GARLAPATI SUDHAKAR REDDY,HYDERABAD vs. INCOME TAX OFFICER, WARD-13(5), HYDERABAD

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ITA 1626/HYD/2025Status: DisposedITAT Hyderabad17 June 2026AY 2017-189 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had provided sufficient evidence, including confirmations from the sister and brother, to explain the cash deposits as loan repayments. Therefore, the addition made by the AO was deleted.

What were the facts?

The assessee deposited Rs. 10,76,500/- in cash during demonetization, claiming it was a refund of loans given to his sister and brother. The Assessing Officer (AO) rejected this explanation due to lack of evidence of withdrawals and added Rs. 8,26,500/- to income under Section 69A.

What were the issues?

Whether the cash deposits made by the assessee during demonetization were adequately explained as loan repayments, or if they constituted unexplained money.

Which sections of the Income-tax Act were involved?

Section 69A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad “SMC” Bench, Hyderabad

आयकर अपीलीय न्यायाधिकरण में, हैदराबाद “एस एम सी” बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad “SMC” Bench, Hyderabad श्री मंजूनाथ जी, माननीय लेखा सदस्य एवं श्री रवीश सूद, माननीय न्याययक सदस्य SHRI G. MANJUNATHA, HON’BLE ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER आयकरअपीलसं./I.T.A.No.1626/Hyd/2025 (निर्धारण वर्ा/ Assessment Year: 2017-18) Garlapati Sudhakar Reddy, Vs. The Income Tax Officer, R/o. Hyderabad. Ward 13(5), Hyderabad. PAN : AHKPR0987N (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent)

करदाता का प्रतततितित्व/ : Shri A.V. Raghuram, Assessee Advocate. Represented by राजस्व का प्रतततितित्व/ : Shri B. Laxmi Kanth, Sr. A.R. Department Represented by सुिवाई समाप्त होिे की ततति/ : 15.06.2026 Date of Conclusion of Hearing घोर्णध की तधरीख/ : 17.06.2026 Date of Pronouncement O R D E R PER MANJUNATHA G., A.M : This appeal filed by the assessee is directed against the order of the learned Addl/Joint Commissioner of Income Tax (Appeals), Panaji [in short “Ld. CIT(A)”], dated 11.09.2025 pertaining to the assessment year 2017-18.

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2.

The brief facts of the case are that the assessee, who is a retired employee, had filed his return of income for A.Y. 2017-18 on 25.07.2017 admitting total income of Rs. 2,92,470/- and agricultural income of Rs. 6,05,300/-. The case was selected for scrutiny to verify the cash deposited during the demonetization period. During the course of assessment proceedings, the A.O. noticed that, the assessee had made cash deposits of Rs. 10,76,500/- into his bank account and therefore, called upon the assessee to file relevant details to explain the source for the cash deposits. In response, the assessee submitted that, out of his salary savings and agricultural income, he had given a hand loan to his sister for admission of her daughter to a medical course in the year 2014. Further, he had also given a hand loan of Rs. 1,50,000/- to his brother out of his agricultural income for the purpose of agricultural operations. The source for the cash deposits was out of refund of loans given to his sister and brother. For this purpose, the assessee furnished relevant bank account details along with a confirmation letter from Smt. D. Radhika Reddy and details of her source of income, including an income certificate issued by the Revenue Authorities. The assessee had

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also filed a confirmation letter from Shri Sudheer Reddy along with a Pattadar Passbook. The A.O., after considering the submissions of the assessee, observed that, although the assessee claimed to have received repayments of loans given to his sister and brother, but the fact remained that there were no major cash withdrawals during the F.Y. 2016-17 to substantiate the claim. Further, the assessee had not furnished any documentary evidence in support of his claim that, he had given the amount from his bank account and the same was returned to him. Therefore, the A.O. rejected the explanation of the assessee. However, taking into account the income declared by the assessee for the year under consideration, the A.O. has accepted the source to the extent of Rs. 2,50,000/- and treated the balance amount of Rs. 8,26,500/- as unexplained money and added the same under Section 69A of the Income-tax Act, 1961.

3.

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee reiterated the submissions made before the A.O. along with the evidences and claimed that, the assessee had received the amount from his sister and brother towards repayment of loans and the

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same had been deposited into his bank account. The Ld. CIT(A), after considering the relevant submissions of the assessee and also taking note of the reasons given by the A.O., sustained the addition on the ground that the assessee had neither substantiated his claim of having filed evidence nor furnished any fresh documentary evidence during the appellate proceedings.

4.

Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.

5.

The learned counsel for the assessee, Shri A.V. Raghuram, Advocate, submitted that, the A.O. and the Ld. CIT(A) erred in making the addition of Rs. 8,26,500/- without considering the relevant evidences filed by the assessee to prove the source for the cash deposits, which is evident from the assessment order, wherein the A.O. wrongly observed that, the assessee had claimed to have withdrawn cash during the financial year 2016-17. However, the fact remains that the assessee had explained before the A.O. that the cash had been withdrawn during the financial year 2014 to give loan to his brother and sister. The learned counsel for the assessee, further referring to bank statements filed

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by the assessee, submitted that, the assessee had initially given a demand draft in favour of Navodaya Medical College, Raichur for admission of his sister's daughter. However, when the college refused to accept the demand draft, the same was credited back into the bank account and the cash was immediately withdrawn and the same has given to his sister for the purpose of her daughter's admission. Similarly, the assessee had also given a loan to his brother for agricultural operations. Since both parties had returned the loan amounts in cash and the same had been deposited into his bank account, the source of the cash deposits stood explained. Although these facts had been explained before the A.O. and the Ld. CIT(A), both the authorities ignored the explanation of the assessee and made the addition under Section 69A of the Act. Therefore, he submitted that the addition made by the A.O. should be deleted.

6.

The learned Senior A.R. for the Revenue, Shri B. Laxmi Kanth, on the other hand, supporting the orders of the A.O. and the Ld. CIT(A), submitted that, the assessee has not established any nexus between the cash withdrawn from the bank out of his salary savings and agricultural income and the loans given to his

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sister for the purpose of fee payment to a medical college for admission of her daughter to a medical course. The assessee has also failed to file any evidence to prove the hand loan given to his brother. Further, the assessee has failed to establish as to why both the parties have returned the loan amount during the demonetization period. Since the conduct of the assessee and the explanation offered by him are contrary to the test of preponderance of human probabilities, the A.O. has rightly treated the cash deposits into the bank account as unexplained money. The Ld. CIT(A), after considering the relevant facts, has rightly sustained the addition made by the A.O. Therefore, he submitted that, the addition made by the A.O. and sustained by the Ld. CIT(A) should be upheld.

7.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered the arguments of the assessee in the light of the bank account statements and confirmations filed by Smt. D. Radhika Reddy and Shri Sudheer Reddy. The assessee claimed that, out of his retirement benefits, he had given a loan of Rs. 9,55,000/- to his sister, Smt. D. Radhika Reddy, for

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the purpose of admission of her daughter to a medical course. For this purpose, the assessee had furnished relevant bank account statements along with a confirmation letter from Smt. D. Radhika Reddy, including the details of her source of income. From the details submitted by the assessee, we find that, the assessee had issued two demand drafts on 09.06.2014 and the same were cancelled and credited into the bank account of the assessee on 11.06.2014. Further, the assessee withdrew cash of Rs. 6,50,000/- on 11.06.2014 and a further sum of Rs. 1,00,000/- on 16.06.2014 and claimed that, when the college refused to accept the demand draft, he had cancelled the demand drafts and drawn cash from the bank and the same was given to his sister for onward payment to the college. This fact has been confirmed by Smt. D. Radhika Reddy by filing a confirmation letter along with her source of income. From the details filed by the assessee, it appears that, the assessee, out of his retirement benefits, had given a hand loan to his sister for the purpose of her daughter's medical admission and the same was returned during the financial year relevant to the assessment year under consideration. Since the assessee has furnished relevant

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evidences, including a confirmation from Smt. D. Radhika Reddy, in our considered view, the A.O. ought to have accepted the explanation of the assessee regarding the source for the cash deposits into the bank account. Further, the assessee claimed to have received a sum of Rs. 1,50,000/- from his brother, Shri Sudheer Reddy, towards repayment of the loan given to him for the purpose of agricultural operations and Shri Sudheer Reddy has confirmed the loan transaction by filing a confirmation letter along with his proof of income. From the details filed by the assessee, it appears that, these are the genuine transactions between relatives for the purpose of meeting necessities and, therefore, in our considered view, the A.O. ought to have accepted the explanation of the assessee with regard to the source for the cash deposits. Since the assessee has furnished relevant evidences, including confirmations from both the parties, in our considered view, the assessee has satisfactorily explained the source for the cash deposits into the bank account during the demonetization period. The Ld. CIT(A), without appreciating the relevant facts, simply sustained the addition made by the A.O. towards cash deposits of Rs. 8,26,500/- under Section 69A of the

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Income-tax Act, 1961. Thus, we set aside the order of the Ld. CIT(A) and delete the addition made by the A.O. towards cash deposits of Rs. 8,26,500/- under Section 69A of the Act.

8.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the Open Court on 17th June, 2026.

Sd/- Sd/- (श्री रवीश सूद) (मंजूनाथ जी) (RAVISH SOOD) (MANJUNATHA G.) न्याययक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER Hyderabad, dated 17.06.2026. TYNM/sps आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : Garlapati Sudhakar Reddy, H.No.2-2-647/225, P1, Satya Sai Apartments, Srinivas Nagar, Central Excise Colony, Bagh Amberpet, Hyderabad – 500013. 2. रधजस्व/ The Revenue : The Income Tax Officer, Ward 13(5), Hyderabad. 3. The Principal Commissioner of Income Tax, Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Digitally signed by TIRUPATI TIRUPATI YAMINI YAMINI NAGA MALLESWARI NAGA MALLESWARI Date: 2026.06.18 15:32:04 +05'30' Sr. Private Secretary ITAT, Hyderabad

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