PRABHUSANKAR RANGASAMY,SALEM vs. ITO, INTN. TAXATION WARD, COIMBATORE

Brief facts of the case are that the assessee, a Non-Resident Individual, did not file the return of income for AY 2017-18. Based on information regarding cash deposit of Rs.20,00,000/-, time deposits of Rs.20,00,000/- in Syndicate Bank and Rs.39,93,000/- in Canara Bank, and interest income of Rs.1,013/-, proceedings u/s. 148A were initiated, culminating in an order u/s. 148A(d) and issuance of notice u/s. 148. The assessee thereafter filed the return declaring total income of Rs.6,23,510/-. During assessment, the Assessing Officer accepted the source of the fixed deposit of

The DRP upheld the addition. It observed that the withdrawals relied upon by the assessee were made several years prior to the cash deposit and lacked any proximate nexus with the impugned deposit. The Panel held that withdrawals made long before the deposit could not be presumed to have remained unutilised. It further found that no cash-flow statement, statement of affairs, evidence of safekeeping, or contemporaneous record had been produced to establish retention of cash. The claim that part of the funds represented agricultural income was also rejected for want of supporting evidence such as proof of landholding, cultivation

The ld. Authorised Representative (AR) submitted that the cash deposit represented accumulated savings inherited from the assessee's late father, who was an agriculturist having regular agricultural income and savings. It was contended that the father and mother led a modest life and had also retained cash withdrawn from remittances sent by the assessee from abroad for their maintenance and medical needs. Upon the father's demise in 2015, the accumulated cash was handed over to the assessee as sole legal heir and was deposited into the NRO account after discussions among the surviving family members regarding the mother's welfare. The assessee relied upon documentary evidence including an affidavit from his sister in support of the explanation.

The ld.AR for the assessee further contended that section 69A was not attracted as a satisfactory explanation regarding the nature and source of the money had been furnished and the Revenue had not brought any material to disprove the explanation. It was argued that the addition was based merely on suspicion and conjecture. On the additional grounds, it was submitted that the higher rate of tax u/s. 115BBE was not applicable to the impugned cash deposit made on 14.07.2016. Reliance was placed on the judgment of the Madras High Court in S.M.I.L.E. Microfinance Ltd. v. ACIT, wherein it was held that the enhanced rate of tax introduced by the Taxation Laws (Second Amendment) Act, 2016 with effect from 01.04.2017 would

The ld. Departmental Representative (DR) supported the orders of the Assessing Officer and the DRP. It was submitted that the assessee failed to establish any direct nexus between earlier withdrawals and the cash deposit made during the relevant previous year. The explanation that substantial cash was retained at home for several years was inherently improbable and unsupported by any contemporaneous evidence. It was further submitted that the claim regarding agricultural savings remained unsubstantiated in the absence of documentary proof relating to agricultural operations or income. Accordingly, the addition u/s. 69A was rightly made and confirmed by the DRP.

We have carefully considered the rival submissions, perused the material available on record and the orders of the authorities below.

The solitary addition in dispute is the addition of Rs.20,00,000/- made u/s. 69A of the Act on account of cash deposit made by the assessee on 14.07.2016. The assessee has consistently explained that the impugned cash represented accumulated savings inherited from his deceased father, comprising agricultural savings and cash withdrawn from remittances sent by the assessee from abroad for the maintenance of his parents. In support of the explanation, the assessee has placed reliance upon bank statements, the affidavit of his sister and the fact that the amount was immediately converted into a fixed deposit.The Assessing Officer rejected the explanation primarily on the ground that the withdrawals relied upon by the

In our considered opinion, the burden cast upon an assessee u/s. 69A of the Act is to offer a satisfactory explanation regarding the nature and source of the money found in his possession. Mere furnishing of an explanation does not automatically discharge such burden unless it is supported by credible and cogent evidence. In the present case, except making a general assertion that the amount represented inherited cash savings, the assessee has not produced any evidence demonstrating the availability of cash of Rs.20,00,000/- on the date of deposit. The withdrawals relied upon pertain to different years and no cash-flow statement or evidence has been furnished to establish that such amounts remained unutilised till July 2016. Likewise, though it is claimed that the father was an agriculturist, no documentary evidence such as land records, details of agricultural operations or evidence of agricultural receipts has been produced. The affidavit filed by the assessee's sister merely supports the version put forth by the assessee but does not, by itself, establish the availability of the impugned cash. An affidavit, in the absence of corroborative documentary evidence, cannot be regarded as sufficient proof of the source of the money. The explanation, therefore, remains based largely on probabilities without supporting evidence. We, therefore, find no infirmity in the conclusion reached by the Assessing Officer and affirmed by the

However, the additional grounds relating to the applicability of section 115BBE deserve acceptance. The impugned cash deposit was made on 14.07.2016, i.e., prior to the amendment brought about by the Taxation Laws (Second Amendment) Act, 2016. The Hon'ble Jurisdictional High Court in S.M.I.L.E. Microfinance Ltd. v. ACIT2024 SCC OnLine Mad 8416 : 2024 (11) TMI 1444 (Mad.) (Madurai Bench of the Madras High Court), decided on 19 November 2024 in W.P.(MD) No. 2078 of 2020 and W.M.P.(MD) No. 1742 of 2020has held that the enhanced rate of tax introduced u/s. 115BBE with effect from 01.04.2017 is prospective and cannot be applied to transactions which took place prior to that date. Respectfully following the binding decision of the Hon’ble jurisdictional High Court, we hold that the enhanced rate of tax under the amended provisions of section 115BBE is not applicable to the impugned addition. The Assessing Officer is directed to compute the tax liability in accordance with the law as it stood applicable to the transaction on the date of deposit.

The legal grounds challenging the reopening and the assessment proceedings were neither substantiated by any material nor seriously pressed during the course of hearing. Accordingly, the same are dismissed.The levy of interest u/s. 234A and 234B is consequential and mandatory and shall be recomputed while giving effect to this order.