DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE SALEM vs. THANGARAJ DURAIRAJU, NAMAKKAL

The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2 The Ld. CIT (A) erred in deleting the addition of Rs. 1,02,08,500/- made on account of unexplained money u/s. 69A on account of deposit of the same in Specified Bank Notes (SBN) as per Notifications dated 08/11/2016 & 09/11/2016 of the Govt. of India The Ld. CIT (A) erred in holding that the above deposits were legal when as per the Notifications dated 08/11/2016 & 09/11/2016 of the Govt. of India, the cash received by the assessee in SBNs from its customers after 8th November, 2016 had no legal validity as the SBNs were declared were not legal tender in these specified transactions & the assessee deposited the same SBNs specified in bank accounts, which were not recognized as legal tenders by the Government order thereby rendering the transactions null and void legally. Thereby they cannot be accepted as a satisfactory explanation to explain the source of cash deposits in the assessment proceedings. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the Order of Ld. CIT (Appeals) may be set aside and that of Assessing Officer may be restored.

The brief facts of the case are that the assessee filed his return of income on 13.11.2017 u/s. 139 of the Act declaring total income at Rs. 8,28,410/-. It is noticed that the assessee deposited Rs. 1,85,19,000/- in the Corporation Bank during the period 08.11.2016 to 31.12.2016, i.e. demonetization period. There was a survey conducted on the premises of the assessee on 22.03.2017. The case of the assessee was selected for complete scrutiny through CASS for the Reason “Cash deposit during the demonetization period”. Ultimately, the case of the assessee was assessed u/s. 143(3) of the Act after making additions of Rs. 1,02,08,500/- u/s. 69A of the Act and Rs. 10 Lacs as unexplained investments. The assessee being aggrieved with the same preferred an appeal before the Ld. CIT(A), who in turn partly allowed the appeal of the assessee and deleted the addition of Rs. 1,02,08,500/- u/s. 69A of the Act. Now, the Revenue being aggrieved with the same preferred the present appeal before us.

We have gone through the order of the AO, order of the Ld. CIT(A) and submissions of both the sides alongwith grounds raised by the Revenue. It is observed that the AO calculated the tax @ 60% and surcharge @ 25%, i.e. tax of Rs. 61,25,100/- and surcharge of Rs. 15,31,275/- = 76,56,375/- on the addition of Rs. 1,02,08,500/- u/s. 69A of the Act. Whereas, in his submission the assessee relied upon the decision of the Hon’ble Jurisdictional High Court in the case of [2025] 179 taxmann.com 65 (Mad.) S.M.I.L.E Microfinance Ltd. v. ACIT, wherein, the Hon’ble Court has held as under: “The next contention raised is that the under section 115BBE the rate of tax imposed is increased from 30 per cent to 60 per cent and the same is applicable with effect from 1-4-2017 onwards as per the amendment. Therefore, the same is applicable to any transaction from 1-4-2017 onwards and nor prior to any transactions prior to 1-4-2017. Since in the present case all alleged transactions are for the period from 8-11-2016 to 30-12-2016, the erstwhile rate of tax 30 per cent only is applicable. But the contention of the revenue is that the amendment was with effect from 1-4-2017 and hence the same is applicable for the financial year 2016-2017 and the assessment year 2017-2018. Further the amendment to section 115BBE is directly related to demonetization which would be evident from objects and reasons for such amendment. [Para 16]

In view of the above decision similar with the facts under consideration, we respectfully follow the decision of the Hon’ble Jurisdictional High Court and the disputed tax liability in this case will be Rs. 30,62,550/- only and this one need to consider in the light of the Circular No. 09/2024 vide F.No. 279/Misc./M-74/2024-ITJ, dated: 17.09.2024, reproduced as below: SECTION 268A OF THE INCOME-TAX ACT, 1961 - FILING OF APPEAL OR APPLICATION FOR REFERENCE BY INCOME-TAX AUTHORITY - ENHANCEMENT OF MONETARY LIMITS FOR FILING OF APPEALS BY DEPARTMENT BEFORE INCOME TAX APPELLATE TRIBUNAL, HIGH COURT AND SLPs/APPEALS BEFORE SUPREME COURT - MEASURES FOR REDUCING LITIGATION - AMENDMENT IN CIRCULAR NO. 5/2024 [F. NO. 279/MISC.142/2007-ITJ(PT.)], DATED 15-3-2024

As a step towards management of litigation, it has been decided by the Board to revise the monetary limits for filing of appeals in Income-tax cases as stated in Para 4.1 of the aforementioned Circular as follows:

Monetary limits given in paragraph 2 above with regard to filing appeal/SLP shall be applicable to all cases including those relating to TDS/TCS under the Income-tax Act, 1961 with exceptions as per paras 3.1 and 3.2 of Circular No 5/2024, dated 15-3-2024, where the decision to appeal/file SLP shall be taken on merits, without regard to the tax effect and the monetary limits.

It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case. The officers concerned shall keep in mind the overall objective of reducing unnecessary litigation and providing certainty to taxpayers on their Income-tax assessments while taking a decision regarding filing an appeal.

The modifications shall come into effect from the date of issue of this Circular. This Circular will apply to SLPs/appeals to be filed henceforth in SC/HCs/Tribunal. It shall also apply to the SLPs/ appeals pending before Supreme Court/High Courts/Tribunal, which may accordingly be withdrawn.

The above may be brought to the notice of all concerned.

This issues under section 268 A of the Income-tax Act, 1961. Divya Chaudhary Deputy Secretary (ITJ) CBDT, New Delhi

Considering the Board’s circular reproduced (supra) and following the decision of the Hon’ble Jurisdictional High Court, it is observed that the appeal filed by the revenue is not maintainable (as the revenue failed to carve out an exception to the circular relied upon by the assessee), hence dismissed without any observation on the merits or law applicable. Resultantly, the grounds raised by the Revenue are dismissed in above terms.

In the result, the appeal of the Revenue is dismissed.