Loading judgment…
Facts
The assessee filed appeals against the orders of the Ld. CIT(A) which upheld the assessment order and penalty. The assessment involved additions of INR 1,86,16,753/- on account of unexplained cash deposits during demonetization, treated as unexplained money under Section 69A. A penalty was also levied under Section 271AAC.
Held
The Tribunal condoned the delay in filing one of the appeals. Regarding the additions, the Tribunal upheld the application of Section 145(3) and directed the AO to apply an 8% profit rate on the cash deposits. The Tribunal also held that Section 115BBE was not applicable for AY 2017-18. Furthermore, the penalty levied under Section 271AAC was deleted as it was based on estimation and no show-cause notice was issued.
Key Issues
Whether the addition made on account of unexplained cash deposits is justified, and whether the penalty levied under Section 271AAC is sustainable.
Sections Cited
143(3), 145(3), 69A, 271AAC, 115BBE, 156, 143(2), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI “G” BENCH: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
[Assessment Year : 2017-18] Singla Apparels Pvt.Ltd. vs ITO 7244, Mahavir Gali Ward Gandhi Nagar, Delhi-1100531. C.R. Building, ITO PAN-AAJCS3628L I.P.Estate New Delhi-110002 APPELLANT RESPONDENT Appellant by Shri Salil Kapoor, Adv. & Shri Utkarsa Gupta, Adv. Respondent by Shri Manish Gupta, Sr.DR Date of Hearing 17.11.2025 Date of Pronouncement 17.11.2025 ORDER
PER MANISH AGARWAL, AM :
The captioned appeals are filed by assessee against the separate orders dt.11.06.2024 and 12.08.2024 by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld.CIT(A)”] in Appeal No. CIT(A), Delhi-8/10554/2019-20 and in Appeal No. NFAC/2016-17/10058210 respectively, passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 31.12.2019 passed u/s 143(3) of the Act and penalty order dated 25.06.2021 passed u/s 271AAC(1) of the Act respectively pertaining to Assessment Year 2017-18.
At the outset, Ld. Counsel for the assessee submitted that the delay in filing the appeal is due to his eye problem as he was suffering from Glaucoma and have trouble in reading hence, due to this reason, this appeal could not be filed within the prescribed time limit which is beyond his control. In the above circumstances, the Ld.AR for the assessee prays for condonation of delay in filing this appeal and requested for admitting the appeal for hearing.
On the contrary, Ld. Sr. DR for the Revenue opposed the submission made by the Ld.AR for the assessee.
We have heard the contentions of both the parties and perused the application for condonation of delay and affidavit filed by Ld.AR for the assessee. Considering the facts placed on record, we are of the considered view that there was a reasonable cause in delay in filing the appeal before us by the assessee. Therefore, in the interest of natural justice and by respectfully following the judgement of Hon’ble Supreme Court in the case of Collector of Land Acquisition vs Mst . Katiji & Ors. 167 ITR 471, we condone the delay in filing the appeal and admitted the same for hearing.
Both appeals have common and identical issues therefore, both appeals are adjudicated by a common order for the sake of convenience.
Brief facts of the case are that the assessee company e-filed its return of income on 30.10.2017, declaring total income at INR 33,14,270/-. The case was selected for scrutiny under Computer Aided Scrutiny Selection (“CASS”) and notice u/s 143(2) was issued on 21.09.2018. Thereafter, various notices u/s 142(1) of the Act were issued from time to time, in response, the assessee furnished the replies. After examination of the same, the AO passed the order u/s 143(3) of the Act dated 31.12.2019 at a total income of INR 2,19,31,023/-.
Against the said order, assessee filed an appeal before Ld. CIT(A) who vide impugned order dated 11.06.2024, dismissed the appeal of the assessee.
Aggrieved by the order of Ld. CIT(A), assessee is in appeal before the Tribunal by taking following grounds of appeal:-
1. “That the CIT(A). Delhi has erred in justifying the additions of Rs.1,86,16,753/- made u/s 69A vide the assessment order passed by the assessing authority and issuing demand notice u/s 156 creating demand of Rs.1,91,35,331/- alleging undisclosed source of income for the A.Y. 2017-18 which is injudicious. non-application of mind and against the factual position.
2. That Ld. CIT(A) has grossly erred in not considering the first appeal to the effect that the AO has disregarded the ground realities of business of the appellant and has made the additions on the basis of surmises and conjectures.
3. That under the facts and circumstances of the case, the Ld. CIT(A) has failed to appreciate that the order passed by the Ld. Assessing Authority u/s 143(3) is arbitrary, injudicious and bed in law as the order has been passed mechanically and without application of mind.
4. The impugned order by the Ld. CIT(A), Delhi under challenge in the second appeal has no discussion, confrontation and simply agreed to the contentions of the assessing authority and passed the order u/s 250 in haste by dismissing the first appeal.
5. That the appellant/assessee has maintained proper books of account and section 69A cannot be applied when the alleged amount is truly and fully disclosed in the books of account.
6. The order passed u/s 250 by the Ld. CIT(A). Delhi is flawed, frivolous, non-application of mind and contrary to the points raised by assessee confronting the assessment order passed u/s 143(3) by the AO.
That the Ld. CIT(A). Delhi failed to appreciate that the assessment order passed u/s 143(3) by the assessing authority is devoid of merit and against the principle of natural justice as no show-cause notice is issued about the proposed additions in the income. An opportunity must have been provided to the assessee before creating such a huge amount.”
Heard the contentions of both parties and perused the material available on record. In this case, AO has made an addition of INR 1,86,16,753/- as unexplained money u/s 69A of the Act being the cash deposited in SBN during the demonetization period claimed as made out of cash sales and earlier withdrawals from bank. The claim of the assessee is that it had maintained regular books of accounts and the AO has invoked the provision of section 145(3) without providing opportunity of being heard to the assessee. After considering the overall facts and circumstances of the case, we are of the considered opinion that the claim of the assessee is that this cash is out of the bank withdrawals as well as all the sales made in cash has not been proved to the satisfaction of the lower authorities. Thus, under these circumstances, we uphold the application of provisions of section 145(3) of the Act and directed the AO to apply the profit rate of 8% on total cash deposits in SBN of INR 1,86,16,753/-. With these directions, all grounds of appeal taken in the appeal memo filed by the assessee as well as additional grounds of appeal are partly allowed.
Additional Ground of appeal No.4 raised by the assessee is with respect to application of section 115BBE of the Act and charging the tax at special rates. We find that Hon’ble Madras High Court in the case of SMILE Microfinance Ltd. v. ACIT in WP(MD) No. 2078 of 2020 & 1742 of 2020 dated 19.11.2024 (Mad.) has held that provision of section 115BBE of the Act are applicable from AY 2018- 19 and onwards thus, by respectfully following the judgement of Hon’ble Madras High Court in the case of SMILE Microfinance Ltd. (supra), we direct the AO not to invoke the provision of section 115BBE on the additions sustained by us herein above. Accordingly, additional ground of appeal No.4 raised by the assessee is allowed.
In the result, appeal of the assessee is partly allowed.
Now we take up appeal of the assessee in [Assessment Year 2017-18].
[Assessment Year 2017-18] 15. The assessee has raised following grounds of appeal:-
1. That the CIT(A), Delhi has erred in justifying the penalty order passed by the assessing authority for the A.Y. 2017-18 which is injudicious, non-application of mind and against the factual position.
2. That Ld. CIT(A) has grossly erred in not considering the first appeal to the effect that the AO has disregarded the ground realities of business of the appellant and has charged penalty of Rs.14,38,144 /- on the basis of surmises and conjectures.
3. That under the facts and circumstances of the case, the Ld. CIT(A) has failed to appreciate that the penalty order passed by the Ld. Assessing Authority u/s 271AAC(A) is arbitrary, injudicious and bed in law as the order has been passed mechanically and without application of mind.
4. The impugned order in the first appeal has no vivid discussion and simply justified to the contentions of the assessing authority and passed the order u/s 271AAC (1) in haste by dismissing the first appeal.
5. The impugned order passed u/s 271AAC (1) by the Ld. CIT(A), Delhi is flawed, frivolous, non-application of mind and contrary to the points raised by assessee.
6. That the Ld. CIT(A), Delhi failed to appreciate that the penalty order passed u/s 271AAC (1) by the assessing authority is devoid of merit and against the principle of natural justice as no show-cause notice is issued regarding penalty proposed against the assessee. An opportunity must have been provided to the assessee before creating such penalty amount of Rs. Rs. 14,38,144/- and passing the penalty order.”
Heard the contentions of both parties and perused the material available on record. The AO has levied the penalty u/s 271AAC of INR 14,38,144/- for concealment of income. Since we have already confirmed the addition on estimation basis by applying profit rate of 8% on the cash deposit, treating the same as sales and further hold that the provisions of section 115BBE of the Act are not applicable while deciding the appeal of the assessee in herein above. Therefore, no penalty is leviable u/s 271AAC of the Act. Further various Hon’ble High Courts have held that that penalty could not be levied on the additions made on estimation basis. Accordingly, we allow all the grounds of appeal of the assessee and deleted the penalty levied u/s 271AAC of the Act.
In the result, the appeal of the assessee is allowed.
ITA 18. In the final result, appeal of the assessee in No.3445/Del/2024 [AY 2017-18] is partly allowed and appeal of the assessee in [AY 2017-18] is allowed.