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Facts
The assessee, engaged in the business of selling Indian-made liquor, made cash sales and deposited the amounts in their bank accounts. During the demonetization period, a cash deposit of Rs. 3,97,000 in the form of Specified Bank Notes (SBN) was made. The Assessing Officer added this amount to the assessee's income under Section 68 and taxed it under Section 115BBE.
Held
The Tribunal held that considering the nature of the assessee's business activities, which primarily involve cash sales, the cash deposit, including the amount in SBN, was not abnormal. The lower authorities had not allowed the concession permitted by CBDT Circular No. 3 of 2017, and the addition was confirmed by the CIT(A).
Key Issues
Whether the addition of Rs. 3,97,000 on account of cash deposit in the form of SBN during demonetization is sustainable, and if Section 115BBE is applicable.
Sections Cited
68, 115BBE
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PER PAWAN SINGH, JUDICIAL MEMBER:
This appeal by assessee is directed against the order of ld. CIT (A)/NFAC dated 16.08.2025 for assessment year 2017-18. The assessee has raised following grounds of appeal:-
“1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming addition of Rs.3,97,000/- on account cash deposit u/s 68 of the Income Tax Act. The appellant prays that the said addition may please be deleted. 2. The appellant craves leave to add and alter the grounds of appeal
.”
2. The rival submissions of both the parties have been heard and record perused. The ld. Authorised Representative (AR) of the assessee submits that assessee is individual and proprietor of Sanjay Country Bar and in the business of sale of Indian made liquor. The assessee is procuring liquor from distributor and selling across the counter. All the sales during the relevant Sukir Ladaku Naik, Mumbai (A.Y. 2017-18) financial year were in cash. Cash collection received across the counter sales were deposited in bank accounts on daily basis. During the relevant financial year the assessee made purchases of Rs.1.12 Crore and have shown sales of Rs.1.33 Crore. During the relevant financial year the assessee deposited total cash of Rs.1.11 Crore, which includes Rs.3,97,000/- in the form of Specified Bank Note (SBN). The Assessing Officer while passing the assessment order made addition of Rs.3,97,000/- and tax the same under Section115BBE. The cash deposit during demonetisation period particularly in the form of SBN was out of cash sales. The Assessing Officer and the ld CIT (A) has not even allowed the concession of cash deposit allowed by CBDT in its Circular No.3 of 2017. The ld. AR of the assessee submits that during the period of 09.11.2016 to 30.12.2016 the assessee made cash deposit of Rs.16,09,300/- out of which only Rs.3,97,000/- was in the form of old currency note and balance of Rs.12,300/- was other normal currency. The SBN was only 3.56% of the entire cash deposit during the year. The ld. AR for the assessee submits that entire addition may be deleted and in alternative at least a concession of Rs.2.50 Lakhs as per CBDT Circular No.3/2017, may be allowed. The ld. AR further submits that enhanced rate of tax as prescribed under Section 115BBE is not applicable on the cash deposit prior to 01.04.2017 as such provision is applicable from 01.04.2017 onwards as has been held by Hon’ble Madras High Court in SMILE Microfinance Limited Vs ACIT [2025179 taxmann.com 65 (Madras)
On the other hand, the ld. Senior DR for the Revenue supported the order of lower authorities.
We have considered the rival submission of both the parties and have gone through the orders of lower authorities carefully. There is no dispute that assessee is engaged in the sales of Indian made liquor. The sales in such business is in cash. There is no dispute that during the entire financial year the assessee has made deposit of more than Rs.1.11 Crore. Even during the demonetisation period the assessee has deposited more than Rs.16 Lakhs, out of which only Rs.3.97 Lakhs was in the form of SBN. Considering the nature of business activities of the assessee the cash deposit was not abnormal, therefore, entire addition of cash deposit is deleted. In the result, the grounds of appeal raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.