Case Law Details
Late Pathangejayarao Gopal Krishna Rao Vs ITO (ITAT Bangalore)
Bangalore ITAT Deletes Demonetisation Addition; Cash Redeposit from Earlier Property Sale Accepted
The Bangalore ITAT deleted an addition of ₹13.35 lakh made under Section 69A in respect of cash deposits during the demonetisation period. The assessee explained that the cash represented money withdrawn earlier from bank accounts out of sale proceeds received through cheques from the Debt Recovery Tribunal (DRT) after a distress sale of property. The Tribunal observed that the assessee had established the source of the funds and that there was no evidence of any other income-generating activity. It noted that if the assessee had substantial undisclosed income, he could have cleared the bank liabilities and avoided auction of the property. In the absence of any contrary evidence from the Revenue, the explanation regarding withdrawal and subsequent redeposit of cash was accepted and the addition was deleted.
The Tribunal also condoned a 90-day delay in filing the appeals, considering the death of the assessee and the age-related and medical difficulties faced by the legal heir. On the connected issue of taxation under Section 115BBE, the Tribunal held that once the quantum addition itself was deleted, the question of taxing the amount at either 30% or 60% did not survive. It further observed that, even otherwise, the issue was covered in favour of the assessee by the decision of the Madras High Court in S.M.I.L.E. Microfinance Ltd. v. ACIT. Accordingly, both appeals of the assessee were allowed.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
These appeals filed are by the assessee challenging the separate orders of the NFAC, Delhi dated 26/06/2025 and 11/09/2025 in respect of the A.Y. 2017-18. Both these appeals belong to the same assessee and therefore they are heard together and disposed of by way of this common order for the sake of convenience.
2. The brief facts of the case are that the assessee is an individual and filed his return of income on 27/03/2018. The case was selected for scrutiny in view of the cash deposits during the demonetization period. The assessee submitted that he and his wife received two cheques from the DRT while selling their property and the same was deposited into their HDFC bank account on 12/12/2013 and 18/01/2014 and later on money was withdrawn and kept it with them which was redeposited during the demonetization period. The AO not accepted the contentions had added a sum of Rs. 13,35,000/- as unexplained money u/s. 69A of the Act. Thereafter the AO had passed a rectification order in which the AO had levied the tax at 60% instead of 30% as per the amended Section 115BBE of the Act. As against the said orders, the assessee filed appeals before the Ld.CIT(A). The Ld.CIT(A) also confirmed the additions and the rectification order.
3. As against the said orders, the assessee is in appeal before this Tribunal with a delay of 90 days. The assessee also filed applications to condone the delays. In the applications, the L/R of the assessee submitted that her husband passed away on 29/02/2020 and therefore she was saddled with all the responsibilities and also because of her age related problems, she missed the due date for filing the appeals. The L/R of the assessee also explained the medical issue and filed the copy of the medical report and submitted that after the recovery from illness only, she came to know about the Ld.CIT(A) order and thereafter the appeal was filed with a delay of 90 days and prayed to condone the said delay.
4. We have considered the submissions and considering the age of the L/R of the assessee and her medical condition, we are inclined to condone the delay and proceeded to decide the appeals on merits.
5. First we will take up the appeal in ITA No. 2824/Bang/2025.
6. At the time of hearing, the Ld.AR submitted that the cash deposited during the demonetization period is nothing but the cash withdrawn in their bank accounts. The Ld.AR further submitted that the assessee does not have any other source for earning income and therefore addition u/s. 69A could not be made. The Ld.AR further submitted that the assessee being an old person, normally kept the cash in his hand and therefore the time gap would not be a reason to treat the deposits as unexplained money u/s. 69A of the Act. Moreover there is a source for the deposits and therefore without any contra evidence, the addition could not be sustained.
7. The Ld.DR submitted that the order of the lower authorities are a detailed one and therefore the same may be confirmed. The Ld.DR also relied on the Coordinate Bench orders of this Tribunal in IT(IT)A No. 705/Bang/2022 dated 28/11/2023 and also the Hon’ble Delhi Tribunal order in ITA No. 1423/Del/2020 dated 01/02/2021 and prayed to dismiss the appeal.
8. We have heard the arguments of both sides and perused the materials available on record.
9. In the present case, the assessee had established that there is a cash balance available in the bank account by depositing the cheques received from the DRT while selling the property under distress sale. In means that the assessee has no sufficient funds to clear the bank dues and therefore the property was auctioned and the balance was returned to the assessee by way of cheques which were deposited into his bank accounts. Later on, money was withdrawn from the said bank and retained by him which was later on redeposited into his bank account. There is no other source for depositing the cash into his bank account. If he is having enough income, he could have cleared the bank dues and avoided the auction of their property. Therefore, when there is no contra evidence available, we are of the opinion that the explanation offered by the assessee has to be accepted and the addition u/s. 69A has to be deleted.
10. We have also considered the orders relied on by the Ld.DR. In the Coordinated Bench order, it was found that a nominal amount was withdrawn and therefore the Tribunal had confirmed the addition. Similarly, in the Hon’ble Delhi Tribunal, facts are different and it cannot be cited as a precedent to the facts of the case on hand.
11. We, therefore, allow the appeal filed by the assessee.
12. In the result, the appeal filed by the assessee in ITA No. 2824/Bang/2025 is allowed.
13. Now we take up the appeal in ITA No. 2825/Bang/2025.
14. In this appeal, the assessee had challenged the higher rate of tax levied under the amended Section 115BBE of the Act by way of a rectification order u/s. 154 of the Act. The earlier appeal relates to the quantum and for the said quantum addition, the AO had earlier in the 143(3) order levied tax at 30% which was increased to 60% by citing the amendment which came into effect from 01/04/2017. The said order was confirmed by the Ld.CIT(A) which is under challenge before this Hon’ble Tribunal.
15. At the time of hearing, the Ld.AR submitted that the amendment came into effect from 01/04/2017 and therefore the transactions effected prior to the said date has to be taxed at the lesser rate of tax at 30% instead of 60%. The Ld.AR further submitted that if the order u/s. 143(3) was allowed, the order passed u/s. 154 would also not sustainable. Alternatively, the Ld.AR submitted that, the dispute involved in this appeal is covered in favour of the assessee by the judgment of the Hon’ble Madras High Court in the case of S.M.I.L.E. Microfinance Ltd. vs. ACIT reported in (2025) 179 com65 (Mad) and therefore prayed to allow the appeal.
16. The Ld.DR submitted that the authorities below had correctly levied the higher rate of tax as per the amendment made w.e.f. 01/04/2017 and prayed to dismiss this appeal.
17. We have heard the arguments of both sides and perused the materials available on record.
18. In the order in ITA No. 2824/Bang/2025, we have deleted the entire additions and therefore the question of levy of tax at 30% or 60% would not arise. Even otherwise, this dispute is covered by the judgment of the Hon’ble Madras High Court reported in (2025) 179 com65 (Mad) in the case of S.M.I.L.E. Microfinance Ltd. vs. ACIT. Therefore we are setting aside the order of the lower authorities and allow the appeal filed by the assessee.
19. In the result, the appeal filed by the assessee in ITA No. 2825/Bang/2025 is allowed.
20. In the combined result, both the appeals filed by the assessee are allowed.
Order pronounced in the open court on 23rd June, 2026.
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