SHRUDHI MAHALAKSHMI,COIMBATORE vs. INCOME TAX OFFICER, COIMBATORE

आदेश / O R D E R

PER MANU KUMAR GIRI, JM:

This captioned Appeal filed by the Assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals), ADDL/JCIT (A) Udaipur [‘CIT(A)’] dated 15.09.2025 for Assessment Year 2017-18. 2. Brief facts of the case are that the assessee, an individual deriving income from salary and other sources, filed her return of income for A.Y. 2017-18 on 23.03.2018 declaring total income of

ITA No. 3423/Chny/2025 (AY 2017-18) Shrudhi Mahalakshmi Vs ITO NCW 4(4) :: 2 :: Rs.8,85,950/-. The case was selected for limited scrutiny under CASS on account of cash deposits made during the demonetisation period. During assessment proceedings, it was noticed that the assessee had deposited cash of Rs.20,35,000/- in her HDFC Bank account on 17.11.2016 and 18.11.2016. The assessee explained that the deposits represented accumulated salary savings kept as cash-in-hand over the years and relied upon self-prepared balance sheets, income and expenditure statements and details of salary earned by herself and her husband. The Assessing Officer (AO) rejected the explanation and treated the cash deposits as unexplained investment u/s. 69 of the Act. The Assessing Officer observed that despite repeated opportunities, the assessee failed to establish the source of the cash deposits with cogent documentary evidence. The claim that the deposits were out of earlier cash withdrawals and accumulated salary savings was found to be unsupported, as the bank statements revealed no substantial cash withdrawals except Rs.30,000/- on 27.04.2016. Mere production of self-prepared balance sheets and cash flow statements was held insufficient to establish availability of cash. The Assessing Officer further noted that the assessee maintained only one disclosed bank account, there was no evidence of cash withdrawals by her husband to support the explanation, and an amount of Rs.17,00,000/- had earlier been transferred by the assessee to her husband through banking channels, indicating that substantial funds were ordinarily routed through banks. Holding that the assessee failed to discharge the onus of proving the source of cash deposits, the Assessing Officer treated the sum of Rs.20,35,000/- as unexplained investment u/s. 69 and added the same to the returned income.

ITA No. 3423/Chny/2025 (AY 2017-18) Shrudhi Mahalakshmi Vs ITO NCW 4(4) :: 3 :: 3. On appeal, the CIT(A) confirmed the addition. The CIT(A) upheld the assessment order. It was held that the assessee had failed to establish the availability of cash-in-hand corresponding to the deposits made during the demonetisation period. The appellate authority observed that there were no substantial cash withdrawals in the preceding years to support the claim of accumulated cash savings and that the self-prepared balance sheets lacked evidentiary value in the absence of supporting primary records.The CIT(A) further noted that the entire amount deposited was subsequently transferred to M/s Jayachandran Alloys Pvt. Ltd., a company in which the assessee's husband was a Director, without any supporting agreement or documentation, thereby rendering the explanation commercially improbable. Applying the test of human probabilities, the CIT(A) held that it was highly unlikely for a salaried individual to retain Rs.20 lakh in cash for years and deposit the same only during demonetisation before immediately transferring it to a related company. The plea based on the husband's income was also rejected as legally untenable in the absence of evidence of transfer or gift. Accordingly, the addition of Rs.20,35,000/- u/s. 69 was confirmed. Aggrieved, the assessee is in appeal before the Tribunal. 4. The ld. Authorised Representative (AR) submitted that the impugned cash deposits represented accumulated savings out of salary earned by the assessee over several years. He contended that the assessee had been regularly employed with M/s Jayachandran Alloys Pvt. Ltd. and had earned substantial salary, while her husband was also drawing considerable income as Director of the company. He argued that the assessee had furnished income and expenditure accounts, balance sheets and cash flow statements

ITA No. 3423/Chny/2025 (AY 2017-18) Shrudhi Mahalakshmi Vs ITO NCW 4(4) :: 4 :: for earlier years showing availability of cash-in-hand. Since the return forms did not require filing of balance sheets by salaried persons, the assessee had discharged the burden of proving the source during assessment proceedings. Further therefore, the addition u/s. 69 and consequential application of section 115BBE were unjustified and deserved to be deleted. 5. The ld. Departmental Representative (DR) supported the orders of the lower authorities and submitted that the assessee failed to establish the source of the cash deposits through credible documentary evidence. It was argued that the bank statements did not reflect withdrawals sufficient to generate the alleged cash balance and that the self-prepared financial statements could not substitute primary evidence. She further contended that the immediate transfer of the deposited amount to the company in which the assessee's husband was a Director rendered the explanation implausible and justified invocation of section 69. Ld.DR therefore prayed that the order of the CIT(A) be upheld. 6. We have heard the rival submissions and perused the material available on record. It is an undisputed fact that the assessee deposited cash of Rs.20,35,000/- during the demonetisation period. The explanation furnished is that the deposits represented accumulated salary savings retained as cash over the years. However, except for self-prepared balance sheets and cash flow statements, no contemporaneous documentary evidence has been placed on record to establish actual availability of such cash. The bank statements do not indicate withdrawals commensurate with the cash allegedly held by the assessee.We further find that the deposited amount was subsequently transferred to M/s Jayachandran Alloys Pvt. Ltd., a company in which the assessee's

ITA No. 3423/Chny/2025 (AY 2017-18) Shrudhi Mahalakshmi Vs ITO NCW 4(4) :: 5 :: husband was a Director, without any supporting agreement or documentary evidence explaining the nature of such transfer. The sequence of events, viewed in the light of surrounding circumstances and applying the test of human probabilities, does not inspire confidence. The explanation based on the income of the assessee's husband is also of no assistance in the absence of evidence demonstrating transfer of funds to the assessee.The burden to satisfactorily explain the nature and source of the impugned cash deposits squarely rested upon the assessee, which has not been discharged by reliable and cogent evidence. We find no infirmity in the findings recorded by the Assessing Officer and affirmed by the CIT(A). 7. However, the applicability of section 115BBE deserve acceptance. The impugned cash deposit was made on 17.11.2016/18.11.2016, i.e., prior to the amendment brought about by the Taxation Laws (Second Amendment) Act, 2016. The Hon'ble Jurisdictional High Court in S.M.I.L.E. Microfinance Ltd. v. ACIT2024 SCC OnLine Mad 8416 : 2024 (11) TMI 1444 (Mad.) (Madurai Bench of the Madras High Court), decided on 19 November 2024 in W.P.(MD) No. 2078 of 2020 and W.M.P.(MD) No. 1742 of 2020has held that the enhanced rate of tax introduced u/s. 115BBE with effect from 01.04.2017 is prospective and cannot be applied to transactions which took place prior to that date. Respectfully following the binding decision of the Hon’ble jurisdictional High Court, we hold that the enhanced rate of tax under the amended provisions of section 115BBE is not applicable to the impugned addition. The Assessing Officer is directed to compute the tax liability in accordance with the law as it stood applicable to the transaction on the date of deposit.

ITA No. 3423/Chny/2025 (AY 2017-18) Shrudhi Mahalakshmi Vs ITO NCW 4(4) :: 6 :: 8. In the result, the appeal is partly allowed. The addition of Rs. 20,35,000/- u/s. 69 is upheld, whereas the assessee succeeds on the issue relating to the applicability of the enhanced rate of tax u/s. 115BBE. The Assessing Officer shall recompute the tax liability accordingly. 9. In the result, the appeal is partly allowed. Order pronounced in the open court on the day 03rd of August, 2026 in Chennai.

Sd/- Sd/- (इंतूरी रामा राव) (मनु कुमार िग�र) (INTURI RAMA RAO) (MANU KUMAR GIRI) लेखा सद*य/ACCOUNTANT MEMBER �या�यक सद*य/JUDICIAL MEMBER

चे�नई/Chennai, +दनांक/Dated: 03rd August, 2026. SNDP, Sr. PS

आदेश क! ��त,ल-प अ.े-षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF

SANDE Digitally signed by SANDEEP EP KUMAR Date: KUMAR 2026.08.05 16:55:55 +05'30'