SUBBA LAXMAMMA KARNATI,HYDERABAD vs. ITO, WARD-17(1), HYDERABAD

आदेश / O R D E R PER MANJUNATHA.G, AM:

These are appeals filed by the assessee are directed against the

order of the Commissioner of Income Tax (Appeals), National Faceless

Appeal Centre (NFAC), Delhi, dated 08.01.2026, and pertains to

assessment year 2016-17.

:: 2 :: 2. The brief facts of the case are that the assessee a housewife is a

non-filer and didn’t file her return of income (RoI) for AY 2016-17. In this

case, as per the Risk Management Strategy formulated by the CBDT

through ITBA software, it was noticed that the assessee has entered into

various transactions through banking company. Therefore, the

assessement has been reopened u/s.147 of the Income Tax Act, 1961 (in

short “the Act“) and notice u/s.148 of the Act dated 24.03.2023 was

issued and served on the assessee. In response to the notice, the

assessee filed her RoI on 22.04.2023 declaring total income of

Rs.1,09,700/-. The case was selected for scrutiny and during the course

of assessement proceedings, the AO noticed that the assessee has made

cash deposits of Rs.5 lakhs into bank account held with Syndicate Bank.

The AO Further noted that there are other credits into bank account to

the tune of Rs.68,71,145/-. The AO called upon the assessee to explain

source for cash deposits and credits into bank account. In response, the

assessee submitted that source for cash deposits and credit into bank

account are out of refund of loan and maturity proceeds at fixed deposits.

The AO after considering the relevant submissions of the assessee

observed that out of the total credits of Rs.68,71,145/-, the assessee has

submitted details in respect of maturity proceeds on FDs to the tune of

Rs.19,60,054.85 & Rs.12,64,551.52 in aggregating to Rs.32,24,606.37.

The remaining credit of Rs.36,46,538.32 is unexplained. Therefore, made

addition of Rs.36,46,539/- u/s.68 of the Act, as unexplained cash credits.

:: 3 :: 3. Aggrieved by the order of the AO, the assessee filed before the

Ld.CIT(A). Before the Ld.CIT(A), the assessee has filed details of credits

along with supporting evidences and explained each and every credit

appearing in the bank account. The Ld.CIT(A) after considering the

relevant submissions of the assessee and also taking note of the reasons

given by the AO observed that, the assessee failed to file any further

evidences in respect of other credits including cash deposits of Rs.5 lakhs

into bank account. Thus, rejected the explanation of the assessee and

sustained the additions made by the AO. Aggrieved by the order of the

Ld.CIT(A), the assessee is now in appeal before this Tribunal.

that the Ld.CIT(A) erred in sustaining the additions made towards credit

into bank account, even though, the assessee has explained each and

every credit including cash deposits into bank account. The Ld. Counsel

for the assessee further submitted that the assessee has filed relevant

bank account statement and also Certificate from the bank regarding loan

availed against Term Deposit to prove credit into bank account.

Although, all these evidences have been furnished to the Ld.CIT(A), but

the Ld.CIT(A) without considering relevant details simply sustained the

additions made by the AO. Therefore, he submitted that the additions

made by the AO and confirmed by the Ld.CIT(A) needs to be deleted.

:: 4 :: 5. The Ld. Sr.AR for the Revenue, on the other hand, supporting the

order of the Ld.CIT(A) submitted that the assessee has failed to explain

the credit into bank account including cash deposits with known source of

income. The assessee now claims to have been explained the credits by

filing relevant details and facts with regard to, whether these evidences

were filed before the AO or not is not forthcoming from the assessement

order. Therefore, she submitted that the matter may be remitted back to

the file of the AO for further verification and decide the issue as per law.

record and had gone through orders of the authorities below. There is no

dispute with regard to the cash deposits and other credits into bank

account. It is also not in dispute that the AO has accepted credits to the

to the tune of Rs.19,60,054.85 & Rs.12,64,551.52 in respect of maturity

proceeds of Term Deposit. In respect of remaining credits of

Rs.36,46,539/-, the AO treated the same as unexplained cash credits.

The assessee has filed various details including relevant bank account

statements for the financial year under consideration and explained that

the cash deposits of Rs.5 lakhs on 31.08.2015 is refund of loan given to

Mr. M.V. Subba Reddy, out of loan taken from Syndicate Bank against

Term Deposit and Mr. M.V. Subba Reddy has deposited a sum of Rs.5

lakhs into the bank account of the assessee on 31.08.2015. The

assessee further submitted that she has taken Rs.10 lakhs loan against

Fixed Deposit and the proceeds of loan are credited into the bank account :: 5 :: on 13.12.2015, for which she has furnished certificate from the bank,

where the bank has confirmed the loan credit in her account of Rs.10

lakhs against Term Deposit. The assessee further submitted that, she

had paid a sum of Rs.10 lakhs to Mr. D.S.Sesha Sai on 03.12.2015, out

loan taken against Term Deposit and Mr. D.S. Sesha Sai has returned an

amount of Rs.5 laksh on 18.01.2016 and Rs.5 lakhs on 01.02.2016. For

this, the assessee has furnished relevant evidences including bank

statement. From the details filed by the assessee, it appears that the

assessee is able to explain source for cash deposits of Rs.5 lakhs and also

other credits of Rs.15 lakhs towards loan taken against Term Deposit and

further a sum of Rs.10 lakhs towards refund of loan from Mr.D.S. Sesha

Sai. In other words, out of the addition made for 36,46,539/-, the

assessee is able to explain credits to the extent of Rs.30 lakhs. In respect

of remaining amount of Rs.6,46,539/- which consists of various small

entries including TDS refund of Rs.842.81 and Rs.1,048.84, there are

clear evidences in the bank account itself it is a refund of TDS by Income

Tax Department. Therefore, the above two credits stands explained.

Further, interest credit of Rs.704.01 & Rs.3443.06, there are clear

evidences in the bank statement, that these are only paid by the bank,

and that above two entries are also stands explained. Further, the

assessee has received a sum of Rs.75,000/- on 20.06.2015 from her son

Mr. Venkata Mahesh Reddy Karnati. Therefore, above entry of

Rs.75,000/- also stands explained. Therefore, we direct the AO to delete :: 6 :: the addition to the extent of Rs.30 lakhs + Rs.75,000/- + Rs.842.81 +

Rs.1,048.84 & + Rs.3,443.06 [Total Rs.30,80,334.71]. In respect of

remaining credits including cash deposits of Rs.1,25,000/- on 11.09.2015,

cash deposits of Rs.36,000/- on 21.09.2015 and further cash deposits of

Rs.2 lakhs on 09.03.2016, the assessee’s explanation is not supported by

any evidence. Similarly, in respect of credit of Rs.2,04,500/-, although

the assessee claims to have received refund of loan from Mr. Venkata

Subba Reddy, but no further evidences have been filed. Therefore, in our

considered view, the above credits also remain unexplained. Therefore,

we confirmed the additions made by the AO towards remaining credit of

Rs.1,25,000/- + Rs.36,000/- + Rs.2 lakhs + Rs.2,04,500/- [in total

Rs.5,65,500/-].

is partly allowed.

ITA No.669/Hyd/2026

u/s.271(1)(c) of the Act, on addition made towards unexplained cash

deposits of Rs.36,46,500/-. The appeal filed by the assessee against the

addition made towards unexplained credit has been partly allowed by us

in ITA No.668/Hyd/2026, where we have allowed substantial relief of

Rs.30,80,334.71 in respect of credits into bank and confirmed the

addition made by the AO to the extent of Rs.5,65,500/- towards :: 7 :: remaining unexplained credit into the bank account. Since, the addition

made by the AO towards cash deposits and other credits has been partly

allowed by the Tribunal, in our considered view penalty levied

u/s.271(1)(c) of the Act needs to be modified after giving effect to the

order of the Tribunal. Thus, we set aside the order passed by the

Ld.CIT(A) and restore the issue of levy of penalty u/s.271(1)(c) of the Act

to the file of the AO. The AO is directed to re-consider the issue of

penalty u/s.271(1)(c) of the Act after giving effect to the order of the

Tribunal in respect of appeal filed by the assessee against additions made

towards credits into bank account u/s.68 of the Act. The AO is further

directed to re-consider the levy of penalty in respect of remaining

additions, if any, sustained by the AO after providing an opportunity to

the assessee to explain her case.

is allowed for statistical purposes.

is partly allowed and appeal filed by the assessee in ITA

No.669/Hyd/2026 is allowed for statistical purposes.

Order pronounced on the 10th day of June, 2026, in Hyderabad. Sd/- Sd/- (िवजय पाल राव) (मंजूनाथा. जी) (VIJAY PAL RAO) (MANJUNATHA.G) उपा�� /VICE-PRESIDENT लेखा सद�/ACCOUNTANT MEMBER Hyderabad, dated 10.06.2026. TLN

आदेशकी �ितिलिप अ�ेिषत/ Copy of the order forwarded to:

िनधा�रती/The 1 : Subba Laxmamma Karnati, Flat No.509, Sravyas Alya, H.No.2-95, Plot No.59 to 70, Assessee Khanamet, Kothaguda, Hyderabad-500 084.

राज�/ The Revenue 2 : The ITO, Ward-17(1), Hyderabad.

3 The Principal Commissioner of Income Tax, Hyderabad. िवभागीय�ितिनिध, आयकर अपीलीय अिधकरण, हैदराबाद / DR, ITAT Hyderabad. 4 गाड�फ़ाईल / Guard file 5

आदेशानुसार / 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: 2026.06.10 12:22:40 +05'30'

Sr. Private Secretary ITAT, Hyderabad