NAGBHUSHAN VEERAPANENI,HYDERABAD vs. DCIT., CENTRAL CIRCLE-1(4), HYDERABAD

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ITA 901/HYD/2025Status: DisposedITAT Hyderabad05 August 2026AY 2018-199 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the addition was unsustainable without an effective opportunity for cross-examination, as the third-party statement was the sole basis for the addition. The matter was restored to the Assessing Officer for fresh adjudication after ensuring cross-examination.

What were the facts?

The assessee's income was enhanced based on alleged 'on-money' payments admitted by a third party. The assessee requested cross-examination of the third party, but it was not effectively provided during assessment or appellate proceedings.

What were the issues?

Whether an addition based on third-party statements is valid without providing the assessee an effective opportunity for cross-examination.

Which sections of the Income-tax Act were involved?

Section 132,Section 132(4),Section 153C,Section 131

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad ‘B‘ Bench, Hyderabad

Hearing: 22/07/2026

आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B‘ Bench, Hyderabad �ी रिवश सूद,�ाियक सद� एवं �ी मधुसूदन साविड़या लेखा सद� सम� | Before Shri Ravish Sood, Judicial Member A N D Shri Madhusudan Sawdia, Accountant Member Appeal No Assessee Revenue A.Y 2087/Hyd/2025 Shri Veerapaneni ACIT Central 2018-19 Lakshmi Circle 2(1) Narayana Hyderabad Hyderabad PAN:AKYPN7252P 754/Hyd/2025 Smt. Anitha Dy. CIT -do- Neerukonda, Central KV Ranga Circle 1(3) Reddy Hyderabad PAN:AVWPN1329E 771/Hyd/2025 Shri Ramana -do- -do- Kumar Veerapaneni, Hyderabad PAN:ACCPV3143M 901/Hyd/2025 Shri Nagbhushan Dy. CIT -do- Veerapaneni, Central Hyderabad Circle 1(4) PAN:AVHPV4082F Hyderabad िनधा�रती �ारा/Assessee by: Shri A.V. Raghuram,Advocate राज� व �ारा/Revenue by: Shri K. Prasad, Sr. AR सुनवाई की तारीख/Date of hearing: 22/07/2026 घोषणा की तारीख/Pronouncement: 05/08/2026 आदेश/ORDER Per Bench:

These four appeals are filed by the respective assessees (“the assessees”), feeling aggrieved by the separate orders passed by the Learned Commissioner of Income Tax (Appeals)-12, Hyderabad (“Ld. CIT(A)”) for the A.Y. 2018-19 dated 16.09.2025, 28.02.2025, 05.03.2025 and 04.03.2025

respectively. Since the issues raised by the assessees are identical, for the sake of convenience, these four appeals were heard together and are being disposed of by this common and consolidated order.

ITA No.2087/Hyd/2025 (Shri Veerapaneni Lakshmi Narayana) 2. The assessee has raised the following grounds of appeal:

1.

On the facts and in the circumstances of the case, the order of the 1d. CIT(A) is erroneous both on facts and in law. 2. The ld. CIT(A) erred in sustaining the addition made by the AO of Rs.22,50,000 as undisclosed income under the head Long Term Capital Gains'. The ld. CIT(A) failed to appreciate that the addition was made by the AO completely relying on the statement of third party, without conducting any enquiry. 3. The ld. CIT(A) erred in sustaining the addition on the ground that the purchaser has admitted that he has paid on money. The ld. CIT(A) failed to appreciate that the said purchasers have not appeared for cross examination during the assessment proceedings as well as appellate proceedings and thereby erred in confirming the addition. 4. The authorities below failed to appreciate the documentary evidence such as sale deed and bank statements as proof of receiving actual amount and that the AO has failed to provide any evidence with respect to receipt of cash by the Appellant over and above the sale consideration mentioned in the sale deed. (Tax Effect: Rs.4,63,500) 5. Any other ground that may be urged at the time of hearing. 3. The brief facts of the case are that the assessee is an individual, had filed his return of income for the assessment year 2018-19 on 23.08.2018, declaring a total income of ₹7,65,610. Subsequently, a search and seizure operation under

section 132 of the Income-tax Act, 1961 (“the Act”) was conducted in the case of M/s. K.M. Kohinoor Infra on 12.07.2018, wherein certain loose sheets were found and seized. During the course of investigation, it came to the knowledge of the Revenue that during the year under consideration, the assessee, along with ten other co-owners (“Sellers”), had sold a parcel of land situated at Mamidipally, admeasuring Ac.5.28 guntas and Ac.0.16 guntas, through two separate sale deeds in favour of Mrs. Asifa Fatima and Mr. Mohammed Ahmed Quadri (“Purchasers”). During the course of the search proceedings, a statement under section 132(4) of the Act was recorded from Mr. Syed Hameeduddin, husband of one of the purchasers, namely Mrs. Asifa Fatima, wherein he allegedly admitted payment of on-money in cash to the sellers. Based on the said statement, the Learned Assessing Officer (“Ld. AO”) worked out the assessee’s share of the alleged on- money at ₹22,50,000. Accordingly, the Ld. AO issued a notice under section 153C of the Act on 05.02.2022. In response thereto, the assessee filed his return of income on 12.07.2022, declaring the same total income of ₹7,65,610. After considering the submissions of the assessee, the Ld. AO recomputed the long-term capital gains by enhancing the sale consideration with the alleged on-money of ₹22,50,000 and computed the long-term capital gain at ₹45,05,878. Consequently, the assessment was completed by the Ld. AO under section 153C of the Act vide order dated 26.03.2023, assessing the total income of the assessee at ₹52,71,488. 4. Aggrieved by the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) confirmed the addition made by the Ld. AO and dismissed the appeal of the assessee.

5.

Against the said order of the Ld. CIT (A), the assessee is in further appeal before us. The primary contention of the Learned Authorized Representative (“Ld. AR”) was that the addition has been made in violation of the principles of natural justice, as the assessee was not afforded an effective opportunity to cross-examine Mr. Syed Hameeduddin and purchasers, whose statements formed the sole basis for making the addition. The Ld. AR invited our attention to the first paragraph of page no. 3 of the assessment order, wherein the Ld. AO himself has recorded that the assessee had requested for cross-examination of Mr. Syed Hameeduddin and Mr. Mohammed Ahmed Quadri, whose statements were relied upon by the Revenue. He submitted that despite such specific request, no effective opportunity of cross-examination was provided to the assessee. It was submitted that the alleged receipt of on-money of ₹22,50,000 has been fastened upon the assessee solely on the basis of third-party statements without permitting the assessee to test the veracity of such statements through cross-examination. Therefore, according to him, the assessment suffers from gross violation of the principles of natural justice and deserves to be set aside. 6. Per contra, the Learned Departmental Representative (“Ld. DR”) invited our attention to the last paragraph of page no. 2 of the assessment order and submitted that the assessee had sought cross-examination only vide letter dated 10.03.2023, i.e., at the fag end of the limitation period available for completing the assessment. The Ld. DR further invited our attention to the second paragraph of page no. 4 of the assessment order and submitted that immediately upon receipt of the assessee’s request, the Ld. AO issued summons dated 11.03.2023 to Mr. Syed Hameeduddin and to the buyers,

requiring them to appear on 16.03.2023. However, none of them appeared and instead sought adjournment citing ill health and preoccupation with other work. He further submitted that the Ld. AO again granted another opportunity by requiring them to appear on 20.03.2023, but even on the second occasion none of them appeared before the Ld. AO. Thus, according to the Ld. DR, the Revenue had made sincere efforts to facilitate the cross-examination, but the same could not materialize because of the non-cooperation of the concerned persons. The Ld. DR further invited our attention to para no. 5.3 of the order of the Ld. CIT(A), wherein the Ld. CIT(A) had again called for a remand report for facilitating cross-examination during the appellate proceedings. Pursuant thereto, the Ld. AO once again issued summons under section 131 of the Act dated 15.02.2024, requiring the concerned persons to appear on 21.02.2024. However, even during the appellate proceedings, none of them appeared before the Ld. AO. Accordingly, the Ld. DR submitted that the Revenue cannot be faulted for the failure of the witnesses to comply with the summons and relied upon the orders of the lower authorities. 7. We have heard the rival submissions and perused the material available on record. The undisputed fact emerging from the record is that the impugned addition of ₹22,50,000 has been made primarily on the basis of the seized materials documents and the statements recorded from Mr. Syed Hameeduddin, husband of one of the purchasers and Mr. Mohammed Ahmed Quadri, alleging payment of on-money in cash to the sellers. It is equally undisputed that the assessee had specifically sought an opportunity to cross-examine the persons whose statements have been relied upon by the

Revenue. In this regard, we have gone through para no. 1 of page no.4 of the order of the Ld. AO, which is to the following effect:

“As requested, opportunity of cross-examination was accorded and Summons dated 11-03-2023 were issued to Shri Syed Hameeduddin, Shri Mohammed Quadri Ahmed and Smt. Asia Fatima requiring them to appear before the undersigned in person on 16-03-2023. Shri Syed Hameeduddin, Shri Mohammed Quadri Ahmed and Smt. Asia Fatima did not appear for the cross- examination on the said date and later through mail the authorized representative of Shri Syed Hameeduddin and Mohammed Ahmed Quadri replied that they did not appear in response to summons because of preoccupied work and ill health and asked for time for 15 days. As the matter is getting time barred on 31-03-2023 another opportunity to appear for cross examination in view of the principles of natural justice was given to appear on 20-03- 2023 at 12 PM. Inspite of affording opportunity two times Shri Syed Hameeduddin, Shri Mohammed Quadri Ahmed and Smt. Asia Fatima have not appeared for cross examination requested by Shri Veerapaneni Lakshmi Narayana with respect to land transaction entered between the two parties.”

8.

On a perusal of the above, it is evident that upon receipt of the assessee’s request, the Ld. AO had issued summons to Mr. Syed Hameeduddin and the purchasers requiring their appearance for the purpose of cross- examination. It is also evident that despite issuance of summons on two occasions during the assessment proceedings none of the said persons appeared before the authorities. We have also gone through para no. 5.3 of the order of the Ld. CIT (A), the relevant portion of which is to the following effect:

9.

On perusal of the above, we find that again during the appellate proceedings pursuant to the directions of the Ld. CIT(A), the Ld. AO once again issued summons under section 131 of the Act dated 15.02.2024, requiring the concerned persons to appear on 21.02.2024. However, even during the appellate proceedings, none of them appeared before the Ld. AO. At the same time, we also find some fault on the part of the assessee. The assessee sought the opportunity of cross- examination only vide letter dated 10.03.2023, which was at the fag end of the limitation period available for completing the assessment. Had the request been made at an earlier stage, the Ld. AO would have had adequate time to secure the attendance of the concerned persons. However, merely because the request was made belatedly cannot justify sustaining an addition based upon third-party statements without effectively providing the opportunity of cross-examination, particularly when such statements constitute the principal basis of the addition. We further find that although the Revenue issued summons to the concerned persons, the record is silent as to what further coercive or remedial measures were taken when those persons failed to comply with the summons issued under the Act. The Revenue has not been able to explain before us the remedial

action taken against the persons who deliberately failed to honour the summons issued by the statutory authority. Once summons under section 131 of the Act are issued, the law also provides adequate powers to secure attendance of the witnesses. In the absence of any material demonstrating that effective statutory measures were invoked to enforce compliance, it cannot be said that adequate opportunity of cross-examination was effectively afforded to the assessee. Considering the totality of the facts and circumstances of the case, and in the interest of justice, we deem it appropriate to set aside the impugned orders of the lower authorities on this issue and restore the matter to the file of the Ld. AO. The Ld. AO shall make all reasonable and effective efforts available under law to secure the presence of Mr. Syed Hameeduddin, Mrs. Asifa Fatima, and Mr. Mohammed Ahmed Quadri and afford the assessee an effective opportunity to cross-examine them. Thereafter, the Ld. AO shall re-adjudicate the issue afresh in accordance with law after considering the outcome of such cross-examination and after affording adequate opportunity of being heard to the assessee. 10. In the result, the appeal of the assessee is allowed for statistical purposes. ITA Nos. 754/Hyd/2025, 771/Hyd/2025 & 901/Hyd/2025 11. The issues involved in these three appeals are identical to the issues involved in ITA No.2087/Hyd/2025. Accordingly, our observations and findings in ITA No.2087/Hyd/2025 shall mutatis mutandis apply to these three appeals also. Accordingly, these three appeals are also set aside the file of the Ld. AO with a direction to re-adjudicate the issue afresh in accordance with law after considering the

outcome of such cross-examination and after affording adequate opportunity of being heard to the assessee.

12.

In the result, these three appeals filed by the assessees are allowed for statistical purposes.

13.

To sum up, all the four appeals filed by the respective assessees are allowed for statistical purposes.

Order pronounced in the Open Court on 5th August, 2026. Sd/- Sd/- (RAVISH SOOD) (MADHUSUDAN SAWDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 5th August, 2026. Vinodan/sps Copy to: S.No Addresses 1 Shri Veerapaneni Lakshmi Narayana, Flat No.902 Block 22, Malaysian Township, Trimulagiri, KPHB Colony, Hyderabad 500085 Smt. Anitha Neerukonda, B 503, SVC Tree Walk Apartments, Serilingampally, Kondapur, KV Ranga Reddy 500084 Shri Ramana Kumar Veerapaneni, 8-3-222/C/1/12-A, 2nd Floor, Sarath Studio Road, Madhuranagar, Hyderabad 500036 Shri Nagabhushan Veerapaneni, 902 Block 22, Malaysian Township, Trimulagiri, KPHB Colony, Hyderabad 500085 2 ACIT/DCIT, Central Circle 2(1), 1(3) and 1(4) Aayakar Bhavan, Basheerbagh, Hyderabad 3 Pr. CIT – CENTRAL, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File

By Order TUMMALACHARLA Digitally signed by TUMMALACHARLA LAKSHMI NARAYANA DN: cn=TUMMALACHARLA LAKSHMI LAKSHMI NARAYANA, c=IN, o=INCOME TAX APPELLATE TRIBUNAL, ou=INCOME TAX NARAYANA APPELLATE TRIBUNAL, CHENNAI BENCH Date: 2026.08.05 14:34:46 +05'30'

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