LATE PATHANGEJAYARAO GOPAL KRISHNA RAO (REPRESENTED BY LEGAL HEIR MALATHI GOPAL PATHANGE),MYSORE vs. INCOME TAX OFFICER, WARD 1(1), MYSORE

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ITA 2825/BANG/2025Status: DisposedITAT Bangalore23 June 2026AY 2017-186 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had established a cash balance from previous withdrawals, and since there was no contra-evidence, the addition under Section 69A was deleted. Consequently, the issue of higher tax rate became moot.

What were the facts?

The assessee deposited cash during demonetization, claiming it was withdrawn earlier from bank accounts after selling property. The AO added this as unexplained money, and later levied tax at a higher rate. The CIT(A) confirmed these orders.

What were the issues?

Whether cash deposits during demonetization, explained as prior withdrawals, constitute unexplained money. Whether the higher tax rate under Section 115BBE is applicable when the primary addition is deleted.

Which sections of the Income-tax Act were involved?

Section 69A,Section 115BBE,Section 154

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘SMC’ BENCH : BANGALORE

Before: SHRI WASEEM AHMED & SHRI SOUNDARARAJAN K.

For Appellant: Shri Darshan Bothran S, CA, Shri Ganesh R Ghale, Standing

IN THE INCOME TAX APPELLATE TRIBUNAL ‘SMC’ BENCH : BANGALORE

BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER

ITA Nos. 2824 & 2825/Bang/2025 Assessment Year : 2017-18

Late Pathangejayarao Gopal Krishna Rao (Represented by Legal Heir Malathi Gopal Pathange), The Income Tax 303, Srinivasa Residency, Officer, 6th Main Road, Ward – 1(1), Gokulam Main Road, Mysore. Vs. V V Mohalla, Mysore – 570 002. PAN: ACWPR8183R APPELLANT RESPONDENT

Assessee by : Shri Darshan Bothran S, CA : Shri Ganesh R Ghale, Standing Revenue by Counsel for the Dept. Date of Hearing : 10-06-2026 Date of Pronouncement : 23-06-2026 ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER

These appeals filed are by the assessee challenging the separate orders of the NFAC, Delhi dated 26/06/2025 and 11/09/2025 in respect of the A.Y. 2017-18. Both these appeals belong to the same assessee and therefore they are heard together and disposed of by way of this common order for the sake of convenience.

Page 2 of 6 ITA Nos. 2824 & 2825/Bang/2025 2. The brief facts of the case are that the assessee is an individual and filed his return of income on 27/03/2018. The case was selected for scrutiny in view of the cash deposits during the demonetization period. The assessee submitted that he and his wife received two cheques from the DRT while selling their property and the same was deposited into their HDFC bank account on 12/12/2013 and 18/01/2014 and later on money was withdrawn and kept it with them which was redeposited during the demonetization period. The AO not accepted the contentions had added a sum of Rs. 13,35,000/- as unexplained money u/s. 69A of the Act. Thereafter the AO had passed a rectification order in which the AO had levied the tax at 60% instead of 30% as per the amended Section 115BBE of the Act. As against the said orders, the assessee filed appeals before the Ld.CIT(A). The Ld.CIT(A) also confirmed the additions and the rectification order.

3.

As against the said orders, the assessee is in appeal before this Tribunal with a delay of 90 days. The assessee also filed applications to condone the delays. In the applications, the L/R of the assessee submitted that her husband passed away on 29/02/2020 and therefore she was saddled with all the responsibilities and also because of her age related problems, she missed the due date for filing the appeals. The L/R of the assessee also explained the medical issue and filed the copy of the medical report and submitted that after the recovery from illness only, she came to know about the Ld.CIT(A) order and thereafter the appeal was filed with a delay of 90 days and prayed to condone the said delay.

4.

We have considered the submissions and considering the age of the L/R of the assessee and her medical condition, we are inclined to condone the delay and proceeded to decide the appeals on merits.

5.

First we will take up the appeal in ITA No. 2824/Bang/2025.

Page 3 of 6 ITA Nos. 2824 & 2825/Bang/2025 6. At the time of hearing, the Ld.AR submitted that the cash deposited during the demonetization period is nothing but the cash withdrawn in their bank accounts. The Ld.AR further submitted that the assessee does not have any other source for earning income and therefore addition u/s. 69A could not be made. The Ld.AR further submitted that the assessee being an old person, normally kept the cash in his hand and therefore the time gap would not be a reason to treat the deposits as unexplained money u/s. 69A of the Act. Moreover there is a source for the deposits and therefore without any contra evidence, the addition could not be sustained.

7.

The Ld.DR submitted that the order of the lower authorities are a detailed one and therefore the same may be confirmed. The Ld.DR also relied on the Coordinate Bench orders of this Tribunal in IT(IT)A No. 705/Bang/2022 dated 28/11/2023 and also the Hon’ble Delhi Tribunal order in ITA No. 1423/Del/2020 dated 01/02/2021 and prayed to dismiss the appeal.

8.

We have heard the arguments of both sides and perused the materials available on record.

9.

In the present case, the assessee had established that there is a cash balance available in the bank account by depositing the cheques received from the DRT while selling the property under distress sale. In means that the assessee has no sufficient funds to clear the bank dues and therefore the property was auctioned and the balance was returned to the assessee by way of cheques which were deposited into his bank accounts. Later on, money was withdrawn from the said bank and retained by him which was later on redeposited into his bank account. There is no other source for depositing the cash into his bank account. If he is having enough income, he could have cleared the bank dues and avoided the auction of their property. Therefore, when there is no contra evidence available, we are of the opinion that the explanation offered by the assessee has to be accepted and the addition u/s. 69A has to be deleted.

Page 4 of 6 ITA Nos. 2824 & 2825/Bang/2025 10. We have also considered the orders relied on by the Ld.DR. In the Coordinated Bench order, it was found that a nominal amount was withdrawn and therefore the Tribunal had confirmed the addition. Similarly, in the Hon’ble Delhi Tribunal, facts are different and it cannot be cited as a precedent to the facts of the case on hand.

11.

We, therefore, allow the appeal filed by the assessee.

12.

In the result, the appeal filed by the assessee in ITA No. 2824/Bang/2025 is allowed.

13.

Now we take up the appeal in ITA No. 2825/Bang/2025.

14.

In this appeal, the assessee had challenged the higher rate of tax levied under the amended Section 115BBE of the Act by way of a rectification order u/s. 154 of the Act. The earlier appeal relates to the quantum and for the said quantum addition, the AO had earlier in the 143(3) order levied tax at 30% which was increased to 60% by citing the amendment which came into effect from 01/04/2017. The said order was confirmed by the Ld.CIT(A) which is under challenge before this Hon’ble Tribunal.

15.

At the time of hearing, the Ld.AR submitted that the amendment came into effect from 01/04/2017 and therefore the transactions effected prior to the said date has to be taxed at the lesser rate of tax at 30% instead of 60%. The Ld.AR further submitted that if the order u/s. 143(3) was allowed, the order passed u/s. 154 would also not sustainable. Alternatively, the Ld.AR submitted that, the dispute involved in this appeal is covered in favour of the assessee by the judgment of the Hon’ble Madras High Court in the case of S.M.I.L.E. Microfinance Ltd. vs. ACIT reported in (2025) 179 taxmann.com 65 (Mad) and therefore prayed to allow the appeal.

Page 5 of 6 ITA Nos. 2824 & 2825/Bang/2025 16. The Ld.DR submitted that the authorities below had correctly levied the higher rate of tax as per the amendment made w.e.f. 01/04/2017 and prayed to dismiss this appeal.

17.

We have heard the arguments of both sides and perused the materials available on record.

18.

In the order in ITA No. 2824/Bang/2025, we have deleted the entire additions and therefore the question of levy of tax at 30% or 60% would not arise. Even otherwise, this dispute is covered by the judgment of the Hon’ble Madras High Court reported in (2025) 179 taxmann.com 65 (Mad) in the case of S.M.I.L.E. Microfinance Ltd. vs. ACIT. Therefore we are setting aside the order of the lower authorities and allow the appeal filed by the assessee.

19.

In the result, the appeal filed by the assessee in ITA No. 2825/Bang/2025 is allowed.

20.

In the combined result, both the appeals filed by the assessee are allowed.

Order pronounced in the open court on 23rd June, 2026.

Sd/- Sd/- (WASEEM AHMED) (SOUNDARARAJAN K.) Accountant Member Judicial Member

Bangalore, Dated, the 23rd June, 2026. /MS /

Page 6 of 6 ITA Nos. 2824 & 2825/Bang/2025 Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file 6. CIT(A) By order

Assistant Registrar, ITAT, Bangalore

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