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Judgment
Per Renu Jauhri, Accountant Member:
This appeal by the Revenue is directed against the order dated 29.12.2025 of National Faceless Appeal Centre (NFAC), Delhi, [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the order dated 29.03.2022 passed under section 143(3) r.w.s. 147 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by AO pertaining to Assessment Year (A.Y.) 2017-18.
The Revenue has raised the following grounds of appeal:
“1.On the basis of the facts and circumstances of the case, the Ld. CIT(A) has erred in law by deleting the addition amounting to Rs. 1,22,60,000/- made by the assessing officer on account of cash deposited during the demonetization period treating the same as unexplained cash credit u/s 68 of the Act, without appreciating the facts brought on record by the AO regarding the above cash deposits.
2.Appellant craves leave to add, amend, alter, modify, DLEETE and OR change any of above grounds on OR before the date of hearing.”
Brief facts are that the assessee filed his return for A.Y. 2017-18 on 25.05.2017 declaring total income of Rs. 8,16,040/-. Subsequently, on the basis of information received, the case was reopened on account of huge of cash deposits made during the period of demonetization. Final assessment was made u/s 147 r.w.s. 144 after making addition of Rs. 1,22,60,000/- u/s 68 of the Act on account of cash deposited by the assessee in his bank accounts and taxed u/s 155BBE of the Act.
Aggrieved, the assessee preferred an appeal before the Ld. CIT(A). Vide order dated 29.12.2025, Ld. CIT(A) deleted the entire addition with the following observations:
“4.4.5The appellant is a regular trader in cattle feed, maintaining audited books of account and registered under VAT. The cash deposits were duly recorded in the books.
4.4.6The Assessing Officer has neither rejected the books of account nor pointed out any defect therein. Merely doubting the cash book or sales figures, without evidence, is insufficient. It is well settled that suspicion, however strong, cannot take the place of proof. Further, once sales are accepted, corresponding cash receipts cannot be treated as unexplained, as this would result in double taxation. …. ….
4.5.1The 9th and 10th grounds challenge invocation of sections 68 and 115BBE. It is argued that section 68 applies only where credits are unexplained, which is not the case here. Further, enhanced provisions of section 115BBE, introduced during the financial year, cannot be applied retrospectively, relying on Vatika Township (P) Ltd. and Karimtharuvi Tea Estate Ltd.
4.5.2Since the addition itself is unsustainable, the consequential application of section 68 and section 115BBE also fail. These grounds are disposed of accordingly.”
Aggrieved with the order of CIT(A), the Revenue is in appeal before the Tribunal.
We have heard the rival submissions and perused the material on record. Admittedly, the assessee is a trader in cattle feed etc. and maintaining regular books of account accounts which were audited. He is also registered under VAT. During the year although total cash deposited in his bank accounts during the demonetization period was 1,22,60,000/- only Rs. 25,00,000/- was in SBNs. The deposits were claimed to have been made out of recorded sales. The AO had neither rejected the books of accounts nor pointed out any defects therein. Once the sales shown by the assessee have been accepted, treating the cash received from the sales as unexplained was not justified. After considering the entire factual matrix, we are of the considered view that an addition of Rs. 3 lakhs on account of unexplained cash out of SBNs would meet the ends of justice. Accordingly, addition to the extent of Rs. 3 lakhs out of total Rs. 1,22,60,000/- is upheld and section 115BBE is not to be applied.
In the result, appeal of the Revenue is partly allowed.