Harmony Forex And Travels Pvt. Ltd. Vs ITO (ITAT Delhi)
Delhi ITAT Grants Relief to Forex Dealer in Demonetisation Case; Restricts Addition to ₹2 Lakh and Rejects Application of Section 115BBE
The Delhi Bench of the ITAT partly allowed the appeal of a forex dealer engaged in money-changing business, where the Assessing Officer had treated cash deposits of ₹25.88 lakh made during the demonetisation period as unexplained money under section 69A and taxed them under section 115BBE. The CIT(A) had already granted partial relief by deleting ₹9 lakh and sustaining an addition of ₹16.88 lakh.
The Tribunal observed that the assessee was carrying on the business of foreign currency exchange and that the cash deposits were prima facie attributable to cash-in-hand generated from bank withdrawals and cash sales of foreign currency. Although the reconciliation was not fully satisfactory, the Tribunal held that the explanation could not be rejected in toto. Considering the facts and in the interest of justice, it restricted the sustained addition of ₹16.88 lakh to a lump sum of ₹2 lakh, granting further relief of ₹14.88 lakh, while specifically directing that the order shall not be treated as a precedent.
On the issue of taxation under section 115BBE, the Tribunal relied on the Madras High Court’s decision in SMILE Microfinance Ltd. v. ACIT and held that the amended provisions of section 115BBE apply only to transactions on or after 1 April 2017. Consequently, the Tribunal held that section 115BBE could not be invoked in the present case relating to AY 2017-18. The appeal was accordingly partly allowed.
Cases Discussed
- SMILE Microfinance Ltd. v. ACIT (Madras HC), W.P. (MD) No. 2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Mad.)
FULL TEXT OF THE ORDER OF ITAT DELHI
This assessee’s appeal for Assessment Year 2017-18, arises against the CIT(A)/NFAC, Delhi’s Order dated 19.03.2026, in proceedings u/s 143(3) of the Income Tax Act, 1961 (in short “the Act”).
2. Case called twice. None appears at the assessee’s behest. It is accordingly proceeded ex-parte.
3. It is noticed that during the course of hearing with the able assistance coming from the Revenue side that out of entire cash deposits of Rs. 25,88,000/-, during demonetization period, as unexplained u/s. 69A read with section 115BBE of the Act. However, Ld. CIT(A) gave the relief of Rs. 9,00,000/- by confirming the addition of Rs. 16,88,000/-. The Revenue could hardly dispute the clinching fact that the CIT(A)/NFAC’s detailed discussions of his order that the assessee is a Forex Dealer and engaged in the business of money changer by exchange foreign currency. That being the case, it could be safely concluded that the impugned cash deposits were out of available cash in hand and source of such cash in hand was withdrawal from banks and cash sales on foreign currency, although not satisfactorily reconciled, prima facie represent the assessee’s income wherein cash component could not be altogether denied. It is thus deemed appropriate in the larger interest of justice to restrict the impugned sustained addition of 16,88,000/- to a lumsum figure of Rs. 2,00,000/- only with a rider that the same shall not be treated as precedent. The Assessee gets relief of Rs. 14,88,000/- in very terms. Necessary computation shall follow as per law.
4. So far as the assessee’s assessment u/s 115BBE is concerned, Hon’ble Madras High Court in SMILE Microfinance Ltd. Vs. ACIT, W.P. (MD) No. 2078 of 2020 & 1742 of 2020 dated 19.11.2024 (Mad.) has already settled the issue against the department that the law applies to the transaction on or after 01.04.2017 only.
5. This assessee’s appeal is partly allowed in above terms.
Order Pronounced in the Open Court on 08/07/2026.
