Amit Gupta vs ACIT

PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :

These captioned cross appeals have been filed against the orders of the learned Commissioner of Income Tax (Appeals)-24, New Delhi [‘CIT(A)’ in short] dated 21.08.2025 arising from the assessment order of the Assessing Officer under section 143(3) of the Income tax Act, 1961 (hereinafter referred as ‘the Act’) dated 31.12.2019, for the Assessment Year 2017-18.

Since the above captioned cross appeals were heard together and the facts in issues are identical, all these appeals are being disposed of by this common order for the sake of convenience and brevity.

The grounds raised by the assessee are as under :

Brief facts of the case are that during the year under consideration, the assessee was engaged in the business of purchase and sale of bullion/jewellery items. During the assessment proceedings, AO made the following additions:

When the aggrieved assessee went in appeal before the ld. CIT(A), the ld. CIT(A) allowed the appeal of the assessee on issues at (i) and (ii) above and dismissed the appeal on issues at (iii) and (iv) above. The aggrieved Assessee as well as the Revenue are in appeal before us.

We first take up the assessee’s appeal. Before us, the ld. counsel for the assessee vehemently submitted that the cash deposits in the bank account during the period of demonetization were out of sales and duly recorded in the books of account.

Per contra, the ld. DR relied on the orders of the authorities below.

We have heard the rival submissions and have perused the relevant material on record. In the instant case, we find that the assessee has attempted to prove the entire cash deposit during demonetization period as being out of sales and recorded in the books of account. Although the assessee, prima facie, appears to have discharged its onus of explaining the cash deposits, it’s contentions to prove the cash deposits during the demonetization period, hardly deserves to be accepted in entirety especially when the assessee could not give satisfactory explanation for the disproportionate increase in cash sales just before demonetization period. On the other hand, the Revenue’s endeavour to disbelieve the assessee’s contention that cash deposits are supported by stock register, purchase records, cannot be fully justified. In this factual matrix, there is some element of failure to explain some of the cash deposit, cannot be ruled out. Be that as it may, it is deemed appropriate, in larger interest of justice, that a lump-sum addition of 5% of the cash deposit amounting to Rs. 8.50 lakh only would be just and proper with a rider that the same shall not be treated as a precedent, so as to cover all loopholes. The assessee’s ground 3,4, and 5 on this count is partly allowed.

In so far as levy of tax at a higher rate under section 115BBE of the Act is concerned, we find that the Madras High Court in the Writ petition in the case of S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Madras) has held that the impugned statutory provision would come into effect on the transaction done on or after 01.04.2017 only. Accordingly, we direct the AO to tax the addition under normal provisions of tax and not under the provisions of 115BBE. Ground 6 is allowed.

Another substantive ground for grievance of the assessee, against the issuance of notice u/s 143(2) incorrect format, is considered no longer res-integra. The issue of the validity of notice under Section 143(2) which do not conform to the format prescribed under CBDT Instruction F. No. 225/157/2017/ITA.II, dated 23 June 2017, has been decided against the assessee by the hon’ble Delhi High Court in the case of Bharat Bansal in WP(C) 2238/2026 dated 17.02.2026. Accordingly ground 7 is dismissed.

With respect to disallowance of interest of Rs.2,34,371/- being difference of interest expenses in OD account and interest income in saving account, we find that the assessee has earned interest by transferring the funds available in OD a/c to his saving account. We find that there is no allegation by the AO that OD fund was not utilized by the assessee for his business purposes. There is also no doubt raised that the assessee has not declared the interest earned on the saving account as income. We therefore agree with the assessee that the said disallowance would lead to double taxation and accordingly the addition is directed to be deleted. Ground 2 is allowed.

The Revenue 1st objection is to the deletion by CIT(A) addition on account of unexplained loan of Rs 1,50,00,000/- from M/s Lalji Mal Hanuman Prasad. We find that the CIT(A) deleted the addition by holding that the loan was repaid back during the year through banking channel; the assessee submitted confirmation from source of the source to establish the identity, genuineness and creditworthiness of M/s Lalji Mal Hanuman Prasad. In such facts and circumstances, we are of the considered view that there is no reason to interfere with the decision of the CIT(A). The ground 1 to 4 is dismissed.

The next grievance is with regard to disallowance of entire amount of purchase of Rs. 7,85,64,254/- from M/s Om Gems & Jewellery, under Section 40A(2)(b) of the Income Tax Act, 1961. The Revenue has raised grounds of genuineness and reasonability of the purchase from the related party. We are of the considered view that once the AO has invoked the provision of section 40A(2), he assumes that the related party as well as the transaction with them are genuine. The only fact to be established by the AO is whether the payment made to the related party is excessive or unreasonable. We find that the CIT(A) gave relief on account of the fact that the AO instead of making disallowance of excessive or unreasonable expenditure, he had disallowed the entire purchase without establishing the related party had charged a higher rate than the market rate. We further find that the CIT(A) has compared the rates charged by M/s Om Gems & Jewellery with the market rate and concluded that the difference in rate charged is very insignificant. In such factual matrix, we are of the considered view that there is no reason to interfere with the decision of the CIT(A). The ground 5 & 6 are dismissed.

In the result, appeal of the assessee in ITA No. 5433/DEL/2025 is partly allowed while that of Revenue in ITA 7767/D/2025 is dismissed.