OM PRAKASH ARORA,DELHI vs. DCIT, CENTRAL CIRCLE-1(1)(1), DELHI

PER NAVEEN CHANDRA, AM :-

This appeal by the assessee is directed against the order of the ld.
CIT(A)-23, New Delhi dated 29.08.2024 pertaining to A.Y 2017-18. 2. The grievances raised by the assessee read as under:
“1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming addition u/s 68 of Income-

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tax Act ('the Act') of Rs. 2,35,40,602/-. In doing so, the Ld.
CIT(A) has erred in:-
1.1 Confirming Id. AO's action of rejecting cash sales made by the appellant during the period 01.10.2016 to 08.11.2016, without rejecting of books of accounts u/s 145(3) of the Act.
1.2 Confirming addition under section 68 of the Act while reducing the sales of the appellant on mere surmises and conjectures, and by misplaced reliance on the preponderance of probability theory, which does not apply to the facts of the case.”
3. In addition to the above grounds, the ld. counsel for the assessee has prayed for admission of additional ground of appeal which read as under:
“Without prejudice, that on the facts and circumstances of the case and in law, the Assessing Officer erred in applying tax rate of 60% (as against applicable rate of 30%) considering that amended provisions of section 115BBE of the Act are applicable retrospectively, without appreciating that the same is applicable to the transaction entered on or after 01.04.2017.”
4. With regard to the above additional ground of appeal, the assessee has submitted the aforesaid grounds of appeal is being raised pursuant to the decision of the Hon'ble Madras High Court in the case of S.M.I.L.E
Microfinance Limited vs ACIT: WP(MD) No.2078 of 2020 and requested for admission under Rule 11 of the Income-tax (Appellate Tribunal)

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6. Briefly stated, the facts of the case are that the assessee e-filed his return of income declaring an income of Rs. 7,00,39,780/- on 07.11.2017. The issue at hand is in respect of Large value cash deposit during demonetization period of Rs. 3,14,80,500/- 2,35,40,602/-.
7. The assessee explained that during the entire FY 2016-17, cash sales and cash deposits in the bank had increased by 40.56% over the preceding year and the increase was not only limited to the demonetization period only. Further, it was categorically pointed out that the assessee was having a cash balance of Rs. 3,20,69,728/-as on 08.11.2016 and this amount had necessarily to be deposited in the Bank as mandated by law. It was also pointed out that even on 01.04.2016, the assessee was having a cash balance of Rs. 2,42,12,987/. The cash deposits in the Bank at any time does not follow any uniform pattern unless artificially designed to be so. Further, the assessee had ITA No. 4931 /DEL/2024
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maintained regular books of accounts which had been duly audited. Each and every query raised by the Assessing Officer was duly addressed and the factual position was explained to the Assessing Officer as is evident from the assessment order itself wherein the Assessing Officer has reproduced all the submissions given by the assessee.
8. The Assessing Officer rejected the explanation regarding cash sales amounting to Rs. 2,35,40,602/- made by the assessee from 01.10.2016 to 08.11.2016 and added this amount to the taxable income of the assessee u/s 68 of the Act. Simultaneously, the Assessing Officer reduced the business income of the assessee by Rs. 9,25,146/- consequent upon rejection of sales and completed the assessment u/s 143(3) of the Act on 29.12.2019 at the assessed income of Rs.
10,02,96,260/-.
9. Aggrieved, the assessee went in appeal before the ld. CIT(A) who confirmed the addition of Rs. 2,35,40,602/- and held that the provisions of section 115BBE applied to the addition made. Aggrieved, the assessee is in appeal before us.
10. We have heard the rival submissions and have perused the relevant material on record. 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

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deposit during demonetization as cash sales and cash in hand. 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 assessee could not produce the stock register to justify the sales. 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 ₹ 10 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 and its sub-ground is partly allowed.
11. 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 ITA No. 4931 /DEL/2024
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under the provisions of 115BBE. The additional ground raised by the assessee is allowed.
12. In the result, appeal of assessee in ITA Nos. 4931/DEL/2024 is partly allowed.
Order pronounced in open court on 21.07.2025. [SATBEER SINGH GODARA]

[NAVEEN CHANDRA]
JUDICIAL MEMBER

ACCOUNTANT MEMBER

Dated : 21st August, 2025. VL/