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Facts
A search operation on the assessee, a lawyer, led to the discovery and seizure of cash amounting to Rs.19,98,600/-. The Assessing Officer and CIT(A) added this amount to his income under Section 69A due to an unexplained source. The assessee filed an appeal before the ITAT with a delay of 469 days, citing severe health issues and hospitalization as the reason.
Held
The Tribunal condoned the delay in filing the appeal, accepting the assessee's medical explanation and applying a liberal interpretation as per Supreme Court guidelines. On merits, the Tribunal found that the assessee had consistently explained the source of the cash from his father-in-law and two junior advocates for safe-keeping, substantiated by affidavits, and therefore, the lower authorities erred in disregarding this evidence and making the addition.
Key Issues
1. Whether the delay in filing the appeal should be condoned based on medical reasons. 2. Whether the assessee successfully explained the source of cash found during the search operation.
Sections Cited
132, 143(3), 153A, 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD “SM-B” BENCH: HYDERABAD
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD “SM-B” BENCH: HYDERABAD BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER ITA.No.444/Hyd./2025 Assessment Year 2019-2020 Sahodhar Reddy The DCIT, Circle-3(1), Muddasani, vs. Hyderabad. HANAMKONDA– 506 001. Telangana. PAN AELPM9122N (Appellant) (Respondent) For Assessee : CA K C Devdas And Shri C Maheshwar Reddy For Revenue : Shri Waseem UR Rehman, Sr. AR Date of Hearing : 02.07.2025 Date of Pronouncement : 07.07.2025 ORDER PER MANJUNATHA G. :
The above appeal has been filed by the Assessee against the order dated 25.09.2023, of the learned CIT(A)- 11, Hyderabad, relating to the assessment year 2019-2020.
Brief facts of the case are that, the assessee is an individual and lawyer by profession. The return of income was filed for the assessment year 2019-2020 on 07.08.2020
2 ITA.No.444/Hyd./2025 declaring total income of Rs.10,27,800/-. A search and seizure operation u/sec.132 of the Income Tax Act, 1961 was conducted in the premises of M/s. Moksha Infracon Pvt. Ltd., and M/s. Kaveri Infra Projects Pvt. Ltd., on 09.08.2018 and as a part of search operation, the assessee was also covered. During the course of search, cash amounting to Rs.19,98,600/- was found and out of which, Rs.19 lakhs was seized. Consequent to search, the assessment has been completed u/sec.143(3) r.w.s.153A of the Income Tax Act, 1961 [in short “the Act”] on 26.04.2021 by making addition of Rs.19,98,600/- towards cash found during the course of search on the ground that, assessee has not furnished any explanation with regard to source for the cash found during the course of search.
Aggrieved by the assessment order passed by the Assessing Officer, the assessee preferred an appeal before the learned CIT(A) who has dismissed the appeal on 20.07.2022 on account of non-compliance and on merits.
The assessee preferred further appeal before the ITAT, Hyderabad Benches, Hyderabad and the Tribunal vide
3 ITA.No.444/Hyd./2025 order dated 19.12.2022 in ITA.No.462/Hyd./2022 remanded the issue back to the file of learned CIT(A) to give reasonable opportunity of hearing to the assessee. The learned CIT(A) in second round of litigation, after considering relevant details filed by the assessee in support of source for cash found during search, rejected the explanation of assessee and upheld the addition made by the Assessing Officer towards cash found during search u/sec.69A of the Income Tax Act, 1961.
Aggrieved by the order of the learned CIT(A), the assessee is now, in appeal before the Tribunal.
At the outset, CA, K C Devdas, Learned Counsel for the Assessee submitted that, there is a delay of 469 days in filing the appeal before the Tribunal, for which, the assessee has filed a petition along with affidavit explaining the reasons for delay. Learned Counsel for the Assessee referring to dates and events submitted that, the learned CIT(A) passed the order on 25.09.2023 and the same was served on the assessee on 25.09.2023. The assessee should have filed an appeal in ordinary course on or before 60 days
4 ITA.No.444/Hyd./2025 from the date of receipt of the appellate order i.e., on 24.11.2023. However, the present appeal has been filed on 13.03.2023 with a delay of 469 days. Learned Counsel for the Assessee further referring to affidavit filed by the assessee submitted that, the appellant is a senior citizen, aged about 73 years and he was suffering from hyper tension, Type II Diabetes, chest pain and pain in both knees. Additionally, he had a limited walking distance, swelling in the left knee and back pain. As a result, he was admitted to the hospital on 06.05.2023. Since immediate treatment was required to safeguard the life of the assessee. After receiving proper medical care, he was discharged on 01.04.2024. Only after his discharge, he realized that, the appeal against the order passed by the learned CIT(A) is yet to be filed and had taken steps to file the present appeal before the Tribunal which caused delay of 469 days. The delay is quite unintentional and inadvertent due to circumstances beyond the control of the appellant due to severe health reasons. Therefore, requested the Tribunal condone the delay in the interest of justice.
5 ITA.No.444/Hyd./2025 7. Learned Counsel for the Assessee coming to the merits of the case submitted that, the learned CIT(A) was erred in sustaining the additions made by the Assessing Officer towards cash seized during the course of search amounting to Rs.19,98,600/- without considering the explanation of assessee that, said cash is explained out of known source of income including cash received from his associates, for which, the assessee has filed relevant details including affidavit from the parties. Learned Counsel for the Assessee further referring to the statement recorded from the assessee during the course of search submitted that, right from the date of search itself, the assessee claims that, he has received Rs.4 lakhs from his father-in-law who kept the money with the assessee for the purpose of medical treatment. Further, Rs.10 lakhs was received from Shri L. Rajaram Reddy [Junior Advocate] who kept the money for safe keeping and further Rs.5 lakhs was received from Shri Sridhar Reddy [Junior Advocate] who kept the money with the appellant for safe keeping. This explanation has been reiterated before the Assessing Officer and the learned
6 ITA.No.444/Hyd./2025 CIT(A) along with relevant evidences. However, the Assessing Officer and the learned CIT(A) without considering the evidences, simply sustained the addition made towards cash found in search. Thus, he submitted that, addition made by the Assessing Officer should be deleted.
Shri Waseem UR Rehman, learned Sr. AR for Revenue, on the other hand, at the outset, strongly opposed the petition filed by the assessee for condonation of delay. The Learned DR further, referring to the affidavit filed by the assessee submitted that, although, the appellant claims to have been undergoing medical treatment of various ailments, but, as per the admission of the appellant himself, he was admitted to hospital on 06.05.2023 and was discharged on 01.04.2023. Further, assuming for a moment, the above period is excluded for the purpose of reckoning the delay, but, still the assessee needs to explain nearly about more than 325 days delay in filing of the appeal from the date of his discharge from the hospital i.e., 01.04.2024 till the date of appeal filed on 13.03.2025. The assessee could not explain the delay with plausible reasons
7 ITA.No.444/Hyd./2025 and, therefore, he submitted that that, the delay in filing of the appeal should not be condoned.
Coming to the merits of the case, the learned Sr. AR supporting the order of the learned CIT(A) submitted that, the assessee has failed to prove the source of the cash found during the course of search with any evidences. Assuming for a moment, the arguments of the assessee is correct that, he has received money from various people, but, their creditworthiness has not been proved. In absence of relevant details, Assessing Officer has rightly made the addition towards cash found during the course of search. The learned CIT(A) after considering submissions of the assessee, has rightly sustained the addition made by the Assessing Officer and, therefore, the order of the learned CIT(A) should be upheld.
We have heard both the parties, perused the relevant petition filed by the assessee along with affidavit explaining the reasons for delay in filing of the appeal, perused the material on record and the orders of the authorities below. We find that, admittedly, the assessee
8 ITA.No.444/Hyd./2025 had given medical reasons for not filing the appeal on or before the due date. As per the contents of the affidavit filed by the assessee, he was suffering from various ailments and was admitted to hospital on 06.05.2023 and was discharged on 01.04.2024. To support his arguments, he has filed medical records which can be considered for condonation of delay. The Hon’ble Supreme Court in the case of Collector, Land Acquisituon vs., MST Katiji [1987] 167 ITR 471 (SC) has laid down certain principles for condoning the delay and also directed the lower courts to follow a lenient approach for condoning the delay. Going by the principles laid down by the Hon’ble Supreme Court in the case of MST Katiji (supra), there is no dispute if an appeal is dismissed on account of technicalities, a meritorious case may be thrown- out of judicial review. Therefore, while condoning the delay, the courts must have a liberal approach or lenient approach considering the reasons given by the petitioners or appellants. Therefore, going by the principles laid down by the Hon’ble Supreme Court in the case of MST Katiji (supra) and also considering the medical history of the assessee, we
9 ITA.No.444/Hyd./2025 condone the delay of 469 days in filing the appeal before the Tribunal and admit the appeal for adjudication.
Coming back to the merits of the case. There is no dispute with regard to the fact that, during the course of search, when a statement was recorded from the assessee to explain source for cash found during the course of search, the assessee claims to have received cash from his father- in-law and 2 of his associates for safe keeping the money for various reasons. This explanation has been reiterated before the Assessing Officer and the learned CIT(A) by filing relevant evidences including affidavit from the persons from whom assessee claims to have received the cash. The Assessing Officer never disputed the fact that, assessee has explained the cash found during the course of search with the known source of income including the amount received from above persons. However, disregarded the explanation of the assessee only on the ground that assessee could not substantiate the claim with relevant evidences. In our considered view, once the assessee has made a statement at the time of search that, money has been received from 10 ITA.No.444/Hyd./2025 various persons and further, the same has been confirmed by the above parties by filing affidavit, in our considered view, the Assessing Officer is erred in disregarding the evidences filed by the assessee and made addition towards cash found during the course of search. Although, Assessing Officer was of the opinion that, the arguments of the assessee is an afterthought to circumvent the addition towards cash found during the course of search, but, in our considered view, the explanation given by the assessee regarding source for cash found during the course of search from the date of search itself is consistent and there is no change in the stand taken by the assessee to explain the source of the cash found during the course of search. Therefore, the theory of an afterthought approach brought in by the Assessing Officer is devoid of merit and cannot be accepted. Therefore, we are of the considered view that, the assessee is able to explain the source for cash found during the course of search out of his known source of income and also amount received from various parties. The learned CIT(A) without considering the relevant evidences, has 11 ITA.No.444/Hyd./2025 simply sustained the addition made by the Assessing Officer. We, therefore, set aside the order of the learned CIT(A) and direct the Assessing Officer to delete the addition. Accordingly, the grounds raised by the assessee are allowed.
In the result, appeal of the Assessee is allowed.
Order pronounced in the open Court on 07.07.2025.