SRINIVASAN CHINNAPPA,PUDUKKOTTAI vs. DCIT, CIRCLE-1(1), TRICHY

ITA 924/CHNY/2026Status: DisposedITAT Chennai06 October 2026AY 2017-1814 pages
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What did the Tribunal hold?

The Tribunal held that the CIT(A) was not justified in sustaining the entire addition of Rs. 21,83,513/-. The primary reason for rejecting the opening cash balance of Rs. 19,80,586/- by the AO, which was the filing of the AY 2016-17 return after demonetization, was considered unjustified. The Tribunal found no adverse material to suggest the cash balance was fictitious or unavailable. Therefore, the opening cash balance of Rs. 19,80,586/- was accepted as an explained source. The AO's acceptance of income up to October 31, 2016 (Rs. 19,32,987/-) and the CIT(A)'s acceptance of marriage gifts (Rs. 3,50,000/-) were also considered. The total explained sources aggregated to Rs. 42,63,573/- against cash deposits of Rs. 44,66,500/-. The remaining difference of Rs. 2,02,927/- was held to be unexplained, as the assessee failed to provide a satisfactory explanation with material evidence. The Tribunal modified the CIT(A)'s order, restricting the addition to Rs. 2,02,927/-. Regarding the tax rate, following the Madras High Court in SMILE Microfinance Ltd. v. ACIT, the Tribunal held that the enhanced rate under Section 115BBE (60%) was not applicable to transactions prior to April 1, 2017, and directed tax at the pre-amended rate of 30%.

What were the facts?

The assessee, Srinivasan Chinnappa, an individual, filed his return for AY 2017-18 under the presumptive scheme of Section 44AD, declaring an income of Rs. 25,63,110/-. The return was selected for scrutiny due to cash deposits of Rs. 44,66,500/- made during the demonetization period. The Assessing Officer (AO) accepted income for seven months (Rs. 19,32,987/-) as an explained source and brought the balance Rs. 25,32,513/- to tax under Section 69A as unexplained money. The CIT(A) granted partial relief, considering marriage gifts of Rs. 3,50,000/- and sustained an addition of Rs. 21,83,513/-. The assessee appealed against the CIT(A)'s order.

What were the issues?

1. Whether the Tribunal was justified in sustaining the addition of Rs. 21,83,513/- under Section 69A, representing cash deposits made during the demonetization period? Assessee's Contentions: - The AO and CIT(A) failed to appreciate the nature of the assessee's businesses (bakery, wedding hall, fish rearing) which involve substantial cash transactions. - The AO erred in not considering the opening cash balance of Rs. 19,80,586/- as on March 31, 2016, as an explained source, merely because the return for AY 2016-17 was filed on March 31, 2017, after demonetization. - The assessee relied on income tax returns filed for AY 2014-15 to 2018-19, showing disclosed cash balances and declared income for AY 2014-15 (Rs. 9,87,630/-), AY 2015-16 (Rs. 19,74,710/-), AY 2016-17 (Rs. 23,31,270/-), AY 2017-18 (Rs. 25,63,110/-), and AY 2018-19 (Rs. 20,37,600/-). - The assessee also considered gifts and presentations received at his son's wedding on November 6, 2016. Revenue's Contentions: - The assessee filed the return for AY 2016-17 on March 31, 2017, after demonetization. - The income declared was on a presumptive basis under Section 44AD, which does not require maintenance of books of account, hence the source of cash cannot be accepted. - The revenue supported the orders of the AO and CIT(A).

Which sections of the Income-tax Act were involved?

Section 44AD,Section 69A,Section 115BBE,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI

Before: SHRI ABY T VARKEY & SHRI S. R. RAGHUNATHA

Hearing: 31.07.2026Pronounced: 06.10.2026

PER S. R. RAGHUNATHA, AM : The present appeal has been preferred by the Assessee against the order dated 17.12.2025 passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the Ld. CIT(A)”], arising from the assessment order dated 31.12.2019 passed by the Deputy Commissioner of Income-tax, Circle 1(1), Trichy [hereinafter referred to as “the AO”], u/s.143(3

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