KOTHA VENKAT REDDY,WARANGAL vs. ITO, WARD-1, WARANGAL

The brief facts of the case are that the assessee is an individual and had not filed return of income under section 139 of the Act for the A.Y. 2016-17. The Learned Assessing Officer (“Ld. AO”) initiated reassessment proceedings under section 147 of the Income Tax Act, 1961 (“the Act”) and issued notice under section 148 of the Act dated 27.03.2023. In response, the assessee filed return of income on 25.04.2023 declaring total income of ₹5,30,910/-. During the assessment proceedings, the Ld. AO observed that the assessee had deposited cash of ₹25,94,500/- and ₹31,50,800/- in two different bank accounts during the year under consideration. The Ld. AO further observed that the assessee had also made time deposit of ₹10,50,000/- during the year under consideration. Since the explanation furnished by the assessee was not accepted, the Ld. AO treated the entire cash deposits of ₹57,45,300/- as unexplained money under section 69A of the Act and time deposit of ₹10,50,000/- as unexplained investment under section 69 of the Act. Accordingly, the assessment was completed by the Ld. AO under section 147 read with section 144B of the Act on 18.03.2024 by assessing total income of the assessee at ₹73,26,210/-. 4. Aggrieved by the order of the Ld. AO, the assessee preferred appeal before the Ld. CIT(A). The Ld. CIT(A), not being

As regards the addition of ₹10,50,000/- on account of time deposit, the Ld. AR submitted that it is not clear from the order of the Ld. AO as to how the figure of ₹10,50,000/- has been arrived at. He invited our attention to the bank statement of the assessee placed at page no.55 of the paper book and submitted that the time deposit of ₹15,00,000/- was made by the assessee on 13.01.2016. It was further submitted that the said time deposit was made out of cash deposited in the bank account, namely ₹10,00,000/- on 11.01.2016 and ₹5,00,000/- on 12.01.2016. Since the cash deposits in the bank account have already been considered by the Ld. AO while making addition of ₹57,45,300/- under section 69A of the Act, separate addition on account of time deposit would amount to double addition, which is not permissible under law. Accordingly, the Ld. AR submitted that the addition of ₹10,50,000/- made by the Ld. AO is liable to be deleted. 7. Per contra, the Learned Departmental Representative (“Ld. DR”) relied on the orders of the lower authorities and submitted that the assessee had failed to produce supporting documentary evidence before the Ld. AO as well as before the Ld. CIT(A). It was submitted that although the assessee claimed source of cash deposits from agricultural income, no details of agricultural land holding, agricultural produce or sale proceeds were filed. The Ld. DR further submitted that the assessee had also failed to establish direct correlation between cash withdrawn from the bank account of his son and cash deposited in the bank accounts of the assessee. However, as regards the issue of time deposit, the Ld. DR fairly submitted that the matter requires verification at the end of the Ld. AO.

We have heard the rival submissions and perused the material available on record. The first issue relates to addition of ₹57,45,300/- made by the Ld. AO under section 69A of the Act on account of cash deposits in the bank accounts of the assessee. The assessee has explained that the source of cash deposits was partly from cash of ₹17,00,000/- received from his son, partly from agricultural income, from past savings and current year cash withdrawals from the Bank. The assessee has also placed reliance on the bank statement of his son to show that cash was withdrawn from the account of his son. At the same time, we find that the assessee has not produced complete supporting evidence before the lower authorities in respect of agricultural income, agricultural land holding, agricultural produce and sale thereof. The correlation between cash withdrawals and cash deposits also requires verification. However, we also find that there appears to be a factual mistake on the part of the Ld. AO in making addition of the entire cash deposits without properly examining the availability of cash withdrawals from the account of the son of the assessee, who is stated to have given ₹17,00,000/- to his father. Further, there were also withdrawals in the bank accounts of the assessee. It is also a matter of common human conduct that some amount of cash may remain available with a person out of past savings. Therefore, in our considered view, the entire addition on account of cash deposits requires fresh verification at the end of the Ld. AO. Accordingly, the issue of addition of ₹57,45,300/- under section 69A of the Act is set aside to the file of the Ld. AO for fresh adjudication after considering the documents and explanation of the assessee.

Now coming to the second issue relating to addition of ₹10,50,000/- on account of time deposit, we have gone through the bank statement of the assessee placed at page no. 55 of the paper book. On perusal of the same, we find that TDR of ₹15,00,000/- was prepared by the assessee on 13.01.2016 by depositing cash of ₹10,00,000/- on 11.01.2016 and ₹5,00,000/- on 12.01.2016. Therefore, there appears to be a mistake in recording of facts by the Ld. AO that TDR of ₹10,50,000/- was made by the assessee during the year instead of ₹15,00,000/-. Further, when the very cash deposits in the bank account have already been considered by the Ld. AO while making addition under section 69A of the Act, separate addition on account of TDR made out of the same cash deposits would amount to double addition, which is not permissible under law. However, this factual aspect also requires verification from the bank statement and other available records. Accordingly, the addition of ₹10,50,000/- made under section 69 of the Act is also set aside to the file of the Ld. AO for fresh verification and adjudication. 10. It is needless to mention that the Ld. AO shall provide reasonable opportunity of being heard to the assessee and thereafter decide the issue afresh in accordance with law. The assessee shall be at liberty to file all necessary documents, evidences and submissions in support of his claim before the Ld. AO. The assessee is also directed to cooperate in the assessment proceedings and not to seek unnecessary adjournments.

In the result, the appeal of the assessee is allowed for statistical purposes.