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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)-NFAC-Delhi [‘CIT(A)’ in short] dated 23.10.2025 arising from the assessment order dated 26.03.2022 passed by the NFAC, Delhi under Section 147 r.w.s 144B of the Income Tax Act, 1961 (‘the Act’) concerning Assessment Year (A.Y.) 2017-18.
The grounds raised by the assessee are as under :
1.“That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned reassessment order u/s 147/144B and that too without assuming jurisdiction as per law and without following the mandatory and statutory conditions laid down u/s 147 to 151 of Income Tax Act, 1961 and without recording 'reason' and without obtaining approval u/s 151 in accordance with law.
2.That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in passing the impugned reassessment order u/s 147/144B is bad in law and against the facts and circumstances of the case and barred by limitation also.
3.That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making aggregate addition of Rs.35,00,000/- on account of cash deposits in the bank account of assessee by treating it as alleged unexplained money and that too u/s 69A and taxing the same u/s 115BBE and that too by recording incorrect facts and findings and in violation of principles of natural justice.
4.In any view of matter and in any case, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of Rs.35,00,000/-on account of cash deposits in the bank account of assessee u/s 69A/115BBE, is bad in law and against the facts and circumstances of the case
5.Without prejudice to the above grounds, that in any case and in any view of the matter, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in taxing a sum of Rs.35,00,000/- u/s 115BBE and that too without appreciating the latest law in this regard.
6.That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234A, 234B, 234C and 234D of Income Tax Act, 1961.
7.That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”
Brief facts of the case is that the assessee is trading in handloom products. The assessee filed its return of income declaring Rs.9,26,500/- on 21.02.2018 for A.Y. 2017-18. Assessee had deposited Rs.35,00,000/- in cash during the demonetization period, therefore, the case was reopened u/s 147 of the Act and notice u/s 148 of the Act was issued on 31.03.2021. During the period of reassessment, multiple notices u/s 142(1) of the Act were issued but the assessee failed to make compliance. After obtaining the bank details from the Canara Bank u/s. 133(6) the assessee filed return of income u/s 148 of the Act declaring the same income of Rs.9,26,500/- and explained the source of cash deposits. The AO found the explanation as not satisfactory and treated the deposits as unexplained money u/s 69A taxable u/s 115BBE of the Act.
Aggrieved, the assessee preferred an appeal before the CIT(A) who considering the facts and circumstances, upheld the action of the Assessing Officer. Now the further aggrieved assessee is in appeal before us.
Before us, the ld. counsel for the assessee vehemently submitted that the Assessing Officer made the addition of cash deposited during the period of demonetization (between 15.11.2016 and 20.11.2016) in Canara Bank accounts. Prior to this period, during seven months only Rs.9,76,700/- were deposited by the assessee in his account and none thereafter. It was submitted that as no satisfactory explanation or supporting documents were produced, the AO considered that the cash deposits were abnormally high, not supported by business records therefore AO made addition of Rs.35,00,000/- u/s 69A taxable u/s 115BBE without rejecting the books of account and without there being any evidence and was made on the basis of conjectures and surmises.
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. 3 lakhs 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.
In the result, appeal of the assessee in ITA 7313/D/2025 is partly allowed.