POREDDY SAMBASIVA REDDY,KADIRI vs. ITO, WARD-1, HINDUPUR

The assessee has raised the following grounds of appeal: “1. Incorrect Addition of Rs 3,45,51,000/- as Unexplained Income u/s 69A The Assessing Officer and the CIT(A) erred in treating the cash deposits in Andhra Pragathi Grameena Bank as unexplained income uls 69A. In reality, these deposits represented business proceeds belonging to Mr. Vuturi Ramana Reddy and Mr. Bandaru Murali, who were operating liquor business and had duly declared such income in their own returns. The appellant merely acted as a conduit to facilitate the deposit and transfer of sale proceeds, having no ownership OR beneficial interest in the funds. 2. Failure to Consider Relevant Evidence and Circumstances Both the AO and CIT(A) failed to consider the factual context, namely that the appellant was a non-proprietor employee assisting in cash handling for the liquor business. The authorities should have verified the ownership of the funds before drawing adverse conclusions. The impugned addition, made without corroboration OR ownership nexus, is arbitrary and unsustainable. 3. Improper Invocation of Section 144 (Best Judgment Assessment) The learned AO wrongly invoked section 144 despite absence of valid service OR effective communication of notices under section 142(1) and 148A(b). The appellant was 3 unaware of the electronic communication process under the Faceless Scheme and hence could not respond in time which was not deliberate default but due to genuine ignorance and third party dependency. The CIT(A) also erred in upholding the assessment without addressing this procedural irregularity. 4. Erroneous Determination of Income at Rs 5,68,24,840/- The estimation of total income at Rs 5.68 crores has no rational basis 4 OR supporting evidence. It is grossly excessive, contrary to the facts, and disproportionate to the appellants financial profile and actual role in the transaction chain. 5. Condonation of Non-Compliance Under Bona Fide Circumstances The non-response to the notices issued u/s 250 was not intentional but due to genuine inability to secure the required data from the actual business owners. The CIT(A) 5 ought to have exercised discretion to admit the additional evidence OR adjourn the matter rather than dismissing the appeal outright. The appellant now possesses all relevant details and prays for their admission before the Hon’ble Tribunal under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. 6. Excessive and Unjust Demand of Rs 10,17,29,971/-The resultant tax demand is grossly excessive and not reflective of 6 the appellants real income OR capacity. The addition being based on presumption and not evidence deserves to be deleted in entirety. 7. Invalid Reopening of Assessment u/s 147 The reassessment initiated u/s 148 was bad in law and void ab initio since it was based solely on Insight Portal flagged information of cash deposits without any independent application of mind OR 7 tangible material to form a belief that income had escaped assessment. The CIT(A) failed to appreciate that the Assessing Officer had merely relied on third-party information without establishing a direct nexus between the appellant and the alleged escaped income. 8. Erroneous Dismissal Without Adjudication on Merits The CIT(A) erred in dismissing the appeal merely for non-compliance to hearing notices without Reddy and Mr. Bandaru Murali, who were in possession of the relevant details and initially refused to share information fearing departmental scrutiny the learned CIT(A) failed to appreciate the bona fide nature of the appellants non appearance. The appellant has now obtained all the necessary documentary evidence and is ready to furnish the same. Hence, the order of the CIT(A) deserves to be set aside.”

The brief facts of the case are that the assessee is an individual who did not file any return of income for the Assessment Year 2018–19 under section 139 of the Income Tax Act, 1961 (“the Act”). Based on the information available in the Insight Portal of the Department, the Learned Assessing Officer (“Ld. AO”) issued a notice dated 22.03.2022 under section 148A(b) of the Act calling upon the assessee to explain certain transactions reflected in his bank account. However, the assessee did not respond to the said notice. Accordingly, the Ld. AO passed an order under section 148A(d) of the Act on 02.04.2022 holding that it was a fit case for issuance of notice under section 148 of the Act and consequently issued notice under section 148 of the Act on 03.04.2022. During the reassessment proceedings, the assessee neither filed the return of income in response to the notice issued under section 148 of the Act nor complied with the various notices issued by the Ld. AO. Consequently, the Ld. AO proceeded to complete the assessment on the basis of the information available on record. On verification of the bank account of the assessee, the Ld. AO found that there was a total deposited of Rs.5,67,57,068/- including cash in his bank account during the year under consideration. Since no explanation was furnished by the assessee regarding the source of the said deposits, the Ld. AO treated the same as unexplained money under section 69A of the Act and added the same to the income of the assessee. The Ld. AO also observed that the assessee had earned interest income of Rs.67,772/- from the bank during the year under consideration and since the assessee had not filed any return of income, the same was also added to the income of the assessee. Accordingly, the Ld. AO completed the assessment under section 147 read with sections 144 and 144B of the Act vide order dated 28.02.2024, determining the total income of the assessee at Rs.5,68,24,840/-, comprising addition of Rs.5,67,57,068/- under section 69A of the Act and Rs.67,772/- on account of interest income. 4. Aggrieved by the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). However, the assessee failed to comply with the notices issued by the Ld. CIT(A). Consequently, the Ld. CIT(A) dismissed the appeal of the assessee and upheld the order passed by the Ld. AO. 5. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal. The Learned Authorised Representative (“Ld. AR”) submitted that the assessee was working as an employee with M/s Rekha Wines for the period from 01.04.2017 to 30.06.2017 and thereafter with M/s Chandana Wines for the period from 01.07.2017 to 31.03.2018. The Ld. AR further submitted that both the said concerns were engaged in the business of sale of wines and liquor where substantial transactions were carried out in cash. The Ld. AR submitted that the cash sales proceeds of the wine shops were temporarily deposited in Poreddy Sambasiva Reddy vs. ITO Page 5 of 8