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Judgment
PER NAVEEN CHANDRA [A. M]:
The above captioned appeal is preferred by the assessee against the order dated 28.05.2025, passed by National Faceless Appeal Centre/Learned Commissioner of Income Tax(Appeals), New Delhi (hereinafter referred to as ‘ld. CIT(A)), under section 250 of the Income Tax Act, 1961 [hereinafter referred to as, “Act”] for Assessment Year 2017-18. The assessment order in this appeal is passed by the Assessing Officer [for short, AO] under section 143(3) of the Act.
The assessee has raised following grounds of appeal:-
1.That the A.O. has misunderstood and misinterpreted the facts of the case by completely ignoring the return filed by the assessee and other relevant information available with the A.O.
2.That the A.O. has erred in not following the Standard Operating Procedure and has treated the entire cash deposits in the bank as income despite the SOP clearly providing guidelines.
3.That the A.O. has erred in making an addition of Rs. 40,71,444/- under section 68 of the Act on account of total cash deposits treating it as unexplained money, out of total cash deposit of Rs. 41,36,000/- during Demonetisation period.
4.That the A.O. has grossly erred in, arbitrarily and erroneously applying the provisions of section 68 and 115BBE of the Act and hence taxing Rs. 40,71,444/-- at the rate of 60 percent in complete disregard of the facts, explanations and documentary evidence.
5.That the A.O. has further erred in treating the entire cash deposits in the bank during demonetisation as income whereas it is well laid that cash deposits were out of Sale Proceeds/Cash Balance and the same was also duly considered while filing D-VAT Return and Income Тax Return.
6.That the A.O. has further erred in addition of Rs.1,08,21,832/-, ignoring the submission made on dated 12-12-2019, in which PAN and address of the Domestic creditors were provided. Ld. AO further erred in establishing the fact that Overseas creditors were in respect of imports made and goods are closed after paying the custom duties and other clearing formalities related to imports of goods in India.
7.That to prove the amount shown as outstanding creditors Ledgers, Purchase Invoice and Payment reflected in bank statement can be provided before Lordship.
8.That the A.O. has further erred in addition of Rs. 10,06,087/-, ignoring the submission on dated 27-11- 2019, wherein details of loan taken/repaid/given during the year under consideration was submitted.
9.That the entire unsecured loan were taken from family members for running the business as need of working capital for going concern of business.
10.That the A.O. has further erred in charging interest of mentioned sections, while determining demand payable by appellant without appreciating that since the Appellant could not be held liable for the payment of Advance tax for the amount under reference, no interest u/s 234B and 234C could be charged. That the A.O. has further erred in initiating penalty proceedings under section 270A and 271AAC of the Income Tax Act, 1961.
Brief facts of the case are that the assessee filed his return of Income declaring an income of Rs.3,89,310/-. The case for the A.Y. 2017-18 was selected for scrutiny and assessment u/s 143(3) was completed vide order dated 30/12/2019 at Rs.1,62,96,190/-. The A.O made additions of cash deposited of Rs 40,71,444/-, out of total cash deposit of Rs. 41,36,000/- during demonetisation period, under section 68 of the Act as unexplained money invoking the provisions of section 115 BBE of the Act; amount of Rs 1,18,27,919/- being the Sundry creditors and Unsecured loan, was also added u/s 68 of the Act. The additions made by the AO was confirmed by the CIT(A), hence the instant appeal.
The ld counsel of the assessee vehemently argued that cash deposits were out of Sale Proceeds/Cash Balance and the same was also duly considered while filing D-VAT Return and Income Тax Return. With respect to addition of Rs.1,08,21,832/-, the assessee had submitted details of PAN and address of the Domestic creditors. The Overseas creditors were in respect of imports made which are closed after paying the custom duties and other clearing formalities related to imports of goods in India and all documents of outstanding creditors like Ledgers, Purchase Invoice and Payment reflected in bank statement can be provided. With respect to addition of Rs. 10,06,087/-, it is submitted that they were loans from family members for running the business.
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 deposit during demonetization as cash sales and cash in hand. 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 AO found abnormal pattern of cash deposits in the preceding year during the same period. On the other hand, the Revenue’s endeavour to disbelieve the assessee’s contention that cash deposit has been made out of sales and cash in hand, 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 8% only of the cash deposits amounting to Rs 3.25 lakh 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 3 and 5 is partly allowed.
That leaves us with the additions of sundry creditors and loans. We find that the assessee explanations have been discarded in absence of evidence/documents. In such factual matrix and considering the running business of the assessee, we deem it appropriate, in larger interest of justice, that a lump-sum addition of 8% only of the sundry creditors and loans amounting to 9.50 lakh would be just and proper with a rider that the same shall not be treated as a precedent, so as to cover all loopholes. Ground 6 to 9 are 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 hon’ble 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. The ground 4 raised by the assessee is allowed.
In the result, appeal of assessee in ITA No.3868/Del/2025 is partly allowed.