Case Law Details
Jayakrishna Nandamuri Vs DCIT (ITAT Hyderabad)
The appeal concerns the addition of ₹23,53,750 as unexplained investment under Section 69B of the Income Tax Act for Assessment Year 1996–97. The assessee challenged the order of the first appellate authority, which had confirmed the addition made by the Assessing Officer (AO).
The case originated when the AO received information that cash payments totaling ₹23,53,750 had been made for the purchase of jewellery from a Coimbatore-based jeweller. Based on this, the AO reopened the assessment under Section 147 and completed reassessment under Section 143(3) read with Section 147, treating the amount as unexplained investment.
In earlier proceedings, the Tribunal and the High Court directed the AO to examine the jeweller and provide an opportunity for cross-examination. Accordingly, the jeweller’s statement was recorded, and the assessee was given an opportunity to cross-examine him. After considering the statement, cross-examination, and submissions, the AO again made the addition, which was subsequently upheld by the first appellate authority.
Before the Tribunal, the assessee contended that the jewellery was purchased by his daughter through his Personal Assistant (PA), and that the source of funds had been fully explained through withdrawals from bank accounts and marriage gifts received by the daughter. It was argued that no evidence showed that the assessee directly paid for or received the jewellery, and that the addition was based on suspicion. The assessee also relied on statements made by the jeweller during cross-examination, where he confirmed that the assessee neither personally paid for nor received the jewellery.
The Revenue, however, supported the findings of the lower authorities, stating that the assessee had failed to satisfactorily explain the source of the investment and that the conclusions were based on material evidence.
Upon examination of the record, the Tribunal noted that it was undisputed that the cash payments were made to the jeweller through the assessee’s PA and that the jewellery was also delivered to the PA. The jeweller confirmed that the payments were received in cash from the PA during visits to Hyderabad and that delivery of jewellery and refund of surplus amounts were also made to the PA.
A key fact highlighted by the Tribunal was that part of the cash payment resulted in a refund by cheque issued in the name of the assessee. This cheque was handed over to the PA and subsequently deposited in the assessee’s bank account. This fact was not disputed by the assessee at any stage.
The Tribunal held that the receipt of the refund cheque in the assessee’s name and its deposit in his bank account established a direct nexus between the assessee and the transaction. In light of this, the argument that the original payment did not pertain to the assessee was found to be untenable.
The Tribunal further observed that the involvement of the PA in making payments and receiving jewellery indicated that the transaction was carried out under the directions of the assessee. The explanation that the daughter independently made the investment was not accepted, as the evidence did not establish that she directly paid the jeweller or received the jewellery.
The Tribunal also noted that the jeweller did not know the daughter and confirmed that she had not approached him for the transaction. Additionally, there was no evidence to show that the daughter had handed over funds to the PA or received the jewellery from him.
Given these findings, the Tribunal concluded that the assessee had direct or indirect participation in the transaction and was responsible for explaining the source of the investment. Since no satisfactory explanation was provided, the addition under Section 69B was justified.
The Tribunal also rejected the applicability of judicial precedents cited by the assessee, stating that the facts of the present case—particularly the refund being credited to the assessee’s account—distinguished it from those cases.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal is filed by Shri Jayakrishna Nandamuri (“the assessee”), feeling aggrieved by the order passed by the Learned ADDL/JCIT(A)-1, NOIDA, (“Ld. First Appellate Authority”) dated 03.09.2025 for the A.Y.1996-97.
2. The assessee has raised the following grounds of appeal:
1. The order of the ld CIT (Appeals) is contrary to law and the facts.
2. The ld CIT (A) erred in making addition of Rs. 23.54 lakhs being value of the jewellery as unexplained investment U/s 69B of the IT Act.
3. The appellant contends based on presumption, suspicion and surmises, the ld CIT(A) erred in making allegation that the appellant through P.A paid the amount to Mr. Muthuswamy for purchase of jewellery and collected the Jewellery for his daughter is false.
4. The ld CIT(A) ought to have noted that Mr. Muthuswamy Jeweller in his cross examination categorically admitted the following facts.
i) That the appellant did not Approach Mr. Muthuswamy for purchase of jewellery. (Vide reply to Q. No. 2 of Cross Examination).
ii) That the appellant did not pay the amount to Mr. Muthuswamy for purchase of jewellery. (Vide reply to Q. No. 6)
iii) That appellant’s PA did not tell Mr. Muthuswamy that the appellant sent money for purchase of jewellery. (Vide reply to Q. No.8)
iv) That Mr. Muthuswamy reaffirmed the fact that the appellant neither paid the amount nor received the Jewellery from him. (Vide reply to Q. No. 10)
5. The ld CIT (A) ought to have noted that the jewellery was purchased by the appellant’s daughter: Late Smt. Kumudini Devi at Coimbatore from Mr.Muthuswamy and that appellant and his wife both had gifted Rs. 16.46 Lakhs for jewellery for marriage, by withdrawing the amount from their Bank A/c’s and in support affidavits and bank statements were filed and the authorities below dislodged the evidence to sustain additions.
6. The ld CIT A ought to have further noted that appellants daughter received gifts Rs. 10.08 Lakhs in her marriage performed by her grandfather who was the then Chief Minister of AP State and confirmations from the donors were filed on record and ld CIT A dislodged the above evidence and sustaining impugned addition.
7. The appellant contends, that Ld CIT (A) passed order wholly based on the role of P.A of the appellant, on assumption and presumptions that the P.A had paid the amount for jewellery and received the jewellery on the instructions of appellant, totally dislodging the evidence on record and admissions of Mr. Muthuswamy in cross examinations, and therefore the impugned order is perverse.
8. The ld CIT(A) ought to have noted that in a closely held family the services of staff like P.A, driver etc are not limited only to the Appellant but entire family utilizes such services.
9. The ld CIT (A) ought to have noted that appellant’s daughter purchased the jewellery from her own funds gifted by her parents and marriage gifts from relatives in the marriage.
10. The ld CIT (A) ought to have also noted that Sri Muthuswamy categorically admitted that the appellant neither approached him nor involved in the payment of amount for jewellery or its delivery. The appellant contends discarding statements and admissions of Mr. Muthuswamy, sustaining additions is bad in law.
11. The appellant contends in the above facts and circumstances, addition is based on guess work, presumptions, surmises and conjectures and such addition is unwarranted.
12. For these and other grounds that may be urged before the disposal of the appeal, appellant prays that the addition of Rs. 23.54 lakhs as unexplained investment U/s 69B of the Act is unwarranted and bad in law.
Place: Hyderabad
Dated: 18/10/2025
3. The brief facts of the case are that the assessee is an individual who had filed the return of income for Assessment Year 1996–97 on 12.05.1997, admitting total income of Rs.1,02,955/-. On the basis of information available, the Learned Assessing Officer (“Ld. AO”) came to know that the assessee had paid Rs.23,53,750/- in cash for purchase of jewellery from Shri M.S. Muthuswamy, Proprietor of M/s Sre Venco Jewellers, Coimbatore ( “the jeweller”). Accordingly, the Ld. AO reopened the assessment under section 147 of the Income Tax Act, 1961 (“the Act”) and issued notice under section 148 of the Act on 21.03.2001. In response, the assessee filed return of income on 30.05.2001 admitting total income of Rs.1,02,995/-. After considering the submissions of the assessee, the Ld. AO completed the assessment under section 143(3) read with section 147 of the Act on 28.03.2002, treating the cash payment of Rs.23,53,750/- as unexplained investment under section 69B of the Act.
4. In the first round of appeal, the Learned Commissioner of Income Tax (Appeals) (“Ld. CIT(A)”) confirmed the addition of Rs.23,53,750/- made by the Ld. AO. On further appeal, the Tribunal in ITA No. 749/Hyd/2003 dated 08.06.2004 set aside the matter to the file of the Ld. AO with a direction to examine the jeweller, provide opportunity of cross-examination to the assessee, and decide the issue afresh in accordance with law. Further, on appeal by the assessee, the Hon’ble High Court also directed the Ld. AO to examine the jeweller and provide opportunity of cross-examination, and all contentions were kept open.
5. Pursuant to the directions of the Hon’ble High Court, the Ld. AO recorded the statement of the jeweller and provided opportunity of cross-examination to the assessee. After considering the statement, cross-examination, and submissions of the assessee, the Ld. AO again made addition of Rs.23,53,750/-under section 69B of the Act. Accordingly, the assessment in the second round was completed by the Ld. AO under section 143(3) read with section 260 of the Act on 31.03.2016, assessing total income of the assessee at Rs.24,56,750/-.
6. Aggrieved with the order of the Ld. AO, the assessee preferred appeal before the Ld. First Appellate Authority. The Ld. First Appellate Authority confirmed the addition made by the Ld. AO.
7. Aggrieved with the order of the Ld. First Appellate Authority, the assessee is now in appeal before this Tribunal. At the outset, the Learned Authorized Representative (“Ld. AR”) submitted that the only issue involved in the present appeal is the addition of Rs.23,53,750/- made under section 69B of the Act. It was contended that the impugned cash payment was made by the Personal Assistant (“PA”) of the assessee to the jeweller and the jewellery was also handed over by the jeweller to the PA. It was further submitted that no evidence has been brought on record by the Revenue to establish that the cash was directly paid by the assessee to the jeweller or that the jewellery was received directly by the assessee. The Ld. AR further submitted that, in fact, the daughter of the assessee had purchased the jewellery through the PA of the assessee and the source of investment in the hands of the daughter has been duly explained with documentary evidence, which has not been doubted by the Revenue authorities. Accordingly, it was contended that the addition in the hands of the assessee has been made merely on suspicion and is liable to be deleted. In support of their contention, the Ld. AR relied on the following judicial precedents:
a. 454 ITR 595 (SC) D.N. Singh Vs. Commissioner of Income Tax and Another
b. 419 ITR 132 (Guj) – Principal Commissioner of Income Tax Vs. Himanshu Chandulal Patel
c. 367 ITR 112 (Delhi) -Pepsi Foods P. Ltd Vs. Assistant commissioner of Income Tax
d. 290 ITR 245 (Delhi) –CIT Vs. Lalit Bhasin
e. 338 ITR 485 -CIT Vs. Puneet Sabharwal
f. KP Varghese Case Hon’ble Supreme Court in 131 ITR 597
g. ITA No. 55/Hyd/2015 –G Mahesh Babu Vs. DCIT.
8. Per contra, the Learned Departmental Representative (“Ld. DR”) relied on the orders of the lower authorities and submitted that the assessee has failed to satisfactorily explain the source of investment. It was contended that the findings of the Ld. AO as well as the Ld. CIT(A) are based on material evidence and no interference is called for.
9. We have considered the rival submissions and perused the material available on record including the case laws relied upon. On perusal of the same, we find that there is no dispute with regard to the fact that cash amounting to Rs.23,53,750/- was paid for purchase of jewellery to the jeweller through the PA of the assessee and the jewellery was handed over by the jeweller to the PA of the assessee. In this regard we have gone through para nos.1.6 to 3.2 of the order of the Ld. Ld. AO which is to the following effect:
10. On perusal of the above, we find that the Ld. AO has reproduced the relevant statement of the jeweller recorded on 26.08.2015 and also the cross examination of the jeweller by the assessee on 28.03.2016. The Ld. AO has elaborately recorded the relevant facts of the case for making the impugned addition. We further find that a crucial fact emerging from the record is that, part of the said cash payment of Rs.23,53,750/- resulted in refund of the balance amount by the jeweller through cheque in the name of the assessee, which was handed over by the jeweller to the PA of the assessee and the cheque was subsequently deposited in the bank account of the assessee. This fact of refund by cheque in the name of the assessee and its deposit in the assessee’s bank account has not been disputed by the assessee at any stage. Therefore, in our considered view, this undisputed fact clearly establishes a direct nexus between the assessee and the transaction with the jeweller. Once the refund arising out of the very same transaction has been received in the name of the assessee and credited to his bank account, the contention of the assessee that the original cash payment did not pertain to him cannot be accepted. The conduct of the transaction, including the routing of refund in the name of the assessee, militates against the stand taken by the assessee. Accordingly, we are of the considered view that the Ld. AO has rightly treated the impugned amount as unexplained investment under section 69B of the Act, and the Ld. CIT(A) was justified in confirming the same.
11. As far as the reliance placed on by the assessee on various judicial precedents, the same are not applicable to the present facts of the case. In the present case, the deposit of cheque in the bank account of the assessee representing the refund of balance amount out of the impugned cash payment clearly establishes a direct nexus between the assessee and the transaction with the jeweller. In view of the present facts and circumstances of the case, we do not find any infirmity in the order of the Ld. CIT(A).
12. In the result, the appeal of the assessee is dismissed.
Order pronounced in the Open Court on 8th April, 2026.
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