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Facts
The assessee appealed against an order for AY 2017-18. The Assessing Officer (AO) added cash deposits made during demonetization under Section 68 of the Income Tax Act and also rejected the trading results, adopting a higher GP rate. The CIT(A) confirmed the Section 68 addition but allowed the GP addition.
Held
The Tribunal found that while the assessee made an attempt to explain the cash deposits, there was an element of failure to explain some of the deposits. It directed a lump-sum addition of Rs 1 lakh. Regarding the levy of tax under Section 115BBE, the Tribunal, following a Madras High Court ruling, directed that the addition be taxed under normal provisions of tax, not under Section 115BBE, as the section was applicable from AY 2018-19.
Key Issues
Whether the cash deposits made during demonetization can be treated as unexplained income under Section 68? Whether Section 115BBE is applicable to AY 2017-18?
Sections Cited
115BBE, 68, 143(3)
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Income Tax Appellate Tribunal, DELHI ‘A’ BENCH,
Before: SHRI SATBEER SINGH GODARA, & SHRI NAVEEN CHANDRA
This appeal by the assessee is directed against the order of the ld.
NFAC, Delhi dated 16.02.2024 for A.Y 2017-18.
Page 1 of 5 a petition for admission of additional ground of appeal has been filed which reads as under:
“That the provisions of section 115BBE is applicable from the A.Y 2018-19 onwards and consequently the levy of tax u/s 115BBE for the A.Y 2017-18 by the Assessing Officer is arbitrary, unjust and deserves to be deleted.” 3. It is the say of the ld. counsel for the assessee that the additional ground is a legal and jurisdictional ground which does not require any fact for its adjudication other than the facts already available on record.
It is also the say of the ld. counsel that since the additional ground goes to the root cause of the case, the same may be admitted and adjudicated upon in view of the judgment of the Hon'ble Supreme Court in the case of NTPC 229 ITR 383 and in the judgment in the case of Smile Micro Finance Ltd Vs. ACIT [WP No. 2078 of 2020], the Hon'ble Madras High Court has held that section 115BBE is applicable only from A.Y 2018- 19.
The fact of the matter in the instant case is the cash deposits during the period of demonetization added u/s 68 of the Income Tax Act. The AO has sought to tax the cash deposited in the bank of Rs 33,75,933/- which is stated to be out of withdrawals and cash deposited out of disclosure under IDS 2016, invoking the provisions of section 115 Page 2 of 5 a G.P. of 9% instead of 7.20% declared by the assessee resulting into addition of Rs 16,17,387/-. The CIT(A) confirmed the amount of addition u/s 68 but allowed the appeal of the assessee with regard to the GP addition.
Per contra, the ld. DR heavily relied upon 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 as cash sales 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 negative cash balance in the cash book. On the other hand, the Revenue’s endeavour to disbelieve the assessee’s contention that cash deposit has been made out of sales and disclosure under IDS scheme, 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 ₹ 1 lakh only would be just and proper with Page 3 of 5 all loopholes. The ground of appeal no 1 to 6 is partly allowed.
8. 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. allowed.
Order pronounced in open court on 28.05.2025.