Delhi ITAT: No Section 68 Tax on Mere Book Entry; 60% U/s 115BBE Inapplicable

Maruti Papers Private Limited Vs ACIT (ITAT Delhi)

Delhi ITAT: Mere Book Entry Without Actual Receipt Cannot Be Taxed u/s 68; 60% Rate u/s 115BBE Also Held Inapplicable for AY 2017-18

The Delhi ITAT dealt with two connected appeals concerning a ₹10 lakh unsecured loan. The AO had made the addition in the original assessment without expressly invoking Section 68 and subsequently passed a Section 154 order applying the special 60% tax rate under Section 115BBE.

On the Section 115BBE issue, the CIT(A) had held that failure to specifically mention Section 68 could be cured by Section 292B and that non-levy of the 60% rate constituted a mistake apparent from the record. The ITAT, however, held that the 60% special rate under Section 115BBE was not applicable for AY 2017-18, relying upon S.M.I.L.E. Microfinance Ltd. (Madras HC) and coordinate-bench decisions in Kanchan Chopra and Ankit Garg. The assessee’s appeal against the Section 154 order was accordingly allowed.

On the Section 68 addition itself, ₹10 lakh had been credited in the books on 31.03.2017 against a cheque, but the cheque was not presented/realised during that financial year. The CIT(A) nevertheless treated the book credit as sufficient for invoking Section 68.

The ITAT disagreed and laid down an important principle: for Section 68, there must not merely be a credit entry in the books but an actual receipt of an amount capable of being treated as deemed income. A mere accrual/book entry without actual receipt cannot itself be taxed under Section 68. Since no amount was actually received during the relevant financial year and receipt occurred only in the subsequent year, Section 68 could not be invoked for the year under appeal. The Tribunal relied upon PCIT v. Zexus Air Services (P.) Ltd (Delhi) and V.R. Global Energy (P.) Ltd. v. ITO.

Accordingly, the ₹10 lakh Section 68 addition was deleted and the assessee succeeded in both appeals.

Key takeaway: A credit entry backed by an unrealised cheque is not, by itself, an actual “sum received” taxable under Section 68 in that year; and the enhanced 60% Section 115BBE rate was also held inapplicable for AY 2017-18.

Cases Discussed:

• PCIT versus Zexus Air Services (P) Ltd. (Delhi High Court), [2025] 171 taxmann.com 211 (Del)
• M.I.L.E. Microfinance Limited v. The Assistant Commissioner of Income Tax (Madras High Court), W.P. (MD) No. 2078 of 2020 & W.M.P. (MD) No. 1742 of 2020 order dated 19.11.2024
• Kanchan Chopra v. ITO (Delhi ITAT), ITA No. 4205/Del/2024 (A.Y. 2017-18) Order dated 19.11.2025
• Ankit Garg v. ITO (Delhi ITAT), ITA No. 5507/Del/2024 (A.Y. 2017-18). Order dated 14.11.2025
• R. Global Energy (P) Ltd. Versus ITO, Corp. Ward 3(4), Chennai (Madras High Court), [2018] 96 taxmann.com (Mad)
• R. Global Energy (P) Ltd. Versus ITO, Corp. Ward 3(4), Chennai, [2020] 113 taxmann.com 31 (SC)

FULL TEXT OF THE ORDER OF ITAT DELHI

These appeals preferred by the Assessee against the order of the Ld. Addl/JCIT(A)-5 Kolkata (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in appeals filed before him against the orders of the ld. Assessing Officer (hereinafter referred to as the Ld. AO, for short) passed u/s 143(3)/154 of the Income-tax Act, 1961 (hereafter referred to as ‘the Act’). Further details of the orders of the lower authorities are as under: –

2. Heard and perused the records. The two appeals are based on common set of facts thus are decided by this common order. The primary facts are that income tax return of assessee for the A.Y. 2017-18 was filed on 24.10.2017 at an income of Rs. 1,46,66,440/-. Later on the case was taken up for scrutiny by issuing notice u/s 143(2), and details called were from time to time. The order u/s 143(3) was passed by 1d. ACIT dated 19.7.2019 at an income of Rs. 1,57,64,480/- by disallowing freight expenses u/s 40A(3) Rs. 54,450/ and also cash payments u/s 40A(3) for Rs. 43588. Besides this addition in respect of unsecured loan amounting to Rs. 10,00,000/- was also made without invoking the provisions of section 68 of the Act. Thereafter the AO has served a notice w/s 154/143(3) dated 4.4.2022 to charge tax u/s 115BBE in respect of addition made for unsecured loan of Rs.10,00,000/- and after taking reply of assessee the AO passed order u/s 154 r.w.143(3) dated 7.7.2022 and charged the addition of Rs. 10 Lakhs to tax on the special rate u/s 115BBE i.e @ 60%.

3. The assesse had challenged the quantum additions as well as 154 order, by separate appeals and the out come of those two orders of ld. CIT(A), are the two appeals before this Tribunal.

4. Now vide ITA 1872/Del/2026 assessee has challenged the order passed by invoking provisions of section 154 treating non levy of tax of special rate u/s 115BBE i.e @ 60%. Though ld. CIT(A) has sustained it recording that provisions of section 292B of the Act justifies the order u/s 154 of the Act and merely because section 68 was not specifically mentioned does not mean that the addition was not made u/s 68 and as deeming provisions of section 68 were applied it obviously attracted taxation u/s 115BBE and not doing so in the assessment order was definitely mistake apparent from records which was rectified by the impugned order u/s 154 of the Act.

5. However, the point is that as for AY 2017-18, the tax on the special rate u/s 115BBE i.e @ 60%, is not applicable and reliance is placed on the decision of Hon’ble High Court of Madras (Madurai Bench) in S.M.I.L.E. Microfinance Limited v. The Assistant Commissioner of Income Tax vide Writ Petition Numbers: W.P. (MD) No. 2078 of 2020 & W.M.P. (MD) No. 1742 of 2020 order dated 19.11.2024, as relied by co-ordinate bench of Delhi in Kanchan Chopra v. ITO, vide ITA No. 4205/Del/2024 (A.Y. 2017-18) Order dated 19.11.2025 and Ankit Garg v. ITO vide ITA No. 5507/Del/2024 (A.Y. 2017-18). Order dated 14.11.2025. Thus the ground raised in ITA 1872/Del/2026 deserves to be sustained. The appeal is allowed.

6. Coming to ITA 1871/Del/2026, we find that assessee has raised following grounds;

“1. Because, the order of learned lower authority is bad in law and against the facts and circumstances hence is unsustainable.

2. Because, Id. CIT(A) grossly erred in sustaining addition of Rs. 10 lakh u/s 68 of Act, (not invoked by AO) being the credit entry booked in AY 2017-18 but cheque uncashed in AY 2018-19, thus nothing is received in AY 2017-18 except book entry and addition is contrary to provisions of section 68 and law settled in Principal CIT VS. Zeus Air Services (P.) Ltd. [2025] 171 taxmann.com 211 (Delhi)

3. Because, without prejudice to above, ld. CIT(A) failed to appreciate that assessee even discharged onus lay upon him u/s 68 by filing mass evidences before both the lower authorities including ITR, Computation, Adhaar, Bank a/c confirmation etc. of lender, so addition is against the fact on record

4. Because Id CIT(A) further misdirected himself in not appreciating discharge shifted onus lay upon him and in any case there is no material in support of addition in as much as no evidence is rejected or found wrong.

5. Therefore, in terms of above grounds addition may kindly be quashed in TOTO.”

7. In context to these grounds we find that in para 5.3.2 and 5.3.3 the ld. CIT(A) has dealt with the issue as follows;

“5.3.2 Having analysed the facts involved, I find that although the assessing officer has not mentioned the specific section but since he has added the impugned credit entry of Rs.10,00,000/- in books of account in the absence of creditworthiness of the concerned creditor, the addition was made by him u/s 68 of the I.T. Act towards unexplained cash credit in books of account. In this regard, I would also like to state that a credit entry for cheque in hand shall attract the provisions of section 68, even if cheque is not honoured or not presented and money is actually not received. When a cheque is received, a receipt is insisted by giver and it is given and receipt is issued and generally it is mentioned on the receipt issued, that the receipt or acknowledgement is subject to realization of cheque. Even otherwise, mere receipt of a cheque does not amount to actual receipt of money. Sum is actually received when the drawee bank honours the cheque on presentation and is paid by way of remittance through clearing system or transfer to account of payee. The drawee bank debit the account of issuer of cheque against available balance and remit the amount through clearing system. Therefore, receipt issued against a cheque is in fact and is considered a provisional receipt, and receipt will be final when it is actually realized. It is significant to mention that mere issue of a receipt does not amount to a credit in books of account of the person who issued the receipt that is usually the payee of cheque or holder in due course. If cheque is dishonoured, the provisional receipt stand cancelled. In the present case of the appellant, though the amount mentioned in the cheque of Rs.10,00,000/- was credited in the books on 31.03.2017 but it was never presented to the bank due to the creditor not having sufficient balance in her bank account.

5.3.3 Now the legal issue of entry into the books of account is to be mentioned. If any entry is made in books of account based on mere receipt of cheque, and account of cheque issuer is credited, it may still be considered a ‘sum found credited” in books of account. If the amount is not transferred from payer to payee, there is always suspicion regarding the genuineness of the transaction and here comes one of the limbs of disproving the guidelines for attracting section 68, i.e. ‘genuineness’. Now-a-days (and even in the year 2016-17), due to digital banking system, money can be transferred from one account to another within seconds and without waiting for drawing for physical cheque, physically present in drawee’s bank account and wait for few days to get it cleared. In this case, the purported cheque was never presented to bank for the next two and half months after its issue by the drawer. The facts and circumstances without any doubt points towards manipulation of books of account so as to enhance the balance sheet by Rs. 10,00,000/- by a fictitious entry.”

8. We are of considered view that department doesn’t dispute that addition was under section 68 of the Act, then it is essential that there should be a credit entry, in books and same should not be mere book entry but there is receipt of some amount which can be added as deemed income. The receipt to be taxed as deemed income should certainly be credited and mere on accrual basis deemed income cannot be taxed under section 68 of the Act. Rather ld. AO himself observes that this receipt is bogus and had not referred to any section of the Act and it is the ld. CIT(A), who held applicability of section 68 of the Act. Thus where there is no actual receipt of cash during the relevant FY but admittedly in subsequent FY, then invoking section 68 of the Act, for this AY, is not sustainable and reliance for this is placed on the decision of Hon’ble Delhi High Court in PCIT versus Zexus Air Services (P) Ltd. [2025] 171 taxmann.com 211 (Del). Hon’ble Madras High Court decision in V.R. Global Energy (P) Ltd. Versus ITO, Corp. Ward 3(4), Chennai, [2018] 96 taxmann.com (Mad) in which SLP of department stands dismissed vide [2020] 113 taxmann.com 31 (SC).

9. Thus the grounds raised in ITA 1871/Del/2026 are sustained. The appeal is allowed and impugned addition of this AY 2017-18 is deleted.

Order pronounced in the open court on 14.08.2026