MRS. NOWZIA BEGUM,CHENNAI V. ITO, NCW-9(3), CHENNAI

ITA 1706/CHNY/2025

AI Insights

The case involves Smt. Nowzia Begum, who appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), which confirmed the addition of unexplained cash deposits made during the demonetization period to her income. The ITAT examined the explanations provided by the assessee regarding the source of these deposits, which were claimed to be from rental income and savings. The Tribunal found merit in the assessee's explanations for a portion of the deposits and reduced the addition made by the FAA, sustaining only a part of the unexplained deposits. Additionally, the Tribunal addressed the applicable tax rate on the sustained amount, referencing a judgment by the Hon'ble Madras High Court which clarified the application of section 115BBE.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 793058 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 13-06-2025
• Other Referred Cases: Karimtharuvi Tea Estate Ltd. vs. State of Kerala, S.M.I.L.E Microfinance Ltd. vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOUTHAMI MANIVASAGAM
• Assessee Lawyers: D.ANAND
• Keywords: Condonation of delay; Corroborative evidences
• Section: 69

Judgement Text

"आयकर अपीलीय अिधकरण, ‘बी’ (एस एम सी), ᭠यायपीठ,चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ (SMC) BENCH, CHENNAI ᮰ी जॉजᭅ जॉजᭅ, उपा᭟यᭃ के समᭃ BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT आयकर अपील सं./ITA No.: 1706/CHNY/2025 िनधाᭅरण वषᭅ/Assessment Year: 2017-18 Smt. Nowzia Begum, No.82, Bangaru Street, Ellis Road, Chennai – 600 002. PAN: ADAPN 7975Q Vs. The Income Tax Officer, Non-Corporate Ward 9(3), Chennai – 34. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri D. Anand, Advocate ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Ms. Gouthami Manivasagam, JCIT सुनवाई कᳱ तारीख/Date of Hearing : 23.09.2025 घोषणा कᳱ तारीख/Date of Pronouncement : 24.09.2025 आदेश/ O R D E R This appeal filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 10.03.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2017-18. Printed from counselvise.com ITA No.1706/Chny/2025 :- 2 -: 2. There is a delay of 13 days in filing this appeal. The assessee has filed a petition for condonation of delay along with an affidavit stating therein the reasons for belated filing of this appeal and also prayed for condonation of delay. On perusal of the reason stated in the affidavit for belated filing of this appeal, I’m of the view that there is sufficient cause for belated filing of this appeal and no latches can be attributed to the assessee. Hence, I condone the delay in filing this appeal and proceed to dispose off the appeal on merits. 3. The grounds raised by the assessee reads as follows:- 1. The order of the National Faceless Appeal Centre (NFAC) to the extent of confirming the addition made in the assessment order is wrong, illegal and is opposed to law. 2. The National Faceless Appeal Centre (NFAC) erred in sustaining 50% of cash deposit as unexplained money by invoking section 69 rws 115BBE of the income Tax Act. 3. The NFAC ought to have seen that the assessing officer erred is making addition under section 69 of the Income Tax Act only on the basis of suspicion and surmise despite the fact that the appellant has provided all possible evidences to prove the cash credit in the bank account and that the assessing officer has let in no material or basis to prove the contrary. 4. The NFAC ought to have seen that addition under section 69 can be made only if the alleged transaction is not recorded in the appellants books and the appellant does not offer explanation for the source of money. In the impugned case the source for deposit is explainable and therefore the addition made under section 69A is unsustainable. Printed from counselvise.com ITA No.1706/Chny/2025 :- 3 -: 5. The NFAC erred in invoking Section 115BBE for taxing the appellant's income at a special rate is erroneous, as the assessment unit failed to consider the binding precedent of the jurisdictional High Court in the case of SMILE, which is directly applicable to the present facts. For these and other grounds that may be rendered at the time of hearing it is most humbly prayed that the Hon'ble Tribunal may be pleased to allow the appellants appeal and thus render justice. 4. Brief facts of the case are as follows: The assessee is an individual deriving income from house property. For the assessment year 2017-18, the return of income was filed on 04.08.2017 declaring total income of Rs.4,79,540/-. The assessment was selected for scrutiny due to cash deposits made during the demonetization period. During the course of assessment proceedings, assessee was directed to explain the source of cash deposits. The assessee submitted that the cash deposits are out of rental income derived from property and the same was corroborated with the cash book which reflected the cash balance available. However, the explanation of the assessee was disbelieved and assessment was completed u/s.143(3) of the Act vide order dated 07.12.2019, wherein the AO added the entire cash deposits of Rs.12,00,000/- made during the demonetization period as unexplained u/s.69 of the Act. The AO also applied special rate of taxation by invoking the provisions of section 115BBE of the Act. Printed from counselvise.com ITA No.1706/Chny/2025 :- 4 -: 5. Aggrieved, assessee filed appeal before the First Appellate Authority (FAA). The FAA partly-allowed the appeal of the assessee by restricting the addition to 50% of the total cash deposits. Accordingly, Rs.6,00,000/- was deleted by the FAA and balance Rs.6,00,000/- was sustained. The relevant finding of the FAA reads as follows:- 5.5 Having duly considered the facts on record and the appellant's submissions, it is noted that the appellant has explained the source of cash deposit of Rs 12 lakh during demonetization as being from cash-in hand available with her which was money saved by her from preceding years incomes, chiefly rental income. This explanation rejected by the A.O as it was noted that rental incomes were being credited into her bank account. and not received in cash. 5.6 In view of the appellant's contention that for the AY: 2016-17 she has shown cash in hand amounting to 12,38,226/-, the appellant was required, vide notice u/s 250 to submit supporting evidence for the same. In response the appellant has submitted ITR-V copies and statement of income for AY 2016-17. It is noted that the appellant filed ITR for AY 2016-17 in Form 2A declaring Income from house property at Rs.306935/-; Income from other sources at Rs. 125071 and Gross Total income of Rs, 432006. Being a non-business ITR the format of Form 2A does not have any column to fill in cash-in-hand except under Schedule AL Asset and Liability at the end of the year which is only applicable in a case where total income exceeds Rs. 50 lakh. Hence it is not possible to verify appellant's claim of cash in hand declared from the ITR. The appellant has also submitted Statement of Total Income with balance sheet for AY 2016-17 showing cash in hand of Rs.12.38.226/-, However the same lacks authenticity and credibility as it is an un-signed and unaudited statement, and there is no evidence to indicate that such balance sheet was submitted along with ITR filed. Hence the claim of available cash in hand of Rs.12,38,226/- is not substantiated by any credible evidence. Printed from counselvise.com ITA No.1706/Chny/2025 :- 5 -: 5.7 However, the appellant's claim that she has maintained savings as cash in hand out of rental incomes in preceding years cannot be dismissed outright as the source of income is not doubted and keeping some savings in cash is a common practice. Accordingly, the addition made is restricted to 50% i.e Rs.6 lakh and the balance addition is deleted. 6. Aggrieved by the order of the FAA, assessee has filed the present appeal before the Tribunal. The Ld.AR relied on the grounds raised whereas, the Ld.DR strongly supported the order of the AO and the FAA. 7. I have heard rival submissions and perused the material on record. The assessee is a senior citizen aged 76 years. The assessee had made cash deposits during the demonetization period totaling to a sum of Rs.12,00,000/-. The FAA had accepted the fact that it is a common practice in Indian households that there shall be some savings in cash and deleted 50% of the addition made by the AO. The assessee’s claim is she was having adequate rental income for past several years right from assessment year 2014-15 up to the relevant assessment year. The gross rental income received by the assessee for the past four years are detailed below:- Printed from counselvise.com ITA No.1706/Chny/2025 :- 6 -: Financial year Amount in Rs. 2013-14 8,11,869/- 2014-15 8,41,736/- 2015-16 9,19,768/- 2016-17 9,24,000/- 8. Though the assessee’s rental income was credited directly into the bank account, there has been adequate withdrawals. The cash balance available according to the assessee as on 30.06.2016 is sum of Rs.12,38,226/-. The assessee being a senior citizen and on facts of the instant case, I’m of the view that further sum of Rs.3,00,000/- can be treated as explained and balance Rs.3,00,000/- only need to be sustained as addition u/s.69A of the Act. It is ordered accordingly. 9. As regards the assessee’s ground of appeal (Ground 5) that tax ought to be calculated at the rate of 30% instead of 60% u/s.115BBE of the Act, I’m of the view that it is well settled that Income-tax Act as it stands amended on the first day of April of any financial year must apply to the assessment for that year. Any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force. In this context, I rely on the Printed from counselvise.com ITA No.1706/Chny/2025 :- 7 -: judgment of the Hon’ble Apex Court in the case of Karimtharuvi Tea Estate Ltd., vs. State of Kerala reported in 60 ITR 262 (SC). 10. The Hon’ble Madras High Court in the case of S.M.I.L.E Microfinance Ltd., vs. ACIT, in W.P(MD) No.2078 of 2020 and W.M.P.(MD) No.1742 of 2020 (judgment dated 19.11.2024) had categorically held that higher rate of tax at 60% u/s.115BBE of the Act will apply only to transactions from 01.04.2017 onwards and not prior to the said cutoff date. It was further held by the Hon’ble Jurisdictional High Court that for the prior transaction the Revenue is empowered to impose tax only 30% rate of tax. The relevant finding of the Hon’ble Madras High Court in the case of S.M.I.L.E Microfinance Ltd., supra reads as follows:- 17. In the aforesaid objects and reasons nowhere it is stated that due to “demonetization” the unaccounted money ought to be charged 60% rate of tax. It only states that step had been taken to curb black money by withdrawing Specified Bank Notes of denomination of Rs.500 and Rs.1000. And also states the people may find illegal ways of converting their black money into black again, hence as per experts advice heavy penalty ought to be levied. From the language of the object “that instead of allowing people to find illegal ways of converting their black money into black again”, it is evident that the government is intended to impose the same for future transactions. Especially the use of word “again” in the object would clearly indicate it is for future transactions i.e. from 01.04.2017. Therefore this Court is of the considered opinion that the revenue is empowered to impose 60% rate of tax for the transactions from 01.04.2017 onwards and not prior to the said cut-off date. And for prior transaction the revenue is empowered to impose only 30% rate of tax. Printed from counselvise.com ITA No.1706/Chny/2025 :- 8 -: 11. In light of the aforesaid judgment of the Hon’ble High Court, I direct the AO to calculate tax at the rate of 30% on the amount sustained by me i.e., Rs.3,00,000/-. It is ordered accordingly. 12. In the result, the appeal filed by the assessee is partly- allowed. Order pronounced in the open court on 24th September, 2025 at Chennai. Sd/- (जॉज[ जॉज[ क े) (GEORGE GEORGE K) उपाÚय¢ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 24th September, 2025 RSR आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy to: 1. अपीलाथȸ/Appellant 2. Ĥ×यथȸ/Respondent 3. आयकर आयुÈत /CIT, Chennai 4. ͪवभागीय ĤǓतǓनͬध/DR 5. गाड[ फाईल/GF. Printed from counselvise.com "