SARASWATHI NALLABOTU,HYDERABAD vs. ITO, WARD-7(2), HYDERABAD

During the course of the assessment proceedings, the AO observed that a perusal of the record revealed that the assessee during the demonetization period, i.e., 09/11/2016 to 30/12/2016, had debits in his bank account No.62206264324 held with State Bank of Hyderabad, 5-7- 1, Near Prakasam Bazar, Shopping Complex, Nalgonda. As the assessee had failed to respond to the notices issued by the AO, the latter treated the cash deposits in the assessee’s bank account of Rs. 32,62,906/- as unexplained cash credits under section 68 of the Act. Apart from that, the AO, in the absence of the requisite details, disallowed the assessee’s claim for deduction under Chapter-VIA of Rs.1,61,350/-. Accordingly, the AO, vide his order dated 29/11/2019, passed under section 144 of the Act, determined the assessee's income at Rs. 42,52,390/-.

Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success.

Ostensibly, as the assessee had failed to participate in the proceedings before the first appellate authority, the latter held a conviction that the assessee was not interested in pursuing the appeal, and finding no infirmity in the view taken by the AO, upheld the addition made by him and dismissed the appeal.

The assessee, aggrieved with the order of the CIT(A), has carried the matter in appeal before us.

We have heard the Learned Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record.

Smt S Sandhya, Advocate, Learned Authorized Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal submitted that as the assessee was prevented by certain reasons from substantiating her claim regarding the source of the credits in her bank account before the authorities below, therefore, an application seeking admission of additional evidence is filed under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. The Ld. AR has taken us through the aforesaid application filed under Rule 29, wherein she has placed on record copies of the assessee’s bank accounts held with various banks and the sale deed dated 20/12/2016, which runs into 31 pages.

Elaborating on the reasons for not filing the aforementioned documents before the authorities below, the Ld. AR submitted that the assessee due to health problem and circumstances beyond her control could not respond to the notices and furnish the aforesaid documents in the course of the assessment proceedings, as a result whereof the AO framed the assessment vide an ex-parte order under section 144 of the Act, dated 29/12/2019, wherein after making an addition of Rs.32,62,906/- under section 69A of the Act, the income of the assessee was determined at a high pitched amount of Rs.42,52,390/-.

The Ld. AR submitted that thereafter the assessee had filed an appeal before the CIT(A), but he had dismissed the appeal without properly adjudicating the grounds based on which the impugned order of assessment was assailed before him and failed to consider the information that was furnished by the assessee appellant.

Coming to the merits of the case, the Ld. AR submitted that both the authorities below had grossly erred in law and in the facts of the case by failing to appreciate the nature and source of the credits in the assessee’s bank account. Elaborating on her contention, the Ld. AR submitted that the assessee had sold an immovable property vide a registered sale deed, dated 20/12/2016 and had received an advance sale consideration of Rs. 20 lakhs in cash from the purchaser. The Ld. AR, to buttress her contention, has taken us through the copy of the registered sale deed, dated 20/12/2016, Pages 23 to 29 of APB, which revealed that the assessee had sold the subject property and was in receipt of sale consideration of Rs.20 lakhs in cash from the purchaser, viz., Sri Lodangi Govardhan S/o. Chandraiah, resident of Plot No.353, Chandragiri Villas, Cherlapally, Nalgonda town. The Ld. AR submitted that out of the aforesaid amount of Rs.20 lakhs that was received by the assessee as an advance sale consideration for the subject property, she had made a cash deposit of Rs.16,31,453/- in his aforementioned bank account No.62206264324 on 18/11/2016 with State Bank of Hyderabad, 5-7-1, Near Prakasam Bazar, Shopping Complex, Nalgonda, Page 19 of APB. The Ld. AR submitted that the assessee, except for her salary income and the subject property transaction, had no other source of income during the year under consideration.

Carrying her contention further, the Ld. AR submitted that the actual cash deposits in the assessee's bank account during the subject year amounted to Rs.16,31,453/-, i.e., the cash deposits made by her on 18/11/2016 (supra), and that the AO had wrongly taken the same at Rs.32,62,906/-. The Ld. AR to buttress the aforesaid factual position has 5 filed before us an affidavit of the assessee, viz., Smt. Saraswathi Nallabotu, D/o. N. Balaiah, wherein she had deposed the aforesaid facts regarding the source of the cash deposits as well as Rs.16,31,453/- that was deposited by her towards her housing loan on 18/11/2016 with State Bank of Hyderabad, 5-7-1, Near Prakasam Bazar, Shopping Complex, Nalgonda.

Per contra, Shri B Laxmi Kanth, Learned Senior Departmental Representative (for short, “Ld. Sr-DR”) submitted that as the assessee had, despite sufficient opportunity, failed to place on record the aforesaid document before both the authorities below, the same cannot, at this stage, be admitted. Elaborating on his contention, the Ld. Sr. DR submitted that though it is the claim of the assessee that the cash deposits of Rs.16,31,453/- made in her bank account on 18/11/2016 were sourced out of the cash sale consideration of the property received in advance during the year under consideration, but nothing was discernible from the registered sale deed, dated 20/12/2016, which would evidence that the cash of Rs.20 lakhs was received and available with the assessee on 18/11/2016. Apart from that, the Ld. Sr. DR submitted that the assessee’s claim that the AO had wrongly taken the cash deposits in her bank account at Rs.32,62,906/- as against the actual amount of Rs.16,31,453/- cannot be summarily accepted.

We have given thoughtful consideration to the contentions advanced by the Learned Authorized Representatives of both parties in the backdrop of the orders of the authorities below.

Admittedly, it is a matter of fact borne from the record that the assessee in her affidavit, dated 12/09/2026, has claimed to have received a cash advance of Rs.20 lakhs pertaining to the sale of property to Shri Lodangi Govardhan S/o Chandraiah, on 15/11/2016, which in turn was utilized for sourcing the cash deposits of Rs.16,31,453/- made on 18/11/2016 with State Bank of Hyderabad, 5-7-1, Near Prakasam Bazar, Shopping Complex, Nalgonda. Also, Shri Lodangi Govardhan S/o. Chandraiah has filed an affidavit dated 20/09/2026, wherein he has confirmed to have paid Rs. 20 lakhs in cash to Smt. Saraswathi Nallabotu (the assessee) on 15/11/2016, as advance sale consideration, and the balance sale consideration on 20/12/2016 through cheque/Demand Draft bearing No. 790558. Apart from that, it is the assessee’s claim that the actual cash deposits in her bank account during the subject year amounted to Rs.16,31,453/-, but the AO wrongly took the same at double the amount, i.e., Rs.32,62,906/- while framing the assessment.

We are of the view that as the aforesaid claim of the assessee both as regards the amount of the cash deposits in her bank account as well as the source thereof, as have been raised before us by drawing support from documents that have been filed before us as additional evidence, were not there before the authorities below, therefore, the matter requires to be set aside to the file of the AO with a direction to readjudicate the case after considering the same. The AO is directed to consider the assessee's claim both regarding the amount of cash deposits stated to have been wrongly taken by the AO while framing the assessment, and the source thereof, in the backdrop of the additional evidence so filed before us.

Before parting, we may herein observe that though the assessee has claimed that she had received cash advance of Rs.20 lakhs from Shri Lodangi Govardhan S/o. Chandraiah, i.e., the purchaser of the property on 15/11/2016, but we find that the said claim is not irrefutably evidenced by the sale deed dated 20/12/2016, as the same merely states that the subject amount had already been paid to the assessee. In our view, the aforesaid claim of the assessee, which is supported by her affidavit as well as that of Shri Lodangi Govardhan S/o. Chandraiah (supra), i.e., the purchaser of the property, though inspires confidence regarding the date of receipt of the cash advance, but in our view, the AO, in order to dispel all doubts regarding the veracity of the said claim, should carry out necessary verifications in the course of the set aside proceedings, as he may deem fit.

We thus, in terms of our aforesaid observations, set aside the order passed by the CIT(A) and restore the matter to the file of the AO in terms of our aforesaid observations.

In the result, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations.