ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, BAREILLY, BAREILLY vs. M/S H S JEWELS BADAUN PVT. LTD., DELHI

ITA 412/LKW/2025Status: DisposedITAT Lucknow14 July 2026AY 2017-1894 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the addition of Rs. 5,57,00,000/- could not have been made under section 68 of the Income Tax Act. It followed the decision of a Co-ordinate Bench of the ITAT, Lucknow, in the case of Kashi Nath Seth Sarraf (P.) Ltd. (supra), and found that the addition made under section 68 was unsustainable. Furthermore, the Tribunal addressed the procedural aspect concerning the assessment under section 153A. It noted that while the assessee's case was a 'completed assessment' at the time of the search and the issuance of the section 153A notice, it became an 'unabated assessment' when the section 153A order was passed, as the original assessment had been set aside under section 263. Crucially, the Tribunal held that in cases falling under 'completed assessment' or 'unabated assessment' categories, no addition can be made in a section 153A assessment in the absence of any incriminating material found during the search under section 132. Citing the Supreme Court's decisions in Pr.CIT vs. Abhisar Buildwell (P.) Ltd. and Dy.CIT vs. U.K. Paints (Overseas) Ltd., the Tribunal concluded that no addition could be made under section 153A in this case for this reason as well. Therefore, the addition made in the assessment order under section 153A deserved to be deleted. The grounds of appeal raised by the Revenue were rejected.

What were the facts?

The Revenue has appealed the order dated 19.04.2025 of the CIT(A) for AY 2017-18. The assessee, M/s HS Jewels Badaun Pvt. Ltd., initially had its income assessed at Rs. 4,53,63,000/- under section 143(3) on 25.12.2019. Subsequently, a search operation on 21.12.2020 led to a Pr.CIT order under section 263 on 17.02.2022, setting aside the original assessment. A notice under section 153A was issued on 01.11.2021, and the assessee filed a return declaring the same income. A fresh assessment order under section 153A was passed on 30.05.2022, determining the income at Rs. 10,10,63,000/-, including an addition of Rs. 5,57,00,000/-. This addition was treated as unexplained cash credits under section 68, representing cash deposited in bank accounts during the demonetization period.

What were the issues?

1. Whether, on the facts and circumstances, the CIT(A) erred in deleting the addition of Rs. 5,57,00,000/- representing cash deposited in Specified Bank Notes (SBNs) during demonetization, ignoring that these notes were no longer legal tender from 09.11.2016 onwards (Section 68). 2. Whether the CIT(A) erred by ignoring that the assessee declared huge cash sales of Rs. 9,65,04,457/- for October 2016 and Rs. 5,00,27,734/- for November 1-8, 2016, to justify its cash-in-hand position, when the average sales for April-September 2016 were Rs. 3,84,13,170/- (Section 68). 3. Whether the CIT(A) erred in ignoring that during October 2016 and the first 8 days of November 2016, the assessee reported cash sales of Rs. 14,65,32,191/-, compared to Rs. 8,23,14,517/- in the corresponding period of the preceding year (Section 68). Revenue's Contentions: The Revenue argued that the cash deposited in SBNs was not legal tender after 09.11.2016. It also contended that the significant increase in cash sales in October and early November 2016, compared to previous periods and the preceding year, was an attempt to justify the cash deposits and that the assessee failed to provide valid reasons for holding demonetized currency for extended periods. The Revenue relied on the principles of human probabilities as laid down in Sumali Dayal vs. CIT, Durga Prasad More Vs. CIT, and Somnath Mani Vs. ITO. Assessee's Contentions: The assessee invoked Rule 27 and argued that the addition under section 153A was not sustainable as no incriminating material was found during the search under section 132. The assessee relied on the Supreme Court decisions in Pr.CIT vs. Abhisar Buildwell (P.) Ltd. and Dy.CIT vs. U.K. Paints (Overseas) Ltd., which held that no addition can be made in a section 153A assessment in cases of completed or unabated assessments without incriminating material.

Which sections of the Income-tax Act were involved?

Section 68,Section 153A,Section 132,Section 263,Section 143(3),Section 115BBE,Section 271AAC

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, LUCKNOW BENCH ‘A’, LUCKNOW

Before: SHRI KUL BHARAT, VICE- & SHRI ANADEE NATH MISSHRA

PER ANADEE NATH MISSHRA:A.M.

(A) _ This appeal has been filed by Revenue against the impugned appellate order dated 19.04.2025 of learned Commissioner of Income Tax(Appeals) -3, Lucknow [for short ‘learned CIT(A)’], for the AY 2017-18. Revenue has raised the following grounds of appeal:

“I. Whether on facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs. 5,57,00,000/- being cash deposited in SBNs during demonetization period in its different bank accounts ignoring the fact that SBNs of Rs. 1000 and Rs. 500 were no longer legal tender w.

The order continues below.

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