Hyderabad ITAT Remands ₹54.29 Lakh Addition, Cites Retirement Benefit Credits

Namademudu Gurrapu Vs ITO (ITAT Hyderabad)

Hyderabad ITAT Remands ₹54.29 Lakh Bank-Deposit Addition: Majority of Credits Prima Facie Represented Government Employee’s Retirement Benefits

In Namademudu Gurrapu v. ITO, ITA No. 427/Hyd/2026 (AY 2016-17), order dated 21.08.2026, the Hyderabad ITAT considered an ex-parte reassessment of a State Government employee who had not filed his return. Based on information regarding time deposits, the AO made an addition of ₹55,33,842, comprising ₹54,28,609 of bank deposits and ₹1,05,233 of interest income. The CIT(A) also dismissed the appeal as the assessee did not participate in the proceedings.

Before the Tribunal, the assessee explained that he was a retired State Government employee and had received retirement benefits aggregating to ₹40,87,211. The table reproduced in the order (page 6) showed amounts including GPF maturity, leave encashment, commuted pension and retirement gratuity. He further pointed out that a ₹10 lakh credit dated 31.08.2015 had been reversed on the very same day, but the AO had nevertheless included it while computing the bank credits.

The ITAT found prima facie substance in these contentions. It specifically observed that the majority of the bank credits comprised retirement benefits received by the assessee as a State Government employee and that the reversed ₹10 lakh entry had wrongly been included by the AO. The remaining credits comprised pension and interest income.

However, since these explanations and supporting material had not been placed before the lower authorities and therefore remained unverified, the Tribunal did not straightaway delete the addition. It restored the entire matter to the AO for fresh adjudication, with liberty to the assessee to substantiate his claim through documentary evidence and with a direction to provide reasonable opportunity of hearing. The appeal was allowed for statistical purposes.

The ITAT also condoned a 117-day delay in filing the appeal, caused by the death of the assessee’s sister, relying on the Supreme Court decision in Vidya Shankar Jaiswal v. ITO (2025) 305 Taxman 83 (SC) for the principle that a justice-oriented and liberal approach should be adopted in considering condonation of delay.

List of Cases Discussed / Relied Upon

• Vidya Shankar Jaiswal Vs ITO, (2025) 305 Taxman 83 (SC) — relied upon by the Tribunal for the principle that a justice-oriented and liberal approach should be adopted while considering condonation of delay.

FULL TEXT OF THE ORDER OF ITAT HYDERABAD

The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (for short, “CIT(A)”), dated 20/08/2025, which in turn arises from the assessment order passed by the Assessing Officer (for short, “AO”) under Section 147 r.w.s 144 of the Income-tax Act, 1961 (for short, “the Act”), dated 20/03/2024, for the Assessment Year 2016-17. The assessee has assailed the impugned order on the following ground of appeal raised before us:

1) “ The Order of the Learned Commissioner of Income Tax (Appeals) is against the law, weight of evidence and probabilities of the case.

2) That the learned Assessing Officer and the learned Commissioner of Income Tax (Appeals) have erred in law and on facts in sustaining the reassessment proceedings, without appreciating that both the notices issued under section 148A as well as under section 148 of the Income- tax Act, 1961 were issued by the Jurisdictional Assessing Officer (JAO), whereas as per the statutory scheme and CBDT instructions, such notices were required to be issued by the Faceless Assessing Officer (FAO). The reassessment proceed ings being initiated by an authority not legally empowered are void ab initio and liable to be quashed.

3) That the learned AO and the learned CIT(A) have failed to appreciate that the time deposits made during the relevant previous year were fully explained and were sourced out of retirement benefits received by the employee, which constitute capital receipts and not taxable income. The addition made merely on the basis of deposits, without disproving the explained source, is arbitrary, unsustainable and contrary to law.

4) The appellant carves leave to add to, amend OR modify the above grounds of appeal either before OR at the time of hearing of the appeal, if it is considered necessary.”

2. Succinctly stated, the assessee, who is a State Government employee deriving salary income, had not filed his return of income for the subject year, i.e., A 2016-17.

3. Thereafter, the AO, based on information gathered from ITS/AIR/CIB, that the assessee during the subject year had made time deposits of Rs.54,28,609/- with State Bank of India (erstwhile State Bank of Hyderabad), Raidurg Branch, Hyderabad, initiated proceedings under section 147 of the Act. The AO passed an order under section 148A(d) of the Act, dated 16/03/2023. Notice under section 148 of the Act, dated 17/03/2023, was issued to the assessee. As is discernible from the record, the AO had, however, issued notices under section 142(1) of the
Act dated 19/10/2023, 19/01/2024, and 24/02/2024, but the assessee failed to comply with them. Also, the notice(s) under section 133(6) of the Act, dated 23/02/2024, issued to the bank authorities were not responded to by the latter.

4. The AO, taking cognizance of the fact that the assessee had neither filed his return of income in response to the notice issued under section 148 of the Act, dated 17/03/2023, nor complied with the notices issued under section 142(1) of the Act, proceeded to frame the assessment to the best of his judgment under section 144 of the Act. Accordingly, the AO, vide his order passed under section 147 r.w.s 144 of the Act, dated 20/03/2024, made an addition of the entire amount of the bank deposits of Rs.55,33,842/-, viz., (i) bank deposits with State Bank of India, Raidurg Branch, Hyderabad: Rs.54,28,609/-; and (ii) interest income: Rs.1,05,233/-.

5. Aggrieved, the assessee carried the matter in appeal before the CIT(A). However, as the assessee failed to participate in the appellate proceedings, the CIT (A), finding no infirmity in the AO’s view, upheld the additions made by him and dismissed the appeal.

6. The assessee, aggrieved with the order of the CIT(A), has carried the matter in appeal before us.

7. We have heard the Learned Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record.

8. Shri Pradeep Raj Kuna, CA, Learned Authorized Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, submitted that there is a delay of 178 days in filing of the present appeal before the Tribunal. However, on perusal of the record, we find that the delay (though not pointed out by the Registry) amounts to 117 days.

9. Be that as it may, the assessee has filed an affidavit, dated 29/06/2026, wherein it is deposed by him that the delay in filing of the present appeal had occurred solely because of the unfortunate demise of his sister during the relevant period. It is stated by him that the sudden death of his sister has caused him immense grief, emotional trauma, and mental distress, coupled with the fact that he had to undertake various family responsibilities arising from her demise. The Ld. AR, to support the fact stated by the assessee, took us through the copy of the Death Certificate of the assessee’s sister, viz., Mrs Bhagyavathi. The Ld.AR submitted that as the delay in filing of the present appeal had crept in because of the aforesaid unfortunate set of circumstances, the same in all fairness be condoned.

10. Per contra, Shri K Prasad, Learned Senior Departmental Representative (for short, “Ld. Sr-DR”), considering the reasons leading to the delay in filing of the present appeal, did not seriously object to the seeking of condonation of the same by the assessee appellant.

11. We have given thoughtful consideration and are of the view that considering the reasoned explanation of the assessee regarding the delay involved in filing of the present appeal, the same merits to be condoned. Our aforesaid view is fortified by the recent decision of the Hon’ble Supreme Court in the case of Vidya Shankar Jaiswal vs. ITO (2025) 305 Taxman 83 (SC). The Hon’ble Apex Court, while setting aside the order of the Hon’ble High Court of Chhattisgarh, which had approved the declining of the condonation of delay of 166 days by the Tribunal, had observed that a justice-oriented and liberal approach should be adopted while considering the application filed by an appellant seeking condonation of the delay involved in filing the appeal.

12. Coming to the merits of the case, the Ld. AR submitted that the impugned addition of Rs.54,28,609/- (out of Rs.55,33,842/-) made by the AO is based on misconceived and incorrect facts. The Ld. AR submitted that as the assessee, due to the aforesaid compelling reasons, could not participate in the proceedings before the lower authorities, had suffered the impugned addition and the dismissal of the appeal vide an ex-pate order.

13. Elaborating on his contention, the Ld.AR submitted that the assessee is a retired State Government employee working under Commandant, Kondapur, 8th AP SP Kondapur and had during the subject year received retirement benefits aggregating to Rs.40,87,211/-, as under:

14. Apart from that, the Ld. AR submitted that the AO, while making an addition of Rs.10 lakhs credited in the assessee’s bank account on 31/08/2015, had failed to take cognizance of the fact that the said credit entry was reversed on the same day.

15. The Ld. AR submitted that the balance credits in the assessee’s bank account were comprised of his pension income as well as the interest income that had accrued on his deposits with the aforementioned bank. It was submitted that as the assessee could not participate in the proceedings before the lower authorities and explain the source of the credits before them, therefore, the matter in all fairness be set aside to the file of the AO with a direction to re-decide the case after affording a reasonable opportunity of being heard to the assessee.

16. Per contra, Shri K Prasad, Ld. Sr. DR though relied upon the orders of the authorities below, but fairly stated that the matter can be set aside to the file of the AO for fresh adjudication considering the peculiar facts of the present case.

17. We have given thoughtful consideration to the contentions advanced by the Learned Authorized Representatives of both parties in the backdrop of the orders of the authorities below.

18. We have perused the record and, prima facie, find substance in the Ld. AR’s contention that the majority of the credits in the bank account of the assessee are comprised of retirement benefits which he had received as a State Government employee. Also, there is substance in the claim of the Ld. AR that a transaction of Rs.10 lakhs on 31/08/2015 in the assessee’s bank account, which was though reversed, had wrongly been considered by the AO while summing up the total credits in the subject bank account. At the same time, we find that the balance credits in the assessee’s bank account comprise his pension and interest income that had accrued on his aforesaid bank account/deposits.

19. Considering the aforesaid facts, we are of the view that as the aforesaid claim of the assessee regarding the nature of the credits in his bank account were not there before the authorities below, as a result whereof the same could not be verified, therefore, in all fairness and in interest of justice, the matter requires to be restored to the file of the AO with a direction to re-decide the case afresh. Needless to say, the AO shall, in the course of the set aside proceedings, afford a reasonable opportunity of being heard to the assessee, who shall remain at liberty to substantiate his claim based on fresh documentary evidence, if any.

20. In the result, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforementioned observations.

Order pronounced in the open court on 21st August, 2026.