SWARNALATA MADUGULA,DELHI vs. INCOME TAX OFFICER, NEW DELHI

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘the CIT(A)’] dated 22.02.2025, for Assessment Year 2017-18.

In appeal, the assessee has assailed the addition of Rs.25,00,000/- u/s.69A r.w.s. 115BBE of the Income Tax Act,1961(hereinafter referred to as ‘the Act’) confirmed by the CIT(A).

Ms. Himanshi Goel, appearing on behalf of the assessee submits that the Assessing Officer (AO) made addition of Rs.25,00,000/- on account of cash deposits in (old currency) in the bank account during the period of (AY 2017-18) demonetization. She submitted that during the course of assessment proceedings and First Appellate proceedings it was explained that the cash deposits are from earlier withdrawals from the bank. The assessee had withdrawn more than Rs.30,00,000/- from the bank. The unutilized amount was immediately deposited by the assessee after declaration of demonetization of Rs.1,000/- and Rs.500/- currency notes, relevant documentary evidences were also provided to the AO. The AO made addition without providing any opportunity of hearing or raising any queries for seeking further clarification from the assessee. The assessee filed appeal before the CIT(A). The CIT(A) sought remand report from the AO on the submissions made by the assessee. The AO furnished remand report dated 08.10.2024, rejecting assessee’s explanation with regard to source of cash deposits. The CIT(A) without giving further opportunity to the assessee to file reply to the remand report, confirmed the addition made by AO. Hence, the present appeal.

The ld. Counsel submits that in the remand report, the AO has not controverted the fact that the assessee had withdrawn cash from the bank aggregating to Rs.30,00,000/-. The AO merely raised a query i.e. purpose of withdrawal of cash. The AO rejected assessee’s explanation for the reason that the purpose of withdrawal was not made clear by the assessee. Since, the assessee has been able to explain the source of cash deposits, the AO could not have travelled beyond a point to question the purpose of withdrawal. Thus, she prayed for reversing finding of the CIT(A) and deleting addition made by the AO. 4.1. The ld. Counsel further pointed that the AO while making addition has invoked the provisions of section 115BBE of the Act and has charged tax @60%. She asserted that the provisions of section 115BBE of the Act are w.e.f.

Per contra, Ms. Sudha Gupta representing the department vehemently defended the impugned order and prayed for dismissing appeal of the assessee.

Both sides heard. The solitary issue in present appeal is addition of Rs. 25,00,000/- on account unexplained cash deposit during demonetization period. The case of the assessee is that cash deposit of Rs.25,00,000/- is from earlier withdrawals. The assessee has furnished the details of withdrawals from her ICICI Bank account as under: Date Amount Withdrawal 04.09.2015 6,00,000/- 07.09.2015 7,00,000/- 08.09.2015 7,00,000/- 21.06.2016 5,00,000/- 29.06.2016 5,00,000/- Total 30,00,000/- 08.11.2016 Demonetization 09.11.2016 25,00,000/- (Deposited)

It is further assailed that the Assessing Officer has invoked the provisions of section 115BBE of the Act and has charged interest @60%. The Hon’ble Madras High Court in the case of SMILE Microfinance Ltd. vs. ACIT, WP (MD) No.2078 of 2022 decided on 19.11.2024 has held that amendment to section 115BBE of the Act would come into effect from 01.04.2017 i.e. relevant to AY 2018-19 onwards. Thus, in the impugned assessment year un-amended provisions of section 115BBE of the Act would apply.

In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on Monday the 27th day of October, 2025.