BOGIREDDY VENKATA RAMI REDDY,HYDERABAD vs. ACIT, CENTRAL CIRLCE-2(2), HYDERABAD

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ITSSA 940/HYD/2025Status: DisposedITAT Hyderabad13 January 2026AY 2013-201443 pages
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What did the Tribunal hold?

The Tribunal held that the Assessing Officer (AO) erred in making additions for unexplained investment by adding two zeros to the figures in the seized documents and in estimating interest at an average rate of 21% on the total loan amount computed by adding two zeros. The Tribunal found that the CIT(A) sustained these additions without appreciating the facts. The Tribunal set aside the CIT(A)'s order and directed the AO to make additions for unaccounted cash loans strictly as per the figures recorded in the seized documents, without adding two zeros. The AO was also directed to compute additions for interest income based solely on the interest reflected in the seized material, without estimation. Finally, the AO was directed to compute the tax liability on these additions by applying the provisions of Section 115BBE of the Income Tax Act, 1961. The Tribunal rejected the assessee's argument regarding the application of Section 115BBE, stating that once additions are made under Sections 68, 69, 69A, and 69C, and the explanation is unsatisfactory, Section 115BBE becomes mandatory. The Tribunal noted that the assessee admitted the transactions in the seized documents related to his finance business were unaccounted.

What were the facts?

The assessee, Bogireddy Venkata Rami Reddy, filed appeals against the orders of the Commissioner of Income Tax (Appeals) for assessment years 2013-14 to 2019-20. These appeals stem from a search and seizure operation under Section 132 of the Income Tax Act, 1961, conducted on July 12, 2018, at the assessee's residential premises. During the search, incriminating material, including a notebook detailing finance business transactions, was seized. The assessee, in a statement under Section 132(4), confirmed the notebook contained his finance business accounts, with figures recorded in hundreds by truncating the last two zeros. Subsequently, a notice under Section 153A was issued. The Assessing Officer (AO) interpreted the seized documents by adding two zeros to the figures, leading to additions for unexplained investment in loans and consequent interest earned. The CIT(A) sustained these additions.

What were the issues?

1. Whether the Commissioner of Income Tax (Appeals) erred in sustaining the addition of ₹2,92,49,127/- on account of unexplained investment (loans), as per Section 68/69/69A/69C of the Income Tax Act, 1961, in the absence of any evidence and by misinterpreting legal presumptions and human probability? 2. Whether the Commissioner of Income Tax (Appeals) erred in upholding the application of Section 115BBE of the Income Tax Act, 1961, on the addition of ₹2,92,49,127/-, without first establishing the fact of unexplained investment and requiring the assessee to prove the source based on presumption? 3. Whether the Commissioner of Income Tax (Appeals) erred in sustaining the addition of ₹99,16,530/- on account of interest earned (on loans), as per Section 68/69/69A/69C of the Income Tax Act, 1961, in the absence of any evidence and by misinterpreting legal presumptions and human probability? Assessee's Contentions: The assessee argued that the CIT(A) deviated from seized material, ignored independent evidence, and misinterpreted Section 132(4A) and human probability. The assessee contended that the additions were erroneous as the AO added two zeros to the figures recorded in the seized documents, which were meant to be in hundreds. The assessee also argued that Section 115BBE was wrongly applied without establishing unexplained investment first. The assessee further argued that interest should not be estimated on the entire loan amount, especially when only a small portion was received, and that the seized documents clearly showed the interest actually received. The assessee also pleaded to telescope loan amounts received back and interest received against fresh loans advanced. Revenue's Contentions: The judgment does not explicitly record the revenue's contentions.

Which sections of the Income-tax Act were involved?

Section 132,Section 132(4),Section 153A,Section 68,Section 69,Section 69A,Section 69C,Section 115BBE

AI-generated summary — verify with the full judgment below

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

आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : Bogireddy Venkata Rami Reddy, Flat No.G5, Srinivas Novas Spots, Addagutta Society, Kukatpally, Hyderabad – 500085, Telangana. 2. रधजस्व/ The Revenue : The Assistant Commissioner of Income Tax, Central Circle 2(2), 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

Sr. Private Secretary ITAT, Hyderabad

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