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Facts
The Revenue appealed against the deletion of an addition of Rs. 1,03,42,470/- made by the Assessing Officer on account of cash deposits during the demonetization period. The assessee claimed these deposits were from sales of ornaments.
Held
The Tribunal found that while the assessee had attempted to explain the source of deposits, the explanation was not fully satisfactory, especially given the abnormal cash sales during a short period. Consequently, a lump-sum addition of Rs. 4 lakhs was deemed appropriate.
Key Issues
Whether cash deposits during demonetization could be treated as unexplained income under Section 68, and whether Section 115BBE applied to transactions prior to April 1, 2017.
Sections Cited
68, 115BBE
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Income Tax Appellate Tribunal, DELHI ‘G’ BENCH,
Before: SHRI SATBEER SINGH GODARA, & SHRI NAVEEN CHANDRA
This appeal by the Revenue is directed against the order of the ld.
CIT(A) dated 30.03.2025 pertaining to A.Y 2017-18.
The solitary grievance arising out of the two grounds raised by the Revenue is the deletion of addition of Rs. 1,03,42,470/- made by the Assessing Officer on account of cash deposited in Bank during
Page 1 of 6 demonetization period u/s 68 of the Income-tax Act, 1961 [the Act, for short].
Briefly stated, the facts of the case are that the assessee is a partnership firm engaged in the wholesale/retail trading of ornaments.
The assessee filed its return of Income on 30.10.2017 declaring total income of Rs. 1,49,490/- Return was selected for scrutiny assessment through CASS and accordingly, statutory notices were issued and served upon the assessee.
During the course of assessment proceedings, the Assessing Officer noticed that during the demonetization period there was abnormal increase in the cash deposits as compared to pre-demonetization period.
In response to notice issued requiring the assessee to explain the details and source of cash, the assessee filed requisite details and stated that the source of cash deposit was collection from customers on account of trading goods and VAT.
Finding all the three ingredients of section 68 of the Act, namely identity, genuineness of transactions and credit worthiness not to be satisfactory, the Assessing Officer came to the conclusion that the assessee has not been unable to explain with supporting documentary evidences that the source of cash deposit during the demonetization period was from cash sales of wax. Applying the provisions of section 68 Page 2 of 6 r.w. 115BBE of the Act, the Assessing Officer held that the sum of Rs. 1,03,42,470/- represented unexplained cash credit income and added the same to the income of the assessee.
When the aggrieved assessee went in appeal before the ld. CIT(A), the ld. CIT(A) deleted the addition of Rs. 1,03,42,470/-. Aggrieved the Revenue is before us.
We have heard the rival submissions and have perused the relevant material on record. In the instant case, we find that the assessee has attempted to prove the entire source of cash deposit during demonetization as cash sales, collection from customers and VAT sales.
Although the assessee, prima facie, appears to have discharged its onus of explaining the source of cash deposit, its contentions to prove the source, hardly deserves to be accepted in entirety especially when the Assessing Officer found that the assessee has booked huge cash sales of Rs 1.13 crore between 01.11.2016 to 08.11.2016 as against average sale of Rs 12,100/- only and no satisfactory explanation was filed. The Assessing Officer observed that the assessee engaged in the normal business activities during the normal course of business upto 31.10.2016 and thereafter huge cash deposits was made arising out of huge cash sales.
On the other hand, the Revenue’s endeavour to disbelieve the assessee’s contention that cash deposit has been made out of sales, cannot be fully justified. In this factual matrix, there is some element of failure to explain some of the cash deposit, cannot be ruled out. Be that as it may, it is deemed appropriate, in larger interest of justice, that a lump-sum addition of Rs. 4 lakhs only would be just and proper with a rider that the same shall not be treated as a precedent, so as to cover all loopholes. The grounds of appeal no 1 and 2 are partly allowed.
10. In so far as assessee's levy of tax at a higher rate under section 115BBE of the Act is concerned, we find that the Madras High Court in the Writ petition in the case of S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Madras) has held that the impugned statutory provision would come into effect on the transaction done on or after 01.04.2017 only. Accordingly, we direct the AO to tax the addition under normal provisions of tax and not under the provisions of 115BBE. The additional ground raised by the assessee is allowed. partly allowed.
Order pronounced in open court on 30.10.2025.