KONDAPPA LAKSHMINARAYANA REDDY,BANGALORE vs. INCOME TAX OFFICER, WARD-4(3)(1), BANGALORE

PER KESHAV DUBEY, JUDICIAL MEMBER:

This appeal at the instance of the assessee is directed against the order of ld. CIT(A)/NFAC dated 05/07/2025 vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1078212192(1) passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”) for the assessment year 2017-18.

ITA No.1750/Bang/2025 Kondappa Lakshminarayana Reddy, Bengaluru Page 2 of 8 2. The ld. CIT(A) NFAC has erred in confirming the addition of Rs.16,11,000/- made by the AO u/s 69A of the Act without appreciating the facts and circumstances of the case.

Tax effect : Rs.4,72,889/-”

3.1 Regarding the Long Term capital gain, the ld. AO held that the assessee had sold an immovable property bearing No.12, 2nd Main Road, Gokul 1st stage, 4th Phase, Bangalore by executing the registered sale deed dated 29.6.2016 and received the sale consideration of Rs.1,21,00,000/- out of which the assessee had claimed the cost of acquisition and cost of improvement amounting

ITA No.1750/Bang/2025 Kondappa Lakshminarayana Reddy, Bengaluru Page 3 of 8 to Rs.82,75,500/- and Rs.49,50,000/- respectively and thus the total deduction claimed was of Rs.1,32,25,500/- as against the sale consideration of Rs.1,21,00,000/- as a result of which the assessee had incurred capital loss of Rs.11,25,500/-. The assessee had not declared the capital gain/loss in the return of income. The ld. AO had held that the assessee claimed the cost of acquisition of site at Rs.300/- per sq.ft., but the AO had allowed a sum of Rs.42.78 based on the information obtained from the Sub-Registrar. Further, the deduction claimed towards cost of improvement amounting to Rs.5,50,000/- attributable to the FY 1984-85 was also not allowed by the AO on the ground that the assessee had not produced any evidence. Whereas the assessee submitted that the deduction claimed towards indexed cost of improvement was related to the construction of house and the rental income derived on it was disclosed, but the ld. AO had not appreciated the explanation and therefore rejected the assessee’s claim in respect of the deduction relating to cost of improvement. The assessee submitted that he had purchased a new asset being a residential house in the month of September, 2016 for a total purchase consideration of Rs.1,30,00,000/- for which the AO had not provided any credit towards the deduction admissible u/s 54 of the Act mainly on the ground of not filing the return of income as per the ratio laid down by the Hon’ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT(2006) 284 ITR 323 (SC). The assessee submitted that the ld. AO was not justified to reject the assessee’s claim for deduction u/s 54 of the Act merely on the ground of non-filing of revised return of income. Further, the assessee submitted that the question of claiming the deduction did not arise while filing the original return of income since the assessee had sufficient time of two years or three years as the case may be to acquire a new asset being a residential house, since the sale of original property was resulted in loss on account of cost of acquisition and cost of improvement.

ITA No.1750/Bang/2025 Kondappa Lakshminarayana Reddy, Bengaluru Page 4 of 8 However, the assessee submitted that a new property was purchased for a consideration of Rs.1,30,00,000/- which ought to have been considered by the AO. The assessee submitted that either way the sale of original property was also not eligible for capital gain tax in view of the fact that a new asset was acquired within a period of 3 months from the date of transfer of original asset. Therefore, the addition made by the AO amounting to Rs.1,09,19,914/- being the capital gain was not justifiable in law and the same is liable to be deleted.

3.2 With regard to addition u/s 69A of the Act, the ld. AO held that the assessee had deposited a sum of Rs.16,11,000/- into the bank account during the demonetization period for which the sources were neither explained nor such money was offered for tax since the burden is on the assessee to prove the source of cash deposits. Therefore, the ld. AO held that the said amount remitted into the bank account during the demonetization period was chargeable to tax u/s 69A of the Act. The assessee submitted that the ld. AO was not justified to hold that the remittance of cash into the bank as income chargeable to tax u/s 69A of the Act without appreciating the fact that mere cash remittance into the bank per- se does not represent the income without arriving at the logical conclusions at least after causing a minimum enquiry. The non filing of explanation as to the source of cash remitted into the bank by itself cannot be a ground for holding such cash as income of the assessee. Thus, the AO concluded the assessment proceedings on a total assessed income of Rs.1,25,91,004/-

ITA No.1750/Bang/2025 Kondappa Lakshminarayana Reddy, Bengaluru Page 5 of 8 5. The ld. CIT(A)/NFAC partly allowed the appeal of the assessee by deleting the alleged long term capital gain of Rs.1,09,19,914/- however, upheld the addition of Rs.16,11,000/- on the ground that there is nothing to show that the assessee had such cash balances in the books. Further, no documentary evidence was submitted to prove the source of cash deposited in the bank account and in the absence of supporting evidences, the addition u/s. 69A of the Act was sustained.

ITA No.1750/Bang/2025 Kondappa Lakshminarayana Reddy, Bengaluru Page 6 of 8 8. The ld. D.R. on the other hand supported the orders of the authorities below.

ITA No.1750/Bang/2025 Kondappa Lakshminarayana Reddy, Bengaluru Page 7 of 8 9.1 On perusal of the order of the ld.CIT(A)/NFAC, we observed that in the absence of documentary evidences to prove the source of cash deposited in the bank account, the ld.CIT(A)/NFAC sustained the addition u/s. 69A of the Act. Further, we also observed that the ld.CIT(A)/NFAC had also categorically noted that there is nothing to show that the assessee had such cash balances in the books. Before us, the ld. A.R. of the assessee drew our attention on the written submissions dated 05/01/2026 and vehemently submitted that the assessee had also withdrawn cash from the Bank of Baroda account no: 122801011004735 amounting to Rs.18,00,000/- on 05/07/2016 and also submitted that the same was utilized for re-depositing into the bank account in view of the demonetization restriction. We are of the considered opinion that this fact was not submitted/ furnished before the authorities below and it is for the first time submitted before us. This being so, in the interest of justice, equity and fair play, we deemed it fit and proper to remit this issue to the file of AO to decide a fresh in accordance with law after taking into consideration the withdrawal of Rs.18,00,000/- as claimed by the assessee from Bank of Baroda after due verification and examination. Needless to say, a reasonable opportunity of being heard must be granted to the assessee. It is ordered accordingly.

Order pronounced in the open court on 11th June, 2026

Sd/- Sd/- (Prashant Maharishi) (Keshav Dubey) Vice President Judicial Member

Bangalore, Dated 11th June,2026. VG/SPS

ITA No.1750/Bang/2025 Kondappa Lakshminarayana Reddy, Bengaluru Page 8 of 8

Copy to:

By order

Asst. Registrar, ITAT, Bangalore.