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Judgment
ORDER
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)’ in short] dated 13.11.2025 arising from the assessment order dated 30.12.2019 passed by the Income Tax Officer, Ward-6(3), Delhi under Section 143(3) 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.The assessment order passed by the learned Income Tax Officer is against the fact of the case and hence bad in Law & Facts.
2.Addition under abnormal increase in sale and un-explained cash deposit during demonitization:
The case was selected for scrutiny on the basis of abnormal increase in sales and cash deposit in Bank and doubted the credit worthiness and genuineness of transaction for the cash deposited by the company during demonetization period. An order was passed without considering the supporting documents and Books of Accounts. The Assessing Officer has made the addition amounting to Rs.27,70,862/-- as Un Explained cash deposit and abnormal increase in retail sale by passing Assessment Order without considering the explanation and documents. The Assessing officer neither found an error in books of accounts nor in the stock records and just made the addition an ad-hoc basis, without any logic.
3.The Assessing officer made the addition, that this deposit during demonetization was planned but he neither considered the VAT returns nor considered that there was sufficient opening balance. These VAT returns were timely filed before the demonetization and not revised.
4.Appeal Dismissed: Assessee filed an Appeal against the order on 11/1/2025 after receiving the assessment order u/s 143 (3) on 08/10/2025. The assessee filed reply in response to the notices received for hearings, but the appeal was dis1nissed.
5.The Learned Income Tax Officer has erred in making the Assessment and raising demand by passing an Order and not considering the documents & explanations given during the course of the assessment.
6.The Assessee craves the leave of this Honorable Authority to add, alter, and amend any /other grounds of appeal at the time of hearing.”
Brief facts of the case are that the assessee is a Pvt. Ltd. company engaged in the retail sales of Crystal show pieces and high class artificial jewellery from its show rooms in Delhi NCR and several other states of India. It filed its return of income on 31.10.2017 declaring income of Rs.40,01,600/-. The Assessing Officer found cash deposit during the demonetization period and finding the assessee’s explanation not convincing, treated 20% of the total cash deposit during demonetization period amounting to Rs.27,70,862/- as unexplained cash deposit.
When the aggrieved assessee went in appeal before the ld. CIT(A), the ld. CIT(A) dismissed the appeal. The aggrieved Assessee is before us.
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 source of cash deposit during demonetization period as being from cash sales. Although the assessee, prima facie, appears to have discharged its onus of explaining source of cash deposit, it’s contentions to prove the source, hardly deserves to be accepted in entirety especially when the assessee could not give satisfactory explanation for increase in sales sales in month prior to the November 2016 as well as that of cash withdrawals despite having sufficient cash in hand of Rs. 27,70,862/-. 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.
In the result, appeal of the assessee in ITA No. 260/Del/2026 is partly allowed.