USHABHAI THANKACHI,CHENNAI vs. ITO, NCW-15(1), CHENNAI

आयकर अपीलीय अधिकरण, ‘ए’ न्यायपीठ, चेन्नई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A / SMC’ BENCH, CHENNAI श्री जॉजज जॉजज के, उपाध्यक्ष एवं श्री एस.आर.रघुनाथा, लेखा सदस्य के समक्ष BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT AND SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.3296/Chny/2025 ननिाारण वर्ा / Assessment Year: 2017-18 Ushabhai Thankachi The Income Tax Officer No.6/11, 1st Main Road, vs. Non-Corporate Ward 15(1) Karpagam Gardens, Adayar Chennai. Chennai – 600 020. [PAN: AAXPU0816D] (प्रत्यर्थी/Respondent) (अपीलार्थी/Appellant) अपीलार्थी की ओर से/Appellant by : Ms.Ilakiya S.D., Advocate प्रत्यर्थी की ओर से/Respondent by : Shri. A.T.Krishnamoorthy, Addl.CIT सुनवाई की तारीख/Date of Hearing : 04.03.2026 घोर्णा की तारीख/Date of Pronouncement : 29.05.2026 आदेश /O R D E R PER S. R. RAGHUNATHA, AM : The present appeal is filed by the assessee against the order dated 15.07.2025 passed by the learned Commissioner of Income Tax (Appeals) Delhi, National Faceless Appeal Centre (hereinafter referred to as “ld.CIT(A)”), dismissing the appeal filed by the assessee against the assessment order dated 26.12.2019 passed u/s. 144 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), pertaining to Assessment Year (A.Y.) 2017-18.

:-2-: ITA. No: 3296/Chny/2025 2. The brief facts which emanating from the records are that the assessee is an individual, did not file here return of income for the AY 2017-18 u/s.139(1) or 139(4) of the Act. The case was picked up for scrutiny based on the information received by the Department that she had deposited Rs.10,11,500/- in cash during the demonetisation period in her bank account with SBT, SBI and IOB. Accordingly, statutory notices were issued to the assessee. Since the assessee did not produce any details, bank account details were collected u/s.133(6) of the Act and found that the total credits in the bank account was Rs.14,27,497/- which includes cash deposit of Rs.10,11,5000/- during the demonetisation period. During the proceedings, the assessee vaguely responded stating that she is a housewife and the deposits made belongs to her spouse and children, stating further that the cash was held for family functions and house renovation expenses. However, the supporting evidences were not produced. Consequently, the AO passed an ex parte order u/s.144 of the Act dated 26.12.2019 by treating the entire credits of Rs.14,27,497/- as unexplained investments u/s.69 r.w.s. 115BBE of the Act. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A). During the appellate proceedings, the assessee uploaded the detailed written submissions along with certain documents. Before the ld.CIT(A), the assessee stated that she did not have taxable income, and hence, did not file the return of income for the AY 2017-18. Further, her husband Mr.V.Shanuganath (PAN AEGPS0459D) is a lawyer, specialising in labour law practicing at Chennai. Further, she also stated that her children are also well settled and living in Chennai. Further, she explained that her income from bank interest and other interest received from companies on deposits works out to Rs.2,76,939/- during the AY 2017-18, and hence, her income was not taxable for the said impugned year. Apart from that, she received Rs.1,73,820 towrds the refund of deposit from TNPFL and transfers from husband, daughter and brother. The balance amount of Rs.10,11,500/- was cash deposited during demonetization was out of her lifetime savings, cash previously withdrawn and

:-3-: ITA. No: 3296/Chny/2025 money received from husband and daughters. Therefore, the assessee submitted that the details furnished is explained towards the total credits found in the bank and prayed for deleting the same. However, the ld.CIT(A) was not convinced with the details provided by the assessee and confirmed the order of the AO by passing an order dated 15.07.2025.

“1. The Commissioner of Income-tax (Appeals) (the "CIT(A)") erred both in law and facts of the case in upholding the additions made by the Assessing Officer ("AO") as unexplained investment under section 69 of the Act, amounting to 14,27,497/-, being the total credits appearing in the following bank accounts: S. Bank Name Account Number Total Credits No. (in Rs.) 1. State Bank of India 30700187477 8,77,078 2. State Bank of Travancore 62261790593 2,93,197 3. Indian Overseas Bank 076401000004955 2,57,222 Total 14,27,497 2. The CIT(A) failed to appreciate the fact that the credits appearing in the bank accounts were from the following sources: (i) Items of income: Income received from deposits with companies and interest on Savings Bank Accounts amounting to 2,76,939/- (ii) Items not in the nature of income: Gifts and transfers from relatives, refund of Income Tax Department and refund of deposits from TN Power Finance Limited amounting to ₹1,73,820/- (iii) Demonetized cash deposits made in Bank Accounts: Cash deposits made from cash held in hand amounting to ₹10,11,500/- 3. The CIT(A) overlooked the fact that in upholding the additions made by the AO, (i) in not considering that the Appellant was not liable to tax, as the income of the Appellant amounted only to 2,76,939/- during the relevant assessment year; (ii) in including amounts not in the nature of income, such as gifts and transfers received from relatives, and refunds received, under section 69 of the Act; and (iii) in not considering that the Appellant had deposited cash out of previous cash withdrawals made from bank and monies received from her husband, which were held in cash for persona! security and other household expenditures of the Appellant.

:-4-: ITA. No: 3296/Chny/2025 4. The CIT(A) failed to consider the evidences, explanations, and supporting documents furnished in support of the aforementioned grounds made by the Appellant during the course of the proceedings. 5. The CIT(A) erred in disposing of the appeal without examining the correctness of the tax demanded at special rate under section 115BBE has been erroneously charged at 60% as against the correct rate of 30%, for the amendment made to section 115BBE of the Act was made only on 15th December 2016 by Chapter II of the Taxation Laws (Second Amendment) Act, 2016 and the amendment did not have a retrospective application, the levy of tax @ 60% under section 115BBE of the Act and additional tax @ 25% on the tax levied are not applicable to assessment year 2017-18 and therefore not correct in law. 6. The CIT(A) failed to appreciate that the income assessed cannot be presumed to be undisclosed in nature since the AO has not shown any evidence showing that assessee had any other source of income which needs to be taxed 60% under section 115BBE of the Act. 7. The Appellant prays that: a. the order passed by the CIT(A) under section 250 of the Act upholding the addition be set aside; b. without prejudice to the prayer made above and, if the additions made by the AO ought be upheld in full or in part, then additions made to the income of the Appellant be charged at the rate of 30%; and c. any other remedy necessary and ancillary to this prayer be passed that the Bench may deem fit. 8. The Appellant craves leave to add, alter, amend, modify, or otherwise raise further grounds of appeal at the time of hearing.”

:-5-: ITA. No: 3296/Chny/2025 held with assessee’s husband up to 8th November, 2016 (page Nos.27 to 48 of the paper book). Further, the ld.AR drew our attention to the confirmation given by the assessee’s husband in page Nos.49 and 50 of the paper book. The ld.AR also submitted that the entire addition has been taxed at 60% u/s.115BBE of the Act, which is not applicable to the impugned assessment year and relied on the decision of the Hon’ble jurisdictional High Court of Madras in the case of S.M.I.L.E. Microfinance Limited v. ACIT [WP (MD) No.2078 of 2020]. In view of the above, the ld.AR prayed for deleting the additions made by the AO and subsequently upheld by the ld.CIT(A). 6. Per contra, the ld.DR for the Revenue submitted that the authorities have already considered all the details submitted by the assessee and rightly made the addition of the bank credits, as the assessee had failed to substantiate the credits and hence prayed for confirming the same. 7. We have heard the rival submissions and perused the material available on record. The undisputed facts are that the assessee is a senior citizen and housewife, who had not filed the return of income for the impugned assessment year on the ground that her taxable income was below the basic exemption limit. The Assessing Officer treated the entire credits appearing in the bank accounts amounting to Rs.14,27,497/- as unexplained investment u/s.69 of the Act, mainly for want of supporting details during the assessment proceedings completed ex parte u/s.144 of the Act. 8. Before the ld.CIT(A) as well as before us, the assessee furnished explanations with regard to the nature of the bank credits. It is seen from the records that out of the total credits, a sum of Rs.2,76,939/- represents interest income received from bank deposits and company deposits, whereas a sum of Rs.1,73,820/- represents amounts received by way of refunds, transfers and gifts from close relatives including husband, daughter and brother. The Revenue has not brought any material on record to disprove the said receipts. Therefore, the addition made in respect of these amounts cannot be sustained

:-6-: ITA. No: 3296/Chny/2025 u/s.69 of the Act. However, we direct the AO to treat the interest income earned of Rs.2,76,939/- as Income from other sources for computing the total income. 9. As regards the cash deposits of Rs.10,11,500/- made during the demonetisation period, the explanation of the assessee is that the same was sourced out of past household savings, cash held in hand and earlier withdrawals made from the joint bank account maintained with ICICI Bank along with her husband. In support of the same, the assessee has placed on record copies of bank statements evidencing substantial cash withdrawals aggregating to Rs.9,07,000/- during the immediately preceding financial year and Rs.8,22,000/- during the relevant financial year up to 08.11.2016. The assessee has also furnished confirmation from her husband explaining the availability of cash and the family circumstances. The Revenue has not disputed the existence of such withdrawals. At the same time, the assessee has not maintained any cash book or contemporaneous records to establish the exact availability of cash on hand as on the date of deposit. 10. Considering the totality of the facts and circumstances of the case, the status of the assessee as a senior citizen housewife, the availability of substantial earlier withdrawals from the joint bank account, and the absence of any evidence brought on record by the Revenue to show that the impugned cash deposits emanated from undisclosed business or unaccounted sources, we are of the considered view that the explanation of the assessee deserves partial acceptance. However, keeping in view the time gap between withdrawals and deposits and the absence of complete cash flow reconciliation, the entire cash deposits cannot be accepted in full. 11. Therefore, on a reasonable and fair estimation, we hold that a sum of Rs.7,00,000/- out of the cash deposits stands satisfactorily explained. The balance amount out of the demonetisation cash deposits shall alone be treated as unexplained money/investment liable to be assessed u/s.69 of the Act. Accordingly, the addition is restricted to the extent of the balance unexplained

:-7-: ITA. No: 3296/Chny/2025 cash deposits of Rs.3,11,500/- after granting relief of Rs.7,00,000/- together with deletion of explained credits representing interest income, refunds and family transfers. 12. Coming to the rate of tax applicable u/s.115BBE of the Act, the assessee contended that the AO erred in levying tax at the enhanced rate of 60%. We find force in the submissions of the assessee. The Hon’ble Madras High Court in the case of S.M.I.L.E. Microfinance Limited v. ACIT held that the enhanced rate introduced by the Taxation Laws (Second Amendment) Act, 2016 with effect from 15.12.2016 cannot be applied retrospectively for the entire assessment year 2017-18 and is applicable only from the A.Y.2018-19. Respectfully following the aforesaid decision, we direct the AO to compute the tax by levying tax on the sustained addition only at the rate of 30% u/s.115BBE of the Act and not at the enhanced rate of 60%. Accordingly, we partly allow the grounds of appeal of the assessee. 13. In the result, the appeal filed by the assessee is partly allowed.

Order pronounced in the court on 29th May, 2026 at Chennai.

Sd/- Sd/- (जॉजा जॉजा के) (एस. आर. रघुनार्था) (S. R. RAGHUNATHA) (GEORGE GEORGE K) लेखा सदस्य/ACCOUNTANT MEMBER उपाध्यक्ष /VICE PRESIDENT

चेन्नई/Chennai, ददनांक/Dated, the 29th May, 2026. Devadas

:-8-: ITA. No: 3296/Chny/2025 आदेश की प्रनतललपप अग्रेपर्त/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3.आयकर आयुक्त/CIT– Chennai/Coimbatore/Madurai/Salem 4. पवभागीय प्रनतननधि/DR 5. गार्ा फाईल/GF

DEVADAS Digitally signed by DEVADAS GOPALANACHARY GOPALANACHARY Date: 2026.06.08 13:49:23 +05'30'