LAKSHMIRAMANA BANDARU,KADAPA vs. ITO., WARD-1, KADAPA

प्रयत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M.

The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals),
National Faceless Appeal Centre (NFAC), Delhi, dated 14.02.2025,

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Lakshmiramana Bandaru which in turn arises from the order passed by the Assessing Officer
(A.O.) under Section 143(3) r.w Section 254 of the Income-tax Act,
1961 (for short, “the Act”), dated 30.04.2021. The assessee has assailed the impugned order on the following grounds of appeal before us:
“1).
The addition of Rs. 40,61,283/- to the returned income is incorrect and not justified when the appellant has proved the sources and explained the same to the assessing officer.
2).
The honourable Income Tax Appellate Tribunal, through its order, dated 14.02.2025 has directed the Assessing Officer to verify the veracity of facts.
Whereas the assessing officer has made addition under Section 69A of the Income-tax Act, 1961, in the fresh assessment order, dated 30-04-
2021. In the earlier assessment order dated 22-12-2018 the addition was under section 68 of the Income-tax Act, 1961. The addition is incorrect and not justified, which amounts to deviation from the instructions of the Tribunal.
Therefore, the addition is liable to be deleted and the assessment order is invalid and bad in law, and liable to be set aside.
3).
The addition of Rs. 40,61,283/- made under section 69A, the cash balance shown in the audited books of account s is incorrect and not justified on the facts of the case and beyond the scope of section 69A.
Hence, the addition is liable to be deleted.
4).
The order in in contravention of the intent and spirit of the CBDT
Circular in respect of Limited Scrutiny. The circular clearly guides the Assessing Officer not to take up the matter b fishing and roving methods.
The genuineness is evident as per the audited balance sheet.
5).
The books of account were audited under Section 44AB of the Income-tax Act, 1961. The addition without rejection of books of account is incorrect and not justified, and liable to be deleted.

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6).
Addition was made purely on the basis of conjectures and surmises, which is not permissible under law. Hence, the addition I incorrect and liable to be vacated.
7).
The assessment is against the principles of natural justice. Hence order is invalid void-ab-initio.
8).
Addition made without considering the submissions and explanations filed by the assessee/appellant I invalid and liable to be deleted.
9).
On the above and other grounds that arise during the appeal, the appellant requests for an order deleting the additions made in the assessment and set aside the order.”

Rs. 40,61,284/- as on 31.03.2016, which was substantially higher than the cash in hand shown in the preceding years. In the first round of assessment, the addition made by the A.O. u/s 68 of the Act towards the huge cash in hand was sustained by the CIT(A).
The assessee thereafter filed an appeal before the Tribunal, which set aside the order to the file of the AO with a direction to provide an opportunity of being heard to the assessee.
4. Thereafter, in the second round of assessment, the assessee failed to furnish the requisite details to the satisfaction of the A.O.
regarding the source of the cash in hand shown as on 31.03.2016. The A.O., therefore, once again made the addition in his order passed under Section 143(3) r.w. Section 254 of the Act by treating the amount as the assessee’s unexplained money under Section 69A of the Act. Aggrieved, the assessee carried the impugned order in appeal before the CIT(A). However, the CIT(A) did not find favour with the contentions advanced by the assessee and upheld the addition of Rs. 40,61,284/- that was made by the A.O. vide his order passed under Section 143(3) r.w Section 254 of the Act, and dismissed the appeal.

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Accordingly, the A.O., based on his deliberations, was of the view that the assessee had failed to discharge the onus that was cast upon him as regards proving the source of the cash balance of Rs
40,61,284/- as on 31-03-2016 and held the entire amount as having been sourced from his unexplained money under Section 69A of the Act. Thus, the A.O. vide his order passed under Section 143(3) r.w Section 254 of the Income-tax Act, dated 30.04.2021, assessed the income of the assessee at Rs. 44,01,014/-.
12. Aggrieved, the assessee carried the matter in appeal before the CIT (Appeals), but without success.

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Lakshmiramana Bandaru both in law and on facts in making the impugned addition of Rs.
40,61,284/- by invoking the provisions of Section 69A of the Act.
Elaborating on his submission, the learned AR contended that as the cash balance of Rs. 40,61,284/- as on 31.03.2016 was duly accounted for in the audited books of account of the assessee, therefore, the provisions of Section 69A, which apply to a case where the assessee is, inter alia, found to be the owner of unexplained money not recorded in the books of accounts, could not have been invoked for making the impugned addition for the subject cash balance on 31.03.2016 that was recorded in the books of account of the assessee. The Ld. AR to buttress this contention, took us through the provisions of Section 69A and emphasized that the said section is not applicable in a case where the assessee is found to be the owner of any money that is duly recorded in his regular books of account. It was, thus, contended by the Ld. AR that the action of the AO in making the addition under Section 69A was devoid of legal sanctity and liable to be struck down on the said ground alone. The Ld. AR further submitted that even during the original assessment proceedings, the A.O. had wrongly invoked the provisions of Section 68 of the Act and made the addition in the 18
Lakshmiramana Bandaru hands of the assessee. The Ld. AR submitted that now, with the change in the section being invoked (from Section 68 to 69A), and given that neither provision was applicable in the present facts, there remains no justification for sustaining the impugned addition.
18. The Ld. AR confined his submissions solely to the legal validity of the addition made by the A.O under Section 69A and, in response to a specific query from the bench qua the merits of the addition, submitted that he is confining his contention only to the aspect of the validity of the addition made by the A.O under Section 69A of the Act. It was reiterated by him that the impugned addition of Rs.
40,61,284/- made by the A.O under Section 69A was legally unsustainable due to the lack of proper juri ictional foundation, and therefore, the same ought to be quashed.
19. Per contra, the learned Departmental Representative (Ld. DR) submitted that as the assessee, neither in the course of the original assessment proceedings nor in the course of the set-aside assessment proceedings or even in the course of the remand proceedings, was able to substantiate, based on supporting documentary evidence, the source of the cash balance of Rs.

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40,61,284/- as on 31-03-2016, therefore, the A.O. had rightly held the same as having been sourced out of the assessee's unexplained money under Section 69A of the Act. Elaborating further on his contention, the learned DR submitted that a perusal of the record revealed that, although it had been the claim of the assessee since inception that the cash balance of Rs. 40,61,284/- was sourced from the cash sales and the liquidation of trade debtors during the relevant year, but, the assessee, despite specific directions by the A.O., had failed to place on record the complete details of the debtors that were liquidated and which purportedly contributed to the accumulated cash balance of Rs. 40,61,284/- as on 31-03-
2016. The learned DR further submitted that the cash balance available with the assessee in the immediately two preceding years, as compared to the substantial amount of Rs. 40,61,284/- on 31-
03-2016, clearly revealed that the cash balance had been manipulated deliberately with the intent to justify the source of the cash deposits made by the assessee during the demonetization period. The Ld. D.R to fortify his contention, had further drawn our attention to the fact that the assessee had filed his return of income for the relevant assessment year only after a substantial delay i.e.,

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Lakshmiramana Bandaru much after the demonetization scheme was announced by the Government on 08-11-2016. The Ld. DR submitted that as no contrary inference could be drawn from the order of the CIT
(Appeals), who, after calling for a “remand report” and deliberating at length on the issue, had rightly sustained the addition made by the AO under Section 69A of the Act, therefore, the appeal filed by the assessee, being devoid of merit and bereft of any substance, was liable to be dismissed.
20. As the assessee has assailed the validity of the impugned addition of Rs. 40,61,284/- made by the A.O on the ground that, as the cash balance on 31-03-2016 was recorded in his books of accounts, therefore, the impugned addition could not have been made in his case under Section 69A of the Act, we deem it fit and apposite to refer to the provisions of Section 69A of the Act, which read as under:
“69A. Unexplained money, etc.
Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the 21
Lakshmiramana Bandaru money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.”

On a careful perusal of Section 69A of the Act, we find that it contemplates that where the assessee, in any financial year, is inter alia found to be the owner of any money which is not recorded in the books of accounts, if any, maintained by the assessee for any source of income, and the assessee offers no explanation about the nature and source of acquisition of such money, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, then the said money may be deemed to be the income of the assessee for such financial year under the provisions of the said section.
21. Thus, in light of the clear mandate of Section 69A of the Act, we principally concur with the assessee that it is only in a case where the assessee is found to be the owner of such money which is not recorded in the books of accounts, and where no satisfactory explanation is offered regarding the nature and source of such 22
Lakshmiramana Bandaru money, that the provisions of Section 69A can be triggered for treating the same as income from unexplained sources.
22. This leads us to the issue that now when the cash balance of Rs. 40,61,284/- as on 31-03-2016 was, in fact, recorded in the books of accounts maintained by the assessee; then, whether the impugned addition could have justifiably been made/sustained by the authorities below by triggering the provisions of Section 69A of the Act?
23. Apropos the learned AR's contention that where, in any financial year, the assessee is found to be the owner of any money, and such money is duly recorded in the books of accounts, there can be no justification in making an addition of the same under Section 69A, we principally concur with the said proposition. We, say so, for the reason that once the subject money is found recorded in the “books of accounts” maintained by the assessee, then, the sine qua non for invoking the provisions of Section 69A of the Act would not be satisfied.
24. However, in the present case, although the ld. AR has contended that the cash balance of Rs. 40,61,284/- as on 23
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“remand proceedings” which revealed the balance on the said date at Rs. 22,77,020.49. 25. Considering the totality of the facts and the failure of the “books of accounts” to reflect the true and correct state of affairs, the CIT(A) had rejected the books under Section 145(3) of the Act.
We are of the firm conviction that in the backdrop of the rejection of the “books of accounts” of the assessee under Section 145(3) of the Act, the assessee cannot thereafter take shelter under those very books to claim that the cash balance of Rs. 40,61,284/- was recorded and, therefore, immune from the applicability of Section 69A of the Act. We say so, specifically because the inability of the assessee to substantiate the source of the said cash balance was in itself the primary ground on which his “books of account” were rejected under Section 145(3) of the Act. Accordingly, we are unable to concur with the learned AR's submission that the AO had erred in invoking Section 69A of the Act for making the impugned addition.
26. Although the learned AR had confined his challenge to the juri ictional validity of the addition under Section 69A of the Act,

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Lakshmiramana Bandaru but for the sake of completeness, we consider it appropriate to briefly examine the merits of the addition upheld by the CIT(A).
27. As observed hereinabove, the assessee had failed to substantiate his claim that the cash in hand of Rs. 40,61,284/- as on 31.03.2016 was sourced from the liquidation of his trade receivables. Apart from that, he had also failed to furnish the details of the trade creditors to whom he allegedly owed the outstanding liabilities and had retained the substantial amount of cash balance for discharging the same. Moreover, the authorities below rightly observed that the cash balance claimed as on 31.03.2016 was significantly higher than the balances disclosed in the immediately preceding two years, and appeared to be strategically built up to explain the subsequent cash deposits made by him during the demonetization period i.e. 09.11.2016 to 31.12.2016. Rather, the authorities below had fortified their aforesaid conviction based on the fact that the assessee had filed his return of income for the subject year on 01.07.2017 i.e. much after the “due date” of 30.09.2016, after the demonetization was announced by the government on 08.11.2016. We, thus, find no infirmity in the view taken by the CIT(A), who after rejecting the books of account of the 26
Lakshmiramana Bandaru assessee under Section 145(3) of the Act, had rightly sustained the addition of Rs. 40,61,284/- made in the hands of the assessee under Section 69A of the Act, uphold the same.
28. Resultantly, the appeal filed by the assessee being devoid and bereft of any substance is dismissed.
Order pronounced in the Open Court on 6th August, 2025. (मंजूनाथ जी)
(MANJUNATHA G.)
लेखा सदस्य/ACCOUNTANT MEMBER (श्री रवीश सूद)
(RAVISH SOOD)
न्यायिक सदस्य/JUDICIAL MEMBER

Hyderabad, dated 06.08.2025. TYNM, Sr.P.S.

आदेशकी प्रयतयलयप अग्रेयर्त/ Copy of the order forwarded to:-

आदेशानुसार / BY ORDER