KONENI REDDEPPA NAIDU,CHITTOOR V. ITO., WARD -1, MADANAPALLE.

ITA 166/HYD/2025

AI Insights

The case revolves around the appeal by Koneni Reddeppa Naidu against the order of the CIT(A) - National Faceless Appeal Centre, which sustained the additions made by the Assessing Officer for the assessment year 2017-2018. The Assessing Officer had noted substantial cash deposits and credits in the Assessee's bank account during the demonetization period, totaling Rs.74.74 lakhs and Rs.625.03 lakhs respectively. The Assessee claimed these were proceeds from his employment with Chinnu Wines and Babu Wines, where he was responsible for collecting and depositing cash. However, both the Assessing Officer and the CIT(A) found the Assessee's explanations and evidence insufficient, leading to the additions under section 68 of the Income Tax Act. The Tribunal, after reviewing the submissions and evidence, concurred with the lower authorities and dismissed the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 706034 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B BALAKRISHNA
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Unexplained cash credit; Salary income

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD “A” BENCH: HYDERABAD BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER ITA.No.166/Hyd./2025 Assessment Year 2017-2018 Koneni Reddeppa Naidu, K.Doddipalli (V) & PO. Kalakada Mandal, Andhra Pradesh. PIN 517236 PAN AFUPR8256A vs. The Income Tax Officer, Ward-1, MADANAPALLE. Chitoor District. Andhra Pradesh (Appellant) (Respondent) For Assessee : CA K A Sai Prasad For Revenue : Sri B Bala Krishna, CIT-DR Date of Hearing : 16.06.2025 Date of Pronouncement : 03.07.2025 ORDER PER MANJUNATHA G. : This appeal has been filed by the Assessee against the order dated 10.12.2024 of the learned CIT(A)- National Faceless Appeal Centre [in short the “NFAC”] Delhi, relating to the assessment year 2017-2018. 2. Briefly stated facts of the case are that, the assessee is an individual and not filed return of income for 2 ITA.No.166/Hyd./2025 assessment year 2017-2018. The Department had information that, assessee during the financial year relevant to assessment year 2017-2018, during demonetization period had deposited huge cash totaling to Rs.74.74 lakhs and other credits totaling to Rs.625.03 lakhs. Therefore, the Assessing Officer had issued notice u/sec.148 of the Income Tax Act, 1961 [in short “the Act”] on 30.03.2021. However, the assessee had not filed any return of income in response to the said sec.148 notice. Therefore, the Assessing Officer issued statutory notices u/sec.142(1) of the Act calling the assessee to furnish his explanation. In response, the assessee has filed his reply dated 24.12.2021 stating that, he was employed on salary basis with Chinnu Wines [Proprietor Sadasiva Polthi] and Babu Wines [Proprietor Anjan Kumar Polthi]. The nature of the job of the assessee is that, he is a collection agent and used to collect the amounts out of sales/payment of wine shop expenses like Excise Department Challans and daily expenses of wine shops and remit the balance to the respective above mentioned persons and that, for security purpose, the 3 ITA.No.166/Hyd./2025 assessee had deposited cash collections from wine shops in his Bank A/c xxx0797 maintained with Andhra Bank, Kalakada Branch. During the demonetization period, the assessee had transferred a sum of Rs.5,80,20,000/- into the account of the above named Proprietor’s of Wine shops. 2.1. The Assessing Officer has considered the reply filed by the assessee and called for certain documents vide notice issued u/sec.142(1) of the Act dated 07.03.2022. Since, there was no reply from the side of the assessee, the Assessing Officer issued show cause notice dated 17.03.2022 proposing therein to assess the income of the assessee at Rs.7,90,13,760/-. In response to the show cause notice, the assessee had filed his reply dated 19.03.2022 and also filed return of income on 06.08.2021, balance sheet of Shri Sadasiva Polthi and Shri Anjan Kumar Polthi, the persons for whom the assessee claimed to have deposited cash in his bank account. The Assessing Officer after examining the reply filed by the assessee, returns of income of Shri Sadasiva Polthi and Shri Anjan Kumar Polthi, and also on perusal of the P & L Account in the case 4 ITA.No.166/Hyd./2025 of Chinnu Wines and Babu Wines noticed that, the sales were shown at Rs.3,79,63,588/- and Rs.3,38,63,492/- by the above parties respectively totaling to Rs.7,18,27,080/-. Whereas the credits in the account of the assessee are to the tune of Rs.7,90,13,760/-. Since the assessee has not submitted sufficient corroborative evidence with regard to the claim of Rs.7,90,13,761/-, the Assessing Officer has not accepted the same and added the said amount u/sec.68 of the Income Tax Act, 1961 read with section 115BBE of the Income Tax Act, 1961 and assessed the total income of the assessee at Rs.7,94,27,823/- as against the returned income of assessee at Rs.3,67,000/- vide order dated 23.03.2022 passed u/sec.147 r.w.s.144B of the Income Tax Act, 1961. 3. On being aggrieved, the assessee carried the matter in appeal before the learned CIT(A). The learned CIT(A) during the course of appellate proceedings has issued notices u/sec.250 of the Act calling the assessee to file his submissions. In response thereto, the assessee has furnished his submissions dated 08.08.2022, 22.08.2022, 5 ITA.No.166/Hyd./2025 24.08.2022, 10.07.2024 and 09.08.2024. The learned CIT(A) noted that, (i) the assessee has failed to furnish source of cash deposit either during assessment proceedings or during appellate proceedings. (ii) The assessee had not filed any day-to-day cash collection register, name of the person from whom cash was collected etc., and (iii) Further, although, Babu Wines and Chinnu Wines are having Bank A/c, the assessee has deposited collection amounts in his Bank A/c and the reason why the daily collections derived out of sale of wine amounts are deposited in assessee’s Bank A/c the assessee could not explained. Therefore, the learned CIT(A) being not satisfied with the explanation/ submissions made by the assessee, sustained the additions made by the Assessing Officer. 4. Aggrieved by the order of the learned CIT(A), the assessee is now in appeal before the Tribunal. 5. CA, K.A. Sai Prasad, Learned Counsel for the Assessee submitted that, the learned CIT(A) has erred in sustaining the addition made by the Assessing Officer 6 ITA.No.166/Hyd./2025 towards credits to the tune of Rs.7,90,13,761/- in the bank accounts of the assessee as unexplained cash credits u/sec.68 of the Act, without considering the explanation of the assessee that, he was employed on salary basis for Chinnu Wines [Proprietor Sadasiva Polthi] and Babu Wines [Proprietor Anjan Kumar Polthi] and cash deposits into his bank account is sale proceeds of above two firms and the assessee has deposited cash into his bank account for security reasons and subsequently the same has been transferred to the bank accounts of above two persons. Learned Counsel for the Assessee further referring to various evidences including return of income filed by the assessee on 06.08.2021 in response to notice u/sec.148 of the Act and further, return of income filed by Sri P. Anjan Kumar and Sri P. Sadasiva submitted that, sales declared by the above two firms put together is more than the amount of credits in bank account of the assessee. There are direct evidences of transfer of funds from bank account of the assessee and credits in the bank account of the above two firms. The assessee has explained reasons for deposit 7 ITA.No.166/Hyd./2025 the cash into his account. Although, the assessee has explained the reasons, but, the Assessing Officer made additions only on the ground that, no evidences has been filed to prove employment with above two firms and also no explanation has been offered for the collection from sales has been credited to the accounts of the assessee. But, the fact remains that, the assessee has filed return of income and shown salary income from above two firms. Therefore, the reasons given by the Assessing Officer and the learned CIT(A) that, no explanation has been given by the assessee, is devoid of merit and should be rejected. Since the assessee has filed all evidences to prove cash deposit to his bank account, is out of sale proceeds of the above two firms and further, the said cash deposit has been subjected to tax in the hands of the proprietor of above two firms, addition made in the hands of the assessee should be deleted. 6. Shri B Bala Krishna, learned CIT-DR, on the other hand, supporting the order of the learned CIT(A) submitted that, the assessee is a non-filer and did not file his return of income for the assessment year under 8 ITA.No.166/Hyd./2025 consideration on or before the due date provided u/sec.139 of the Act. The assessment has been reopened on the basis of information with the Department that, assessee during the demonetization period has deposited huge cash and other credits into his bank account. Notice u/sec.148 of the Act dated 30.03.2021 was issued, but, the assessee did not file his return of income on or before the due date provided in the notice. The assessee could not satisfactorily explained source for cash deposit into bank account. Although, the assessee claims that cash deposit is out of sale proceeds of Chinnu Wines and Babu Wines and he was employed in the above firms, but, no evidence has been filed to justify the claim of the assessee. The only evidence the assessee has filed is the income tax return filed on 06.08.2021 which is after issue of notice u/sec.148 of the Act and, therefore, the Assessing Officer and the learned CIT(A) rejected the explanation of the assessee and made addition. Therefore, he submitted that, the addition made by the Assessing Officer towards cash deposit and other credits should be sustained. 9 ITA.No.166/Hyd./2025 7. We have heard both the parties, perused the material on record and the orders of the authorities below. There is no dispute with regard to the fact that, the assessee has made huge cash deposit into his bank account during demonetization period and also there are huge credits in his bank accounts, but, the assessee has not filed his return of income for the year under consideration on or before the due date provided u/sec.139 of the act. Further, the assessee did not file his return of income in response to notice u/sec.148 of the Act within the time allowed in the said notice. The assessee explained source for cash deposit and other credits out of sale proceeds of Chinnu and Babu Wines and claimed that, he was employed on salary basis in the above two firms to look-after the day-to-day affairs of the business including collection of cash and deposit into bank account. Since the place of business of above two firms and the place of residence of the Proprietors is different, the assessee took the responsibility of collection of cash from sales and due to security reasons, the same has been credited to his bank account maintained at the place 10 ITA.No.166/Hyd./2025 of business and subsequently transferred to the bank accounts of the above two persons. The Assessing Officer rejected the explanation of assessee on the ground that, the assessee is a non-filer and has not filed his return of income u/sec.148 notice and further, even, if assessee filed return of income, such return is beyond the due date and after issue of notice u/sec.148 of the Act. Further, the assessee could not substantiate it’s claim of an employee of above two firms with any credible evidence. 8. We have given due consideration to the arguments of the Learned Counsel for the Assessee in light of various evidences on the issue of addition made towards cash deposit and other credits in the bank account u/sec.68 of the Act and we ourselves do not subscribe to the arguments of the Learned Counsel for the Assessee for the simple reason that, the claim of the assessee that, he was employee in above two firms is not substantiated with any credible evidence. The assessee could not file any evidences to prove employment with above two firms, except, affidavit filed by Sri Anjan Kumar Polthi and Sri 11 ITA.No.166/Hyd./2025 Sadasiva Polthi along with their return of income for the relevant assessment year. From the above, it is difficult to establish employee-employer relationship between the above two firms and the assessee. Although, the assessee referred to the return of income filed on 06.08.2021 to claim the employment with above two firms on the basis of income declared under the Head “Income from Salary”, but, in our considered view, such return of income has been filed after issue of notice u/sec.148 of the Act and thus, the same can be at best considered as an afterthought to circumvent the additions to be made towards cash deposit u/sec.68 of the Act. If at all the claim of the assessee is correct that, he was employed on salary basis in the above two firms, the assessee should have file an appointment letter, salary slips or any other evidence that goes to prove the employment with the above firms. Moreover, going by the nature of trade in which the assessee claims to have been employed is trading in IMFL/liquor which is a goods traded in a bonded warehouse or shop and as per the relevant Excise Acts of States, the employees who are working in bonded 12 ITA.No.166/Hyd./2025 warehouse/place of business should be provided to the concerned authorities while obtaining licenses from the authorities for trading in said goods. In the present case, the assessee neither filed any credible evidence to prove employment nor filed any details with regard to furnishing of employees details to the authorities while obtaining the licenses. In absence of any evidence which could prove the employment, in our considered view, the averments made by the assessee in light of return of income filed showing income from salary cannot prove the employment of the assessee. Once assessee is unable to prove the employment with above firms, then, the argument that, source for cash deposit into bank account is sales of above two firms is also cannot be accepted. Although, the assessee refers to few entries in the bank account of the assessee with corresponding entries in the bank account of above two firms, but, in our considered view, the said entries does not prove the deposit of cash into assessee’s bank account out of sale proceeds of above two firms because, the assessee might have various other transactions with the above two 13 ITA.No.166/Hyd./2025 firms which assessee can only be explained. Since the assessee is unable to prove the employment in the above two firms, in our considered view, the explanation offered by the assessee towards source for cash deposit into bank account and other credits into bank account, cannot be accepted. The Assessing Officer and the learned CIT(A) after considering the relevant submissions, have rightly rejected the arguments of the assessee and made additions towards total credits in bank account including cash deposits u/sec.68 of the Act as unexplained cash credits. Thus, we are inclined to uphold the order of the learned CIT(A) and dismiss the ground raised by the assessee. 9. In the result, appeal of the Assessee is dismissed. Order pronounced in the open Court on 03.07.2025. Sd/- Sd/- [VIJAY PAL RAO] [MANJUNATHA G] VICE PRESIDENT ACCOUNTANT MEMBER Hyderabad, Dated 03rd July, 2025 VBP 14 ITA.No.166/Hyd./2025 Copy to 1. Koneni Reddeppa Naidu, K.Doddipalli (V) & PO. Kalakada Mandal, Andhra Pradesh. C/o. Katrapati & Associates, 1-1-298/2/B/3, Sowbhagya Avenue Apts. 1st Floor, Ashok Nagar, Street No.1, Hyderabad. Telangana. 2. The Income Tax Officer, Ward-1, MADANAPALLE. Chitoor District. Andhra Pradesh 3. The PCIT, Tirupati. State of Andhra Pradesh 4. The DR ITAT “A” Bench, Hyderabad. 5. Guard File. //By Order// //True Copy// "