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Judgment
PER SHRI ANUBHAV SHARMA, JUDICIAL MEMBER:
These appeals preferred by the Assessee against the order of the Ld. Addl/JCIT(A)-5 Kolkata (hereinafter referred to as the First Appellate Authority or 'the ld. FAA' for short) in appeals filed before him against the orders of the ld. Assessing Officer (hereinafter referred to as the Ld. AO, for short) passed u/s 143(3)/154 of the Income-tax Act, 1961 (hereafter referred to as ‘the Act’). Further details of the orders of the lower authorities are as under: -
| ITA No. & AY | Ld. FAA who passed the appellate order | Appeal No. & Date of order of the Ld. FAA | AO who passed the assessment order & Date of order |
| 1871/D/26 2016-17 | Addl/JCIT(A)-5 Kolkata | DIN & Order No : ITBA/APL/S/250/2025 -26/1084859637(1) Dated: 16.01.2026 | ACIT, Circle-3(1)(1) Muzzaffarnagar Dated 19.07.2019 |
| 1872/D/26 2017-18 | Addl/JCIT(A)-5 Kolkata | DIN & Order No : ITBA/APL/S/250/2025 -26/1084860380(1) Dated: 16.01.2026 | ACIT, Circle-3(1)(1) Muzzaffarnagar Dated 07.07.2022 |
Heard and perused the records. The two appeals are based on common set of facts thus are decided by this common order. The primary facts are that income tax return of assessee for the A.Y. 2017-18 was filed on 24.10.2017 at an income of Rs. 1,46,66,440/-. Later on the case was taken up for scrutiny by issuing notice u/s 143(2), and details called were from time to time. The order u/s 143(3) was passed by 1d. ACIT dated 19.7.2019 at an income of Rs. 1,57,64,480/- by disallowing freight expenses u/s 40A(3) Rs. 54,450/ and also cash payments u/s 40A(3) for Rs. 43588. Besides this addition in respect of unsecured loan amounting to Rs. 10,00,000/- was also made without invoking the provisions of section 68 of the Act. Thereafter the AO has served a notice w/s 154/143(3) dated 4.4.2022 to charge tax u/s 115BBE in respect of addition made for unsecured loan of Rs.10,00,000/- and after taking reply of assessee the AO passed order u/s 154 r.w.143(3) dated 7.7.2022 and charged the addition of Rs. 10 Lakhs to tax on the special rate u/s 115BBE i.e @ 60%.
The assesse had challenged the quantum additions as well as 154 order, by separate appeals and the out come of those two orders of ld. CIT(A), are the two appeals before this Tribunal.
Now vide ITA 1872/Del/2026 assessee has challenged the order passed by invoking provisions of section 154 treating non levy of tax of special rate u/s 115BBE i.e @ 60%. Though ld. CIT(A) has sustained it recording that provisions of section 292B of the Act justifies the order u/s 154 of the Act and merely because section 68 was not specifically mentioned does not mean that the addition was not made u/s 68 and as deeming provisions of section 68 were applied it obviously attracted taxation u/s 115BBE and not doing so in the assessment order was definitely mistake apparent from records which was rectified by the impugned order u/s 154 of the Act.
However, the point is that as for AY 2017-18, the tax on the special rate u/s 115BBE i.e @ 60%, is not applicable and reliance is placed on the decision of Hon'ble High Court of Madras (Madurai Bench) in S.M.I.L.E. Microfinance Limited v. The Assistant Commissioner of Income Tax vide Writ Petition Numbers: W.P. (MD) No. 2078 of 2020 & W.M.P. (MD) No. 1742 of 2020 order dated 19.11.2024, as relied by co-ordinate bench of Delhi in Kanchan Chopra v. ITO, vide ITA No. 4205/Del/2024 (A.Y. 2017-18) Order dated 19.11.2025 and Ankit Garg v. ITO vide ITA No. 5507/Del/2024 (A.Y. 2017-18). Order dated 14.11.2025. Thus the ground raised in ITA 1872/Del/2026 deserves to be sustained. The appeal is allowed.
Coming to ITA 1871/Del/2026, we find that assessee has raised following grounds;
“1.Because, the order of learned lower authority is bad in law and against the facts and circumstances hence is unsustainable.
2.Because, Id. CIT(A) grossly erred in sustaining addition of Rs. 10 lakh u/s 68 of Act, (not invoked by AO) being the credit entry booked in AY 2017-18 but cheque uncashed in AY 2018-19, thus nothing is received in AY 2017-18 except book entry and addition is contrary to provisions of section 68 and law settled in Principal CIT VS. Zeus Air Services (P.) Ltd. [2025] 171 taxmann.com 211 (Delhi)
3.Because, without prejudice to above, ld. CIT(A) failed to appreciate that assessee even discharged onus lay upon him u/s 68 by filing mass evidences before both the lower authorities including ITR, Computation, Adhaar, Bank a/c confirmation etc. of lender, so addition is against the fact on record
4.Because Id CIT(A) further misdirected himself in not appreciating discharge shifted onus lay upon him and in any case there is no material in support of addition in as much as no evidence is rejected or found wrong.
5.Therefore, in terms of above grounds addition may kindly be quashed in TOTO.”
In context to these grounds we find that in para 5.3.2 and 5.3.3 the ld. CIT(A) has dealt with the issue as follows;
“5.3.2Having analysed the facts involved, I find that although the assessing officer has not mentioned the specific section but since he has added the impugned credit entry of Rs.10,00,000/- in books of account in the absence of creditworthiness of the concerned creditor, the addition was made by him u/s 68 of the I.T. Act towards unexplained cash credit in books of account. In this regard, I would also like to state that a credit entry for cheque in hand shall attract the provisions of section 68, even if cheque is not honoured or not presented and money is actually not received. When a cheque is received, a receipt is insisted by giver and it is given and receipt is issued and generally it is mentioned on the receipt issued, that the receipt or acknowledgement is subject to realization of cheque. Even otherwise, mere receipt of a cheque does not amount to actual receipt of money. Sum is actually received when the drawee bank honours the cheque on presentation and is paid by way of remittance through clearing system or transfer to account of payee. The drawee bank debit the account of issuer of cheque against available balance and remit the amount through clearing system. Therefore, receipt issued against a cheque is in fact and is considered a provisional receipt, and receipt will be final when it is actually realized. It is significant to mention that mere issue of a receipt does not amount to a credit in books of account of the person who issued the receipt that is usually the payee of cheque or holder in due course. If cheque is dishonoured, the provisional receipt stand cancelled. In the present case of the appellant, though the amount mentioned in the cheque of Rs.10,00,000/- was credited in the books on 31.03.2017 but it was never presented to the bank due to the creditor not having sufficient balance in her bank account.
5.3.3Now the legal issue of entry into the books of account is to be mentioned. If any entry is made in books of account based on mere receipt of cheque, and account of cheque issuer is credited, it may still be considered a 'sum found credited" in books of account. If the amount is not transferred from payer to payee, there is always suspicion regarding the genuineness of the transaction and here comes one of the limbs of disproving the guidelines for attracting section 68, i.e. 'genuineness'. Now-a-days (and even in the year 2016-17), due to digital banking system, money can be transferred from one account to another within seconds and without waiting for drawing for physical cheque, physically present in drawee's bank account and wait for few days to get it cleared. In this case, the purported cheque was never presented to bank for the next two and half months after its issue by the drawer. The facts and circumstances without any doubt points towards manipulation of books of account so as to enhance the balance sheet by Rs. 10,00,000/- by a fictitious entry.”
We are of considered view that department doesn’t dispute that addition was under section 68 of the Act, then it is essential that there should be a credit entry, in books and same should not be mere book entry but there is receipt of some amount which can be added as deemed income. The receipt to be taxed as deemed income should certainly be credited and mere on accrual basis deemed income cannot be taxed under section 68 of the Act. Rather ld. AO himself observes that this receipt is bogus and had not referred to any section of the Act and it is the ld. CIT(A), who held applicability of section 68 of the Act. Thus where there is no actual receipt of cash during the relevant FY but admittedly in subsequent FY, then invoking section 68 of the Act, for this AY, is not sustainable and reliance for this is placed on the decision of Hon’ble Delhi High Court in PCIT versus Zexus Air Services (P) Ltd. [2025] 171 taxmann.com 211 (Del). Hon’ble Madras High Court decision in V.R. Global Energy (P) Ltd. Versus ITO, Corp. Ward 3(4), Chennai, [2018] 96 taxmann.com (Mad) in which SLP of department stands dismissed vide [2020] 113 taxmann.com 31 (SC).
Thus the grounds raised in ITA 1871/Del/2026 are sustained. The appeal is allowed and impugned addition of this AY 2017-18 is deleted.