DHARMA RAO NAINENI,HYDERABAD vs. ITO, WARD - 11(1), HYDERABAD

ITA 614/HYD/2026Status: DisposedITAT Hyderabad23 September 2026AY 2017-1811 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition of Rs. 30,00,000 in the hands of the assessee under section 69A of the Act was unsustainable. The Tribunal noted that the assessee's son, Mr. N. Lakshmikanth, had admitted to transferring Rs. 30 lakhs to his father on March 15, 2017, from his bank account. This amount was sourced from a credit of Rs. 35 lakhs received via RTGS from 'AIM DEVELOPERS AND BUILDERS-N' on March 14, 2017. The Tribunal reasoned that the explanation of the son regarding the source of the amount paid to the assessee was substantiated because the Rs. 30 lakhs was sourced from his bank account, which had a substantial credit the day before the transfer. Crucially, the Tribunal pointed out that the '1st Proviso' to Section 68, which requires an explanation for the source of credit, was introduced only from April 1, 2023, and was not applicable to AY 2017-18. Therefore, the AO could not have looked into the 'source of source' for the Rs. 35 lakhs. The Tribunal also questioned the applicability of Section 69A, stating that a credit entry in a bank account does not fall within the definition of 'money, bullion, jewellery or other valuable article' as contemplated by Section 69A. The addition, if any, should have been considered under Section 69. Consequently, the addition of Rs. 30 lakhs was vacated.

What were the facts?

The assessee, Dharma Rao Naineni, is appealing an order by the CIT(A) which upheld an addition made by the Assessing Officer (AO) under section 147 r.w.s. 144B of the Income Tax Act, 1961, for Assessment Year 2017-18. The AO initiated reassessment proceedings as the assessee had not filed a return for the year. During assessment, the AO noted a credit of Rs. 30,00,000 in the assessee's bank account on March 15, 2017. The assessee claimed this was an internal family transfer from his son, Mr. N. Lakshmikanth. Despite requests for details regarding the son's PAN, transaction purpose, and bank statements, the assessee provided only the son's PAN. The AO later issued a notice to the son, who confirmed the transfer of Rs. 30 lakhs to his father for meeting payment obligations, stating it was an internal family adjustment. The son also provided his bank statement and income tax returns for AY 2015-16 and AY 2016-17. The AO observed that the son's bank account had a credit of Rs. 35 lakhs on March 14, 2017, from 'AIM DEVELOPERS AND BUILDERS-N' via RTGS, and that the son's taxable income in preceding years was insufficient to explain the Rs. 30 lakh transfer.

What were the issues?

1. Whether the addition of Rs. 30,00,000 as unexplained money under section 69A of the Act by the AO, and sustained by the CIT(A), is erroneous on facts and in law? Assessee's Contention: The amount of Rs. 30 lakhs was received as an internal family arrangement from his son, Mr. N. Lakshmikanth, via bank transfer. The son had confirmed this payment to the assessee to meet his obligations and provided his bank statement and income tax returns. Therefore, it should not be treated as unexplained money under section 69A. Revenue's Contention: The AO observed that the assessee's son did not have the capacity to transfer Rs. 30 lakhs from his own sources, as his taxable income in AY 2015-16 and AY 2016-17 was Rs. 5,25,200/- and Rs. 5,10,400/- respectively. Furthermore, both the assessee and his son failed to explain the source of the Rs. 35 lakhs credited to the son's bank account, from which the Rs. 30 lakhs was transferred to the assessee.

Which sections of the Income-tax Act were involved?

Section 147,Section 144B,Section 148A,Section 148,Section 142(1),Section 133(6),Section 69A,Section 68,Section 69

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCHES, HYDERABAD

Before: SHRI RAVISH SOOD, HON’BLE & SHRI MADHUSUDAN SAWDIA, HON’BLE

For Respondent: Shri B Laxmi Kanth, Sr-AR

PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Center, Delhi (for short, “CIT(A)”), dated 12/01/2026, which in turn arises from the order passed by the Assessing Officer (“AO”) under section 147 r.w.s. 144B of t

The order continues below.

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