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Judgment
PER S.RIFAUR RAHMAN,AM:
This appeal is filed by the assessee against the order passed by the ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [for short ‘ld. CIT (A)] dated 18.11.2025 for the Assessment Year 2017-18.
At the time of hearing, ld. AR of the assessee submitted the grounds raised in the appeal and his submissions ground-wise as under :-
“1.The Appellant is engaged in the business of merchant import and trading of coated steel used for manufacturing writing boards.
2.The return of income for A.Y. 2017-18 was filed declaring total income of Rs.33,61,840.
3.The case was selected for scrutiny under CASS primarily on account of cash deposits during the demonetisation period.
4.Assessment under section 143(3) was completed on 27.12.2019 determining total income at Rs.1,26,34,560 by making the following additions:
S.No. Particulars Amount 1 Addition u/s 68 on account of alleged unexplained cash deposits (cash sales) Rs.88,16,946 2 Addition u/s 68 on account of gift from mother Rs.7,00,000 3. The Assessing Officer further invoked the provisions of section 115BBE. ISSUE NO.1
Addition of Rs.88,16,946 under Section 68 on account of Cash Sales
The entire addition deserves to be deleted for the following reasons: .
A. Cash sales are duly recorded in regular books
The impugned cash deposits represent business receipts arising from duly recorded cash sales effected in the ordinary course of business. The corresponding sales have been duly accounted for in the regular books of account, which have not been rejected under Section 145(3) of the Act. In the absence of rejection of the books of account, the Assessing Officer cannot selectively disregard the recorded sales and treat the corresponding cash deposits as unexplained under Section 68.
B. VAT Returns were filed contemporaneously
The following VAT Returns were filed much before the assessment proceedings:
Month Branch Cash Sales Filed on PB Page October 2016 Bangalore Rs.42,39,120 19.11.2016 607(Part 3) November 2016 Bangalore Rs.53,27,753 23.12.2016 610(Part 3) October 2016 Hyderabad Rs.12,39,034 24.11.2016 772(Part 3) November 2016 Hyderabad Rs.92,988 23.12.2016 774(Part 3) These statutory returns were filed during the relevant period itself and much before any scrutiny proceedings. Hence, the sales were already disclosed before the Commercial Tax Authorities and cannot subsequently be termed as non-genuine.
C. Commercial Tax Authorities have accepted the turnover
The Annual Assessment Orders issued by:
•Department of Commercial Taxes, Karnataka (Pages 1122-1128 [Part 5]), and
•Department of Commercial Taxes, Hyderabad (Pages 1116-1118 [Part 5]), certify the turnover disclosed by the appellant.
Thus, another statutory authority has accepted the sales.
Judicial precedents squarely support the Appellant's case
•ITO vs. Appliances Forever, ITA No. 284210e112023 (ITAT Delhi)
•ITO vs. Aditi Gems and Jewelery, ITA No. 374810el12023 (ITAT Delhi)
•Fine Gujranwala vs. ITO, ITA No. 154010el12022 (ITAT Delhi)
ISSUE NO.2
B. Addition of Rs.7,00,000 under Section 68 on account of Gift
The addition of Rs.7,00,000 under Section 68 is unsustainable as the Appellant has duly established the identity of the donor, her creditworthiness, and the genuineness of the transaction by furnishing:
•Gift Deed executed by Smt. Shashi Sharma in favour of Late Shri Sanjay Sharma (Pages 785-786 [Part 3]);
•Income-tax Returns and Computation of Income of the donor for A.Ys. 2015-16 to ;2017-18, evidencing miscellaneous cash income aggregating to {12,88,300 over the preceding three years, thereby establishing her financial capacity (Pages 787-797[Part 3]).
The donor is the assessee's mother and a regular income-tax assessee. The Assessing Officer has neither disputed the identity of the donor nor brought any material on record to disprove her creditworthiness or the genuineness of the gift. Accordingly, the initial onus under Section 68 stands duly discharged, and in the absence of any adverse evidence, the addition of Rs.7,00,000 deserves to be deleted.
Judicial precedents squarely support the Appellant's case
•Dheeraj Thakran vs ITO, ITA No. 27611Del12016 (ITAT Delhi)
ISSUE NO.3 Applicability of Section 115BBE
Without prejudice, even assuming any addition survives (which is denied), the provisions of amended section 115BBE imposing tax at 60% are not applicable. The issue stands covered by the judgment of the Madras High Court in the case of S.M.I.L.E. Microfinance Ltd. Vs ACCIT (W.P.(MD)No. 2078 of 2020 and W.M.P.(MD)No. 1742 of 2020), wherein it has been held that:
The enhanced rate of tax introduced by the Taxation Laws (Second Amendment) Act, 2016 is prospective and cannot be applied to transactions pertaining to the period 08.11.2016 to 30.12.2016. In the present case also, all cash deposits pertain to the demonetisation period. Therefore, the enhanced rate under amended section 115BBE is not applicable
Prayer
In view of the facts of the case, documentary evidence placed on record, and the settled legal position, it is most respectfully prayed that the Hon'ble Tribunal may be pleased to:
1.Delete the addition of Rs.88,16,946 made under section 68;
2.Delete the addition of Rs.7,00,000 made under section 68;
3.Hold that the provisions of amended section 115BBE are not applicable to the facts of the present case; and
4.Consequently, direct that the assessed income be restored to the returned income and the resultant tax demand be reduced to NIL.
On the other hand, ld. DR of the Revenue brought to our notice detailed findings of the AO and ld. CIT (A) in the respective orders and heavily relied on them.
Considered the rival submissions and material placed on record. With regard to addition of Rs.88,16,946 under Section 68 on account of cash deposits, we observed from the records that cash sales are duly recorded in regular books and the said impugned cash deposits represent business receipts arising from duly recorded cash sales effected in the ordinary course of business. We further observed that the corresponding sales have been duly accounted for in the regular books of account, which have not been rejected under Section 145(3) of the Act. We are of the opinion that in the absence of rejection of the books of account, the Assessing Officer cannot disregard the recorded sales and treat the corresponding cash deposits as unexplained under Section 68. We further observed that VAT Returns were filed before the assessment proceedings and the details of VAT returns month-wise are given above in the submissions of the ld. AR. We further observed that these statutory returns were filed during the relevant period itself and much before any scrutiny proceedings. Hence, we are of the opinion that the sales already disclosed before the Commercial Tax Authorities and the same cannot subsequently be termed as non-genuine and also the commercial tax authorities have accepted the turnover.
Further, we find force from the decisions relied upon by the ld. AR of the assessee as above. For the sake of brevity, we reproduced the findings of the coordinate Bench in the case of ITO vs. Appliances Forever (supra) as under :-
“6.2The issue before us is with respect to addition of Rs.65,53,340/- made on account of cash deposits during the demonetization period. It is an admitted fact that the respondent/assessee, engaged in the business of trading of Imported Electrical Goods, has made cash sales as well as credit sales. It has maintained sales vouchers and filed VAT return within the stipulated time period. The revision of VAT return has not affected the 7 turn over shown in the original VAT return. Before us, revenue has not placed any material on record to demonstrate that the details of cash sales shown by the respondent/assessee are fictitious/bogus. The purchases are entirely through imports. Further, the revenue has also failed to place any material on the record to demonstrate that the VAT returns of the relevant year have not been accepted by the VAT authority and the Custom authority has not accepted the imports/purchases. Hence, following the reasoning given in the co-ordinate Bench decision in the case of Ramesh Kochar, ITA No. 171/Del/2022 dated 26.04.2022, we hereby hold that this case is squarely covered by this decision of Ramesh Kochar (supra). Accordingly, we are of the considered view that the addition of Rs.65,53,340/- under section 69A of the Act is uncalled for and the CIT(A) is justified in deleting the same. Consequentially, we decline to interfere with the order of the Ld. CIT(A).
Respectfully following the aforesaid decision and our above finding, we allow this ground raised by the assessee.
With regard to addition of Rs.7,00,000 under Section 68 on account of Gift, we observed that the assessee has duly established the identity of the donor, her creditworthiness, and the genuineness of the transaction. We observed that his mother, Smt. Shashi Sharma executed the Gift Deed in favour of the assessee and the same is placed on record. We further observed that assessee’s mother Income-tax Returns and Computation of Income of the donor for A.Ys. 2015-16 to 2017-18 are also placed on record thereby establishing her financial capacity. Hence, we observed that assessee’s mother, who is the donor, is a regular income-tax assessee and the Assessing Officer has neither disputed the identity of the donor nor brought any material on record to disprove her creditworthiness or the genuineness of the gift. Accordingly, we observed that the initial onus under Section 68 stands duly discharged, and in the absence of any adverse evidence, we allow this ground raised by the assessee.
With regard to invocation of the provisions of section 115BBE by the AO, we observe that Hon’ble Madras High Court in the case of SMILE Microfinance Ltd. vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020 dated 19.11.2024 held that the said provision applied for transactions done on or after 01.04.2017 only. The Assessing Officer is accordingly directed to assess the income under normal provisions only.
In the result, the appeal filed by the assessee is allowed as indicated above.