POREDDY SAMBASIVA REDDY,ANANTAPUR vs. ITO, WARD-1, HINDUPUR

Succinctly stated, the AO based on information gathered from the AIMS module of ITBA that the assessee during the demonetization period, i.e., 09/11/2016 to 30/12/2016 had made substantial cash Poreddy Sambasiva Reddy vs. ITO deposits in his bank account with Andhra Pragati Grameena Bank, but not filed his return of income for the subject year, issued notice under section 142(1) of the Act, dated 08/12/2017, wherein he was called upon to file his return of income for the year under consideration. However, the assessee failed to comply with the aforesaid notice and did not file his return of income.

The AO, during the course of the assessment proceedings, called for the bank accounts of the assessee held with Andhra Pragati Grameena Bank, N.P. Kunta under section 133(6) of the Act. It was observed by him that the assessee during the demonetization period, i.e., 09/11/2016 to 30/12/2016 had made cash deposits in his two bank accounts held with the aforementioned bank, viz., (i) bank account No.91406537669: Rs. 32,28,500/-; and (ii) bank account No.19145581682: Rs.2,17,500/-. Apart from that, the AO observed that the assessee had, during the subject year, made total cash deposits in his aforementioned bank accounts amounting to Rs. 1,50,81,349/-.

As the assessee had failed to file his return of income in response to the notice issued under section 142(1) of the Act, the AO proceeded to frame the assessment to the best of his judgment under section 144 of the Act. The AO observed that a perusal of bank account No. 91406537669 (supra) revealed that the assessee, who during the subject year, was running a wine shop under the name and style of M/s. Lakshmi Narasimha Wines had, during the demonetization Poreddy Sambasiva Reddy vs. ITO period, made cash deposits of Rs.32,28,500/- in the said bank account. Also, upon perusal of the bank account, it was observed that the deposits made therein were remitted to AP Beverages for the purchase of wine.

Thereafter, the AO, in the absence of any information forthcoming regarding the source of the cash deposits of Rs.32,28,500/- made in the bank account of the assessee during the demonetization period, i.e., from 09/11/2016 to 30/12/2016 held the entire amount as the unexplained money of the assessee under section 69A of the Act. Apart from that, the AO held the balance amount of cash deposits of Rs.1,18,52,849/- made by the assessee during the remainder of the year, i.e., pre/post demonetization period, as his receipts from the business of running a wine shop and estimated his income @ 3% on the said amount, which thus resulted in an addition of Rs.3,55,585/-. Accordingly, the AO vide his order passed under section 144 of the Act, dated 09/12/2019, determined the income of the assessee at Rs.35,84,085/-.

Aggrieved, the assessee carried the matter in appeal before the CIT(A). However, as the assessee, despite having been put to notice about the hearing of the appeal on four occasions, had failed to participate and therein prosecute the matter, the CIT(A) held a conviction that the assessee appellant was not interested in pursuing the appeal and summarily dismissed the same on the said count itself. Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, submitted that the CIT(A) had grossly erred in law and facts of the case in summarily dismissing the appeal vide a non-speaking order. Apart from that, the Ld. AR submitted that as the entire cash deposits made by the assessee in his bank account were sourced from his business of running a wine shop, therefore, there was no justification for both the authorities below to have summarily held the amount so deposited during the demonetization period as the assessee’s unexplained money under section 69A of the Act.

Per contra, Shri Mohan Babu, Learned Senior Departmental Representative (for short, “Ld. Sr. DR”), relied upon the orders of the authorities below. It was submitted that as the assessee had not only failed to explain the source of the cash deposits made in his bank account during the demonetization period, but also failed to lead any evidence/material which would point out any perversity in the view taken by the AO in the course of the proceedings before the CIT(A), Poreddy Sambasiva Reddy vs. ITO which had gone unattended, therefore the AO had rightly held the subject cash deposits as having been sourced out of the assessee’s unexplained money under section 69A of the Act. The Ld. Sr. DR submitted that as the CIT(A) had rightly upheld the order passed by the AO, the appeal filed by the assessee being devoid and bereft of any substance is liable to be dismissed.

We have given thoughtful consideration to the contentions advanced by the Learned Authorised Representatives of both parties in the backdrop of the orders of the authorities below.

At the threshold, we may herein observe that the lackadaisical approach adopted by the assessee regarding his income tax proceedings can safely be gathered from the fact that not only he had failed to furnish his return of income both under section 139 or in response to notice issued under section 142(1) of the Act, but had also left the assessment proceedings unattended, which, thus had resulted in the framing of the assessment by the AO vide an ex-parte order passed under section 144 of the Act, dated 09/12/2019. Apart from that, we find that the assessee even before the CIT(A) had despite having been put to notice about the hearing of the appeal on four occasions, i.e., vide notices dated 02/04/2025, 17/07/2025, 20/08/2025 and 07/10/2025 had for the reasons best known to him not participated in the proceedings, as a result whereof the appeal filed by him was dismissed.

Although, we principally concur with the CIT(A) that as the assessee despite having been put to notice about the fixation of the hearing of the appeal on four occasions failed to participate in the appellate proceedings, the said appellate proceedings could not have been kept in abeyance and had rightly been disposed of vide an ex- parte order, but are unable to persuade ourselves to subscribe to the manner in which he had without giving any reason summarily approved the view taken by the AO. In our view, the CIT(A), irrespective of the fact that the assessee appellant had failed to participate in the proceedings before him, ought to have given an independent reasoning for approving the view taken by the AO instead of summarily upholding the assessment for the reason that, as the assessee appellant had failed to participate in the proceedings, the same revealed his disinterest in pursuing the appeal. As per section 250(6) of the Act, the CIT(A) is statutorily obligated to dispose of the appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support thereof. Our aforesaid view is fortified by the judgment of the Hon'ble Luthra (HUF) (2017) 297 CTR 614 (Bom). The Hon’ble High Court in the aforementioned case had observed as under:

From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the AO Poreddy Sambasiva Reddy vs. ITO to make further inquiry and report the result of the same to him as found in Sec. 250 of the Act. Further, Sec. 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Sec. 251(1)(a) and (h) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-s. (2) of s. 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under s. 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact w.e.f. 1st June, 2001 the power of the CIT(A) to set aside the order of the AO and restore it to the AO for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CITIA) are co- terminus with that of the AO i.e. he can do all that A.O could do. Therefore, just as it is not open to the AO to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non- prosecution of the appeal by the assessee. This is amply clear from the s. 251(1)(a) and (b) and Explanation to Sec. 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.”

We thus, in terms of our aforesaid observations, are unable to concur with the manner in which the present appeal had been disposed of by the CIT(A) vide a non-speaking order. Accordingly, we set aside the matter to the file of the CIT(A) with a direction to readjudicate the appeal. Needless to say, the CIT(A) shall, in the course of the set aside proceedings, afford a reasonable opportunity of being heard to the assessee. AY: 2019-20

We shall now take up the appeal filed by the assessee in ITA No.1905/Hyd/2025 for the AY 2019-20 against the order passed by the CIT(A), dated 22/10/2025, which in turn arises from the order passed by the AO under section 147 r.w.s 144 r.w.s 144B of the Act, dated 28/02/2024. 17. As the facts and the issue involved in the present appeal leading to the summarily dismissal of the appeal by the CIT(A) vide a non- speaking order remains the same as were there before us in the aforementioned appeal of the assessee for the AY 2017-18 in ITA No.1904/Hyd/2025, the order therein passed shall apply mutatis mutandis for the purpose of disposing of the present appeal. Accordingly, the CIT(A )'s order on the same terms is set aside, with a direction to readjudicate the appeal on the basis of a speaking order.

In the result, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations.

Ex-consequenti, both the appeals filed by the assessee are allowed for statistical purposes in terms of our aforesaid observations. Order pronounced in the open court on 03rd July, 2026. S (मधुसूदन साव"डया) (रवीश सूद) (MADHUSUDAN SAWDIA) (RAVISH SOOD) लेखासद"य/ACCOUNTANT MEMBER "या"यकसद"य/JUDICIAL MEMBER d/- Hyderabad, dated 03/07/2026. **OKK/sps आदेशक"""त"ल"पअ"े"षत/ Copy of the order forwarded to:-

The Principal Commissioner of Income Tax, Kurnool

"वभागीय""त"न"ध, आयकरअपील"यअ"धकरण /DR,ITAT, Hyderabad.

The Commissioner of Income Tax 6. गाड"फ़ाईल / Guard file