Sunil Kumar Bansal vs ITO

PER MANISH AGARWAL, AM :

The present appeal is filed by the assessee against the order dated 29.09.2025 by Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. CIT(A), Karnal/10924/2019-20 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 21.12.2019 passed u/s 143(3) of the Act pertaining to Assessment Year 2017-18.

Brief facts of the case are that assessee has filed its return of income, declaring total income at INR 4,45,174/- and claimed deduction under Chapter VI-A of INR 1,32,869/- and further declared net agricultural income of INR 1,83,284/- for rate purposes. The case was selected for scrutiny for the reason of abnormal increase in cash deposit during the demonetization period in Specified Bank Notes (“SBN”). Thereafter, statutory notice u/s 143(2) were issued on 21.08.2018 followed by the notices u/s 142(1) of the Act alongwith questionnaires from time to time. The assessee filed all the relevant details and after perusing the same, AO observed that the assessee has deposited cash of INR 36,01,000/- during the period of demonetization in SBN in his saving bank accounts as against which in immediately preceding year, only a sum of INR 1,12,000/-was deposited in cash. The AO further observed that opening cash in hand declared was of INR 38,652/- only. The AO further observed that the assessee has shown cash in hand of INR 2,76,958/- as on 30.09.2016 as per the cash book. The claim of the assessee was that he has made cash withdrawal of more than INR 1.05 crores out of which funds were available in SBN which stood deposited when the demonetization was announced. However, the AO rejected the claim of the assessee and after allowing the credit for average cash balance of INR 41,303/-, made the addition of the balance amount of INR 35,59,691/- u/s 68 of the Act as unexplained credit and further invoked provision of section 115BBE of the Act for charging the tax at the special rates. Besides this, the AO has made the addition of INR 4,46,433/- being the loans taken from Shri Anil Kumar of INR 2,14,867/-; Smt. Pinki Bansal of INR 2,31,56/- u/s 68 of the Act and further invoked the provisions of section 115BBE of the Act. The AO further observed that Two creditors namely M/s. Amira Foods Ltd. of INR 1,89,000/- and Shri Ambika Int Foods of INR 31,84,280/- were outstanding as opening balance and assessee has not filed any details with respect to the material supplied to them nor any confirmed copy of ledger was filed therefore, AO has made the addition of the said amount of INR 33,73,280/-. Accordingly, total income of the assessee was assessed at INR 78,75,000/- including the agricultural income of INR 1,83,284/-.

Against the said order, assessee filed an appeal before Ld. CIT(A) who without appreciating the facts and submissions made by the assessee, has confirmed the order of AO vide order dated 29.09.2025 and dismissed the appeal of the assessee.

Aggrieved by the order of Ld. CIT(A), assessee is in appeal before the Tribunal by taking various Grounds of appeal mentioned in the appeal memo.

Ground of appeal No.1 raised by the assessee is general in nature needs no adjudication.

Ground of appeal No. 2 of the assessee is with respect to the confirmation of addition of INR 35,59,697/- made on account of cash deposited in SBN during demonetization period held as unexplained credit u/s 68 of the Act.

Before us, Ld. AR submits that during the course of assessment proceedings, assessee has filed copy of cash book for the period from 01.04.2016 to 31.03.2017 which is placed at pages 5 to 26 and copies of bank statements placed at pages 277 to 36 of the Paper Book. Ld. AR submits that there was opening cash balance of INR 2,76,958/-as on 01.10.2016 and during the month of October, 2016 till 08.11.2016, assessee has made total cash withdrawals of INR 1,05,88,000/- from the bank and further total sum of INR 10,68,000/- were withdrawn in the month of Nov. 2016, upto 08.11.2016. Ld.AR submits that all these cash withdrawals were duly recorded in the cash book and after making payments to various agriculturists against purchases, cash available in SBN of INR 36,01,000/- was deposited in the bank account after demonetization period in SBN. Ld. AR submits that AO has not rejected the books of accounts where cash was accumulated out of bank withdrawals which fact cannot be brushed aside and therefore, requested for the deletion of the additions so made.

On the other hand, Ld. Sr. DR for the Revenue vehemently supported the orders of the lower authorities and submits that there was abnormal increase in cash deposited in the bank account during the period of demonetization in SBN and assessee has filed to justify the source of such cash deposit therefore, AO has rightly made the addition which was confirmed by Ld. CIT(A) and thus requested for the confirmation of the same. Ld. Sr. DR further submits that utilization of cash withdrawal could be established by the Mandi document like Form I, J etc. which were never furnished therefore, the availability and utilization of the cash cannot be accepted. He prayed accordingly.

Heard the contentions of both parties at length and perused the material available on record. It is observed that the assessee had explained the immediate source of cash deposited in SBN during the demonetization period as out of balance available with him on the date of demonetization out of cash withdrawal made in the month of October & November, 2016 (upto 8.11.2016). In support of the same, assessee has filed the copy of cash book and copy of bank statement reflecting the withdrawal in cash. The AO instead of doubting the source of the cash has doubted the utilization of cash withdrawn from the bank account and observed that the assessee has not filed any documents prescribed by the Mandi for making cash payments. Once the assessee has been able to justify the source of cash out of the bank withdrawal which were duly recorded in the books of accounts and such books of accounts have not been rejected, it cannot be held that the cash available out of withdrawals made earlier is unexplained. Moreover, the cash was deposited out of the balance available in the cash book. Now coming to the issue as to how much cash was available with the assessee. From the perusal of the cash book placed in the paper book, it is observed that closing balance as on 08.11.2016 was of INR 35,69,785/- and after making payments on 09/11/2016 of INR 98,605/- the opening balance as on 10.11.2016 was of INR 34,71,180/-. Thereafter, the assessee has deposited the cash in SBN from 10.11.2016 to 21.11.2016 in various bank accounts totaling to INR 36,01,001/-. Besides this, during the period from 10.11.2016 to 21.11.2016, assessee has made cash payments to various parties of INR 48580/- thus there was a deficit of total deficit of INR 2,32,410/- [INR 36,01,000/– (INR 34,71,170/-- INR 48,580/-)], source of which remained unexplained.

In view of the above facts, as against the total addition made and confirmed at INR. 35,59,697/-, total addition of INR 2,32,410/-is hereby confirmed u/s 68 of the Act. Regarding the applicability of the provision of section 115BBE of the Act, the same has been incorporated w.e.f. 01.04.2018 and applicable from AY 2018-19 as has been held by Hon’ble Madras High Court in the case of SMILE Microfinance Ltd. v. ACIT in WP(MD) No. 2078 of 2020 & 1742 of 2020 dated 19.11.2024 (Mad.) wherein Hon’ble Madras High Court has already settled this issue and held that Section 115BBE applies from AY 2018-19 and onwards. Very recently the hon’ble Rajasthan High Court in the case of Deepak Maratha Vs. Union of India in DB CWP No. 3625/2020 vide order dt. 27.05.2026 has held as under:

Thus, by following the aforesaid judgements of hon’ble high courts we are of the view that the year under appeal before us is AY 2017-18 thus, the provision of section 115BBE of the Act are not applicable to this year which are applicable from AY 2018-19 and onwards. Therefore, we direct the AO to charge the tax at normal rate of tax. Ground of appeal No.2 raised by the assessee is partly allowed.

Ground of appeal No.3 of the assessee is with respect to the addition of INR 4,46,433/- u/s 68 r.w.s. 115BBE of the Act on account of loans received from his brother Shri Anil Kumar of INR 2,14,867/- and his wife, Smt. Pinki Bansal of INR 2,31,566/-.

Heard the contentions of both parties at length and perused the material available on record. It is observed that during the course of assessment proceedings, assessee has filed the copy of bank statements and confirmed copy of accounts of both the lenders. The AO alleged that they are having common address and their total income is not sufficient to provide loan to the assessee and thus, made the addition. Before Ld. CIT(A), the assessee has reiterated the same facts and submits that assessee has filed all the documents in support of the loans taken and discharged the burden casted upon it. Once the assessee has established the identity and by filing the confirmations and bank statements of both the lenders, assessee has established the immediate source of loans taken. In such circumstances, AO cannot ask the assessee to explain the “source of source” which has come in statute w.e.f. Assessment Year 2023-24 and onwards vide Finance Act, 2022. It is not the case of the Revenue that cash was deposited in the bank accounts of both the lenders or they were not having sufficient balance in their bank accounts. Once the copy of confirmation and their bank statements are filed, which are placed at pages 37 to 40 of Paper Book, the assessee has discharged the burden casted upon him. In case the Ao has any doubts with regard to the identity or creditworthiness, he should bring on record any contrary material by making independent enquiries which has not been done in the instant case. From the perusal of the overall facts, in our consideration opinion, the assessee has been able to prove the identity of the loan creditors as well as their creditworthiness by filing their confirmations and bank statements having sufficient funds before advancing funds to the assessee, therefore, the addition made of INR 4,46,433/- u/s 68 of the Act, is hereby deleted. The, Ground of appeal No.3 raised by the assessee is thus allowed.

Ground of appeal No.4 is with respect to the addition of INR 33,73,280/- made u/s 68 of the Act on account of sundry creditors.

Heard the contentions of both parties at length and perused the material available on record. It is observed that the AO has alleged that there are opening balances outstanding in the name of two debtors namely, M/s. Amira Pure Foods Pvt. Ltd. of INR 1,89,000/-and M/s. Shri Ambika International Food of INR 31,84,280/-. The AO alleged that the assessee has not provided the details and materiel supplied or their confirmed ledger accounts and thus made the addition by invoking the provisions of section 68 of the Act.

Heard the parties and perused the material available on records. It is observed that the addition is made u/s 68 of the Act for the outstanding balances in the name of two debtors. Undisputedly, both the parties are debtors having debit outstanding balances therefore, provision of section 68 which are not applicable which are applicable for the credits in the books of accounts therefore, we hold that the provision of section 68 cannot be applied on such outstanding balances.

Now coming to the reason for long outstanding balances in the name of both the debtors. The assessee explained that in the case of M/s. Amira Pure Foods Pvt. Ltd., the company went into liquidation and declared insolvent by the hon’ble NCLT, Delhi Bench vide its order dated 17.02.2020. The assessee filed the copy of the liquidation order wand the copy of the cheque issued which was returned uncashed which are placed at pages 49 to 56 of Paper Book. The assessee has also filed the legal suit against the said company therefore, it cannot be said that it is an unexplained debtor. It is also found that recovery of the outstanding balance is beyond the control of the assessee therefore, no addition could be made for the said amount. Accordingly, we delete the addition of INR 1,89,000/- made towards the outstanding balance in the name of M/s. Amira Pure Foods Pvt. Ltd.

Regarding the outstanding debit balance of INR 31,84,280/- in the name of M/s. Shri Ambika International Food, the claim of the assessee was that out of this amount, INR 11.00 Lakhs were received in subsequent financial year i.e. in FY 2017-18 and remaining amount of INR 20,84,280/- is still outstanding. The assessee submits that party has been defaulted with the banks also and State Bank of India has issued the notice for sale of the property owned by the said company. In support, a copy of newspaper cutting as submitted before the lower authorities is placed at page 63 of Paper Book. The assessee further claimed that the assessee has sold the goods to this party in preceding years and the amount is outstanding as a normal business debtor and due to the circumstances beyond the control of the assessee, the balance remained outstanding. Looking to these facts, we hold that balance outstanding of INR 33,73,280/- is in the normal course of business and the recovery is become difficult as the financial position of the party appears to be bad. In view of the facts stated herein above, we find that once it is established the balance outstanding is on account of sales made, and is normal business transaction, no addition could be made for the same. Accordingly, the addition made by the AO is hereby, deleted. Therefore, Ground of appeal No.4 raised by the assessee is allowed.

Ground of appeal No.5 raised by the assessee is general in nature, hence not adjudicated.

In the result, appeal of the assessee is partly allowed.