to the Jurisdictional Authority for taking an

appropriate decision in accordance with law.

15. Admittedly when the notices were issued, the petitioner was

not present either in the territories of India and that he was in

USA. So whatever notices have been issued at the Indian address

could not result in any fruitful results and was only an empty

formality. Though the learned Senior Standing Counsel has relied

upon a bunch of judgments to support his contentions, but when

we look into the factual matrix of each of those judgments and the

question of law which arouse for consideration in the given facts

therein, we have no hesitation in holding that all those judgments

are distinguishable on facts itself.

16. For all the aforesaid reasons, we are of the considered

opinion that the petitioner ought to had been given a fair chance of

defence in support of his contention that whatever amount has

come to his bank account in India was a non-taxable amount.

Therefore, the writ petition stands allowed and the impugned order

of assessment passed by the Assessing Officer is set aside /

quashed and the matter stands remitted back to the Assessing

Officer for passing of a fresh assessment order after affording a fair

opportunity of hearing to the petitioner.

17. As a sequel, miscellaneous petitions pending if any, shall

stand closed. However, there shall be no order as to costs.

_____________ P.SAM KOSHY, J

_________________________ NARSING RAO NANDIKONDA, J

Date: 21.11.2025 GSD