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Facts
During a police search, cash of Rs. 70 lakhs was found with the assessee. The assessee explained that Rs. 45 lakhs was advance for sale of agricultural land and Rs. 25 lakhs was past savings. The Assessing Officer treated the entire amount as unexplained income under Section 69A of the Income Tax Act, 1961.
Held
The Tribunal held that the issue regarding the source of cash requires proper verification of evidence. To serve the interest of justice, the Tribunal set aside the orders of the lower authorities and restored the matter to the Assessing Officer for fresh adjudication.
Key Issues
Whether the cash found with the assessee was appropriately treated as unexplained income, and if the assessee was given sufficient opportunity to prove the source of the cash.
Sections Cited
69A, 132A, 143(3), 143(2), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
ORDER PER MADHUSUDAN SAWDIA, A.M.: This appeal is filed by Sri Lagusari Peddasunkanna (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals)-11, Hyderabad (“Ld. CIT(A)”), dated 25/02/2025 for the Assessment Year (“A.Y.”) 2022-23.
vs. DCIT 2. At the outset, it is observed that there is a delay of 78 days in filing the present appeal before this Tribunal. In this regard, the assessee has filed a petition for condonation of delay along with an affidavit explaining the reasons for the delay in filing the appeal. The Learned Authorised Representative (“Ld. AR”) submitted that the assessee is residing at Kurnool, which is situated at a considerable distance from Hyderabad, where the jurisdictional Bench of the Tribunal is located. It was further submitted that the assessee does not have adequate knowledge of income-tax proceedings and the appellate remedies available under the Income Tax Act, 1961 (“the Act”). Due to lack of familiarity with the legal procedures, the assessee required time to consult an appropriate tax consultant for the purpose of filing the appeal before this Tribunal. The Ld. AR submitted that the delay in filing the appeal was neither intentional nor deliberate, but occurred due to bona fide reasons. Therefore, the Ld. AR prayed that the delay may kindly be condoned and the appeal may be admitted for adjudication on merits.
Per contra, the Learned Departmental Representative (“Ld. DR”) objected to the condonation of delay and submitted that the assessee has not shown sufficient cause for the delay and therefore the petition for condonation deserves to be rejected.
We have heard the rival submissions and perused the material available on record including the condonation petition and the affidavit filed by the assessee. It is a settled principle that while considering an application for condonation of delay, a justice-oriented and liberal approach should be adopted
Page 2 of 8 Lagusari Peddasunkanna vs. DCIT so that substantial justice is not defeated on technical grounds. The Hon’ble Supreme Court in the case of Vidya Shankar Jaiswal v. CIT (174 Taxman.com 21) has held that a justice-oriented and liberal approach should be adopted while considering applications for condonation of delay. Respectfully following the principle laid down by the Hon’ble Supreme Court and considering the facts and circumstances of the present case, we are satisfied that the assessee was prevented by reasonable and sufficient cause from filing the appeal within the prescribed time limit. Accordingly, in the interest of substantial justice, the delay of 78 days in filing the appeal before the Tribunal is condoned and the appeal is admitted for adjudication on merits.
The assessee has raised the following grounds of appeal:
“1. The order of the Learned Commissioner of Income Tax (Appeals) is erroneous both in law as well as on the facts of the case.
On the facts and circumstances of the case, the Learned CIT(Appeals) is not Justified in upholding the addition made of Rs.70,00,000/- as unexplained Income u/s.69A of the 1.T. Act even though the sources were explained.
3. On the facts and circumstance of the case, the Learned CIT(Appeals) is not justified in relying upon the remand report furnished by the Assessing Officer without verifying the fact whether the Assessing Officer has made any enquiries or not which is against the principles of natural justice.
4. On the facts and circumstance of the case, the Learned CIT(Appeals) ought to have appreciated that no sale/purchase agreement can be considered as bogus unless it is proved beyond doubt that no such transaction has really been carried out by causing the proper enquiries.
5. On the facts and circumstances of the case, the Learned CIT(A) also ought to have appreciated that there can be no evidence that can be produced with regard to the family savings and further the CIT(A) ought to have considered and allowed such source, since the appellant could furnish copies of the pattadar books in support of land holdings.
On the facts and circumstances of the case, the Learned CIT(Appeals) ought to have considered that the Assessing Officer could not be able to prove that the lands does not belong to the appellant by establishing that such land holdings does not belong to the appellant and therefore, the Ld. CIT (Appeals) ought to have allowed the claim made by the appellant.
6. The brief facts of the case are that the assessee, an individual, filed his return of income for the Assessment Year 2022–23 on 20.10.2022 declaring total income at Rs. Nil. During a search operation conducted by the local police at a lodge in Kurnool on 08.04.2021, the police authorities found cash amounting to Rs.70 lakhs in the possession of the assessee along with five other persons. On receipt of the said information, the Income Tax Department issued a warrant of requisition under section 132A of the Income Tax Act, 1961 (“the Act”) on 19.07.2021, and the said cash amounting to Rs.70 lakhs was requisitioned by the Revenue. Subsequently, the case of the assessee was selected for compulsory scrutiny and accordingly notice under section 143(2) of the Act dated 12.12.2022 was issued. Thereafter, notice under section 142(1) of the Act dated 22.12.2022 was issued by the Learned Assessing Officer (“Ld. AO”) calling upon the assessee to explain the source of the cash amounting to Rs.70 lakhs found in his possession. In response to the said notice, the assessee filed a reply dated 28.12.2022 explaining that Rs.45 lakhs out of the said cash represented advance received for sale of agricultural land, while the balance amount of Rs.25 lakhs was stated to be the past savings of the assessee and his family members. The Ld. AO required the assessee to furnish documentary evidence in support of the said explanation. However, the assessee failed to file any documentary evidence substantiating the claim regarding the source of the cash. Consequently, the Ld. AO treated the entire
Page 4 of 8 Lagusari Peddasunkanna vs. DCIT cash amounting to Rs.70 lakhs as unexplained money under section 69A of the Act and added the same to the income of the assessee. Accordingly, the Ld. AO completed the assessment under section 143(3) of the Act vide order dated 19.02.2024, assessing the total income of the assessee at Rs.70 lakhs.
Aggrieved by the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee reiterated the same explanation regarding the source of cash of Rs.70 lakhs and also filed certain documents including copy of Pattadar Passbook evidencing ownership of agricultural land measuring 4 acres jointly with his brother, copy of purchase document of the said land and copy of sale document relating to sale of two acres of land. The Ld. CIT(A) called for a remand report from the Ld. AO and after considering the material placed on record, the remand report of the Ld. AO and the submissions of the assessee, the Ld. CIT(A) was not convinced with the explanation offered by the assessee. Accordingly, the Ld. CIT(A) upheld the addition made by the Ld. AO and dismissed the appeal of the assessee.
Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal. The Ld. AR submitted that the assessee along with his brother is the owner of agricultural land measuring 4 acres, in support of which the assessee has filed the Pattadar Passbook and purchase documents relating to the said land. The Ld. AR further submitted that the assessee had entered into an agreement for sale dated 25.02.2021 with four persons for sale of 2 acres of land out of the said land at the rate of Rs.40 lakhs per acre, and had received advance of Rs.45 lakhs in cash from the purchasers. In support of the said
Page 5 of 8 Lagusari Peddasunkanna vs. DCIT claim, the assessee filed an unregistered agreement to sell dated 25.02.2021. With regard to the remaining amount of Rs.25 lakhs, the Ld. AR submitted that the same represented past savings of the assessee and his family members. The Ld. AR further submitted that the Ld. AO made the addition and the Ld. CIT(A) dismissed the appeal mainly due to lack of adequate supporting evidence. The Ld. AR submitted that if one more opportunity is provided, the assessee will produce all the necessary documentary evidence in support of his claim before the Ld. AO. Therefore, the Ld. AR requested that the issue may be set aside to the file of the Ld. AO for fresh examination.
Per contra, the Ld. DR strongly objected to the request of the assessee and contended that adequate opportunities had already been provided by the Ld. AO as well as by the Ld. CIT(A). Despite sufficient opportunities, the assessee failed to furnish any credible evidence to substantiate the explanation regarding the source of the cash. Therefore, the Ld. DR submitted that the assessee should not be given any further opportunity and the orders of the lower authorities deserve to be upheld.
We have heard the rival submissions and perused the material available on record. It is an undisputed fact that during the police search conducted on 08.04.2021, cash amounting to Rs.70 lakhs was found in the possession of the assessee. Subsequently, the said cash was requisitioned by the Income Tax Department under section 132A of the Act. During the assessment proceedings, the assessee explained that the cash represented advance received for sale of agricultural land and partly the past savings of the assessee and his family
Page 6 of 8 Lagusari Peddasunkanna vs. DCIT members. However, since the assessee failed to substantiate the said explanation by producing documentary evidence, the Ld. AO treated the entire amount of Rs. 70 lakhs as unexplained money under section 69A of the Act. Before the Ld. CIT(A), the assessee filed certain documents relating to ownership of agricultural land and an agreement for sale dated 25.02.2021, however the Ld. CIT(A) was not satisfied with the explanation of the assessee. Before us, the Ld. AR submitted that the assessee could not properly substantiate the explanation before the lower authorities due to lack of proper opportunity and requested that one more opportunity may be granted to produce the necessary evidences in support of the explanation regarding the source of the cash. Considering the totality of facts and circumstances of the case, we are of the view that the issue relating to the source of cash requires proper verification of the evidences which the assessee proposes to file. In the interest of justice, we deem it appropriate to set aside the orders of the lower authorities on this issue and restore the matter to the file of the Ld. AO for fresh adjudication. The Ld. AO is directed to examine the evidences to be filed by the assessee and decide the issue afresh in accordance with law after providing adequate opportunity of being heard to the assessee. The assessee is also directed to co-operate with the Ld. AO in the set-aside proceedings and shall not seek unnecessary adjournments. The assessee shall be at liberty to file all the necessary evidences in support of his claim before the Ld. AO.
Order pronounced in the Open Court on 13th March, 2026.