The Income Tax Appellate Tribunal (ITAT), Delhi Bench has dismissed an appeal filed by the Income Tax Department against Eurospa Terrytowels Pvt. Ltd. for the Assessment Year 2017–18, citing low tax effect and non-applicability of enhanced tax rates under Section 115BBE of the Income Tax Act, 1961.
The Bench of Satbeer Singh Godara (Judicial Member) and Manish Agarwal (Accountant Member) has observed that the Revenue’s calculation was flawed. Referring to the ruling of the Madras High Court in SMILE Microfinance Ltd. v. ACIT , the Tribunal emphasized that the provisions of Section 115BBE, which prescribe a higher tax rate for unexplained income, are applicable only to transactions made on or after April 1, 2017.
The case arose from an order passed by the National Faceless Appeal Centre (NFAC), which had deleted the addition of ₹81,00,000 made by the Assessing Officer (AO) as unexplained cash deposits allegedly falling under Sections 68, 69, or 69A of the Act. The AO sought to tax this amount at a penal rate of 60% under Section 115BBE.
The department challenged the NFAC’s order on the ground that the cash deposits should be treated as unexplained income and subjected to tax under Section 115BBE. The AO had calculated the total tax effect involved in the case to be ₹62,57,250.
Since the relevant assessment year included transactions prior to this date, the Tribunal held that the penal provisions of Section 115BBE were not applicable in the present case. Consequently, the computed tax effect fell below the monetary threshold prescribed under CBDT Circular No. 09 of 2024 dated September 17, 2024, which restricts filing of appeals in cases involving low tax effect.
Case Details
Case Title: Income Tax Officer Versus Eurospa Terrytowels Pvt. Ltd.
Case No.: ITA No. 3557/Del/2024
Date: 04.08.2025
Counsel For Petitioner: Jai Prakash, AR
Counsel For Respondent: Rajesh Kumar Dhanesta, Sr. DR
