2025 (12) TMI 531 - AT - Income Tax

Cash deposits held business turnover; only 5% taxable income, s.115BBE inapplicable, normal tax provisions apply

ITAT allowed assessee's appeal in part, holding that cash deposits treated as unexplained u/s 68 constituted part of business turnover, as net profit had ... Nature of cash deposits - unexplained addition u/s 68 read with section 115 BBE - HELD THAT:- There could be hardly any dispute that assessee has already suffered net profits estimation from 4% to 5% hereinabove. That being the case, the reasonable inference which could prima facie be drawn is that the same per se formed part of his business turnover although not specifically reconciled or verified by both the lower authorities. Faced with this situation, the tribunal hereby finds part merit in his case and directs the learned Assessing Officer to assess the impugned cash deposits @ 5% in preceding terms. Necessary computation shall follow as per law. So far as the assessee’s assessment u/s 115BBE is concerned, the revenue could hardly dispute that hon’ble Madras high court in SMILE Microfinance Ltd. v. ACIT [2024 (11) TMI 1444 - MADRAS HIGH COURT] has already settled the issue that Section 115BBE applies on transactions on or after 01.04.2017 only. Accordingly direct the Assessing Officer to finalize the consequential computation under normal provisions than u/s 115BBE of the Act in very terms. Ordered accordingly. The assessee appealed against additions arising from assessment under section 143(3) for AY 2017-18. The dispute concerned (i) treatment of cash deposits of Rs. 22,37,500 during demonetization as 'unexplained' under section 68 read with section 115BBE, and (ii) enhancement of net profit rate from 4% to 5%. The assessee did not press the ground against net profit estimation at 5%, which was therefore rejected. On the cash deposits, the Tribunal noted that the assessee's income had already been subjected to net profit estimation at 5%, and drew the 'reasonable inference' that the impugned deposits formed part of business turnover, though not specifically reconciled by lower authorities. It held there was 'part merit' in the assessee's case and directed the Assessing Officer to tax the cash deposits by applying 5% in line with the estimated profit. Relying on SMILE Microfinance Ltd. v. ACIT (Madras High Court), it was held that section 115BBE applies only to transactions on or after 01.04.2017; computation must be made under normal provisions, not section 115BBE. The appeal was partly allowed.