RANJIT SINGH,MOHALI, PUNJAB vs. ITO WARD 5(5), CHANDIGARH, CHANDIGARH

IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCHES, “SMC” CHANDIGARH HEARING THROUGH: PHYSICAL MODE BEFORE: SHRI. LALIET KUMAR, JUDICIAL MEMBER आयकर अपील सं./ ITA No. 393 /Chd/2026 िनधा�रण वष� / Assessment Year : 2017-18 Ranjit Singh बनाम The ITO Village Singhpura, Derabassi, Ward-5(5), Chandigarh Mohali, Punjab-140601 �ायी लेखा सं./PAN NO: ABZPS7423D अपीलाथ�/Appellant ��थ�/Respondent िनधा�रती की ओर से/Assessee by : Shri Sumit B. Nagpal, Advocate राज� की ओर से/ Revenue by : Dr. Ranjit Kaur, Addl. CIT, Sr. DR सुनवाई की तारीख/Date of Hearing : 30/07/2026 उदघोषणा की तारीख/Date of Pronouncement : 30/07/2026 आदेश/Order PER LALIET KUMAR, J.M This is an appeal filed by the Assessee against the order of the Ld. CIT, Appeal, Addl/JCIT(A)-1, Jaipur dt. 21/01/2026 for the Assessment Year 2017- 18. 2. In the present appeal Assessee has raised the following grounds;

2 4. That the Ld. AO also erred in taxing the cash deposits at a higher rate of 78% as per provisions of Section 115BBE against the tax rate of 30%. 5. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed of. 3. Briefly, the facts of the case are that the assessee is an individual deriving income from salary, agriculture, sale of milk, rental income and allied agricultural activities. During the demonetisation period, cash deposits were made in the bank account of the assessee. The case was selected for limited scrutiny to examine the source of such cash deposits. The Assessing Officer accepted part of the explanation relating to rental income and sale of milk but treated the balance cash deposits as unexplained money under section 69A of the Act and taxed the same under section 115BBE. 4. Against the order of the AO the assessee went in appeal before the Ld. CIT(A). The learned CIT(A) confirmed the addition as well as the application of section 115BBE. 5. Against the order of the Ld. CIT(A) the assessee preferred in appeal before the Tribunal. 6. During the course of hearing the learned AR for the assessee submitted that the assessee is an agriculturist and is deriving income from agricultural operations, sale of cattle and milk besides earning rental income. It was submitted that the cash deposited in the bank was out of the earlier savings available with the assessee, which stood duly demonstrated from the bank account reflecting withdrawals aggregating to approximately Rs. 13 lakhs. 6.1 It was further submitted that neither the Assessing Officer nor the learned CIT(A) has brought any material on record to establish that the cash so withdrawn had been utilized elsewhere or for any other purpose. In the absence of any contrary evidence, the availability of cash with the assessee could not be doubted merely on the basis of conjectures. 6.2 The learned AR further submitted that the assessee is a senior citizen aged about 72 years, suffering from heart ailments and residing at Zirakpur with his wife. It was argued that considering his age and medical condition, it

3 was quite natural for him to keep substantial cash available at home to meet medical emergencies, hospitalisation expenses, diagnostic tests and other unforeseen contingencies. 6.3 On the issue of taxability under section 115BBE, the learned AR submitted that the Assessing Officer erred in applying the enhanced rate of tax under section 115BBE as amended by the Taxation Laws (Second Amendment) Act, 2016. It was submitted that the enhanced rate became applicable only from Assessment Year 2018-19 and could not be applied to Assessment Year 2017-18. Reliance was placed on the judgment of the Hon'ble Rajasthan High Court in Deepak Maratha v. Union of India, wherein it has been held that the amendment to section 115BBE operates prospectively and not retrospectively. 7. Per contra, the learned DR submitted that the assessee had failed to satisfactorily establish the source of the cash deposits. It was argued that the explanation regarding earlier withdrawals and availability of cash was not supported by cogent evidence and, therefore, both the Assessing Officer and the learned CIT(A) were justified in sustaining the addition under section 69A. 8. With regard to the applicability of section 115BBE, the learned DR could not controvert the legal proposition canvassed by the learned AR regarding the prospective applicability of the amended provisions. 9. I have heard the rival submissions and carefully perused the material available on record. It is an undisputed position that the learned CIT(A), while deciding the appeal, has not disputed the factum of cash withdrawals made by the assessee from his bank account. The learned CIT(A) has also accepted that cash was available with the assessee. The only reason assigned for sustaining the addition is that it was highly improbable for the assessee to retain such a substantial amount of cash for a prolonged period. 9.1 In my considered opinion, such reasoning by itself cannot constitute a valid basis for making an addition under section 69A. It is a matter of common human conduct that many individuals, particularly senior citizens,

4 prefer to retain cash at home for meeting unforeseen contingencies. More particularly, after the outbreak of COVID-19 and even prior thereto, it has become a common practice amongst citizens to keep reasonable cash reserves for medical emergencies, household necessities and other urgent requirements. 9.2 The assessee before me is a senior citizen aged about 72 years and is stated to be suffering from heart ailments. The explanation that cash was retained to meet medical emergencies and other unforeseen contingencies appears to be plausible and consistent with ordinary human conduct. More importantly, the Revenue has not brought any material on record to establish that the cash withdrawn from the bank had been utilised elsewhere or had ceased to be available with the assessee. Mere disbelief or suspicion cannot substitute evidence. 9.3 At the same time, considering the totality of the facts and circumstances, I am of the opinion that the explanation furnished by the assessee cannot be accepted in its entirety. Therefore, in order to balance the equities and meet the ends of justice, I deem it appropriate to grant substantial relief to the assessee. 9.4 Accordingly, the addition to the extent of Rs. 10,00,000/- is directed to be deleted. The balance addition of Rs. 3,04,500/-, as sustained by the authorities below, is upheld. 10. The next issue relates to the applicability of the enhanced rate of tax under section 115BBE. 11. The learned AR has rightly contended that the enhanced rate prescribed under section 115BBE pursuant to the amendment brought by the Taxation Laws (Second Amendment) Act, 2016 became operative only from Assessment Year 2018-19. The reliance placed upon the judgment of the Hon'ble Rajasthan High Court in Deepak Maratha v. Union of India is well founded. The Hon'ble High Court has categorically held that the amendment enhancing the rate of tax under section 115BBE is prospective in operation and cannot be applied to Assessment Year 2017-18.

5 12. The learned DR has not disputed the aforesaid legal position. 13. Respectfully following the judgment of the Hon'ble Rajasthan High Court, I hold that the enhanced rate of tax under section 115BBE is not applicable to the year under consideration. Consequently, the orders of the Assessing Officer and the learned CIT(A), to the extent they apply the amended provisions of section 115BBE, are set aside. The Assessing Officer is directed to recompute the tax liability by applying the normal rate of tax as applicable under the Act, without invoking the amended provisions of section 115BBE. 14. In the result, the appeal of the assessee is partly allowed. The addition of Rs. 10,00,000/- is deleted. The balance addition of Rs. 3,04,500/- is sustained. The application of the enhanced rate of tax under section 115BBE is quashed and the Assessing Officer is directed to recompute the tax at the normal rates applicable for Assessment Year 2017-18.

Order pronounced on 30/07/2026 Sd/- ( LALIET KUMAR) JUDICIAL MEMBER AG आदेश की �ितिलिप अ�ेिषत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकर आयु�/ CIT 3. आयकर आयु� (अपील)/ The CIT(A) 4. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�ीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File 6.

BY ORDER, ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KENDRIYA SADAN, SECTOR-9A CHANDIGARH