SULTAN BATCHA MUBARAK ALI,THIRUVARUR vs. ITO, WARD-1, THIRUVARUR

PDF · subscribers
ITA 603/CHNY/2026Status: DisposedITAT Chennai13 August 2026AY 2017-1812 pages
AI SummaryAllowed

What did the Tribunal hold?

For AY 2017-18, the Tribunal held that the higher tax rate under Section 115BBE was not applicable to transactions prior to April 1, 2017, following a High Court decision. For AY 2020-21, the Tribunal accepted the assessee's explanation that cash deposits were out of business receipts.

What were the facts?

For AY 2017-18, the assessee made cash deposits in bank accounts and received brokerage income. The AO made additions for cash deposits and taxed them under Section 115BBE. For AY 2020-21, the AO made an addition for cash deposits in a bank account. The CIT(A) dismissed the appeals in both cases.

What were the issues?

Whether the enhanced tax rate under Section 115BBE applies to transactions prior to April 1, 2017, and whether cash deposits were adequately explained by business receipts.

Which sections of the Income-tax Act were involved?

Section 115BBE,Section 69,Section 69A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CHENNAI BENCHES, CHENNAI

Before: SHRI INTURI RAMA RAO & SHRI S.S.VISWANETHRA RAVI

Pronounced: 13.08.2026

PER INTURI RAMA RAO, ACCOUNTANT MEMBER :

These are two appeals filed by the Assessee directed against the separate orders of ld.Commissioner of Income Tax(Appeal)[NFAC], both dated 10.12.2025 passed u/s.250 of the Income Tax Act, 1961 for the Assessment Years 2017-18 and 2020-21 respectively.

2.

The Assessee in ITA No.603/CHNY/2026 raised the following grounds of appeal :

“1. The order of the learned Commissioner of Income tax (appeals) officer is contrary to the facts and circumstances as also the legal position obtaining in the case of the appellant.

2.

The learned Commissioner of Income Tax (appeals) failed to consider the income recognisition as per Accounting Standards before making the above additions. The following is the grounds of appeal.

THE BANK ACCOUNT IS REFLECTED IN THE BALANCE SHEET FILED. ALL THE TRANSACTIONS REFLECTED IN THE BANK ACCOUNT IS ACCEPTED BY THE ASSESSING OFFICER. CASH WIDRAWAL IS ALSO ACCEPTED. ONLY CASH DEPOSITED IS MADE AN ADDITIONS U/S 155BBE OF THE ACT. HOW THE BANK IS REFLECTED IN THE BALANCE SHEET WITHOUT THE TRANSACTIONS THE BALANCE SHEET HOW TALLY. MORE OVER SB ACCOUNT INTEREST IS OFFERED AS INCOME AND THE SAME IS ACCEPTED. HOW THE TRANSACTIONS REFLECTED IN THE RETRUN OF INCOME AND ONLY CASH DEPOSIT IS TREATED AS INCOME U/S 115BBE OF THE ACT(CASH WITHDRAWAL AND CASH DEPOSIT IS NOT CONSIDERED rendered.”

ITA No.603/CHNY/2026 for A.Y.2017-18 :

3.

Briefly, the facts of the case are that the appellant is an Individual. No regular Return of Income u/s.139 of the Income Tax Act, 1961 was filed by the appellant for the Assessment Year 2017-18. However, based on the information that the appellant made cash deposits of Rs.1,24,450/- in the bank account maintained with City Union Bank Limited and also withdrawn amount of Rs.3,53,21,500/-. And also, cash deposits of Rs.78,000/- in the bank account maintained with State Bank of India and also withdrawn amount of Rs.72,80,000/-. And also, received income from brokerage totaling to Rs.2,54,855/-. The Juri ictional Assessing Officer formed an opinion that the income got escaped from assessment to tax, accordingly, a notice u/s.148 of the Act was issued calling upon the appellant to file the Return of Income within a period of 30 days on 27.03.2024 after complying with the procedure laid down u/s.148A of the Act. In response to notice u/s.148 of the Act, the appellant filed the Return of Income on 29.03.2024 disclosing income of Rs.4,34,550/-. Against the said Return of Income, the assessment was completed by the Assessment Unit of the Department(hereinafter called ‘AO’) vide order dated 25.02.2025 passed u/s.147 r.w.s 144 read with section 144B of the Act at a total income of Rs.5,79,550/-. While doing so, the Assessing Officer made addition of cash deposits of Rs.1,45,000/- as unexplained money of the appellant and subjected to tax under provisions of section 115BBE of the Act.

4.

Being aggrieved by the above assessment order, the appellant preferred an appeal before the Learned CIT(A), contending that the Assessing Officer ought not have taxed the addition to the returned income under the rates prescribed u/s.115BBE of the Act. However, the ld.CIT(A) dismissed the claim of the appellant.

5.

We heard rival submissions and perused the material available on record. The issue in the present appeal stands covered by the decision of the Hon’ble Madras High Court in the case S.M.I.L.E Micro Finance Limited Vs. ACIT [2025] 479 ITR 172 (Madras) wherein, it is held as under :

“16. The next contention raised by the Learned Senior Counsel is that the under section 115BBE the rate of tax imposed is increased from 30% to 60% and the same is applicable with effect from 01.04.2017 onwards as per the amendment. Therefore, the same is applicable to any transaction from 01.04.2017 onwards and nor prior to any transactions prior to 01.04.2017. Since in the present case all alleged transactions are for the period from 08.11.2016 to 30.12.2016, hence the erstwhile rate of tax 30% only is applicable. But the contention of the revenue is that the amendment was with effect from 01.04.2017 and hence the same is applicable for the financial year 2016-2017 and the assessment year 2017-2018. Further the amendment to section 115BBE is directly related to demonetization which would be evident from objects and reasons for such amendment. In order to consider the same, the objects and reasons of Taxation Laws (Second Amendment) Bill 2016 is extracted hereunder:

Press Information Bureau

Government of India 28-November-2016 15:56 IST

Taxation Laws (Second Amendment) Bill, 2016 introduced in Lok Sabha; A scheme namely, 'Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016' (PMGKY) proposed in the Bill.

Evasion of taxes deprives the nation of critical resources which could enable the Government to undertake anti-poverty and development programmes. It also puts a disproportionate burden on the honest taxpayers who have to bear the brunt of higher taxes to make up for the revenue leakage. As a step forward to curb black money, bank notes of existing series of denomination of the value of Rs.500 and Rs.1000 [Specified Bank Notes(SBN)] have been recently withdrawn the Reserve Bank of India.

Concerns have been raised that some of the existing provisions of the Income tax Act, 1961 (the Act) can possibly be used for concealing black money. The Taxation Laws (Second Amendment) Bill, 2016 ('the Bill') has been introduced in the Parliament to amend the provisions of the Act to ensure that defaulting assessees are subjected to tax at a higher rate and stringent penalty provision. Further, in the wake of declaring specified bank notes "as not legal tender", there have been suggestions from experts that instead of allowing people to find illegal ways of converting their black money into black again, the Government should give them an opportunity to pay taxes with heavy penalty and allow them to come clean so that not only the Government gets additional revenue for undertaking activities for the welfare of the poor but also the remaining part of the declared income legitimately comes into the formal economy.

In this backdrop, an alternative Scheme namely, 'Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016' (PMGKY) has been proposed in the Bill. The declarant under this regime shall be required to pay tax @ 30% of the undisclosed income, and penalty @10% of the undisclosed income. Further, a surcharge to be called 'Pradhan Mantri Garib Kalyan Cess' @33% of tax is also proposed to be levied. In addition to tax, surcharge and penalty (totaling to approximately 50%), the declarant shall have to deposit 25% of undisclosed income in a Deposit Scheme to be notified by the RBI under the 'Pradhan Mantri Garib Kalyan Deposit Scheme, 2016'. This amount is proposed to be utilized for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc., so that there is justice and equality.

……………………….

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.”

6.

In the light of above Juri ictional High Court’s decision, we are of the considered opinion that the addition made by the Assessing Officer invoking provisions of section 69, 69A cannot be subjected to tax at the rates prescribed u/s.115BBE of the Act for the Assessment Year 2017-18. Accordingly, we direct the income assessed u/s.69, 69A of the Act.

7.

In the result, appeal filed by the assessee stands allowed.

ITA No.604/CHNY/2026 for A.Y.2020-21 :

8.

The Assessee raised the following grounds of appeal :

“1. The order of the learned Commissioner of Income tax (appeals) officer is contrary to the facts and circumstances as also the legal position obtaining in the case of the appellant.

2.

The learned Commissioner of Income Tax (appeals) failed to consider the income recognition as per Accounting Standards before making the above additions. The following is the grounds of appeal.

THE BANK ACCOUNT IS REFLECTED IN THE BALANCE SHEET FILED. ALL THE TRANSACTIONS REFLECTED IN THE BANK ACCOUNT IS ACCEPTED BY THE ASSESSING OFFICER. CASH WIDRAWAL IS ALSO ACCEPTED. ONLY CASH DEPOSITED IS MADE AN ADDITIONS U/S 155BBE OF THE ACT. HOW THE BANK IS REFLECTED IN THE BALANCE SHEET WITHOUT THE TRANSACTIONS THE BALANCE SHEET HOW TALLY. MORE OVER SB ACCOUNT INTEREST IS OFFERED AS INCOME AND THE SAME IS ACCEPTED. HOW THE TRANSACTIONS REFLECTED IN THE RETRUN OF INCOME AND ONLY CASH DEPOSIT IS TREATED AS INCOME U/S 115BBE OF THE ACT.”

9.

We find that the cash deposits of Rs.56,500/-in the account maintained with City Union Bank Limited as appellant had failed to offer any explanation.

10.

Being aggrieved by the above assessment order, the appellant preferred an appeal before the Learned CIT(A), contending that the said cash deposits were made out of the business receipts of the appellant, therefore, no addition is called-for. However, the ld.CIT(A) dismissed the appeal by holding that the appellant had not produced any corroborative evidence.

11.

Being aggrieved by the order of the Learned CIT(A), the appellant is in appeal before us in the present appeal. We find from the reading of the assessment order that the Assessing Officer had accepted the finding that the appellant had been doing the business of agents with the following concerns : (i) Western Union (ii) Gold Man Securities Private limited (iii) UTI Infrastructure Tech and Service Limited (iv) Transcorp International Limited (v) Subidha Info Serve Private Limited (vi) UAE Exchange Financial services Limited (vii) Akbar Online booking company pvt. Ltd. (viii) Instant Global Money Transfer Pvt. Ltd.

12.

Therefore, in the absence of evidence to the contrary, the Learned CIT(A) ought to have accepted the explanation of the appellant that cash deposit of Rs.56,500/- was made out of the business receipts of the appellant, accordingly, we direct the Assessing Officer to delete the addition of Rs.56,500/-.

13.

In the result, appeal filed by the Assessee in ITA No.604/CHNY/2026 stands allowed.

14.

To sum up, both appeals filed by the Assessee are allowed. Order pronounced in the open Court on 13th August, 2026. (SS VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Chennai; िदनांक / Dated : 13th Aug, 2026 SGR, Sr.PS आदेश क" "ितिलिप अ"ेिषत / Copy of the Order forwarded to : अपीलाथ" / The Appellant.

1.

""यथ" / The Respondent.

2.3.

The CIT Chennai/Madurai/Coimbatore/Salem. 4. िवभागीय "ितिनिध, आयकर अपीलीय अिधकरण, “ए” ब"च, चे"नई / DR, ITAT Chennai. 5. गाड" फ़ाइल / Guard File. GANGADHARA RAO SALEELA Date: 2026.08.25 15:29:24 +05'30'

12

More judgments on Section 115BBE

All 8,662 judgments and leading authorities on Section 115BBE →

Recent GST High Court judgments

Search GST case law →