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Facts
The assessee filed an appeal against an order dismissing their appeal, which was against an assessment order. There was a delay of 516 days in filing the appeal. The assessee had made cash deposits totaling Rs. 16,09,500 during the demonetization period, which the Assessing Officer treated as unexplained investment. The assessee claimed the source as salary, agricultural, and rental income.
Held
The Tribunal condoned the delay in filing the appeal. While acknowledging the assessee's claim of income sources, they noted the lack of complete substantiation. The Tribunal decided to delete 50% of the addition and sustain the remaining 50%, directing the Assessing Officer to recalculate the tax at 30% on the sustained addition, as the deposits were made before April 1, 2017.
Key Issues
Whether the cash deposits made during the demonetization period were sufficiently explained, and the applicability of the tax rate under Section 115BBE for transactions prior to April 1, 2017.
Sections Cited
143(3), 142(1), 69, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K & SHRI S.R. RAGHUNATHA
आदेश /O R D E R
PER S. R. RAGHUNATHA, AM:
The present appeal is filed by the assessee against the order dated 24.11.2023 passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “ld.CIT(A)”), dismissing the appeal filed by the assessee against the assessment order dated 05.12.2019 passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), pertaining to Assessment Year (A.Y.) 2017-18.
We find that there is a delay of 516 days in filing the present appeal before us. The Ld.AR placed on record an affidavit from the assessee, explaining the :-2-: ITA. No:1871 /Chny/2025 reasons for the delay and prayed that the delay be condoned and the appeal be taken up on merits. Per contra, the Ld.DR opposed the petition for condonation of delay and submitted that the assessee has not made out a case for condoning the delay and that the appeal may be dismissed in limine on the grounds of limitation. On going through the reasons for delay, we are satisfied that the assessee had sufficient cause in not presenting the appeal within the period of limitation specified under the Act. We, accordingly, condone the delay in filing the appeal and now proceed to hear the case on merits.
The brief facts of the case are that the assessee is an individual and has filed her return of income on 30.12.2017 admitting an income of Rs.5,57,650/-. The assessee’s case was selected for limited scrutiny under CASS to examine the deposits made during the demonetization period in various bank account as below: Amount (in Bank Rs.) City Union Bank 6,17,500/- HDFC Bank 6,92,000/- Karur Vysya Bank 3,00,000/- Total: 16,09,500/-
Accordingly, statutory notices u/s.143(2) and 142(1) of the Act were issued and served upon the assessee. During the course of assessment proceedings, the assessee, vide replies dated 23.07.2019 and 04.11.2019, stated that she had deposited a sum of Rs.16,09,500/- in SBN in above- captioned banks and that the source of the deposits is from her salary income, agricultural income and rental income from properties that she had received by way of partition deed executed in the year 2013 and her past savings. Thereafter, the Assessing Officer concluded the assessment u/s.143(3) of the Act, by passing an order dated 05.12.2019 assessing the income at Rs.18,67,150/-. Out of the sum of Rs.16,09,500/- of cash deposited, addition of Rs.13,09,500/- was made as unexplained investment u/s.69 of the Act, after deducting cash-in-hand to the tune of Rs.3,00,000/-. The Assessing Officer’s
:-3-: ITA. No:1871 /Chny/2025 reasoning for the addition u/s.69 of the Act is that the assessee has filed her return of income for the Assessment Years 2011-12 to 2016-17 on 29.11.2016, after the announcement of demonetization, showing a cumulative gross income of Rs.26,11,685/-. Further, the Assessing Officer also stated that the deposits were made in tranches rather than lump sum deposit during the demonetization period.
Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the ld.CIT(A) on various grounds. The assessee reiterated her explanation that her sources of income are the salary income, income earned from agricultural land (which also yields crops such as coconut, mangoes, etc..) and rental income from the properties received by way of partition deed. The assessee also submitted that in the return filed on 29.11.2016, the total bank balance stood at Rs.11,06,481/- and cash in hand amounted to Rs.23,72,738/- with which, the assessee was able to deposit SBN of Rs.16,09,500/-. The ld.CIT(A), vide order dated 24.11.2025, while dismissing the appeal stated that the preponderance of probability was against the assessee. He further stated that the assessee failed to substantiate the source with relevant documents and that the case law relied by the assessee is distinguishable from their own case.
Aggrieved by the order of the ld.CIT(A), the assessee is now in appeal before us.
The ld.AR for the assessee submitted that the ld.CIT(A) has erred in confirming the order of Assessing Officer without appreciating the merits of the case and that the case law relied by the assessee is applicable to the facts and circumstances of their own case. The ld.AR submitted that the total income declared in the impugned year was Rs.5,57,650/- apart from the agricultural income. The ld.AR stated that the assessee is owning 10.33 Acres of agricultural land out of the registered partition deed dated 14.02.2013 and earning the agricultural income from coconut, Mango and other crops. Further,
:-4-: ITA. No:1871 /Chny/2025 the ld.AR also stated that the assessee has obtained a residential house and shops from the registered partition deed dated 14.12.2013, which is also yielding rental income declared in the return of income. The ld.AR also submitted that the return of income filed for 31.03.2016 on 29.11.2016, the cash balance declared was Rs.23.72 lakhs along with bank balance of Rs.11.06 lakhs. The ld.AR stated that though the return of income for the A.Y. 2016-17 was filed after the announcement of demonetisation, the cash balance was shown Rs.23.72 lakhs was available for cash deposit made during the demonetisation period. Hence, the ld.AR requested to consider the above explanation to prove the source of cash deposit and prayed for deleting the same.
Without prejudice to the above arguments, it was contended by the ld.AR that the addition made u/s.69 of the Act r.w.s.115BBE of the Act would not attract a higher rate of tax at 60 percent, but only at 30 percent, since the provision operates only with effect from 01.04.2017 and not prior to that. Reliance was placed on the judgment rendered by the Hon’ble jurisdictional High Court in the case of SMILE Microfinance Ltd. vs. ACIT in WP(MD) no. 2078 of 2020 & 1742 of 2020 dated 19.11.2024 (Mad.), in support of this proposition.
Per contra, the ld.DR, recapitulated the ld.CIT(A) and submitted that the order of the ld.CIT(A) confirming the addition of Assessing Officer u/s.69 r.w.s of 115BBE of the Act is justified. The ld.DR relied on the following case in support of their arguments:
CIT V. P.Mohanakala [2007] 161 taxmann 169(SC) Sumati Dayal V. CIT [1995] 80 taxmann 89 (SC)
We have heard the arguments made by both the sides, perused the orders of the Assessing Officer & the ld. CIT(A) and the other materials placed on record. It is an admitted fact that the during the demonetization period, the :-5-: ITA. No:1871 /Chny/2025 assessee made cash deposits into various account, as captioned above, to the sum of Rs.16,09,500/- and the Assessing Officer, after deducting Rs.3,00,000/- as cash in hand, added a sum of Rs.13,09,500/- u/s.69 read with section 115BBE of the Act. The ld.CIT(A), upheld the addition of the Assessing Officer due to want of supporting evidences with regard to sources claimed by the assessee (salary income, rental income, agricultural income).
We note that the assessee has received the agricultural land and residential property from the partition deed in the year 2013 by registered partition deed and earning income from both agricultural land of 10.33 acres and the rental income from the building. Further, the assessee has filed a valid return of income for the A.Y.2016-17 also on 29.11.2016, though filed after the announcement of demonetisation. Therefore, we are of the view that the assessee had source of income to deposit the cash into her bank account. In view of the above and to meet the ends of justice and fair play, we are inclined to delete 50% of the additions as explained source of cash deposit and sustain the balance 50% of addition made by the AO and confirmed by the ld.CIT(A). Hence, we direct the AO to delete the addition of Rs.654,750/- (50% of Rs.13,09,500/-) and sustain the balance 50% of addition made. Thus, the corresponding grounds of the assessee are partly allowed.
We also note that, as per the decision of the Hon'ble Jurisdictional High Court, in the case of SMILE Microfinance Ltd. vs. ACIT in WP(MD) no. 2078 of 2020 & 1742 of 2020 dated 19.11.2024 (Mad.), the Hon’ble High Court ruled that amendment made to Section 115BBE of the Act will apply for transactions after 01.04.2017 and not prior to it. It is pertinent to note that the Assessing Officer has made the addition u/s.69 of the Act at the rate of 60% u/s.115BBE of the Act for the A.Y.2017-18. For the year under consideration, tax rate of 30% will apply, since the amendment increasing the tax rate came into effect from 01.04.2017, meaning they will apply from the Assessment Year 2018-19 and not during the impugned Assessment Year 2017-18 as per the decision
:-6-: ITA. No:1871 /Chny/2025 rendered by the Hon’ble Madras High Court. As it can be seen in this case, the cash were deposited prior to 01.04.2017 and therefore, the ratio of this judgment squarely applies to the facts of the present case. Therefore, the rate of tax that can be applied u/s.115BBE of the Act is only 30% and not 60% on the sustained additions.
We, accordingly, direct the Assessing Officer to reduce the tax rate u/s.115BBE to 30% and recompute the demand.
In this result, the appeal of the assessee is partly allowed.
Order pronounced in the court on 04th February, 2026 at Chennai.