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Judgment
PER NAVEEN CHANDRA [A. M]:
The above captioned appeal is preferred by the assessee against the order dated 16.08.2025 respectively, passed by Ld. CIT(A)-26, New Delhi, under section 250 of the Income Tax Act, 1961 [hereinafter referred to as, “Act”] for Assessment Year 2017-18. The assessment in this appeal is framed by the Assessing Officer [for short, AO] under section 143(3) of the Act.
The assessee has raised following grounds of appeal:-
“1.The Learned CIT (A) - 26, New Delhi (hereinafter referred to as ‘Ld. CIT(A)') erred in law and in the fact & circumstances of the case while confirming an addition of Rs 70,00,000/- u/s 68 on account of cash deposited during demonetization period on treating the same as unexplained.
2.The Learned CIT(A) has grossly erred in holding that "if the appellant is doing business wherein cash sales are involved, then there should be some cash expenses also" and under this presumption confirming an addition u/s 68.
3.The Ld CIT(A) has erred again in making a presumption that if there are business debtors of the appellant, there is a business practice that any amount received from debtors should be taken through banking channels not in cash" and making this the basis for confirming the addition.
4.The Learned CIT(A) has grossly erred on facts and in law in making an addition of cash sales which is already offered for tax in different tax laws i.e. Excise, Income Tax and VAT. Hence, the income upon which tax has been duly paid by Appellant under various laws and as per the provision of the Act should not be taxed again in the hands of Appellant otherwise it would lead to double taxation which is against the principle of natural justice.
5.The Appellant craves to add, alter, modify or delete any ground of appeal either before or at the time of hearing of the appeal.”
The sole issue involved in this case is addition of Rs.85 lakh under section 68 r.w.s. 115BBE of the Act on account of cash deposit in the bank accounts during demonetization period. The Revenue has argued that the Assessing Officer has added the said cash deposit on account of the fact that explanation furnished by the assessee about the nature of source of cash deposit was not satisfactory, whereas the assessee stated that cash deposits are made from cash sales, cash receipts from debtors and its cash withdrawal from banks.
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 as cash sales, cash receipts from debtors and cash withdrawals. Although the assessee, prima facie, appears to have discharged its onus of explaining source of cash deposit, it’s contentions to prove the source, hardly deserves to be accepted in entirety especially when the AO found that the cash deposit during the period deviated from the normal pattern of cash deposit in the same period of preceding year for which the assessee could not furnish satisfactory explanation. On the other hand, the Revenue’s endeavour to disbelieve the assessee’s contention that cash deposit has been made out of sales and cash withdrawals, 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 ₹ 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 ground of appeal no 1 to 4 is partly allowed.
In so far as assessee's 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. The additional ground raised by the assessee is allowed.