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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:
This appeal is filed by the Assessee against the order of Ld. CIT(A) 24 dated 22.08.2025 arising from the assessment order dated 28.12.2019 passed by Assessing Officer DCIT, Circlc-49(1), Delhi u/s 143(3) of Income Tax Act, 1961 (herein after referred as 'the Act') for the Assessment Year 2017-18.
The Assessee has raised the following grounds of appeal:
1.That the Assessment Order dated 28.12.2019 u/s 143(3) of the Act is bad in law.
2.That the Ld. AO has erred on facts and in law in making total addition of Rs. 85,22,778 thereby increasing returned income of Rs.21,56,080 toassessed income of Rs. I,06,78,860/-.
3.That the Ld. CIT(A) has erred in law in confirming the addition without taking into account all the facts of the case.
4.That the CIT(A) order passed u/s 250 of the Act dated 20.08.2025 is bad in law.
5.That the Ld. AO/ CIT(A) has erred on law and on facts in making/ sustaining addition of Rs.46,10,000/- u/s 68 read with Sec 115BBE of the Act on account of cash deposit made during demonetisation.
6.That the Ld. AO/ CIT(A) has failed to appreciate that Unexplained cash sale addition is impermissible sans rejection of books of accounts u/s 145(3) & acceptance of audited results as held by Hon'ble Supreme Court in the case of Lalchand Bhagat Ambical Ram vs. the CIT (1959) 37 ITR 288(SC).
7.That the Ld. AO as well as CIT(A) failed to appreciate that the cash deposited was already a part of declared income and recorded in the books of accounts accepted by the Revenue.
8.That the Ld. AO as well as CIT(A) has erred in making/ sustaining addition on account of cash deposit during demonetisation based on surmises and assumptions by merely following the statistical data comparison.
9.That the Ld. AO as well as CIT(A) failed to appreciate the consistent practice of maintaining high cash balances considering nature of business of the assessee.
10.That the Ld. AO has erred in law in making an ad-hoc addition of Rs.37,12,778/- being 50% of increase in the expense head Loading & Unloading charges and Border Expenses.
11.The Ld. AO as well as CIT(A) has failed to appreciate that an arbitrary or percentage based estimated disallowance without rejecting the books of accounts u/s 145(3) is unwarranted.
12.That the Ld. AO as well as CIT(A) failed to appreciate that these are legitimate business expenses incurred wholly and exclusively for the purpose of business of the assessee.
13.That the assessee craves to amend, modify, add, withdraw or substitute any ground during the course of appellate proceedings in the interest of natural justice.
14.That each ground of appeal is independent and without prejudice to other grounds of appeal raised herein.”
Brief facts of the case are that the assessee is an individual and proprietor of Tanwar Freshness Carriers and doing business of fleet carriers and transport of goods. The assessee has derived to shown income under the head Income from "Salary", "Business & Profession" and "Other Sources" during the relevant financial year. The assessee filed his e-return declaring taxable income of Rs.21,56,080/- on 31.10.2017 which was processed u/s 143(1) of the Act.
During the course of assessment proceedings, it was noticed that the assessee has deposited in his bank account cash of Rs.46,10,000/-during the demonetization period, which was considered as unexplained income by the AO and disallowed expenses Rs.37,12,778/-on account of loading and unloading, border expense.
Aggrieved assessee was in appeal before the ld. CIT(A). The ld. CIT(A) dismissed the appeal of the assessee.
Aggrieved, assessee is now in appeal before us.
Before us, ld. Counsel for the assessee submitted that addition of Rs.46,10,000/- under section 68 r.w.s 115BBE of the Act on account of cash deposit made during the demonetization period, which was actually part of sales made by the assessee. The ld. Counsel further submitted that another addition of Rs.37,12,778/- was made by AO on ad-hoc basis being 50% increase in the expense head Loading & unloading charges and Border Expenses. The ld AR further submitted that no books of account was rejected.
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. 5 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 ad-hoc additions of expense, we are of the considered view that the ld AO has not provided any cogent materials to make such additions. The LD AO has not justified the additions with any evidence to demonstrate that increase in expense on account of loading and unloading, border expense was not for the purposes of business of the assessee. Accordingly, the same cannot be sustained and is therefore deleted.
In the result, appeal of the assessee in ITA No. 6553/Del/2025 is partly allowed.