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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), NFAC, Delhi [‘CIT(A), NFAC’ in short] dated 15.10.2025 arising from the assessment order being passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) dated 23.12.2019 passed by Assessing Officer, for the Assessment Year 2017- 18.
At the very outset, the ld. counsel for the assessee stated that there is a delay in filing appeal. The delay is hereby condoned in view of the reasons submitted.
The grounds of appeal raised by the assessee are as under :
1.That on the facts, circumstances of the case and in law, the action of the lower authorities in making and confirming the addition of Rs.29,70,000/-being the cash deposited in the bank account during the demonetisation period is unjust, illegal, arbitrary, unwarranted, accordingly the addition deserves to be deleted in full.
2.That on the facts, circumstances of the case and in law, the ACIT erred in holding that the assessee is not able to substantiate the source of cash deposited to the extent of Rs.29,70,000/- and failed to consider that the source of cash deposited in the bank account during the demonetisation period was out of cash sales and duly recorded and included in revenue from operations, accordingly such addition is unjust, illegal, arbitrary, unwarranted, accordingly the addition deserves to be deleted in full.
3.That on the facts, circumstances of the case and in law, the lower authorities erred in making and confirming the addition of Rs.29,70,000/-cash deposited during the demonetisation period is not genuine and held as unexplained credit u/s.68, even after accepting the books of accounts and declared profit, and failed to consider the fact that such addition results addition of the same amount twice, accordingly the assessee-appellant prays that the addition of Rs.29,70,000/- may kindly be deleted in full.
4.That on the facts, circumstances of the case and in law, the CIT(A) erred in confirming the addition of Rs.29,70,000/- on assumption and presumption by not considering the written submission and documentary evidences including case laws filed in the form of Paper Book, thus it is prayed that the addition of Rs.29,70,000/- deserves to be deleted in full.
5.That on the facts, circumstances of the case and in law, the lower authorities erred in applying higher tax rate u/s.115BBE on the addition of Rs.29,70,000/- u/s.68 and failed to consider the fact that higher rate specified in the section 115BBE is applicable for the transaction held on or after 01/04/2017, thus the assessee-appellant prays appropriate relief in this regard.
6.That on the facts, circumstances of the case and in law, the CIT (A) erred in confirming the addition of Rs.5,63,500/- by treating the cost of the air conditioners installed in the existing office premises in different locations as capital expenditure and failed to consider the fact that the air conditioners are installed in existing office premises for smooth operation and revenue in nature allowable u/s.37 of the I. tax Act,1961, thus it is prayed that the addition of Rs.5,63,500/- deserves to be deleted in full.
7.That without prejudice to the grounds of appeal no.6 raised above, the CIT(A) erred in confirming the addition of Rs.5,63,000/- as capital expenditure and failed to appreciate the fact that such treatment of the AO is just deferment of allowing the deduction in favour of the assessee and revenue neutral, accordingly the assessee-appellant prays for full relief in this regard.
8.That the appellant craves leave to adduce additional grounds and/ or amend or withdraw any of the aforesaid Grounds before or at the time of hearing of appeal.”
Brief facts of the case are that the AO passed order under section 143(3) of the Act on 23.12.2019 and made addition of Rs.29,70,000/- as unexplained cash deposit invoking section 68. Further, addition was made of Rs.5,63,500/- treating it as capital expenditure as against under the repairs and maintenance head.
Being aggrieved with the assessment order, assessee filed appeal before the ld. CIT(A), who has dismissed the appeal. Now the further aggrieved assessee is in appeal before us.
Before us, the ld. counsel for the assessee vehemently submitted that the cash deposits of Rs.29,70,000/- in the bank account during the demonetization period was out of cash sales and duly recorded and included in revenue from operations.
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 source of cash deposit during demonetization period as being from cash sales. We also find that on the other hand, the Revenue’s endeavour to disbelieve the assessee’s contention that cash deposit has been made out of sales, 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 Rs. 2 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 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.
With respect to the treatment of expense of Rs.5,63,500/-, we are of the considered view that the cost of installation of the air conditioners in the existing office premises in different locations, is revenue expenditure allowable u/s 37 of the Act,1961. The said addition is accordingly deleted.
In the result, appeal of the assessee in ITA No. 1415/Del/2026 is partly allowed.