MADHUSUDHAN REDDY LAKKIREDDY,SIDDIPET vs. INCOME TAX OFFICER, WARD-1, SIDDIPET

Ostensibly, we find that the AO did not find favour with the assessee’s claim that the cash deposits of Rs. 13.20 lakhs made in his bank accounts during the demonetization period were sourced out of the sale proceeds of agricultural land as the copy of the sale deed No. 11050/2018, dated 07/12/2016 showed the entire sale consideration at Rs. 2.40 lakhs only. Apart from that, the AO observed that the subject land as per the sale deed was sold by the assessee along with his brother as a co-owner and, thus, his share in the same worked out at Rs. 1,20,000/-. Also, the AO observed that while for the sale deed was executed on 07/12/2016 but the assessee had made the cash deposits 4 Madhusudhan Reddy Lakkireddy vs. ITO aggregating to Rs.16.20 lakhs prior to the aforesaid sale transaction, viz., (i) cash deposits made during the demonetization period: Rs.13.20 lakhs; and (ii) cash deposits made during the pre-demonetization period i.e., 21/09/2016: Rs.3 lakhs. Accordingly, the AO held the entire amount of cash deposits of Rs.16.20 lakhs as having been sourced out of the assessee’s unexplained money under section 69A of the Act. Apart from that, an independent unexplained credit of Rs.66,550/- on 20/12/2016 in the assessee’s bank account with Andhra Bank was also added by the AO under section 69A of the Act. Further, the AO made addition of the interest income on the savings bank account of the assessee of Rs. 20,682/-.

Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success. For the sake of clarity, the observations of the CIT(A) are culled out as under:

Sri P. Vinod, Advocate, the Learned Authorized Representative (for short “Ld. DR”) for the assessee, at the threshold of hearing of the appeal, submitted that the assessee has suffered dismissal of his appeal vide a non-speaking order in gross violation of the principles of natural justice. Elaborating on his contention, the Ld. AR submitted that though the CIT(A) in his order had observed that the assessee had failed to comply with either of the four notices intimating the fixation of the hearing of the appeal, but the same is factually incorrect. The Ld. AR submitted that in compliance to the notice dated 24/12/2020 the assessee had well within the stipulated time period i.e., on 08/01/2021 submitted before the CIT(A) that he was considering opting for Vivad-Se-Vishwas Scheme and was seeking the necessary professional advice of a Chartered Accountant. Accordingly, the assessee had for the aforesaid reason requested the CIT(A) for adjourning the matter to the first week of February, 2021. Also, the Ld. AR submitted that the assessee in compliance to the notice dated 05/03/2023 had once again requested the CIT(A) for some further time as the written submission to be filed before him were under preparation and the same could not be compiled as there was a delay in collecting the relevant information. The Ld. AR to buttress his aforesaid contention had taken us through the acknowledgements 7 Madhusudhan Reddy Lakkireddy vs. ITO evidencing the filing/uploading of the aforesaid replies of the assessee with the CIT(A). The Ld. AR submitted that based on the aforesaid facts the observation of the CIT(A) that the assessee had not complied with any of the four notices intimating the fixation of the hearing of the appeal was found to be factually incorrect. Apart from that, the Ld. AR submitted that as the assessee who is an agriculturist having no other sources of income had made the cash deposits of Rs.13.20 lakhs (supra) in the bank account during the demonetization period out of the sale proceeds received by him on sale of his agricultural land, therefore, there was no justification for the lower authorities to have held that the said amount was sourced out of his unexplained money under section 69A of the Act.

Per contra, Sri V. Ravish Bhatt, the Learned Departmental Representative (for short “Ld. DR”) relied upon the orders of the lower authorities.

Admittedly, it is a matter of fact borne from the record that the assessee in compliance to the notice dated 24/12/2020 (seeking compliance by 08/01/2021) and notice dated 05/03/2023 (seeking compliance by 13/03/2023) had requested the CIT(A) for allowing some further time. However, we find that the CIT(A) had wrongly observed that the assessee on the said two dates had failed to comply to the aforesaid notices that were issued by his office on 24/12/2020 and 05/03/2023. 8 Madhusudhan Reddy Lakkireddy vs. ITO 11. We find that though the assessee on the last occasion i.e., vide his request for adjournment dated 13/03/2023 had sought for ten days of time for furnishing the requisite details, but on a specific query by the Bench we were informed that no such reply/submissions were thereafter filed with the CIT(A). At the same time, we find it incomprehensible that the appellate proceedings before the CIT(A) which were triggered vide an appeal filed by the assessee on 20/02/2020 took more than 5½ years and had finally culminated vide an order dated 20/08/2025. Although, we deprecate the conduct of the assessee who had sought for adjournments and at no occasion filed any written submission with the CIT(A), but at the same time are unable to persuade ourselves to subscribe the time period of five and half years (approx.) that the CIT(A) had taken to dispose of the subject appeal.

Although, there appears to be no justification for the substantial time period of 5½ years taken in disposing of the appeal, but we cannot remain oblivion of the fact that the assessee had not filed any written submission or effectively participated in the appellate proceedings before the said first appellate authority. As there is no justification for the assessee for not participating in the proceedings before the CIT(A) and/or furnish any written submissions in support of his contentions over a span of 5½ years from the date of filing of the appeal, therefore, we are unable to dislodge the dismissal of his appeal by the CIT(A) who has 9 Madhusudhan Reddy Lakkireddy vs. ITO given independent observations and reasoning for sustaining the additions made by the AO under section 69A and under section 56 of the Act. We, thus, in the backdrop of our aforesaid observations finding no substance in the assessee’s appeal, dismiss the same.