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Judgment
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)-Delhi [‘CIT(A)’ in short] dated 13.06.2025 arising from the assessment order dated 26.12.2019 passed by the Income Tax Officer (ITO)-2(4), Badaun-2 under Section 143(3) of the Income Tax Act, 1961 (‘the Act’) concerning Assessment Year (A.Y.) 2018-19.
The grounds raised by the assessee are as under :
1.That the assessment order dated 26.12.2019 passed under Section 143(3) of the Income-tax Act, 1961 ('Act') and the additions made therein are illegal, bad in law, and without jurisdiction.
2.That in view of the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) ['CIT(A)'] has erred in confirming the additions made by the Assessing Officer without proper appreciation of facts and legal principles.
3.That the Assessing Officer has erred in completing the assessment at Rs. 47,45,191/- as against returned income of Rs. 2,95,560/-.
4.That the Assessment order passed by the AO is in complete violation of the instructions and circulars of the Central Board of Direct Taxes and hence, deserved to be quashed.
5.That the Assessing Officer has erred in making an addition of Rs.15,61,000 Under section 69A in respect of money found and seized during Aachar Sanhita (Code of Conduct) for election of local body (Nagar Palika) and the CIT(A) has erred in confirming the said addition.
6.That the Assessing Officer has erred in making an addition of Rs.6,00,970/ by treating the business turnover of the milk business as unexplained money under section 69A of the Act, and the CIT(A) has erred in confirming the said addition.
7.That the Assessing Officer has erred in making an addition of Rs.9,887/ as business income and the CIT(A) has erred in confirming the said addition.
8.That the Assessing Officer has erred in making an addition of Rs.23,99.334/- as unexplained money under section 69A of the Act on account of alleged unexplained credits in bank accounts.
9.That in respect of addition of Rs.23,99,334/-, the CIT(A) has erred in not considering the Appellant's submissions in entirety and directing the AO to re-calculate the unexplained credits in bank account as per peak credit when the element duly explained the source of each bank credit.
10.That the Assessing Officer has erred in invoking the provisions of Section 115BBE of the Act while making the additions and the CIT(A) has erred in confirming the said action of the Assessing Officer.
11.That the Assessing Officer has erred in initiating penalty proceedings under Section 271AAC(1) of the Act.
12.That the appellant craves leave to add, alter, modify, or withdraw any of the grounds of appeal before or during the course of appellate proceedings.”
The assessee had filed the return of income of Rs.2,95,560/- and assessment was made by the AO at Rs.47,45,191/-. The main addition was Rs.15,61,000/- under section 69A of the Act in respect of money found and seized during the Code of Conduct period for election of local body. Another addition is of Rs.6,00,970/- by treating the business turnover of the milk business as unexplained money under section 69A of the Act. The 3rd addition is with regard to unexplained credit in bank account as per peak credit under section 69A of the Act amounting to Rs.23,99,334/- and the 4th addition is Rs.9,887/- as business income.
At the outset, the learned Counsel of the assessee did not press ground no. 7 with regard to addition of Rs.9,887/- and ground nos. 8 & 9 with regard to addition of Rs.23,99,334/-. Accordingly, ground 7 and 8 & 9 are dismissed as not pressed.
Now we are left with ground nos. 5 & 6 regarding additions of Rs.15,61,000/- and Rs.6,00,970/- under section 69A of the Act. Learned Counsel of the assessee vehemently argued that the cash have been received from the close family member on the occasion of the engagement and marriage of the assessee’s brother. Hence, the same should be considered exempt under section 56(2)(vii) of the Act. With regard to business turnover of milk business, the learned Counsel argued that the entire turnover of the business cannot be added and only the profit elements embedded there should be considered.
Per contra, learned DR relied on the orders of the AO and CIT(A).
We have heard the rival submissions and carefully perused the materials on record. In the instant case, we find that the assessee has attempted to prove the entire source of cash found during the requisition u/s 132A as cash gifts received from close family members. Although, the assessee, prima facie, appears to have discharged its onus of explaining source of cash found, it’s contentions to prove the source, hardly deserves to be accepted in entirety especially when the AO found that the cash gifts received from the relatives are ante dated from the date of search. On the other hand, the Revenue’s endeavour to disbelieve the assessee’s contention that he received cash gifts from the relatives, cannot be fully justified. In this factual matrix, there is some element of failure to explain some of the cash found, cannot be ruled out. Further, the assessee’s explanation on the addition on account of milk business, that the entire business turnover of milk business cannot be added as income and only the profit element embedded in the business turnover be treated as income, has substance. Be that as it may, it is deemed appropriate, in larger interest of justice, that a lump-sum cumulative addition of ₹ 8 lakh only, on both counts, 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 5 and 6 are partly allowed.
Ground 10 regarding 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. Since the transaction pertained to period after 01.04.2017, the invocation of section 115BBE is upheld. Ground 10 is dismissed.
Ground 11 regarding penalty u/s 271AAC(1) is premature.
In the result, appeal of the assessee is partly allowed.