RAPOLU KAVITHA,HYDERABAD V. DCIT., CENTRAL CIRCLE-2(1), HYDERABAD

ITA 775/HYD/2025

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The cases involve Shri Sunil Kumar Mukka and Ms. Rapolu Kavitha, who appealed against the orders of the Learned Commissioner of Income Tax (Appeals), Hyderabad-12, which upheld the additions made by the Assessing Officer under section 69 of the Income Tax Act, 1961. The additions were based on the findings from a search and seizure operation that revealed discrepancies between the declared and actual transaction values of property purchases. The main legal contention was whether the cash payments recorded in a seized document could be considered as unexplained investments. The tribunal examined the evidentiary value of the seized documents and the explanations provided by the assessees regarding the sources of the cash payments and gifts received.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 780116 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2019-2020
• Appeal Filed On: 01-05-2025
• Other Referred Cases: CBI vs. V.C. Shukla (1998) 3 SCC 410, Sadiq Sheikh vs. CIT [227 Taxman 594, dated 15.12.2020]
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHIN KUMAR
• Keywords: Unexplained investment; Salary income; Document seized; Documents seized; Gift; Search and seizure; Loose papers
• Section: 69

Judgement Text

" आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B’ Bench, Hyderabad Įी ͪवजय पाल राव, उपाÚ य¢ एवं Įी मधुसूदन सावͫडया, लेखा सदè य क े सम¢ । BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER आ.अपी.सं /ITA No.772/Hyd/2025 (िनधाŊरण वषŊ/Assessment Year:2019-20) 1. Shri Sunil Kumar Mukka, Warangal. PAN: BHRPM0791F Vs. Dy. Commissioner of Income Tax, Central Circle 2(1), Hyderabad. आ.अपी.सं /ITA No.775/Hyd/2025 (िनधाŊरण वषŊ/Assessment Year:2019-20) 2. Ms. Rapolu Kavitha, Hyderabad. PAN: AGPPR3343A Vs. Dy. Commissioner of Income Tax, Central Circle 2(1), Hyderabad. (Appellant) (Respondent) िनधाŊįरती Ȫारा/Assessees by: Shri C. Srinivasa Rao, C.A. राज̾ व Ȫारा/Revenue by: Dr. Sachin Kumar, SR-DR सुनवाई की तारीख/Date of hearing: 16/09/2025 घोषणा की तारीख/Pronouncement: 08/10/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : These appeals are filed by Shri Sunil Kumar Mukka and Ms. Rapolu Kavitha (“the assessees”), feeling aggrieved by the separate orders Printed from counselvise.com ITA Nos.772 & 775/Hyd/2025 2 passed by the Learned Commissioner of Income Tax (Appeals), Hyderabad-12 (“Ld. CIT(A)”), both dated 05.03.2025 for the A.Y. 2019-20. Since the grounds raised by the assessees are identical, they are heard together and one consolidated order is being passed for the sake of convenience and brevity. ITA No.772/Hyd/2025 2. The assessee has raised the following grounds of appeal : Printed from counselvise.com ITA Nos.772 & 775/Hyd/2025 3 3. The brief facts of the case are that, the assessee is an individual deriving income from salary and income from other sources. The assessee filed his return of income for A.Y. 2019–20 on 14.09.2020, admitting total income of Rs.5,50,670/-. During the year under consideration, the assessee had purchased Plot No.13 admeasuring 315 sq. yds. at Domer Pochampally Village (“impugned plot”) from Mr. Rohit Mehta as vendor and M/s. Mirchi Developers Pvt. Ltd. as consenting party (“the seller”). A search and seizure operation was carried out in the case of M/s. MSR India Ltd. and Shri M. Srinivasa Reddy, Director of the seller, on 07.01.2021. During the course of such proceedings, certain documents pertaining to the seller were found and seized. In the case of the seller also, a search was conducted on 23.12.2020. The Ld. AO, on examining seized material, noticed that the assessee had purchased the impugned plot for total Printed from counselvise.com ITA Nos.772 & 775/Hyd/2025 4 consideration of Rs.77,17,500/-, whereas the registered sale deed dated 31.01.2019 reflected consideration of Rs.22,05,000/-. Accordingly, notice under section 153C of the Act was issued to the assessee by the Ld. AO on 30.09.2022. In response to the said notice, the assessee filed return of income on 01.02.2023, declaring the same income of Rs.5,50,670/- as in the original return. Subsequently, notice under section 143(2) was issued by the Ld. AO to the assessee on 30.06.2023. During the assessment proceedings, on perusal of the seized documents, the Ld. AO found that the assessee had made cash payments of Rs.50,000/- (17.09.2018), Rs.23,00,000/- (21.09.2018), and Rs.6,30,403/- (29.01.2019), aggregating to Rs.29,80,403/- to the seller. The Ld. AO being not satisfied with the explanation of the assessee treated the entire cash payment of Rs.29,80,403/- as unexplained investment under section 69 of the Act. 3.1 The Ld. AO also noted cash deposits of Rs.49,000/- and Rs.40,000/- in assessee’s bank account on 29.09.2018 and 03.10.2018 respectively. Further there was also cheque deposit of Printed from counselvise.com ITA Nos.772 & 775/Hyd/2025 5 Rs.3,50,000/-, in the bank account of the assessee. With regard to the cash deposit of Rs.89,000/- and cheque deposit of Rs.3,50,000/-, the assessee explained that these payments have been gifted by his father and mother out of their respective business and tailoring incomes. However, from their bank accounts, the Ld. AO noted equivalent cash deposits immediately prior to such transfers. Being unsatisfied, the Ld. AO treated the entire gift of Rs.4,39,000/- also as unexplained. Accordingly, the Ld. AO completed assessment under section 153C on 23.02.2024, making addition of Rs.34,19,403/- under section 69 of the Act as unexplained investment, assessing total income of the assessee at Rs.39,70,073/-. 4. Aggrieved with the order of Ld. AO, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) upheld the additions made by the Ld. AO. 5. Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before us. The Learned Authorised Representative (“Ld. AR”) submitted that the addition of Rs.29,80,403/- was solely based on a Printed from counselvise.com ITA Nos.772 & 775/Hyd/2025 6 loose sheet found from the premises of a third party. Such document, not seized from the assessee’s premises, cannot be considered incriminating material in assessee’s case without any corroborative evidence. In support, reliance was placed on the judgment of the Hon’ble Supreme Court in CBI vs. V.C. Shukla (1998) 3 SCC 410, wherein it was held that “books” ordinarily mean bound material; loose sheets or scraps of paper cannot be treated as books of account, and have weak evidentiary value as they are easily detachable and unverifiable. It was thus argued that no addition can be sustained merely on such loose papers, particularly when no independent verification or corroboration was brought on record by the Revenue. 6. As regards addition of Rs.4,39,000/-, the Ld. AR submitted that the amount of Rs. 89,000/- was received in cash and Rs. 3,50,000/- was received through banking channels as gift from father and mother. He further submitted that, the father of the assessee was engaged in business, while mother was earning through tailoring work. The deposits in their bank accounts represented accumulated Printed from counselvise.com ITA Nos.772 & 775/Hyd/2025 7 income from such activities. The Ld. AO made no further enquiry into their sources and disbelief the gifts received by the assessee. Hence, the gift is genuine and the addition deserves to be deleted. 7. Per contra, the Learned Departmental Representative (“Ld. DR”) supported the orders of the lower authorities. He pointed out that the seized document reproduced at page no.2 of the assessment order is not a casual loose sheet but a systematic record containing the Plot number, size, assessee’s name, date-wise details of payments and mode of payments (cash/cheque), which have specific linkage with actual sale deed particulars. The Ld. DR highlighted that certain cheque entries in the seized paper match with the assessee’s registered sale deed. He argued that, when most of the details of the seized document matches with the actual sale deed i.e. Plot number, size, assessee’s name and some part of sales consideration, the assessee cannot selectively deny the cash components of Rs.29,80,403/-. The Ld. DR thus submitted that the seized record has direct nexus with the assessee’s purchase Printed from counselvise.com ITA Nos.772 & 775/Hyd/2025 8 transaction and cannot be brushed aside as “loose sheet” of no evidentiary value. 7.1 On addition of Rs.4,39,000/-, the Ld. DR relied on the Hon’ble Supreme Court decision in Sadiq Sheikh vs. CIT [227 Taxman 594, dated 15.12.2020], wherein the SLP was dismissed against High Court order holding that when credit entries in the assessee’s bank account were explained as received from relatives/friends, but no evidence was furnished regarding their capacity to advance such amounts, deletion by Tribunal was unjustified. He argued that similarly here, the assessee failed to prove the capacity of his father and mother. Accordingly, the addition of Rs.4,39,000/- made by the Ld. AO should not be deleted. 8. We have considered rival submissions and perused the material available on record. The short controversy is with respect to the addition of Rs.34,19,403/- under section 69 of the Act, comprising Rs.29,80,403/- based on seized document and Rs.4,39,000/- claimed as gift. As regards Rs.29,80,403/-, we note that Printed from counselvise.com ITA Nos.772 & 775/Hyd/2025 9 the seized paper was seized during the search & seizure in case of M/s. MSR India Ltd and Sri M Srinivasa Reddy, Director of M/s Mirchi Developers Private Ltd. We have gone through the seized documents reproduced by the Ld. AO at page no.2 of his order which is to the following effect : 9. On perusal of above, we find that, the seized document specifically records assessee’s name, plot number, size, and date- wise payment details (including cheque and cash). We also find that the assessee’s name, plot number, size and several cheque entries as Printed from counselvise.com ITA Nos.772 & 775/Hyd/2025 10 per seized documents match with actual sale deed. When most of the particulars match with the sale deed, the inference is compelling that the cash entries also form part of the same transaction. The assessee’s reliance on the decision of Hon’ble Supreme Court in the case of CBI Vs. V.C. Shukla (supra) is distinguishable. That decision dealt with stray loose papers. Here, the document is not a random scrap but a structured statement, having linkage with the registered document, thus carrying corroborative value. Therefore, when most of the details of the seized document matches with the actual sale deed i.e. Plot number, size, assessee’s name and some part of sales consideration, the assessee cannot selectively deny the cash components of Rs.29,80,403/-. Accordingly, we uphold the findings of the lower authorities that cash payments of Rs.29,80,403/- represent unexplained investment. 10. With regard to the addition of Rs.4,39,000/-, the assessee explained that the amount of Rs.3,50,000/- was received through bank transfers and Rs.89,000/- was received in cash from his father and mother, whose incomes were from business and tailoring work. Printed from counselvise.com ITA Nos.772 & 775/Hyd/2025 11 It is correct that equivalent cash deposits were made in their bank accounts before transfer, but the assessee has furnished at least an explanation of their sources. The Ld. AO did not conduct any further enquiry or bring contrary evidence. The reliance of the Ld. DR on the decision of Hon’ble Supreme Court in the case of Sadiq Sheikh vs. CIT (supra) is distinguishable. In that case, the assessee offered no explanation regarding the capacity of creditors. However in the present case, the assessee has furnished an explanation, identifying the parents as sources with known activities, and the Revenue has not disproved it by further verification. In these facts, we hold that the addition of Rs.4,39,000/- cannot be sustained. The same is directed to be deleted. 11. In the result, the appeal of the assessee in ITA No.772/Hyd/2025 is partly allowed. ITA No.775/Hyd/2025 12. The assessee has raised the following grounds of appeal : Printed from counselvise.com ITA Nos.772 & 775/Hyd/2025 12 13. The issues involved in this appeal is identical to the issues involved in the appeal in ITA No.772/Hyd/2025 regarding addition Printed from counselvise.com ITA Nos.772 & 775/Hyd/2025 13 made by Ld. AO on the basis of seized documents, wherein we have uphold the addition made by the Ld. AO under section 69 of the Act. Therefore, our discussion and findings in ITA No.772/Hyd/2025 are mutatis mutandis applicable to this appeal also. Accordingly, we uphold the addition made by the Ld. Assessing Officer in this appeal also. 14. In the result, the appeal of the assessee in ITA No.775/Hyd/2025 is dismissed. 15. To sum up, the appeal of the assessee in ITA No.772/Hyd/2025 is partly allowed and in ITA No.775/Hyd/2025 is dismissed. Order pronounced in the open Court on 8th Oct., 2025. Sd/- Sd/- (VIJAY PAL RAO) (MADHUSUDAN SAWDIA) VICE PRESIDENT ACCOUNTANT MEMBER Hyderabad, Dated: 08.10.2025. * Reddy gp/PVV Printed from counselvise.com ITA Nos.772 & 775/Hyd/2025 14 Copy of the Order forwarded to : 1. 1. Shri Sunil Kumar Mukka, 6-9, Main Road, Dharmasagar, Warangal- 506142 2. Ms. Rapolu Kavitha, 6-54/1, Nehru Nagar, Gajularamaram, Rangaa Reddy District - 500055 2. DCIT, Central Circle 2(1), Hyderabad. 3. Pr.CIT (Central), Hyderabad. 4. DR, ITAT, Hyderabad. 5. Guard file. BY ORDER, Printed from counselvise.com "