VENEPALLI SATYANARAYANA RAO,NALGONDA vs. ITO, WARD-1, SURYAPET

ITA 2100/HYD/2025Status: DisposedITAT Hyderabad16 October 2026AY 2013-148 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the assessee, who was an agriculturist before starting the liquor business, had filed new evidence before the Tribunal to support claims of opening capital and HUF receipts. While the AO and CIT(A) had rejected these due to lack of evidence at their level, the Tribunal found the new evidence, including land holdings and sale bills for paddy, and lease deeds for HUF property, to be potentially valid. However, since these were not verified by the AO, the Tribunal set aside these issues to the AO for verification. Regarding the liquor sales, the Tribunal observed that the sales were recorded in the assessee's books of account, which were audited. The AO's rejection was based solely on the perceived abnormality of sales on two specific days compared to the average. The Tribunal found the AO's reasoning insufficient to reject the explanation without rejecting the books of account. Therefore, this issue was also set aside to the AO for verification in light of the evidence filed by the assessee. The appeal was allowed for statistical purposes.

What were the facts?

The assessee, Venepalli Satyanarayana Rao, proprietor of Keerthi Wines, filed a return of income for AY 2013-14 declaring Rs. 7,92,550. The Assessing Officer (AO) initiated scrutiny due to cash deposits of Rs. 27,90,000 in the assessee's savings bank account. The assessee explained these deposits as opening capital (Rs. 12,23,719), funds from HUF out of agricultural income (Rs. 7,61,900), and sale of liquor (Rs. 11,00,000). The AO rejected the explanation for opening capital and HUF funds due to lack of evidence, adding Rs. 12,60,000 and Rs. 7,61,900 respectively. Regarding liquor sales, the AO accepted Rs. 2,00,000 and added the balance Rs. 9,00,000 as unexplained expenditure under Section 69C. The CIT(A) upheld these additions. The assessee appealed to the ITAT.

What were the issues?

1. Whether the addition of Rs. 12,60,000 as unexplained cash credit (opening capital) is justified, considering the assessee's claim of being an agriculturist and the subsequent filing of evidence before the Tribunal? (Question of law and fact, turning on Section 68). 2. Whether the addition of Rs. 7,61,900 received from HUF out of agricultural income is justified, given the assessee's claim and the evidence filed before the Tribunal? (Question of law and fact, turning on Section 68). 3. Whether the addition of Rs. 9,00,000 as unexplained expenditure under Section 69C, relating to liquor sales, is justified, especially when sales are recorded in audited books of account? (Question of law and fact, turning on Section 69C). Assessee's Contentions: The assessee argued that crucial evidence for opening capital and HUF receipts, including proof of agricultural land and lease deeds, was filed for the first time before the Tribunal. The assessee claimed to be an agriculturist with substantial income. Regarding liquor sales, the assessee contended that the additions under Section 69C were incorrect as sales were recorded in audited books, and the AO had not rejected the books. Alternatively, the assessee suggested estimating profit at 3% on total sales. Revenue's Contentions: The Revenue supported the CIT(A)'s order, arguing that the assessee was a non-filer for earlier years, and the claims of opening capital and HUF receipts lacked credible evidence. The Revenue also contended that the liquor sales claim was not justified given the average daily sales.

Which sections of the Income-tax Act were involved?

Section 68,Section 69C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCHES, HYDERABAD

Before: SHRI MANJUNATHA.G, HON’BLE & SHRI RAVISH SOOD, HON’BLE

PER MANJUNATHA.G, AM:

This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals)/Addl/JCIT(A)-1, [in short “the Ld.CIT(A)”] Delhi, dated 29.09.2025, and pertains to assessment year 2013-14. ITA 2100/HYD/2025 VENEPALLI SATYANARAYANA RAO

2.

The brief facts of the case are that the

The order continues below.

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