Kandera Brick Field Vs ITO (ITAT Delhi)
Demonetisation Deposits: ITAT Reduces ₹16.50 Lakh Addition to ₹1.50 Lakh in Brick Kiln Case
The Delhi Bench of the Income Tax Appellate Tribunal has reduced an addition relating to demonetisation-period cash deposits from ₹16.50 lakh to ₹1.50 lakh in the case of Kandera Brick Field.
The Tribunal considered the nature of the assessee’s brick kiln business, its predominantly rural market and the possibility of cash sales in an unorganised sector. Although the assessee had not satisfactorily established the entire source of the deposits, the Bench considered a lump-sum addition of ₹1.50 lakh sufficient to address the evidentiary shortcomings.
The decision was rendered by Judicial Member Satbeer Singh Godara in ITA No.7262/Del/2026, concerning Assessment Year 2017-18. The Tribunal also directed assessment under the normal provisions, rejecting the disputed application of Section 115BBE.
Background of the Dispute
The appeal arose from an order dated 2 July 2026 passed by the CIT(A)/National Faceless Appeal Centre, Delhi.
The proceedings involved an assessment under Section 144 read with Sections 254 and 144B of the Income-tax Act, 1961.
The tax authorities had treated cash deposits of ₹16.50 lakh made during demonetisation as unexplained under Sections 68/69. The CIT(A) upheld that treatment.
Before the Tribunal, the assessee pressed its sole substantive ground challenging the addition. Both parties reiterated their respective positions concerning whether the source of the deposits had been adequately established.
The dispute therefore required consideration of the assessee’s supporting evidence alongside the circumstances of its business.
Revenue Emphasised the Assessee’s Burden of Proof
The Revenue argued that the assessee bore the responsibility of explaining the cash deposits through cogent supporting evidence.
According to the Department, the addition should remain because the assessee had not satisfactorily proved the source of the money deposited.
The Tribunal did not disregard this evidentiary requirement. It expressly acknowledged that the assessee had failed to explain and establish its case to the complete satisfaction of the lower authorities.
Consequently, the relief was not based on a finding that every deposit had been conclusively reconciled with a proved cash sale. The Bench instead examined what adjustment was appropriate in the particular factual setting.
Rural Brick Kiln Business Was Relevant
The Tribunal noted that Kandera Brick Field operated in the brick kiln business, involving a predominantly rural market and a highly unorganised sector.
Within that business environment, the possibility of cash sales or cash turnover could not altogether be ruled out.
This observation was central to the relief. The Tribunal considered that the commercial setting had to be taken into account when evaluating the deposits and the shortcomings in the explanation.
The Bench nevertheless retained an addition, reflecting its finding that the assessee’s evidence did not fully establish the source.
The order thus balanced the plausible existence of business cash receipts against the failure to provide satisfactory documentary support for the entire amount.
Addition Restricted to ₹1.50 Lakh
On these facts, the Tribunal considered a lump-sum addition of ₹1.50 lakh appropriate.
It stated that this amount would address the assessee’s shortcomings in explaining and proving the source of the cash deposits through cogent evidence.
The remaining ₹15 lakh was deleted.
The Tribunal did not prescribe a standard profit percentage or direct that a fixed proportion of demonetisation deposits should always be assessed. Its conclusion was expressed as an estimate arising from the factual circumstances before it.
Accordingly, the decision should be understood as case-specific relief, rather than an automatic rule for all cash deposits made by rural businesses.
Normal Tax Provisions Directed Instead of Section 115BBE
The Tribunal separately considered the assessee’s challenge concerning Section 115BBE.
It relied on S.M.I.L.E. Microfinance Ltd. v. ACIT, W\.P.(MD) Nos.2078 and 1742 of 2020, decided by the Madras High Court on 19 November 2024.
Following its reading of that decision, the Bench stated that the disputed statutory provision would operate for transactions undertaken on or after 1 April 2017.
It accordingly directed that the assessee be assessed under the normal provisions of the Act.
This was an express direction in the present appeal. The order should not be read as a comprehensive account of the legislative history of Section 115BBE or its application to every assessment year.
Relief Granted Without a Fresh Remand
The Tribunal determined the amount to be retained on the record before it. It did not restore the source-of-deposit issue for another round of verification.
The operative result therefore provided two forms of relief: reduction of the addition to ₹1.50 lakh and computation under the normal tax provisions.
At the same time, the surviving addition preserved the consequence of the assessee’s incomplete explanation. The order did not treat the nature of the business as a substitute for evidence in every case.
Appeal Partly Allowed
The Tribunal partly allowed the appeal, deleting ₹15 lakh from the original addition. No other ground or argument was pressed.
Cases Discussed
- S.M.I.L.E. Microfinance Limited Vs ACIT (Madras High Court) — W.P.(MD) Nos. 2078 and 1742 of 2020, decided 19 November 2024. Cited by the Tribunal concerning Section 115BBE; this TaxGuru page reports the ruling. The judgment is dated 2024 and is linked.
FULL TEXT OF THE ORDER OF ITAT DELHI
This assessee’s appeal for assessment year 2017-18 arises against the Commissioner of Income Tax(Appeals)/National Faceless Appeal Centre (for short, “CIT(A)/NFAC”), Delhi’s DIN & Order No. ITBA/NFAC/S/250/2026-2027/1090728342(1) dated 02-Jul-2026, involving proceedings u/s 144 r.w.s. 254 r.w.s. 144B of the Income Tax Act, 1961; hereinafter referred to as, “the Act” .
Heard both the parties. Case file perused.
2. The assessee’s sole substantive ground raised in the instant appeal challenges both the learned lower authorities’ respective assessments and lower appellate findings treating his cash deposits of Rs. 16.50 lakhs made during demonetization as unexplained u/s 68/69 of the Act which stands upheld in the CIT(A) lower appellate discussion.
This is what leaves the assessee aggrieved.
3. Both the parties vehemently reiterate their respective stands against and in support of the impugned addition. The Revenue’s case, more particularly is that it was the assessee’s onus all along to plead and prove source of its impugned cash deposits with the help of cogent supportive evidence, and, therefore, the same deserves to be upheld. It is in this factual backdrop that I hereby notice from a perusal of a case records that the assessee/forum is engaged in brick kiln business involving prominently rural market and a highly unorganized sector wherein possibility of cash sales/turnover could not be altogether ruled out although it has failed to plead and prove the same to the entire satisfaction of both the learned lower authorities. Be that as it may, I deem it appropriate in this factual backdrop that a lumpsump addition of Rs. 1.50 lakhs in the assessee’s hands shall take care of all of its shortfalls in filing and proving source of those cash deposits by way of cogent evidence. The remaining addition amount of Rs. 15 lakhs is hereby deleted.
4. So far as assessee’s assessment under section 115BBE is concerned, I quote S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Madras) that the impugned statutory provision would come into effect on the transaction done on or after 01.04.2017 only. The assessee is accordingly directed to be assessed under the “normal” provisions as per law.
No other ground or argument has been pressed.
5. This assessee’s appeal is partly allowed.
Order pronounced in the open court on 18-Aug-2026.
