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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :
This captioned appeal has been filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals)-Delhi [‘CIT(A)’ in short] dated 03.09.2025 arising from the Assessment Order dated 20.12.2019 passed by the Income Tax Officer (ITO), Ward 5(1)(2), G. Budh Nagar under Section 144 of the Income Tax Act, 1961 (the Act) concerning Assessment Year (A.Y.) 2017-18.
The grounds raised by the assessee are as under :
“1.That under the facts & circumstances of the case, the Ld.CIT (A) has erred to hold validity of assessment order on PAN-AAECC0623N without the legal and valid service of notice u/s 142(1) r.w.s. 282 of IT Act. Holding of valid assessment order without valid service of notice is arbitrary, unjust, uncalled for, illegal void ab initio and against the equity and natural justice.
2.That under the facts and circumstances of the case, the Ld. CIT(A) has erred to conform the addition of Rs.2,55,43,062/- u/s 69A, whereas entire deposit in PNB account no. 617008700001851 was duly incorporated in regular books of accounts on the basis of which return was filed on PAN no. AAECC5409J. Confirmation of addition of Rs.2,55,43,062/- and application of section 69A is arbitrary, unjust, uncalled for illegal and against the equity and natural justice.
3.That without prejudice to ground no. 1 & 2 and under the facts and circumstances of the case when entire deposit in PNB is duly recorded in regular audited books of accounts assessed by PAN No. AAECC5409J, there was no justification to confirm the addition of Rs.2,55,43,062/- and application of section 69. The addition of Rs.2,55,43,062/- and application of section 69A is arbitrary, unjust, uncalled for illegal, highly excessive and against the principal of natural justice and equity.”
The solitary issue involved in the case is addition of Rs.2,33,43,062/- as unexplained credit entries in the Bank account and Rs.22,00,000/- as unexplained cash deposit in the Bank account, totaling to Rs.2,55,43,062/- under section 69A of the Act read with section 115BBE of the Act.
The AO found that the assessee had deposited cash of Rs 22,00,000/- including cash deposit of Rs 10,50,000/- during the demonetization period. The total credits in the bank account was Rs 2,33,43,062/- during the year. As the assessee had not filed its ITR nor responded to notices u/s 142(1) and show cause notices, the AO added the entire credits in the bank account of Rs 2,55,43,062/- as unexplained money u/s 69A of the Act r.w. 115BBE. The CIT(A) confirmed the said additions. Aggrieved the assessee is before us.
The Director of the company, Ms Navita Sharma stated before us that assessee was allotted two PANs AAECC0623N and AAECC5409J. The PAN AAECC0623N is not registered by the assessee company on Income Tax Portal and not used by the company. The Id. Assessing Officer got the information from Punjab National Bank on PAN AAECC0623N and completed the assessment u/s for AY 2017-18 u/s 144 of the Income Tax Act. It is submitted that the assessee is regularly filing its Income Tax Return on its PAN AAECC5409J since inception till now i.e. AY 2023-24. The assessee is a Private Limited Company and the entries in the PNB bank is duly recorded in the regular books accounts and the financial statements for FY 2016-17 are also duly audited. It is stated that the assessee has filed the ITR for AY 2017-18 vide E Acknowledgment No. 522165141280318 dated 28-3-2018 on its PAN AAECC5409J. She prayed for deletion of the additions made of Rs. 2,55,43,0621 u/s 69A in Assessment Order u/s 144 on PAN AAECC0623N.
Per contra, the ld. DR heavily relied upon 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 source of cash deposits during demonetization and other credits in the bank during the years as belonging to assessee under different PAN AAECC5409J. We find that the assessee operates the PNB bank account under PAN AAECC0623N, to deposit cash and sale proceeds whereas the assessee uses PAN AAECC5409J for income tax purposes. Though possessing more than one Permanent Account Number (PAN) is illegal under Section 139A(7) of the Income Tax Act, 1961 and violators may face a penalty under Section 272B, the assessee, prima facie, appears to have discharged its onus of explaining source of credits in bank account. Nevertheless, it’s contentions to prove the source for entire cash deposits, hardly deserves to be accepted in entirety especially when the CIT(A) found no explanation for cash deposits in the PNB bank account. On the other hand, the Revenue’s endeavour to disbelieve the assessee’s contention that said cash/credit entries in the PNB bank account are recorded in books, 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 ₹ 10 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 ground of appeal no 1 to 3 is partly allowed.
In so far as assessee's 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.
In the result, appeal of assessee in ITA No. 7042/DEL/2025 is partly allowed.