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Facts
The assessee, engaged in footwear trading and manufacturing, deposited Rs. 1,23,97,000/- in cash during the demonetization period, claiming it was from cash sales. The Assessing Officer added this entire amount under Section 68 read with Section 115BBE due to an unexplained abnormal rise in cash in hand. The CIT(A) subsequently deleted this addition.
Held
The Tribunal found that while the assessee's explanation regarding sales was not entirely rebutted, the source of the improved cash deposit was not fully proven. Therefore, a lump sum addition of Rs. 8 lakhs was deemed appropriate. It was also clarified that Section 115BBE applies to transactions on or after 01.04.2017, and the assessee is to be assessed under normal provisions.
Key Issues
Whether the CIT(A) erred in deleting the addition under Section 68 and 115BBE for cash deposits during demonetization, and the applicability of Section 115BBE for transactions before April 1, 2017.
Sections Cited
68, 115BBE, 143(3), 143(1), 143(2), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH, ‘E’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA
ORDER PER AMITABH SHUKLA, AM,
This appeal filed by the Revenue is against order dated 09.04.2025 of National Faceless Appeal Centre/learned Commissioner of Income Tax, New Delhi, [hereinafter referred to as ‘ld. CIT(A)] arising out of assessment order dated 29.12.2019 passed u/s 143(3) of the Income Tax Act, 1961 pertaining to Assessment Year 2017-18. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
The Revenue has raised following grounds of appeal:-
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.1,23,97,000/- made on account of cash deposited during demonetisation period u/s 68 of the Act, 1961 ignoring the actual facts and circumstances of the 2. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition without taken into account the malafide intention of the assessee. During the course of assessment proceedings, it has been found that the assessee company, in its return of income filed for the AY 2017-18, has mentioned wrong information regarding the bank account number as well as the amount of cash deposit.
3. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition without taken into account that sales, cash sales and cash deposits in banks are inconsistent, the total cash deposits in bank in Nov & Dee 2015 is at NIL whereas in Nov & Dec 2016, the total cash deposits in bank is at Rs. 1,23,97,000/-. VAT returns were also revised and sales were inflated and no justification was filed.
4. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition without taken into account that the assessee also failed to collect TCS on cash No cash were deposited in banks after 30.12.2016 or even before the period of demonetization. It is also noted that there was no trend of cash deposits in bank in preceding year, or in current year or in succeeding year.
5. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition without taken into account that no PANs were given / uploaded of the top 10 parties from whom purchase were made for verification. Details of month wise cash sales & cash deposits in banks from 01.04.2015 to 31.03.2016 was not furnished /uploaded for verification.
6. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.1,23,97,000/- u/s 68 of the Act, 1961 merely on the ground that the case of the assessee is covered by the recent decision of jurisdictional High Court of Delhi in the case of PCIT Vs Agson Global (P.) Ltd. (441 ITR 550) wherein the Hon'ble High Court dismissed the appal of the Revenue wherein assessee had deposited the cash into the bank account in SBN post Page 2 of 6
demonetization which was realized from cash sales. The Ld. CIT(A) has not taken into account the principle laid down by the Hon'ble Supreme Court in the case of CIT Vs. Durga Prasad More 82 ITR 540 (SC).”
Brief facts of the case are that the company is engaged in the business of trading and manufacturing of footware. The assessee company e-filed its Return of Income on 02.11.2017 declaring an income of Rs.14,78,840/-. The return was processed u/s 143(1) of the Act. The case was selected under CASS for complete scrutiny. Statutory notice u/s 143(2) of the Act dated 10.08.2018 was issue and served upon the assessee. Thereafter notices u/s 142(1) alongwith questionnaire were issued vide to which the assessee company had replied to all notices. On perusal of ITS data of the assessee, it was revealed that the assessee had deposited cash during the demonetization period 9th November, 2016 to 30th December, 2016) amounting to Rs.1,23,97,000/-. Through notice u/s 142(1) the assessee was asked to file the detail of cash deposited in the bank accounts during the demonetization period i.e. 9.11.2016 to 31.12.2019 alongwith documentary evidence and source thereof. In response to this, the assessee submitted that Company has deposited cash from cash in hand which was Cash received from Sales made to Customers. The A.O noted on perusal of the cash details submitted by the assessee for the FY 2016-17 before and during demonetization period that there were abnormal rise in cash in hand. The assessee didn't supply any concrete reply to justify such huge increase in cash deposits during the year and demonetization period. The assessee also did not Page 3 of 6 submit any reply on why the cash in hand was increased significantly just prior to the demonetization period. Accordingly, Rs.1,23,97,000/- being the total cash deposits during the year was added to the total income of the assessee u/s 68 of the I.T. Act read with section 115BBE of the Act @ rate of 60%. In appeal, the ld. First Appellate Authority deleted the addition made by the ld. AO.
Per Contra, the ld. DR placed full reliance upon the order of the ld. Assessing Officer.
The ld. Counsel for the assessee reiterated his arguments taken before the First Appellate Authority.
We have heard rival submissions in the light of material placed on record. The ld. Counsel for the assessee has invited our attention to the assessee’s financials comprising his books of account, reconciliation of sales and purchases, cash deposits etc. The Revenue could hardly dispute that the ld. AO have nowhere specifically rebutted all these supporting documents in the assessment proceedings. The fact however remaining, that the assessee has not proved the source of improvement of cash deposit despite the fact that it is stated to be engaged in sale of footwear items. Be that as it may, we are of the considered view that the learned AO could not have summarily rejected the assessee’s foregoing explanation, reconciling on its cash deposits to regular business sales, therefore, we deem it appropriate that lumpsum addition of only Rs.8 lakhs in the given facts would be just and proper with a rider that the same Page 4 of 6 shall not be treated as precedent. Necessary computation shall follow as per law.
So far as assessee’s assessment under section 115BBE is concerned, we quote S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Madras) that the impugned statutory provision would come into effect on the transaction done on or after 01.04.2017 only. The assessee is accordingly directed to be assessed under the normal provision as per law.
In the result, the appeal of the Revenue is partly allowed. Order pronounced in the open court on 13th January, 2026.