MADHUSUDHAN REDDY LAKKIREDDY,SIDDIPET V. INCOME TAX OFFICER, WARD-1, SIDDIPET

ITA 1416/HYD/2025

AI Insights

The case revolves around the appeal by Madhusudhan Reddy Lakkireddy against the order of the Commissioner of Income-Tax (Appeals), which sustained the additions made by the Assessing Officer. The additions pertained to unexplained cash deposits totaling Rs. 16,20,000 made during the demonetization period and an unexplained credit of Rs. 66,550 in the assessee's bank account. The assessee claimed these deposits were from the sale proceeds of agricultural land, but the Assessing Officer found the explanation unsatisfactory based on the sale deed and the timing of the deposits. The Tribunal dismissed the appeal, noting the assessee's failure to provide adequate evidence to substantiate his claims and the prolonged duration of the appellate proceedings, which lasted over 5.5 years.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 786090 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Appeal Filed On: 30-08-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Tax effect; Principle of natural justice; Source of fund; Earning of tax free income
• Section: 144; 142(1); 56

Judgement Text

"आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘SMC’ Bench, Hyderabad Įी रवीश सूद, माननीय ÛयाǓयक सदèय एवं Įी मधुसूदन सावͫडया, माननीय लेखा सदèय SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER AND SHRI MADHUSUDAN SAWDIA HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./I.T.A. No. 1416/Hyd/2025 (Ǔनधा[रणवष[/ Assessment Year:2017-18) Madhusudhan Reddy Lakkireddy, Siddipet. PAN: AKEPL4802B VS. Income Tax Officer, Ward-1, Siddipet. (अपीलाथȸ/ Appellant) (Ĥ×यथȸ/ Respondent) करदाताकाĤǓतǓनͬध×व/ Assessee Represented by : Sri P. Vinod, Advocate राजèवकाĤǓतǓनͬध×व/ Department Represented by : Sri V. Ravish Bhatt, Sr. AR सुनवाईसमाÜतहोनेकȧǓतͬथ/ Date of Conclusion of Hearing : 27/10/2025 घोषणा कȧ तारȣख/ Date of Pronouncement : 31/10/2025 ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 20/08/2025, which in turn arises from the order passed by the Assessing Officer Printed from counselvise.com 2 ITA No. 1416/Hyd/2020 Madhusudhan Reddy Lakkireddy vs. ITO (for short, “A.O.”) under Section 144 of the Income Tax Act, 1961 (for short “the Act”) dated 31/10/2019 for A.Y. 2017-18. The assessee has assailed the impugned order on the following grounds of appeal before us: “1. On the facts and in the circumstances of the case, the order of the ld. CIT(A) is erroneous and unsustainable in law apart from being passed in violation of principles of natural justice. The Id. CIT(A) failed to appreciate that proper notices were not served on the appellant as required under section 282 of the Act r.w. rule 127 of the Rules, and therefore Appellant could not put forth his case. 2. Without prejudice to the above, the Id. CIT(A) erred in sustaining the addition made by the AO of Rs. 16,86,550 as unexplained money u/s.694 of the Act. 3. The ld. CIT(A) erred in confirming the addition of Rs.20,682, which is interest income from bank as income from other sources. (Tax Effect: Rs.13,02,860) 4. Any other ground that may be urged at the time of hearing.” 2. Succinctly stated, the AO based on the information received from AIMS that the assessee had during the subject year made cash deposits aggregating to Rs. 13,24,022/- in his bank account during the demonetization period i.e., 09/11/2016 to 30/12/2016, issued notice under section 142(1) of the Act, dated 10/03/2018, wherein the assessee was called upon to file his return of income for the year under consideration AY 2017-18. In compliance, the assessee filed/uploaded the return of income on 11/04/2018 declaring NIL income along with an exempt income of Rs.19.60 lakhs. As the assessee had delayed the filing of his return of income, the AO held the same as invalid and non-est in law. Printed from counselvise.com 3 ITA No. 1416/Hyd/2020 Madhusudhan Reddy Lakkireddy vs. ITO 3. During the course of the assessment proceedings, the AO called upon the assessee to put forth an explanation regarding the source of the cash deposits of Rs.13.20 lakhs made in his two bank accounts during the subject year. In reply, it was the assessee’s claim that the subject cash deposits were sourced out of the sale proceeds of his agricultural land amounting to Rs.20 lakhs. Elaborating further, it was the assessee’s claim that the cash sale proceeds of the agricultural land were deposited by him in his bank accounts for the purpose of utilizing the same at the relevant time on the marriage of his daughter and to meet other personal expenses. The assessee to support his aforesaid contention had filed before the AO a copy of the sale deed No. 11050/2018, dated 07/12/2016. 4. Ostensibly, we find that the AO did not find favour with the assessee’s claim that the cash deposits of Rs. 13.20 lakhs made in his bank accounts during the demonetization period were sourced out of the sale proceeds of agricultural land as the copy of the sale deed No. 11050/2018, dated 07/12/2016 showed the entire sale consideration at Rs. 2.40 lakhs only. Apart from that, the AO observed that the subject land as per the sale deed was sold by the assessee along with his brother as a co-owner and, thus, his share in the same worked out at Rs. 1,20,000/-. Also, the AO observed that while for the sale deed was executed on 07/12/2016 but the assessee had made the cash deposits Printed from counselvise.com 4 ITA No. 1416/Hyd/2020 Madhusudhan Reddy Lakkireddy vs. ITO aggregating to Rs.16.20 lakhs prior to the aforesaid sale transaction, viz., (i) cash deposits made during the demonetization period: Rs.13.20 lakhs; and (ii) cash deposits made during the pre-demonetization period i.e., 21/09/2016: Rs.3 lakhs. Accordingly, the AO held the entire amount of cash deposits of Rs.16.20 lakhs as having been sourced out of the assessee’s unexplained money under section 69A of the Act. Apart from that, an independent unexplained credit of Rs.66,550/- on 20/12/2016 in the assessee’s bank account with Andhra Bank was also added by the AO under section 69A of the Act. Further, the AO made addition of the interest income on the savings bank account of the assessee of Rs. 20,682/-. 5. Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success. For the sake of clarity, the observations of the CIT(A) are culled out as under: “7. I have gone through the assessment order, grounds of appeal and the statement of facts filed along with Form 35 by the appellant. In Ground No.2, the appellant has challenged the action of the AO in making addition in respect of cash deposits of Rs.13,20,000/-. It is evident from the assessment order that, during the course of assessment proceedings, the appellant was granted various opportunities of being heard by the AO. In response to the notices the appellant reiterated in the submission before the AO that the appellant had sold agricultural land at a sale consideration of Rs.20,00,000/- and an amount of Rs. 13,20,000/- was deposited in two bank accounts. But after verification of the bank statements by the AO it is seen that cash deposits aggregating to Rs.5,20,000/- and cash deposits of Rs.3,00,000/-on 21.09.2016 in Andhra Bank and cash deposit of Rs.8,00,000/- was made in State Bank of India on 11.11.2016 during the demonetization period. According to the AO, the appellant's submission that the cash deposits of Rs. 13,20,000/- have been made during the demonetization period from out of the receipt of sale proceeds of agricultural land at Rs. 20,00,000/-is not supported with any documentary evidence in as much as the copy of sale deed no. 11050/16 dated Printed from counselvise.com 5 ITA No. 1416/Hyd/2020 Madhusudhan Reddy Lakkireddy vs. ITO 07.12.2016 showed the entire sale consideration at Rs.2,40,000/- only. Whereas the sale deed was executed on 07.12.2016 and the appellant's share of sale consideration is only Rs.1,20,000/- and the aggregating cash deposits out of Rs.16,20,000/-, Rs.13,20,000/- during demonetisation period and Rs. 3,00,000/- on 21.09.2016 have been made prior to the date of sale of agricultural land i.e. on 07.12.2016. It is clearly noticed from the assessment order that the fact that the appellant's cash deposits have been made in the two bank accounts is much earlier to the sale of agricultural land and also the share of amount for sale consideration is only Rs. 1,20,000/-. Therefore, the addition made by the AO in respect of impugned cash deposit of Rs.13,20,000/- is justified under the law of IT Act. Thereafter, the appellant did not claim the genuineness of another cash deposits of Rs.3,00,000/- made on 21.09.2016 and source for the credit of Rs.66,550/- on 20.12.2016. As a result, the sources of aggregating cash deposits of Rs. 16,20,000/- and the sources for cash credit of Rs.66,550/- totaling to Rs. 16,86,550/- remained unexplained to the AO. As the appellant has failed to file any submission, it is presumed that the appellant does not wish to bring any material on record to substantiate its claim made against the disallowance made by the AO. The initial onus is on the appellant to bring on record any cogent evidences substantiate the claim made against the addition made by the AO. As the appellant has failed to discharge this initial onus, I do not find any infirmity in the order passed by the AO. Hence, the action of the AO in making addition of Rs. 16,86,550/- u/s.69A of the Act stand upheld. Ground no.2 is dismissed. 8. Ground no. 3 is making the addition of Rs.20.682/- as income from other sources. The appellant had received an interest income of Rs. 20,682/- from savings banks accounts. As per the IT Act, 1961, the interest income is brought to tax under the head 'income from other sources' u/s. 56 of the Act. It says 'If the interest earned on the savings account exceeds Rs. 10,000/- in a financial year, then the excess amount will be considered as taxable income under the head 'Income from Other Sources. It is important to note that the deduction under section 80TTA is not available on interest earned on fixed deposits, recurring deposits, or any other type of deposits. Therefore, the addition of Rs.20,682/- is as per the law and I do not find any infirmity in making the addition of Rs. 20.682/-. Hence, ground no. 3 is dismissed 9. The ground no. 1 is general in nature hence not adjudicated. 10. In the result, the appeal of the appellant is dismissed.” 6. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. Printed from counselvise.com 6 ITA No. 1416/Hyd/2020 Madhusudhan Reddy Lakkireddy vs. ITO 7. We have heard the Learned Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record. 8. Sri P. Vinod, Advocate, the Learned Authorized Representative (for short “Ld. DR”) for the assessee, at the threshold of hearing of the appeal, submitted that the assessee has suffered dismissal of his appeal vide a non-speaking order in gross violation of the principles of natural justice. Elaborating on his contention, the Ld. AR submitted that though the CIT(A) in his order had observed that the assessee had failed to comply with either of the four notices intimating the fixation of the hearing of the appeal, but the same is factually incorrect. The Ld. AR submitted that in compliance to the notice dated 24/12/2020 the assessee had well within the stipulated time period i.e., on 08/01/2021 submitted before the CIT(A) that he was considering opting for Vivad-Se-Vishwas Scheme and was seeking the necessary professional advice of a Chartered Accountant. Accordingly, the assessee had for the aforesaid reason requested the CIT(A) for adjourning the matter to the first week of February, 2021. Also, the Ld. AR submitted that the assessee in compliance to the notice dated 05/03/2023 had once again requested the CIT(A) for some further time as the written submission to be filed before him were under preparation and the same could not be compiled as there was a delay in collecting the relevant information. The Ld. AR to buttress his aforesaid contention had taken us through the acknowledgements Printed from counselvise.com 7 ITA No. 1416/Hyd/2020 Madhusudhan Reddy Lakkireddy vs. ITO evidencing the filing/uploading of the aforesaid replies of the assessee with the CIT(A). The Ld. AR submitted that based on the aforesaid facts the observation of the CIT(A) that the assessee had not complied with any of the four notices intimating the fixation of the hearing of the appeal was found to be factually incorrect. Apart from that, the Ld. AR submitted that as the assessee who is an agriculturist having no other sources of income had made the cash deposits of Rs.13.20 lakhs (supra) in the bank account during the demonetization period out of the sale proceeds received by him on sale of his agricultural land, therefore, there was no justification for the lower authorities to have held that the said amount was sourced out of his unexplained money under section 69A of the Act. 9. Per contra, Sri V. Ravish Bhatt, the Learned Departmental Representative (for short “Ld. DR”) relied upon the orders of the lower authorities. 10. Admittedly, it is a matter of fact borne from the record that the assessee in compliance to the notice dated 24/12/2020 (seeking compliance by 08/01/2021) and notice dated 05/03/2023 (seeking compliance by 13/03/2023) had requested the CIT(A) for allowing some further time. However, we find that the CIT(A) had wrongly observed that the assessee on the said two dates had failed to comply to the aforesaid notices that were issued by his office on 24/12/2020 and 05/03/2023. Printed from counselvise.com 8 ITA No. 1416/Hyd/2020 Madhusudhan Reddy Lakkireddy vs. ITO 11. We find that though the assessee on the last occasion i.e., vide his request for adjournment dated 13/03/2023 had sought for ten days of time for furnishing the requisite details, but on a specific query by the Bench we were informed that no such reply/submissions were thereafter filed with the CIT(A). At the same time, we find it incomprehensible that the appellate proceedings before the CIT(A) which were triggered vide an appeal filed by the assessee on 20/02/2020 took more than 5½ years and had finally culminated vide an order dated 20/08/2025. Although, we deprecate the conduct of the assessee who had sought for adjournments and at no occasion filed any written submission with the CIT(A), but at the same time are unable to persuade ourselves to subscribe the time period of five and half years (approx.) that the CIT(A) had taken to dispose of the subject appeal. 12. Although, there appears to be no justification for the substantial time period of 5½ years taken in disposing of the appeal, but we cannot remain oblivion of the fact that the assessee had not filed any written submission or effectively participated in the appellate proceedings before the said first appellate authority. As there is no justification for the assessee for not participating in the proceedings before the CIT(A) and/or furnish any written submissions in support of his contentions over a span of 5½ years from the date of filing of the appeal, therefore, we are unable to dislodge the dismissal of his appeal by the CIT(A) who has Printed from counselvise.com 9 ITA No. 1416/Hyd/2020 Madhusudhan Reddy Lakkireddy vs. ITO given independent observations and reasoning for sustaining the additions made by the AO under section 69A and under section 56 of the Act. We, thus, in the backdrop of our aforesaid observations finding no substance in the assessee’s appeal, dismiss the same. 13. Resultantly, the appeal filed by the assessee is dismissed in terms of our observations. Order pronounced in the open court on 31st October, 2025. S Sd/- Sd/- (मधुसूदन सावͫडया) (MADHUSUDAN SAWDIA) लेखासदèय/ACCOUNTANT MEMBER S Sd/-/- (रवीश सूद) (RAVISH SOOD) ÛयाǓयकसदèय/JUDICIAL MEMBER d/- Sd Hyderabad, dated: 31.10.2025. OKK/sps आदेशकȧĤǓतͧलͪपअĒेͪषत/ Copy of the order forwarded to:- 1. Ǔनधा[ǐरती/The Assessee : Madhusudhan Reddy Lakkireddy, 8-2-238, Shivaji Nagar, Siddipet, Telangana-502103. 2. राजèव/ The Revenue : Income Tax Officer, Ward-1, O/o. ITO, 1st Floor, Subhash Road, Siddipet, Telangana-502103. 3. The Principal Commissioner of Income Tax, Hyderabad. 4. ͪवभागीयĤǓतǓनͬध, आयकरअपीलȣयअͬधकरण /DR,ITAT, Hyderabad. 5. The Commissioner of Income Tax 6. गाड[फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Hyderabad. Printed from counselvise.com "