SESHAM RAMANAIAH,PRAKASAM V. ITO., WARD-1, ONGOLE

ITA 1062/HYD/2025

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Shri Sesham Ramanaiah, the appellant, contested the orders of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, which upheld the additions made by the Ld. AO regarding unexplained cash deposits and unexplained investments in property. The case involved the reassessment of the assessee's income for the Assessment Year 2016-17, where significant cash deposits and property purchases were scrutinized under sections 69A and 69 of the Income Tax Act, 1961. The Tribunal found that the new evidence provided by the assessee, including lease agreements and details of agricultural income, warranted a re-examination of the issues by the Ld. AO.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 780101 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 15 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: 2016-2017
• Appeal Filed On: 23-06-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHIN KUMAR
• Assessee Lawyers: SWATHI SHEELA
• Keywords: Opportunity of being heard; Additional evidence; Reassessment proceedings; Unexplained investment; Cost of acquisition; Principle of natural justice; Source of fund
• Section: 147; 148; 144; 69; 139

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.1062/Hyd/2025 (िनधाŊरण वषŊ/Assessment Year:2016-17) Shri Sesham Ramanaiah, Ongole, PrakashamDistrict. PAN: AZIPR0354H Vs. Income Tax Officer, Ward-1, Ongole. (Appellant) (Respondent) िनधाŊįरती Ȫारा/Assessee by: Ms. Swathi Sheela, C.A. राज̾ व Ȫारा/Revenue by: Dr. Sachin Kumar, SR-DR सुनवाई की तारीख/Date of hearing: 18/09/2025 घोषणा की तारीख/Pronouncement: 08/10/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by Shri Sesham Ramanaiah (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 23.05.2025 for the A.Y. 2016-17. 2. The assessee has raised the following grounds of appeal : Printed from counselvise.com ITA No.1062/Hyd/2025 2 Printed from counselvise.com ITA No.1062/Hyd/2025 3 Printed from counselvise.com ITA No.1062/Hyd/2025 4 Printed from counselvise.com ITA No.1062/Hyd/2025 5 3. The brief facts of the case are that, the assessee is an individual who did not file any return of income for A.Y. 2016-17 under section 139 of the Income Tax Act, 1961 (“the Act”). The case of the assessee was reopened under section 147 of the Act and notice under section 148 of the Act was issued to the assessee on 23.03.2023. In response, the assessee filed return of income on 05.10.2023, declaring income of Rs.3,98,584/- for A.Y. 2016–17. During the reassessment proceedings, the Learned Assessing Officer (“Ld. AO”) noticed cash deposits of Rs.25,00,000/- in the assessee’s Syndicate Bank account. On being called upon to explain, the assessee submitted that the deposits came out of income from dealing of paddy, other commission income and agricultural income from lands held in the name of his family, including savings of earlier years. However, since no documentary evidence was filed, the Ld. AO Printed from counselvise.com ITA No.1062/Hyd/2025 6 treated the entire cash deposit of Rs.25,00,000/- as unexplained money under section 69A of the Act. 3.1 The Ld. AO further found that the assessee had jointly purchased two properties with Mr. Sesham China Ramanaiah ( “ brother”) for Rs.82,65,000/- and Rs.30,25,000/- respectively (total Rs.1,12,90,000/-). The assessee’s share was 50%, i.e., Rs.56,45,000/-. The assessee claimed that the source for purchase of the said properties was out of unsecured loans received from friends and relatives in earlier years, but failed to produce list of creditors or bank statements before the Ld. AO. Accordingly, the Ld. AO treated the assessee’s share in entire purchase cost of Rs.56,45,000/- as unexplained investment under section 69 of the Act. Accordingly, the Ld. AO completed the assessment under section 147 read with sections 144 and 144B of the Act on 15.03.2024, determining the total income of the assessee at Rs.85,43,584/-. 4. Aggrieved with the order of Ld. AO, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) upheld the additions, holding Printed from counselvise.com ITA No.1062/Hyd/2025 7 that additional evidence filed by the assessee could not be considered since no petition under Rule 46A was filed. 5. Aggrieved with the order of Ld. CIT(A), the assessee is in further appeal before us. The Learned Authorised Representative (“Ld. AR”) submitted that only two issues are involved out of grounds of appeals of the assessee. On the first issue of Rs.25,00,000/- addition under section 69A, the Ld. AR submitted that the assessee had taken agricultural land on lease from various persons and earned agricultural income therefrom. In support of his contention, the Ld. AR invited our attention to the copies of lease agreements, landholding details and income computation for various years placed at page nos. 1 to 15 of the paper book. It was argued that the deposits in bank accounts were out of such agricultural income and past savings. 6. On the second issue of Rs.56,45,000/- addition under section 69 of the Act, the Ld. AR submitted that the assessee’s father, Shri Venkateshwarlu, had advanced Rs.83,90,000/- from HUF funds to Printed from counselvise.com ITA No.1062/Hyd/2025 8 Shri Botuku Yellarao(“Seller”) in earlier years. Against repayment of this loan and accumulated interest, the said seller transferred the properties in the joint names of the assessee and his brother. It was emphasized that no consideration was paid by the assessee during the year under consideration to the seller. Hence, no addition could be made in the year under consideration in the hands of the assessee. In this regard, the Ld. AR relied on copies of court orders placed at page nos. 86 to 99 of the paper book, which confirm litigation regarding the said loans, wherein the seller has confirmed that he had received the loan in earlier years. It was contended that since the transfer was by way of adjustment of earlier loan, no unexplained investment arises in the year under consideration. Accordingly, the Ld. AR submitted that, the addition made by the Ld. AO in the year under consideration is liable to be deleted. 7. Per contra, On the first issue, the Learned Departmental Representative (“Ld. DR”) submitted that before the Ld. AO the assessee had contended that the land belongs to their family. However before the Tribunal the assessee is contending that the Printed from counselvise.com ITA No.1062/Hyd/2025 9 lands have been taken by the assessee on lease from others. Further, no reliable evidence of agricultural activity was produced either before the Ld. AO or the Ld. CIT(A). Now before the Tribunal the assessee has submitted only the working of amount of agriculture income without any evidence of any agricultural activity. The lease agreements now relied upon were admittedly executed on 31.07.2025, much after the assessment proceedings, and thus are afterthoughts. Hence, the issue requires verification. 8. On the second issue, the Ld. DR argued that before the Ld. AO the assessee had claimed the source as unsecured loans from friends and relatives, while before the Tribunal he is claiming the source as HUF funds. The assessee has contended that the loans had been given to the seller against the promissory notes. However, no evidence of such HUF loan or copies of promissory notes have been filed by the assessee. Thus, the claim of the assessee lacks credibility. Accordingly, the Ld. DR submitted that the addition made by the Ld. AO deserves to be sustained. Printed from counselvise.com ITA No.1062/Hyd/2025 10 9. We have considered rival submissions and perused the material available on record. As regards, the first issue of addition of Rs.25,00,000/- under section 69A, the assessee has now filed lease agreements and details of agricultural income, which were not produced before the lower authorities. These documents go to the root of the matter. Since they were executed recently and not examined earlier, in the interest of natural justice, we deem it fit to restore this issue to the file of the Ld. AO for fresh adjudication. The assessee shall file all necessary documents to establish ownership/lease of land, proof of cultivation and actual earning of agricultural income. The Ld. AO shall verify and decide the issue afresh after granting due opportunity of being heard. 10. As regards the second issue of addition of Rs.56,45,000/- under section 69, we note that the assessee gave inconsistent explanations at different stages i.e. before the Ld. AO claiming unsecured loans from friends/relatives, and before us claiming loans advanced out of HUF funds in earlier years. Further, no documentary evidence such as fund trail of HUF, promissory notes, or bank statements has been Printed from counselvise.com ITA No.1062/Hyd/2025 11 filed. Even the alleged court orders only establish litigation but not the source of funds. In the absence of concrete evidence, the issue requires verification. Accordingly, we remit this issue also to the file of the Ld. AO with directions to consider all documentary evidence including HUF accounts, loan agreements, and any other proof that the assessee may file. The Ld. AO shall adjudicate the matter de novo after affording adequate opportunity of being heard to the assessee. 11. In the result, the appeal of the assessee is allowed for statistical purposes. 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 No.1062/Hyd/2025 12 Copy of the Order forwarded to : 1. Shri Sesham Ramanaiah, 5-1360, Kurichedu Road, Kothamissin Bazar, Darsi Mandal, Ongole-523247 2. The ITO, Ward-1, Ongole. 3. Pr.CIT, Guntur/Vijayawada. 4. DR, ITAT, Hyderabad. 5. Guard file. BY ORDER, Printed from counselvise.com "