MANOHAR LAL KUKREJA,AMBALA, HARYANA vs. INCOME TAX OFFICER, WARD 5, AMBALA, AMBALA, HARYANA

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ITA 449/CHANDI/2026Status: DisposedITAT Chandigarh12 August 2026AY 2017-184 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal deleted the addition related to the opening cash balance, stating it cannot be added without rejecting the books of accounts. However, it confirmed the remaining addition as the assessee failed to substantiate the claim and acknowledge the demonetization deadline.

What were the facts?

The assessee challenged an addition of Rs. 13,30,000 made by the AO and upheld by the CIT(A) on account of demonetized currency deposits. The assessee claimed the amount was from opening cash balance and recoveries from debtors.

What were the issues?

Whether the addition of demonetized currency deposit is justified without rejecting the books of accounts, and whether Section 115BBE can be applied retrospectively.

Which sections of the Income-tax Act were involved?

Section 69A,Section 115BBE,Section 145(3)

AI-generated summary — verify with the full judgment below

आयकर अपीलीय अिधकरण,च�ीगढ़ �ायपीठ “बी” , च�ीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE �ी लिलत कुमार, �ाियक सद� एवं �ी िवजय वमा� , लेखा सद� BEFORE: SHRI. LALIET KUMAR, JM & SHRI. VIJAY VARMA, AM आयकर अपील सं./ ITA No. 449/Chd/ 2026 िनधा�रण वष� / Assessment Year : 2017-18 Manohar Lal Kukreja बनाम The ITO Prop. K Pharma Chem, Kuldeep Ward-5, Ambala Nagar, Ambala Cant, Ambala, Haryana-133001 �ायी लेखा सं./PAN NO: ACUPK0121C अपीलाथ�/Appellant ��थ�/Respondent िनधा�रती की ओर से/Assessee by : Shri B.M. Monga, Advocate and Shri Rohit Kaura, Advocate राज� की ओर से/ Revenue by : Dr. Ranjit Kaur, Addl. CIT, Sr. DR सुनवाई की तारीख/Date of Hearing : 05/08/2026 उदघोषणा की तारीख/Date of Pronouncement : 12/08/2026 आदेश/Order PER VIJAY VARMA, A.M: This is an appeal filed by the Assessee against the order of the Ld. CIT, Appeal, Addl/JCIT(A)-2, Vadodara dt. 22/12/2025 for the Assessment Year 2017-18.

2.

In this appeal the appellant has raised the following grounds of appeal:

1.

That the order of Ld. CIT(A) is against the law and facts of the case. 2. That CIT(A) is not justified while upholding the Arbitrary order of the Ld. AO, while making additions of Rs. 13,30,000/-without appreciating that these are purely business receipts and recoveries from debtors and out of the cash in hand available with the assessee from the business carried on by the appellant from last 35 years. 3. That the learned CIT(A) is not justified in upholding the illegal order of Ld. AO in making addition of Rs. 13,30,000/- u/s 69A without appreciating the replies, evidences and various documents as submitted by the assessee appellant particularly when, the amount recovered from debtors is outstanding as on 1.4.2016 duly reflected in the Audited Balance Sheet of the preceding previous year. 4. That CIT(A) is not justified while upholding the illegal order of the Ld. AO, sustaining the addition of Rs. 13,30,000/- u/s 69A 4 of the Act, that too without rejecting the books of accounts u/s 145(3) of the Act, which action is illegal and against the well settled law 5. That the learned CIT(A) is not justified in upholding the illegal order of Ld. AO in making addition of Rs. 13,30,000/- u/s 69A without considering the fact that the

amount recovered from debtors is nothing but realization of sales already accepted in previous years and due taxes had already been paid and thus, again making the instant addition amounts to double taxation. 6. That the Ld. CIT(A) and Ld. AO has grossly erred in law and on facts in making additions of Rs. 13,30,000/- purely on the basis of presumptions, conjecture and surmises without disturbing/doubting the sales of earlier years duly reflected in audited books of accounts of such years. 7. That the appellant craves leave to add OR amend the grounds of appeal before the appeal is finally heard and disposed off. 3. Assessee has also raised an additional ground which read as under:

“ 8. That without prejudice to the aforementioned grounds of appeal, the learned Assessing Officer as well as CIT(A) have grossly erred in applying the special tax rate of 60 percent under section 115BBE instead of 30 percent as applicable in the instant case since the income declared was purely on account of business income and higher rate of taxes are not applicable to the A.Y. 2017-18 as per well settled law.”

4.

Since additional ground raised by the Appellant is purely a legal ground therefore the same is admitted for adjudication.

5.

The only issue involved in this case is an addition of Rs. 13,30,000/- being the addition for deposit of specified bank notes after demonetization in 2016, besides charging of tax under section 115BBE of the Act.

6.

As per the order of the Ld. AO at page 8 the assessee had opening cash balance of Rs. 10,70,524/- on the date the demonetization was announced i.e; 08/11/2016 and the remaining cash is claimed to have been received after that date in cash from debtors namely M/s Burk & Barrow Edibles, M/s Panm Biotech Pvt. Ltd. and Montech Bio Pharma.

7.

The Ld. AO did not accept the claim of the appellant on the ground that the appellant failed to furnish confirmation, from debtors and also on the ground that the opening cash balance on the date of demonetization was deposited approximately 20 days after demonetization. The Ld. AO on page 9 also held that the assessee could not have accepted demonetized currency after 09/11/2016 as it ceased to be a legal tender after that date and those were to be used only for

specified transaction as notified in the Gazette Notification of Ministry of Finance number 2653 dt. 08/11/2016.

8.

The Ld. CIT(A) upheld both the actions of the AO on page 7 of the appellate order and held that the appellant failed to establish the nexus between alleged outstanding debtors and cash deposit.

9.

During the course of hearing the Ld. DR vehemently argued that the source of cash was explained before the AO and Ld. CIT(A). The AR also relied on the several case laws including the decision of S.M.I.L.E Microfinance Ltd. Vs. ACIT, (2025) 179 taxmann.com (Madras High Court) which held that the Section 115BBE cannot be applied retrospectively. The appellant also relied on the decision of Coordinate Bench in case of Shri Varun Kumar Jain Vs. ITO, Ward Nabha in ITA No. 770/Chd/2023 dt. 27/02/2025.

10.

On the other hand the Ld. DR supported the order of the Ld. CIT(A).

11.

The contention of rival parties have been examined. As held by the Hon’ble Madras High Court in the case of S.M.I.L.E Microfinance Ltd. Vs. ACIT (supra) and other judicial decision relied upon by the appellant, Section 115BBE can not be applied retrospectively. Therefore this additional ground is allowed in favour of the appellant.

12.

As regards the addition of Rs. 13,30,000/- there cannot be any justification for adding the opening balance of the cash book on the date of demonetization unless the said cash book is rejected on the basis of some cogent evidence. Therefore addition to the extent of Rs. Rs. 10,70,524/- is deleted the remaining addition of Rs. 2,59,476/- is confirmed as the appellant failed to substantiate its claim

to that extent and also the fact that the currency seized to be a legal tender after 08/11/2016.

13.

In the result appeal is partly allowed.

Order pronounced on 12/08/2026

Sd/- Sd/- लिलत कुमार िवजय वमा� (LALIET KUMAR) (VIJAY VARMA) �ाियक सद� /JUDICIAL MEMBER लेखा सद�/ ACCOUNTANT MEMBER AG आदेश की �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��थ�/ The Respondent 3. आयकर आयु�/ CIT 4. आयकर आयु� (अपील)/ The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�ीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

BY ORDER, ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KENDRIYA SADAN, SECTOR-9A CHANDIGARH

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