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Facts
The assessee, Pace Tel Systems Pvt Ltd, made substantial cash deposits during the demonetization period, which the AO treated as unexplained cash credit under Section 68, making an addition of Rs. 3,39,10,762/-. The CIT(A) subsequently deleted this entire addition, leading the Revenue to appeal the deletion of Rs. 2,88,38,262/-.
Held
The Tribunal partially upheld the Revenue's appeal, deeming a lump-sum addition of Rs. 8 lakhs to be appropriate for the unexplained cash deposit, acknowledging some failure in the assessee's explanation. It further directed the AO to tax this addition under normal provisions, not under Section 115BBE, citing a Madras High Court ruling that Section 115BBE applies from 01.04.2017.
Key Issues
1. Whether the deletion of unexplained cash deposit addition under Section 68 by CIT(A) was justified. 2. The applicability of Section 115BBE for taxing the unexplained cash credit.
Sections Cited
68, 115BBE, 115JB, 40(a)(ia), 143(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘A’ BENCH,
Before: SHRI SATBEER SINGH GODARA, & SHRI NAVEEN CHANDRA
This appeal by the Revenue is directed against the order of the ld.
CIT(A, New Delhi dated 21.12.2023 pertaining to A.Y 2017-18.
The solitary grievance raised by the Revenue is the deletion of addition of Rs. 2,88,38,262/- by the ld. CIT(A) made by the Assessing Officer on account of unexplained cash deposit u/s 68 of the Act.
Page 1 of 6 Private Limited e-filed its return of income for A.Y 2017-18 on 02.11.2017 declaring income of Rs. 2,69,86,910/-and Rs. 2,78,84,951 u/s 115JB of the Act. Subsequently, the case was selected for complete scrutiny assessment through CASS with reasons to examine lower amount disallowed under section 40(a)(ia) in ITR in comparison to tax audit report and High Revenue from operations including other income and no scrutiny in preceding 5 assessment years. Accordingly, notice under sub section 2 of section 143 of the Act was issued and served on the assessee company.
During the assessment proceedings, the Assessing Officer found abnormal increase in the cash deposit made in different bank accounts of the Assessee Company during the demonetization period as compared to the rate of cash deposit during the pre-demonetization. The assessee explained that total cash deposited during the period of demonetization in different bank accounts maintained by the assessee on PAN India basis was Rs. 2,88,38,262/- out of which cash in old currency SBN was Rs. 50,72,500/. The Assessee also filed certificate from HDFC Bank and email from ICICI Bank for deposit of cash with breakup of old currency notes SBN.
Page 2 of 6 made the addition of Rs. 3,39,10,762/- on account of cash deposit during demonetization period as unexplained cash credit under section 68 read with section 115BBE of the Act.
When the aggrieved assessee went in appeal before the ld. CIT(A), the ld. CIT(A) deleted the addition.
Aggrieved, the Revenue is in appeal before us.
We have heard the rival submissions and 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 from 274 centers in different cities providing exclusive service cum retail sales of the big mobile manufacture i.e. OPPO Mobiles India Private Limited. Although the assessee, prima facie, appears to have discharged its onus of explaining 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 did not submit any comparable of the cash deposit made in FY 2015-16 vis a vis cash deposit made in the FY 2016-17. Further, the AO also found that the corresponding purchases for the said sales and the sources of cash deposits remained unverifiable.
Page 3 of 6 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. 8 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 Revenue’s ground on this count is partly allowed.
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. allowed.
Page 4 of 6 [SATBEER SINGH GODARA] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : September, 2025.
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