Ankish Madhan vs ITO Ward 29(1), Delhi

PER SHRI M BALAGANESH, ACCOUNTANT MEMBER:

The appeal in ITA No.28/Del/2026 for AY 2016-17, arises out of the order of the Id National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as 'Id. CIT(A)', in short] dated 03.10.2025 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') dated 26.12.2018 by the Assessing Officer, ITO, Ward-29(2), Delhi (hereinafter referred to as 'Id. AO').

At the outset, we find that there is a delay in filing of appeal by the assessee by 29 days before us. Considering the reasons adduced in the condonation petition, we find that assessee was prevented from sufficient cause in not filing the appeal in time before us. Accordingly, we are inclined to condone the delay and admit the appeal of the assessee for adjudication.

The assessee has raised an additional ground challenging the non-applicability of enhanced rate of tax as per Section 115 BBE of the Act for the year under consideration. This being a legal issue, we are inclined to admit the said additional Ground. Further, we also find that Hon’ble Madras High Court in the case of of SMILE Microfinance Limited vs ACIT in WP (MD) No. 2078 of 2020 and WMP (MD) No. 1742 of 2020 dated 19-11-2024 had held that the provisions of section 115BBE of the Act which enhanced the rate of tax could be made applicable only from 01.04.2017, relevant to assessment year 2018-19 onwards and not earlier. Respectfully following the same, the Additional ground raised by the assessee is allowed.

Ground Nos. 1 and 6 raised by the assessee are general in nature.

The Ground No. 3 raised by the assessee is challenging the confirmation of addition of Rs. 30 lakhs u/s 68 of the Act.

We have heard the rival submissions and perused the materials available on record. The assessee is an individual. The return of income for AY 2016-17 was filed by the assessee on 21.11.2016 declaring total income of Rs. 14,99,880/-. The case of the assessee was sought to be selected for scrutiny in order to examine 2 issues apparently as under:-

During the year under consideration, the assessee had shown an amount of Rs. 2,62,27,884/- as sundry creditors as on 31.03.2016 in the balance sheet for which the details were called for. The assessee gave the detailed vide letter dated 07.12.2018 as under:-

The assessee submitted ledger account of Shri Mohit Luthra without obtaining the conformation from him in which inadvertently a payment of Rs. 30 lakhs made by the assessee on 29.03.2018 to Mohit Luthra as per Cheque No. 616102 which is duly debited in the bank statement of the assessee, was omitted and therefore, the credit balance was shown at Rs. 30 lakhs in the name of Mohit Luthra as against the name of Ms. Ranju Jain from whom Rs. 30 lakhs were received on 04.04.2015 as per Cheque No. 000136 in the same bank account and this amount was omitted to be recorded in the balance sheet. Since a bank receipt of Rs. 30 lakhs from one party and bank payment of Rs. 30 lakhs to another party were not reflected in the accounts, there was no disturbance caused to the financial statements of the assessee due to this omission except the variance in the name of the sundry creditors. A revised balance sheet vide reply dated 21.12.2018 along with confirmation of Ranju Jain was filed by the assessee before the ld AO. It was specifically clarified before the ld AO that the credit of Rs. 30 lakhs is in the name of Ranju Jain which is outstanding as on 31.03.2016 and not in the name of Mohit Luthra. The assessee furnished the PAN of Mohit Luthra before the ld AO together with the confirmation from him by countersigning the ledger account wherein the balance outstanding was Rs. Nil as on 31.03.2016. The total transactions of the assessee with Mohit Luthra are as under:-

Hence, it could be seen that there was no outstanding balance of Mohit Lutra as on 31.03.2016. The contention of the assessee that payment made to Mohit Luthra on 29.03.2016, which got debited in the bank statement of the assessee on 29.03.2016 was omitted to be disclosed in the balance sheet of the assessee is found to be correct. Correspondingly, the assessee had received a sum of Rs. 30 lakhs on 04.04.2015, vide cheque number 000136 from Ranju Jain, which is also not reflected in the balance sheet. Since a receipt of Rs. 30 lakhs and payment of Rs. 30 lakhs was omitted in the balance sheet, it did not create any disturbance in the balance sheet, except with variation in the name of the sundry creditors. The assessee had wrongly shown the name of Mohit Luthra for Rs. 30 lakhs as sundry creditors instead of Ranju Jain. This fact has been duly placed on record by the assessee by filing a revised balance sheet on 21.12.2018 before the ld AO itself, which was not appreciated and which eventually lead to addition u/s 68 of the Act in the sum of Rs. 30 lakhs. We find that the assessee on its part had filed confirmation from Ranju Jain for advancing loan of Rs. 30 lakhs to the assessee. Further, this loan was repaid by the assessee on 05.05.2016 through regular banking channels. The assessee on his part furnished the loan confirmation from Ranju Jain, ITR of Ranju Jain, computation of income of Ranju Jain for AY 2016-17 and PAN of Ranju Jain and bank statements of Ranju Jain, proving the creditworthiness. In these circumstances, there is absolutely no scope for sustaining the addition of Rs. 30 lakhs on account of sundry creditor as assessee had properly explained all the three ingredients of Section 68 of the Act qua both Mohit Luthra and Ranju Jain. Accordingly, the Ground No. 3 raised by the assessee is allowed.

Ground No. 4 raised by the assessee is challenging the confirmation of addition of Rs. 34,80,500 u/s 68 of the Act.

We have heard the rival submissions and perused the material available on record. The assessee had shown cash in hand as on 31.03.2016 in the sum of Rs. 34,80,500. During the year under consideration, the assessee had shown commission income of Rs. 44 lakhs out of which Rs. 35 lakhs was received in cash. The receipt of commission income was duly credited in the profit and loss account and duly considered in the return of income. The genuineness of receipt of brokerage income in cash is not doubted by the revenue. The books of account of the assessee were not sought to be rejected by the AO. The assessee had furnished the complete cashbook before the ld AO, where the receipt of commission income is duly disclosed. The assessee furnished the names and addresses of six persons together with their PAN for receipt of commission income before the ld AO. Despite all these documents, the ld AO sought to treat the closing cash balance in hand as on 31.03.2016 in the sum of Rs. 34,80,500 as unexplained money and added the same u/s 68 of the Act, which stood confirmed by the ld CIT(A).

We find that assessee had indeed offered commission income of Rs. 44 lakhs and out of which Rs. 35 lakhs is received in cash. Apart from that, there was some cash withdrawal and cash deposits made from the bank account. The entire cashbook in the whole FY 2015-16 is enclosed in pages 34 to 36 of the book wherein we find that there is no negative cash balance on any single day. The cash book filed by the assessee was not sought to be rejected by the ld AO. There is absolutely no case made out by the revenue for making an addition of Rs. 34,80,500 on account of closing cash balance reflected in the balance sheet as on 31.03.2016. When the cash income is offered to tax the other side of the same transaction is getting reflected in the form of closing cash balance, which cannot be brought to tax separately. Hence, the ground No. 4 raised by the assessee is allowed.

In view of aforesaid adjudication of Ground Nos. 3 and 4, the adjudication of Ground No. 2 become academic.

Ground No. 5 raised by the assessee is consequential.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 09^th -September-2026.