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Facts
Police seized Rs. 1,00,00,000/- in cash from the assessee who was driving a car. The assessee initially claimed the cash belonged to his employer, then later claimed it was an advance for agricultural land sale which did not materialize.
Held
The Tribunal found that the assessee's claims regarding the source of the cash were inconsistent and lacked sufficient corroborative evidence. Therefore, the matter was set aside to the Assessing Officer for further verification.
Key Issues
Whether the seized cash represented unexplained income of the assessee, and if the assessee provided sufficient evidence to substantiate his claims regarding the source of the cash.
Sections Cited
131, 142(1), 69A, 115BBE, 250
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Income Tax Appellate Tribunal, Hyderabad “B” Bench, Hyderabad
करदाता का प्रतततितित्व/ : Shri P. Murali Mohan Rao, Assessee C.A. Represented by राजस्व का प्रतततितित्व/ : Dr. Sachin Kumar, Sr. A.R. Department Represented by सुिवाई समाप्त होिे की ततति/ : 13.01.2026 Date of Conclusion of Hearing घोर्णध की तधरीख/ 11.03.2026 : Date of Pronouncement O R D E R PER MANJUNATHA G., A.M : This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals) – 12, 2 Seenaiah Boddupalli Hyderabad (for short “Ld. CIT(A)”) dated 11.07.2025, pertaining to the assessment year 2020-21.
The grounds raised by the assessee read as under :
“1. The order of the Ld. CTT (A) u/s 250 of the Act dt. 11/07/2025 for the AY 2020-21 is erroneous both on facts and in law to the extent the order is prejudicial to the interests of the appellant.
2. The Ld. CIT (A) erred in dismissing the appeal without considering the facts and circumstances of the case.
3. The Ld. CIT(A) erred in confirming the addition made by the AO for the sum of Rs. 1,00,00,000 in the hands of assessee when assessee has furnished proper information and evidences.
4. The Ld. CIT (A) ought to have considered the Affidavits submitted before him which are proper documents and crucial evidence for disposing the appeal in favour of the appellant.
The Ld. CIT (A) ought not to have dismissed the appeal only on the basis of non-response to the remand report of the AO without appreciating explanation and evidences submitted by the assessee.
6. The Ld. CIT(A) have not considered that the transaction of sale of agricultural land were effected on oral agreement, which fact can be seen in the affidavits filed by the assessee.
The Ld. CIT(A) ought to have delete the addition made by the AO, as the amount does not belongs to the assessee and the advance amount was intended to be returned to respective parties.
Appellant may, add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal”.
The brief facts of the case are that, the assessee is an individual and is deriving income from salary. During the course of vehicle checking by the election flying squad team on 07.04.2019, police personnel found an amount of Rs.1,00,00,000/- in a Toyota Innova 3 Seenaiah Boddupalli car being driven by the assessee, Sri Boddupalli Seenaiah. The assessee stated that, he was working as driver for Sri Jai Veer Kunduru and upon his owner's direction, he was carrying the cash. However, the assessee could not produce relevant supporting documents nor given satisfactory reply for the cash being carried by him. Therefore, the cash was seized by the flying squad. A statement was recorded from Sri Jai Veer Kunduru under Section 131 of the Income-tax Act, 1961, dated 01.05.2019, who claimed to be the person for whom and on whose directions the seized cash was being carried back. In the statement, Sri Jai Veer Kunduru stated that, the assessee was working in his house for the last 24 years and he denied all the allegations made by the assessee before the police authorities and he also stated that, he is nowhere connected to the cash seized by the police. Subsequently, in the statement recorded under Section 131 of the Income-tax Act, dated 01.05.2019, the assessee stated that, during the month of March, 2019, one person came to him with a proposal of purchasing his entire agricultural land of Ac.10.83 guntas. After negotiations, the deal was settled to some extent and out of which Rs. 1,00,00,000/- was given as advance. However, on a later date, the deal could not be materialized 4 Seenaiah Boddupalli and the amount taken as advance was forced to be returned back. While carrying the amount to return back to the party, police personnel intercepted the vehicle and seized the cash. However, the assessee was once again unable to produce any documentary evidence in support of his explanation.
Subsequently, a notice under Section 142(1) of the Income-tax Act, dated 25.06.2021 was issued to the assessee calling for return of income. The assessee filed his return of income on 29.06.2021 admitting total income of Rs. 67,255/- and agricultural income at Rs. 2,72,565/-. During the course of assessment proceedings, the assessee neither personally appeared nor furnished any details. Therefore, a final show-cause notice dated 03.09.2021 was issued to the and the assessee was asked to explain the source for the cash found by the flying squad. The assessee submitted his reply on 29.06.2021 stating that, the cash seized was nothing but the advance for sale of his land, which did not materialize. The A.O., after considering the relevant submissions of the assessee, observed that, the assessee has made an oral statement without any valid documentary evidence to substantiate the claim of advance received from a person for selling his agricultural land. Therefore, the A.O.
5 Seenaiah Boddupalli rejected the explanation of the assessee and made addition of Rs.1,00,00,000/- under Section 69A of the Income-tax Act, 1961 and brought it to tax under Section 115BBE of the Income-tax Act, 1961.
5. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee filed certain additional evidences in the form of affidavit from the purported purchasers along with their identity proof and income proof. The Ld. CIT(A) forwarded the additional evidences filed by the assessee to the A.O. for his comments and remand report. The A.O., vide his letter dated 30.05.2025 has submitted a remand report and raised objections for admitting the additional evidences. The remand report was forwarded to the assessee and despite opportunity, no counter comments or rebuttal was filed. Therefore, a final opportunity was given to the assessee, for which the assessee filed written submissions and reiterated the arguments made before the A.O. during the course of assessment proceedings and claimed that, he had received Rs.1,00,00,000/- in cash from a person for selling his agricultural land and the deal was not materialized for some reasons and he was carrying the cash to return to the party, and at 6 Seenaiah Boddupalli the time the police personnel seized the cash. The Ld. CIT(A), after considering the relevant submissions of the assessee and also taking note of various evidences filed by the assessee, observed that, the assessee failed to substantiate the claim of receipt of advance for sale of agricultural land. In the absence of any relevant documentary evidence, the explanation remained unsubstantiated and was rightly rejected by the A.O. The source of the seized cash remained unexplained. Therefore, it was observed that, there is no error in the order passed by the A.O. in making addition towards cash found and seized by the department under Section 69A of the Act, as unexplained money and bringing the same to tax under Section 115BBE of the Income-tax Act, 1961.
Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.
7. The learned counsel for the assessee Shri P. Murali Mohan Rao, C.A. submitted that, the Ld. CIT(A) erred in sustaining the addition made by the A.O. towards cash found and seized by the department, even though, the assessee filed supporting and corroborative evidences to justify the arguments that, he had received advance for 7 Seenaiah Boddupalli sale of agricultural land and was carrying the same in his car to return to the party. The learned counsel for the assessee further, referring to the various evidences, including details of identity of the persons, who paid the advance and income certificates, submitted that, the assessee filed the details of advances paid by six persons along with their identity proofs. The above parties also filed letters before the A.O. requesting to release the funds. The assessee also furnished relevant pattadar passbooks to prove holding of agricultural land. Although these evidences were furnished before the A.O. and the Ld. CIT(A), both the authorities rejected the explanation of the assessee and therefore, he submitted that, the addition made by the A.O. should be deleted. In this regard, he relied upon the decision of the Hon'ble Madras High Court in the case of CIT vs. Mark Hospitals Private Limited reported in 373 ITR 115 (Madras) and the decision of the ITAT Hyderabad Bench in the case of Neeraj Gupta Vs. DCIT in dated 17.10.2025.
8. The learned Senior A.R. for the Revenue, on the other hand, supporting the order of the Ld. CIT(A), submitted that, the assessee had given an explanation at the time when cash was found by the 8 Seenaiah Boddupalli police authorities that, the above cash belonged to his employer, Sri Jai Veer Kunduru. Subsequently, the assessee changed his stand and claimed that, he had received Rs.1,00,00,000/- from certain persons for sale of agricultural land and because of cancellation of the said transaction, he was carrying the cash to return to the parties. The arguments of the assessee to explain the source for the cash found by the police authorities are vague and without any documentary evidence. Although the assessee claims that, he had received cash from six persons for sale of agricultural land, going by the evidences filed by the assessee, it is very clear that, it is an afterthought. Since the assessee has not proved the source for the cash found by the police authorities, the A.O. has rightly made addition towards cash under Section 69A of the Income-tax Act, 1961. The Ld. CIT(A), after considering the relevant facts, has rightly sustained the addition made by the A.O.
We have heard both parties, perused the material available on record and have gone through the orders of the authorities below. There is no dispute with regard to the fact that, on 07.04.2019, the election flying squad team intercepted the vehicle and found an amount of Rs. 1,00,00,000/- in cash in the possession of the 9 Seenaiah Boddupalli assessee, who was driving the car. The assessee was inquired about the cash, for which he stated that, he was working as driver for Sri Jai Veer Kunduru and upon his owner's directions, he was carrying the cash. To verify the claim of the assessee, a statement under Section 131 of the Income-tax Act, 1961, was recorded from Sri Jai Veer Kunduru on 01.05.2019, wherein he denied the claim of the assessee and stated that, he is nowhere connected with the cash seized by the police. A statement under Section 131 of the Act was recorded from the assessee on 01.05.2019 and in response to a specific question, the assessee stated that, during the month of March, 2019, one person came for purchase of agricultural land of Ac.10.83 guntas and paid advance of Rs. 1,00,00,000/-. Since the deal could not be materialized, the amount taken as advance was returned back to the parties. The assessee filed certain evidences to justify his arguments including the pattadar passbooks to prove holding of agricultural land and also details of names and addresses of the persons from whom he claimed to have received advances. The assessee claimed to have received advance of Rs. 1,00,00,000/- from six persons from his native place. The assessee also filed details of the persons along with their identity proof, proof of agricultural 10 Seenaiah Boddupalli income and in a few cases income-tax returns filed by the parties to prove the capacity of the persons, who paid the advances. Going by the evidences filed by the assessee, it appears that, the assessee received advance from six persons for sale of agricultural land of Ac.10-83 guntas. However, the fact remains that, there are divergent claims of the assessee in respect of the source for cash found, i.e., on the date of seizure of cash on 07.04.2019, the assessee claimed that, the above cash belonged to his employer Sri Jai Veer Kunduru. However, on 01.05.2019, when his employer denied any link to the cash found by the police authorities, the assessee came up with a different argument and claimed that, he had received advance of Rs.1,00,00,000/- from certain persons for sale of agricultural land. In our considered view, going by the theory of human probabilities, the initial argument of the assessee that, he was carrying the cash at the direction of his employer seems to be probable because his employer, Sri Jai Veer Kunduru, never disputed the fact that, the assessee was working for him as a driver, although he denied any link to the cash found in his possession. Further, the subsequent argument of the assessee that, he had received advances from certain person without naming the person 11 Seenaiah Boddupalli from whom he has received advance lacs credence, going by the evidences filed by the assessee. Although the assessee claims that, he received advance from six persons and furnished their identity proofs, PAN cards and income-tax returns filed by few persons for some assessment years along with income certificates issued by the revenue authorities, in the absence of any agreement to sell or any corroborative document evidencing the transaction, the explanation offered by the assessee on the basis of these evidences needs to be verified to ascertain the authenticity of the evidences filed by the assessee and correctness of the claim of the assessee. Since there are divergent explanations from the assessee with regard to the source for the cash found by the police authorities and the evidences filed by the assessee to substantiate his second version of argument, in our considered view, the matter needs to be set aside to the file of the A.O. for further verification. Thus, we set aside the order of the Ld. CIT(A) and restore the issue back to the file of the A.O. The A.O. is directed to verify the claim of the assessee in light of statements recorded from the assessee and his employer and also ascertain the correct owner of the cash found by the police authorities. The A.O. is also directed to verify the claim of the assessee with regard to 12 Seenaiah Boddupalli receipt of advances for agricultural land in light of various evidences furnished by the assessee, including the relevant pattadar passbooks to prove holding of land admeasuring Ac.10.83 guntas and the claim of six persons having paid advance to the assessee for purchase of land, and decide the issue in accordance with law.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 11th March, 2026. श्री विजय पाल राि (मंजूनाथ जी) (VIJAY PAL RAO) (MANJUNATHA G.) उपाध्यक्ष /VICE PRESIDENT लेखा सदस्य/ACCOUNTANT MEMBER Hyderabad, dated 11.03.2026. TYNM/sps 13 Seenaiah Boddupalli