ASHISH SINDWANI,NILOKHERI, HARYANA vs. INCOME TAX OFFICER, WARD- 1, KARNAL

आयकर अपीलीय अिधकरण
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ŵी िवकास अव̾थी, Ɋाियक सद˟ एवं
ŵी एस įरफौर रहमान, लेखाकार सद˟ के समƗ

IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “A”, DELHI
BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER &
SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER
आअसं.1607/िदʟी/2024(िन.व. 2017-18)
Ashish Sindwani, Nilokheri,
C/o Rajiv Goel & Associates,
179, Bank Road, Ambala Cantt,
Haryana 133001
PAN: DTNPS-9951-M

...... अपीलाथᱮ/Appellant
बनाम Vs.

Income Tax Officer,
Ward-1, Aayakar Bhawan,
Sector-12, Karnal, Haryana 132001

..... ᮧितवादी/Respondent

Assessee by : Shri Dhruv Goyal, Chartered Accountant

Department by: Shri Ashish Tripathi, Sr. DR

सुनवाई कᳱ ितिथ/ Date of hearing

:
16/04/2025

घोषणा कᳱ ितिथ/ Date of pronouncement :
:
10/07/2025

आदेश/ORDER

PER VIKAS AWASTHY, JM:

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘the CIT(A)] dated 09.02.2024, for the Assessment Year 2017-18. 2. The assessee in appeal has assailed the order of CIT(A) on two counts:-
“(i) confirming addition of Rs.24,77,940/- u/s. 69A of the Act, on account of cash deposits during the period of demonization; &

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(ii) Confirming addition of Rs. 62,67,952/- by thus, estimating profits of the asessee at the rate of 8% on bank credits of Rs.7,83,49,399/-.”
2. Shri Dhruv Goyal, appearing on behalf of the assessee submits that the assessee was engaged in the retail trade business of mobile phones and accessories. During the period relevant to assessment year 2017-18, the assessee had run into losses due to which he had to close down his business. Hence, no return of income was filed for AY 2017-18. Prior to AY 2017-18, the assessee was regularly filing his return of income along with audited books of account. In the case of assessee, the assessment for AY 2017-18 was completed u/s. 144 of the Income Tax Act,1961(hereinafter referred to as ‘the Act’) making following additions:-
(i) Cash deposit during demonization period in the bank account Rs.
59,61,440/- &
(ii) Estimated 8% business profit u/s. 44AD of the Act considering bank credits of Rs.7,83,49,399/- as turnover and making addition of Rs.62,67,952/-.
In addition to the above, while computing tax liability, the Assessing Officer
(AO) applied tax rate of 60% u/s. 115BBE of the Act on both the above additions.
Aggrieved, by the assessment order dated 27.12.2019 passed in the u/s. 144 of the Act, the assessee carried the issue in appeal before the CIT(A). The CIT(A) granted part relief to the assessee in restricting deposits during demonetization to Rs.24,77,940/-. On the issue of estimation of business profits at 8% u/s.44 AD of the Act, the CIT(A) did not adjudicate the issue, stating that no specific ground of appeal has been raised by the assessee.

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2.2. The ld. AR of the assessee submitted that the assessee has been consistently depositing cash in his two bank accounts, maintained with UCO bank and Oriental Bank of Commerce (OBC). It is not the case where the cash deposits were made only during demonetization. The assessee deposited total cash of Rs.5,95,73,960/-in both bank accounts out of which only Rs.29,77,940/- was deposited during demonetization period. And out of the aforesaid amount only
Rs.2,00,000/- were deposited in old currency notes of Rs.500/- and Rs.1,000/- that were demonetized. He referred to the bank statements of UCO Bank at pages
13 to 43 of the paper book and the bank statement of Oriental Bank of Commerce at pages 44 to 55 of the paper book to show that the assessee has been depositing cash on regular intervals throughout the year. He asserted that even with regard to the cash deposits during demonetization, the entire cash cannot be added and only profit element embedded in such cash deposits be taxed.
2.3. With regard to addition of Rs.62,67,953/- u/s. 44AD of the Act by applying
8% profit rate on bank credits of Rs.7,83,498,699, the ld. AR submits that the CIT(A) has erred in coming to the conclusion that no ground was raised on this issue. The ld. AR pointed that detailed submissions were made before the CIT(A) on this issue. He referred to written submissions filed before the CIT(A) at pages 2
to 12 of the paper book. The ld. AR pointed that specific submissions were made on the issue in para no.2 and 3 of the written submissions. Hence, the issue was brought to the notice of CIT(A) and he ought to have adjudicated the same. On merits of the issue, the ld. AR pointed that the actual bank credits in account were to the tune of Rs.7,60,75,300/- and not Rs.7,83,49,399/-. As far as the application of profit rate at 8% u/s.44AD of the Act is concerned, the provisions of section 44AD of the Act are not applicable as the total turnover of the assessee is much more than Rs.1,00,00,000/. Placing reliance on the decision rendered in the case

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of Shri Ram Jhanwar Lal, 321 ITR 400 (Rajasthan) he argued that provisions of section 44AD of the Act would not apply where the turnover exceeds the limit specified u/s.44AD of the Act. The ld.AR submitted that the average net profit of the assessee for the last three years is 1.85%. The addition can be made on the basis of net profit of the immediate three preceding assessment years. He furnished a summary of turnover and net profit percentage for the A.Ys 2014-15,
2015-16 and 2016-17. 2.4. With regard to rate of tax at 60% u/s.115BBE of the Act, he submitted that the rate of 60% would not apply to the impugned assessment as the tax rate has been revised w.e.f 01.04.2017 and would apply prospectively. To support of his submissions, he referred to decision of Delhi Bench of Tribunal in the case of the DCIT vs. Tapesh Tyagi in ITA No. 1344/Del/2021 decided on 27.10.2023. 3. Per contra, Shri Ashish Tripathi representing the department vehemently defended the impugned order and prayed for dismissing appeal of the assesee.
The ld. DR submitted that the assessee is a non filer. Notice u/s. 142(1) of the Act was issued to the assessee to file return of income for AY 2017-18. Despite service of notice neither any return of income was filed nor any reply was sent by the assessee. Repeated notices were served on the assessee, the assessee did not participate in assessment proceedings, hence, the AO was constrained to complete the assessment invoking provisions of section 144 of the Act. The ld. DR further pointed that in so far as the issue of addition based on estimation of profit at the rate of 8% treating the bank credits as the turnover since no such ground was raised by the assessee before the CIT(A) the same was not adjudicated, accordingly, the ground raised before the Tribunal on the issue does not emanate from the impugned order.

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4. Both sides heard orders of the authorities below examined. The assessee in appeal has raised three issues. The first issue is with respect to addition of Rs.24,77,940/- u/s. 69A of the Act, confirmed by the CIT(A)on account of cash deposits during the period of demonetization. The contention of assessee is that the cash deposits in the bank are from the sales turnover of the assessee. And it is not only during the period of demonetization, but throughout the year that the assessee has been depositing cash in his two bank accounts i.e. current account maintained with UCO Bank and the saving bank account with Oriental Bank of Commerce. The assessee has furnished month wise cash deposits in his bank accounts during the period relevant assessment year 2017-18, the same is reproduced herein below:-
Cash Deposits
Month
UCO Bank
OBC Bank
Total
April
6,684,670
4,167,000
10,551,670
May 8,292,430
1,751,000
10,042,430
June
4,662,960
5,441,950
10,104,910
July
6,334,380
703,080
7,037,460
August
7,559,600
763,000
8,322,600
September
2,055,070
294,000
2,349,070
October
1,932,540
407,000
2,339,540
November
704,420
485,000
1,189,420
December
597,400
1,252,290
1,849,690
January
382,960
2,568,380
2,951,340
February
74,790
1,486,650
1,561,440
March
741,370
533,020
1,274,390
Total
39,722,590
19,851,370
59,573,960

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deposits throughout the year (except demonetization period) has been accepted by the Department, we see no plausible reason to exclude cash deposits during demonetization especially when there is no abnormal rise in cash deposits.
Therefore, we are of considered view that the addition of Rs.24,77,940/- made on account of cash deposits during demonetization is unwarranted. Hence, the same is directed to be deleted. The assessee succeeds on ground no. 1 of appeal.
6. In ground no. 2 of appeal, the assessee has assailed addition of Rs.62,67,952/- resulting from estimation of profits at the rate of 8% on bank credits of Rs.7,83,49,399/-. The AO has invoked the provisions of section 44AD of the Act and has estimated business income of the assessee at the rate of 8% of total turnover. The total turnover has been computed by the Assessing Officer treating all bank deposits, excluding the amount deposited during demonization period. The provision section 44AD of the Act as they were applicable to the assessment year under appeal mandates that the provisions of section would apply where the gross receipts does not exceed Rs.1,00,00,000/-. In the impugned assessment year, gross receipts of the assessee are more than Rs.7,00,00,000/-.
Hence, the provisions of section 44AD would not apply. The assessee has furnished a summary of net profit percentage for the last three years. The same is tabulated here in under:-
AY
Net Profit %
2014-15
2.84%
2015-16
1.42%
2016-17
1.29%
Average
Net
Profit
1.85%

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income based on the audited accounts. The assessee has placed on record copy of audited balance sheet of the assessee for the Financial Years 2015-16 & 2014-15. Considering entire facts of the case, we find merit in the submissions of the assessee, the AO is directed to re-compute profits of the assessee by adopting average net profits of the three preceding assessment years. Thus, ground no. 2
of assessee’s appeal is allowed, pro tanto.
8. In ground no. 3 and 4 of appeal, the assessee has assailed computation of tax at the rate of 60% u/s.115BBE of the Act. The issue has now been settled by the Hon’ble Madras High Court in the case of S.M.I.L.E Microfinance Ltd. vs. ACIT in WP(MD) No. 2078 of 2020 decided on 19.11.2024 holding that the tax rate of 60% u/s. 115BBE of the Act applies prospectively from 01.04 2017. In other words prior to the said date the rate of tax would be 30%. The coordinate Bench in the case of DCIT vs. Tapesh Tyagi (supra) has taken a similar view. Hence, in light of aforesaid decisions the AO is directed to apply 30% rate of tax u/s.115BBE of the Act in the impugned assessment year. The ground of appeal no. 3 & 4 are allowed.
9. In the result, appeal of the assessee is partly allowed
Order pronounced in the open court on Thur ay the 10th day of July, 2025. (S RIFAUR RAHMAN)
(VIKAS AWASTHY)
लेखाकार सद᭭य/ACCOUNTANT MEMBER
᭠याियक सद᭭य/JUDICIAL MEMBER
िदʟी/Delhi, ᳰदनांक/Dated 10/07/2025

NV/-

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ᮧितिलिप अᮕेिषतCopy of the Order forwarded to :
1. अपीलाथᱮ/The Appellant ,
2. ᮧितवादी/ The Respondent.
3. The PCIT/CIT(A)
4. िवभागीय ᮧितिनिध, आय.अपी.अिध., िदʟी /DR, ITAT, िदʟी
5. गाडᭅ फाइल/Guard file.

BY ORDER,
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(Dy./Asstt.