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Facts
The assessee, Shri Srirangarao Nadipally, filed an appeal against the order of the CIT(A) for AY 2016-17. The AO made additions for opening cash balance, agricultural income, and a loan from his mother, totaling Rs. 1,09,72,287. The CIT(A) confirmed these additions.
Held
The Tribunal held that the addition for opening cash balance was not justified as it was accepted in the prior year's scrutiny assessment. The issue of agricultural income was remanded to the AO for fresh verification due to lack of documentary evidence. The addition for the loan from the mother was also set aside and remanded to the AO for fresh adjudication, as the availability of cash on the specific date of the loan was not established.
Key Issues
Whether the additions made by the AO on account of opening cash balance, agricultural income, and loan from mother were justified and whether the CIT(A) erred in confirming these additions.
Sections Cited
68/69A, 143(2), 143(3)
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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Shri Vijay Pal Rao, Vice-Shri Madhusudan Sawdia
(िनधा�रण वष�/Assessment Year: 2016-17) Shri Srirangarao Nadipally Vs. Assistant Commissioner KARIMNAGAR of Income Tax PAN:ACBPN3816E Circle-1, Karimnagar (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: Adv. KVSSN Kumar राज� व �ारा/Revenue by: Sankar Pandi P - Sr. DR सुनवाई की तारीख/Date of hearing: 05/01/2026 घोषणा की तारीख/Pronouncement: 09/01/2026 आदेश/ORDER Per Madhusudan Sawdia, A.M.: This appeal is filed by Shri Srirangarao Nadipally (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”) dated 24.03.2025 for the A.Y 2016-17.
The assessee has raised the following grounds of appeal:
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The brief facts of the case are that the assessee is an individual who filed his return of income for the Assessment Year 2016–17 on 04.03.2017, declaring a total income of Rs.69,01,760/-. The case of the assessee was selected for scrutiny under CASS and accordingly, notice under section 143(2) of the Income Tax Act, 1961 (“the Act”) was issued on 18.09.2017. During the course of assessment proceedings, the Learned Assessing Officer (“Ld. AO”) observed that the assessee was partner in many partnership firms and had introduced capital in cash in those partnership firms. The Ld. AO further noticed that the assessee had made various cash payments, including repayment of loans and contribution to PPF account. Accordingly, the assessee was called upon to explain the sources of such investments and cash payments. In response, the assessee furnished a cash flow statement explaining the sources. However, the Ld. AO was not satisfied with the source explained out of opening cash balance of Rs.91,22,287/-, agricultural income of Rs.9,00,000/- and loan received from Smt. Tharamma amounting to Rs.9,50,000/-. Accordingly, the Ld. AO added these amounts aggregating to Rs.1,09,72,287/- as his income in the hands of the assessee. The assessment was completed by the Ld. AO under section 143(3) of the Act vide order dated 21.12.2018, assessing the total income of the assessee at Rs.1,78,74,047/-.
Aggrieved with the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A), who confirmed all the additions made by the Ld. AO and dismissed the appeal of the assessee.
Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal. At the outset, the Learned Authorized Representative (“Ld. AR”) submitted that only three issues arise from the grounds of appeal
of the assessee. He further submitted that the first issue of the assessee is relating to addition of Rs.91,22,287/- on account of opening cash balance. The Ld. AR invited our attention to page no. 127 of the paper book, being the return of income filed by the assessee for the immediately preceding Assessment Year 2015–16, wherein the assessee had disclosed a closing cash balance of Rs.91,22,287/- as on 31.03.2015. He submitted that the said return was filed on 14.03.2016. He further invited our attention to the assessment order for Assessment Year 2015–16 passed by the Ld. AO under section 143(3) of the Act on 29.12.2017, placed at page nos. 128 to 132 of the paper book. He submitted that the assessment for AY 2015–16 was completed after scrutiny and no adverse observation whatsoever was made by the Ld. AO regarding the cash balance shown by the assessee as on 31.03.2015. Accordingly, the Ld. AR submitted that once the closing cash balance of Rs.91,22,287/- has been disclosed in the return of income for AY 2015–16 and the same has been accepted by the Ld. AO in scrutiny assessment without any adverse remark, the opening cash balance for the year under consideration cannot be doubted and the addition made by the Ld. AO deserves to be deleted.
6. Per contra, the Learned Departmental Representative (“Ld. DR”) relied on the orders of the lower authorities. He submitted that the assessment for Assessment Year 2015–16 was Page 6 of 14 initially selected for limited scrutiny and therefore, it cannot be presumed that the cash balance shown by the assessee as on 31.03.2015 was examined or accepted by the Ld. AO. Accordingly, he submitted that the assessee cannot take shelter under the assessment order for AY 2015–16 to justify the opening cash balance in the year under consideration.
We have considered the rival submissions and perused the material available on record. In this regard, we have gone through the schedule AL of the return of income for the AY 2015- 16 placed at page no. 127 of the paper book, which is to the following effect:
On perusal of the above, we find that the assessee has disclosed a closing cash balance of Rs.91,22,287/- as on 31.03.2015 in the return of income filed for Assessment Year 2015–16. We have also gone through the first page of the assessment order for Assessment Year 2015–16 passed by the Ld. AO under section 143(3) of the Act on 29.12.2017, placed at page
Page 7 of 14 no.128 of the paper book, the relevant portion of which is to the following effect:
On perusal of above, we find that although the case was initially selected for limited scrutiny, the same was subsequently converted into complete scrutiny. Despite such complete scrutiny, no adverse observation has been recorded by the Ld. AO with respect to the closing cash balance of Rs.91,22,287/- shown by the assessee as on 31.03.2015. Once the closing cash balance has been duly disclosed in the return of income for the immediately preceding assessment year and the assessment for that year has been completed under section 143(3) of the Act without any adverse finding, the said closing balance assumes the character of accepted fact. Consequently, the opening cash balance for the year under consideration cannot be treated as unexplained. Therefore, in our considered view, the Ld. AO was not justified in making addition of Rs.91,22,287/- by doubting the opening cash balance, which stood accepted in the Page 8 of 14 scrutiny assessment of the earlier year. Accordingly, the addition of Rs.91,22,287/- is liable to be deleted.
The Ld. AR submitted that the second issue arising from the grounds of appeal relates to the addition of Rs.9,00,000/- made on account of agricultural income. In this regard, the Ld. AR invited our attention to the statement of affairs of the assessee as on 31.03.2016 placed at page nos. 66 to 70 of the paper book, wherein the assessee had disclosed details of agricultural land holdings. He submitted that the assessee is the owner of approximately 45 acres of agricultural land. He further submitted that the Ld. AO as well as the Ld. CIT(A) did not accept the claim of agricultural income on the ground that the assessee had not furnished details regarding the nature of crops grown, gross agricultural receipts, expenses incurred towards labour, fertilisers, pesticides, etc., and the net agricultural income along with supporting evidence. The Ld. AR submitted that the assessee had not carried out agricultural operations himself but had given the agricultural land on lease. He further submitted that the assessee had disclosed agricultural income of Rs.9,00,000/- in the immediately preceding assessment year as well, which was the subject matter of complete scrutiny assessment and no adverse observation was recorded by the Ld. AO in that year. He therefore contended that once the agricultural income was accepted in the immediately preceding assessment year in scrutiny proceedings, the same ought not to have been rejected in the year under consideration. Accordingly, the Ld. AR prayed for deletion of the addition.
11. Per contra, the Ld. DR relied on the orders of the lower authorities. He submitted that the assessee failed to produce any documentary evidence in support of the claim of agricultural income, either before the Ld. AO or before the Ld. CIT(A). He further submitted that mere ownership of agricultural land does not automatically establish earning of agricultural income and in the absence of supporting evidence, the addition has rightly been made.
12. We have considered the rival submissions and perused the material available on record. From a perusal of the assessment order as well as the order of the Ld. CIT(A), we find that the addition of Rs.9,00,000/- has been made on the ground that the assessee failed to furnish details with regard to the type of crops grown, gross receipts from agricultural operations, expenses incurred such as labour charges, fertilisers and pesticides, and the net agricultural income along with supporting evidences. Before us, the assessee has contended that agricultural operations were not carried out by him directly and that the agricultural land was given on lease. However, we find that no documentary evidence whatsoever has been produced either before the lower authorities or before us to substantiate this contention, such as lease agreements, details of lessees, mode of receipt of lease rent or any other supporting material. The contention of the assessee that agricultural income of the same amount was accepted in the immediately preceding assessment year during scrutiny assessment also cannot, by itself, be a conclusive ground to accept the claim in the year under consideration. It is quite
Page 10 of 14 possible that agricultural operations were carried out or land was leased in one year but not in another year. Each assessment year is a separate and independent unit of assessment, and the assessee is required to substantiate the claim of agricultural income for the year under consideration with cogent evidence. Considering the totality of facts and circumstances, we are of the view that this issue requires fresh verification at the level of the Ld. AO. Accordingly, in the interest of justice, we set aside this issue to the file of the Ld. AO with a direction to re-adjudicate the claim of agricultural income of Rs.9,00,000/- afresh, after affording adequate opportunity of being heard to the assessee. The assessee is directed to produce necessary documentary evidence before the Ld. AO in support of his claim of agricultural income, including but not limited to details of land holdings, lease arrangements (if any), nature of agricultural activity, receipts, and related evidence. The Ld. AO shall examine the same and decide the issue in accordance with law.
The Ld. AR submitted that the third issue arising from the grounds of appeal relates to the addition of Rs.9,50,000/- made on account of loan received from Smt. Tharamma, who is the mother of the assessee. He submitted that the assessee had taken a cash loan of Rs.9,50,000/- from his mother on 10.12.2015 and the said loan was repaid during the same financial year on 29.02.2016. He submitted that the Ld. AO as well as the Ld. CIT(A) made the addition on the ground that the assessee failed to furnish details such as PAN, address, bank statements and copy of return of income of Smt. Tharamma, along
Page 11 of 14 with evidence of giving and repayment of the loan. In this regard, the Ld. AR invited our attention to page nos. 54 to 58 of the paper book, wherein copies of the return of income, capital account and balance sheet of Smt. Tharamma for the Assessment Year 2016– 17 have been placed. He submitted that all these documents were also filed before the lower authorities. Therefore, the observation of the lower authorities that no documents were filed by the assessee is factually incorrect. He further specifically invited our attention to the statement of affairs of Smt. Tharamma as on 31.03.2016, placed at page no. 58 of the paper book, to demonstrate that she was having sufficient cash balance to advance the loan to the assessee. The Ld. AR also submitted that the Ld. AO having jurisdiction over the assessee and his mother was the same. Therefore, if the Ld. AO had any doubt regarding the genuineness of the loan transaction, he could have made necessary enquiries from Smt. Tharamma. Accordingly, the Ld. AR prayed for deletion of the addition.
Per contra, the Ld. DR relied on the orders of the lower authorities. He submitted that the assessee failed to file proper confirmations and supporting evidence regarding the loan transaction before the Ld. AO as well as before the Ld. CIT(A). Accordingly, he submitted that the addition was rightly made and deserves to be sustained.
We have considered the rival submissions and perused the material available on record. We find that the addition of Rs.9,50,000/- has been made on the ground that the assessee
Page 12 of 14 failed to furnish complete and verifiable evidence in respect of the loan transaction allegedly received from Smt. Tharamma, who is the mother of the assessee. Before us, the assessee has placed reliance on copies of the return of income, capital account and statement of affairs of Smt. Tharamma as on 31.03.2016 to demonstrate that she was having sufficient cash balance. However, in our considered view, merely because the lender was having sufficient cash balance as on 31.03.2016, it cannot be presumed that she was having sufficient cash balance on the date of advancing the loan during the financial year, i.e. on 10.12.2015. The availability of cash on the date of advancing the loan is a crucial fact which requires verification. Further, we find that no specific confirmation evidencing the receipt of loan on 10.12.2015 and its repayment on 29.02.2016 has been furnished by the assessee neither before us nor before the lower authorities. Considering the totality of facts and circumstances, we are of the view that this issue requires proper and factual verification. Accordingly, in the interest of justice, we set aside this issue to the file of the Ld. AO for fresh adjudication. The assessee is directed to furnish confirmations from Smt. Tharamma along with supporting evidence establishing availability of cash on the date of advancing the loan, mode of receipt and repayment, and any other relevant material. The Ld. AO shall verify the same and decide the issue afresh in accordance with law after affording adequate opportunity of being heard to the assessee.
In the result, the appeal of the assessee is allowed for statistical purposes.