KEDAR NATH CHHABRA,DEHRADUN vs. ACIT CIRCLE 1, DEHRADUN

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ITA 264/DDN/2025Status: DisposedITAT Dehradun05 June 2026AY 2017-184 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal found that while the assessee had attempted to explain the source of the cash deposit, there was some unexplained portion. However, the revenue's disallowance was also not fully justified. Therefore, a lump-sum addition of INR 5.00 was deemed appropriate.

What were the facts?

The assessee firm deposited cash of INR 43,76,500 during the demonetization period, claiming it was from business receipts. The AO made an addition of INR 33,51,000 as unexplained, which was upheld by the CIT(A).

What were the issues?

Whether the cash deposited during demonetization was sufficiently explained, and if tax should be levied under Section 115BBE.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 115BBE

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DEHRADUN “DB” BENCH: DEHRADUN

Before: SHRI YOGESH KUMAR U.S. & SHRI MANISH AGARWAL

For Appellant: Shri Rajan Malik, CA &, Ms. Rashi Nagpal, CA
For Respondent: Shri Amar Pal Singh, Sr.DR
Hearing: 12.03.2026Pronounced: 05.06.2026

IN THE INCOME TAX APPELLATE TRIBUNAL DEHRADUN “DB” BENCH: DEHRADUN BEFORE SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No. 264/DDN/2025 [Assessment Year : 2017-18] vs ACIT Kedar Nath Chhabra 35/1, Subhash Road, Circle-1 Dehradun, Subhash Road, Uttarakhand-248001 Dehradun PAN-ABXPC8121E Uttarakhand APPELLANT RESPONDENT Appellant by Shri Rajan Malik, CA & Ms. Rashi Nagpal, CA Respondent by Shri Amar Pal Singh, Sr.DR Date of Hearing 12.03.2026 Date of Pronouncement 05.06.2026 ORDER PER YOGESH KUMAR U.S., J.M: The present appeal is filed by assessee against the order dated 02.12.2025 passed by Ld. Commissioner of Income Tax (A), Meerut [“Ld.CIT(A)”] in Appeal No. CIT (A), Dehradun/10541/2019-20 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 26.12.2019 passed u/s 143(3) of the Act pertaining to Assessment Year 2017-18.

2.

Brief facts of the case are that the assessee firm filed its return of income on 26.08.2017, declaring a total income of INR 82,09,620/- which was processed u/s 143(1) of the Income Tax Act,

ITA No. 264/DDN/2025

1961. Subsequently, on the basis of list generated through CASS, the case of the assessee was selected for scrutiny. Thereafter, statutory notice u/s 143(2) of the Income Tax Act, 1961 was issued to the assessee on 21.09.2018 followed by statutory notices u/s 142(1) along with questionnaire were issued to the assessee on 08.08.2019 fixing the case for submission of online reply on or before 19.08.2019. Thereafter, notice u/s 142(1) was issued to the assessee from time to time for online submission of reply to the questionnaire. In response thereto, the assessee has furnished online reply alongwith supporting documents. The assessee has also produced books of account along with bills/vouchers and the same was examined on test check basis. After examining the replies/information/documents and books of account furnished/produced by the assessee, assessment was completed in terms of the assessment order dated 26.12.2019 u/s 143(3) of the Act assessing the total income of the assessee at INR 1,15,60,620/-.

3.

Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 02.12.2025, dismissed the appeal of the assessee.

4.

Aggrieved by the order of Ld.CIT(A), assessee is in appeal before the Tribunal by taking various grounds of appeal mentioned in the appeal memo.

ITA No. 264/DDN/2025

5.

Heard the contentions of both the parties at length and perused the material available on record. The solitary issue in this case is regarding the cash deposited during demonetization period of INR 43,76,500/- in SBN out of which the AO has made the addition of INR 33,51,000/- treating the same as unexplained. Claim of the assessee was that cash was deposited out of the regular business activities of running of medical laboratory where due to outbreak of Dengu, the receipts were got increased multifold. The assessee also filed details of receipts and other relevant evidences in support of the claim. As per the details filed, assessee has cash in hand available with him as on the closing hours of 08.11.2016 out of which the said cash was deposited. We find that the assessee has attempted to prove the entire source of cash deposit during demonetization as cash receipts from lab. Although the assessee, prima facie, appears to have discharged its onus of explaining source of cash deposit, it's contentions to prove the source, hardly deserves to be accepted in entirety especially when the AO found unexplained increase in gross receipts sales during the period of demonetization. On the other hand, the Revenue's endeavor to disbelieve the assessee's contention that cash deposit has been made out of gross receipts of lab cannot be fully justified.

6.

In this factual matrix, there is some element of failure to explain some of the cash deposit, cannot be ruled out. Be that as it may, it is deemed appropriate, in larger interest of justice, that a lump-sum addition of INR 5.00 only would be just and proper with a rider that

ITA No. 264/DDN/2025

the same shall not be treated as a precedent, so as to cover all loopholes. In so far as levy of tax at a higher rate under section 115BBE of the Act is concerned, we find that the Hon’ble Madras High Court in the Writ petition in the case of S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Madras) has held that the impugned statutory provision would come into effect on the transaction done on or after 01.04.2017 only. Accordingly, we direct the AO to tax the addition under normal provisions of tax and not under the provisions of 115BBE. Accordingly, all Grounds of appeal raised by the assessee are partly allowed.

7.

In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 05.06.2026.

Sd/- Sd/- (MANISH AGARWAL) (YOGESH KUMAR U.S.) JUDICIAL MEMBER ACCOUNTANT MEMBER Date-05.06.2026 *Amit Kumar, Sr.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT 6. Guard File ASSISTANT REGISTRAR ITAT, NEW DELHI (Dehradun Circuit Bench, Dehradun) Page | 4

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