Satendra Kumar Vs ITO (ITAT Delhi)
Assessee, a civil contractor, deposited Rs.30.49 lakh in SBNs during demonetization. AO made addition of entire cash deposit of Rs.31.38 lakh u/s 68, rejecting explanation that deposits were sourced from cash withdrawals by Assessee & his son, both engaged in construction business.
CIT(A) held that withdrawals made months earlier could not be treated as kept idle till November 2016 & confirmed addition.
Before Tribunal, Assessee produced complete bank statements showing aggregate cash withdrawals exceeding Rs.47 lakh, of which only Rs.30.49 lakh was deposited during demonetization, balance being used for business expenses. Tribunal held that AO made no enquiry to disprove utilisation of withdrawals & ignored joint-account withdrawals of son’s proprietary concern. Tribunal noted that demonetization was an unforeseen situation compelling deposit of available SBN cash. Once Assessee demonstrated sufficient cash availability, source stood explained. Addition u/s 68 was deleted. Grounds relating to applicability of amended s.115BBE were rendered academic as the quantum itself was deleted. Appeal allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. This appeal by assessee is directed against the order of learned CIT(A)/National Faceless Appeal Centre, Delhi dated 14.10.2025 for assessment year (AY) 2017-18. The assessee has raised following grounds of appeal:
“1. That the learned Commissioner Income Tax (Appeals) has grossly erred both in law and on facts, in sustaining an assessment under section 143(3) of the Income Tax Act 1961 (‘Act‘), at an income of Rs. 36,38,690/- as against returned income of Rs. 5,00,690/-.
2. That the learned Commissioner of Income Tax (Appeals) has further erred, both in law and on facts, in sustaining an addition of Rs. 31,38,000/- under section 68 of the Act, treating the amounts deposited in bank account as unexplained cash credit, while ignoring the explanations and evidences duly submitted by the appellant. The said finding is contrary to the facts on record, based on mere conjectures and surmises, and is bad in law.
3. Without prejudice to the foregoing grounds, the appellant craves leave to raise the following Additional Ground:
That on the facts and in the circumstances of the case, and in law, the Learned Assessing Officer has erred in applying the provisions of section. 115BBE of the Income-tax Act, 1961, as amended by the Taxation Laws (Second Amendment) Act, 2016, to the addition made under section 68 of the Act, and in consequently levying tax at the rate of 60% along with surcharge at 25%. The Learned Assessing Officer failed to appreciate that the said amendment, being substantive and penal in nature, cannot be applied retrospectively to cash receipts or credits pertaining to the period prior to its enactment on 15th December 2016. The application of the higher rate of tax under the amended provisions is therefore unjustified, unconstitutional, and bad in law, and the addition, if any, ought to have been taxed at the rate applicable under the unamended provisions.
4. That the learned Commissioner of Income Tax (Appeals) has further erred in sustaining initiation of penalty proceedings under section 271AAC, 272A(1) and 270A of the Act and in upholding the levy of interest under sections 234B and 234C of the Act, which are not leviable on the facts and circumstances of the case.”
2. Brief facts of the case are that the assessee is individual and engaged in the business of Civil contract, filed his return of income for AY 2017-18 declaring income of Rs.5.00 lakhs(approximately). The case was selected for limited scrutiny about the increase in cash deposit during demonetization period. During assessment, the Assessing Officer noted that the assessee has made cash deposit with his two bank accounts maintained with Shivalik Mercantile Cooperative Bank of Rs.30.49 lakhs in the form of specified bank note (SBN) during demonetization period. There was other cash deposit during the financial year of Rs.31.38 lakh. The Assessing Officer recorded that in response to show-cause notice, the assessee explained that cash was deposited out of cash withdrawals by him as well as his son. The reply of the assessee was not accepted by the Assessing Officer. The Assessing Officer added the entire cash deposit during the year of Rs.31.38 lakhs.
