Outlook Fashion Vs ITO (ITAT Delhi)
Demonetisation Cash Deposits Get 8% Estimation; 115BBE Held Inapplicable Pre-01.04.2017
The Delhi ITAT (SMC), in Outlook Fashions v. ITO (ITA No. 7782/Del/2025, AY 2017-18; order dated 24.12.2025), has partly allowed the Assessee’s appeal by scaling down the addition on demonetisation cash deposits and excluding the harsh application of section 115BBE.
The Assessee, engaged in manufacturing and trading of textiles, had deposited ₹24.73 lakh in cash during the demonetisation period. The AO treated the entire amount as unexplained cash u/s 69A and taxed it u/s 115BBE, which was upheld by the NFAC.
The Tribunal observed that in an unorganised textile business, cash transactions cannot be ruled out altogether. At the same time, the Assessee had failed to fully reconcile cash sales with turnover. Balancing both aspects, the ITAT held that treating the cash deposits as business turnover and estimating profit at 8% would meet the ends of justice, with a clear caveat that the view shall not be treated as a precedent.
On the issue of tax rate, the Tribunal followed the Madras High Court ruling in SMILE Microfinance Ltd. v. ACIT and held that section 115BBE applies only to transactions on or after 01.04.2017. Since the demonetisation deposits related to an earlier period, the AO was directed to compute income under normal provisions and not u/s 115BBE.
Accordingly, the appeal was partly allowed, granting substantial relief to the Assessee.
FULL TEXT OF THE ORDER OF ITAT DELHI
This assessee’s appeal ITA no. 7782/Del/2025 for assessment year 2017-18 arises against CIT(A)/ NFAC, Delhi’s order dated 20.05.2024 (DIN & Order No. ITBA/NFAC/S/250/2024-25/1065001290(1), in proceedings u/s 143(3) r.w.s. 144 of the Income-tax Act, 1961, hereinafter referred to as the ‘Act’. Heard both the parties. Case file perused.
