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Facts
The Revenue filed an appeal against the order of the CIT(A) who directed the AO to recompute the tax as per applicable provisions, holding that the 60% tax rate under Section 115BBE was not applicable for AY 2017-18. The assessee, engaged in liquor trading and resort operations, had deposited a substantial amount of cash during the demonetization period. The AO treated this as unaccounted income under Section 68 and taxed it at 60% under Section 115BBE.
Held
The Tribunal held that the amended provisions of Section 115BBE, levying tax at 60%, are applicable to the Assessment Year 2017-18. The Tribunal relied on decisions of the Kerala High Court and coordinate benches, stating that the rate enhancement is applicable from the commencement of the assessment year.
Key Issues
Whether the enhanced tax rate of 60% under Section 115BBE is applicable to AY 2017-18, given that the amendment was effective from 01.04.2017.
Sections Cited
Section 250, Section 143(2), Section 142(1), Section 115BBE, Section 68, Section 133A, Section 69A, Section 2(37A), Section 4, Article 271
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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYASHRI SANDEEP SINGH KARHAIL
Date of Hearing – 16/04/2025 Date of Order – 16/04/2025
O R D E R PER SANDEEP SINGH KARHAIL, J.M.
The Revenue has filed the present appeal against the impugned order dated 01/02/2024, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (“Learned CIT(A)”), for the Assessment Year 2017-18.
2. In the interest of justice, the slight delay of 4 days in filing the present appeal by the Revenue is condoned.
When the present appeal was called for hearing, neither did anyone appear on behalf of the assessee, nor was any application seeking an adjournment filed. From the perusal of the record, we find that in the previous six hearings also no one appeared on behalf of the assessee. Accordingly, the direction was issued to the Revenue to serve the notice of hearing on the assessee. Vide letter dated 09/04/2024, filed through the office of the learned Departmental Representative (“learned DR”), the AO submitted that when attempts were made to serve the notice at the given address of the assessee, it was found that the assessee company is no longer present at the said address. Accordingly, notice was sent through post at the address mentioned by the assessee in its latest Income Tax Return for the assessment year 2024- 25. Additionally, notice was also sent to the email address of the assessee in ITBA system. Despite the aforesaid steps having been taken, there is no representation on behalf of the assessee. Accordingly, we proceed to decide the present appeal on the basis of the material available on record and after consideration of the submissions of the learned DR.
In this appeal, the Revenue has raised the following grounds:
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1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to re-compute the tax as per applicable provisions of law, whereas the AO has correctly computed the tax @ 60% as per Section 115BBE of the Income Tax Act?
2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the tax rate of 60% is not applicable in the case for A.Y. 2017-18 despite upholding the addition and also the applicability of provision of section 115BBE for computation of tax for the year.?"
3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the amended provision u/s. 115BBE i.e. computation of tax @ 60%, is applicable from 01.04.2017 i.e. from F.Y. 2017-18 relevant to A.Y. 2018-19 and not applicable to A.Y. 2017-18?"
4. The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the AO be restored.”
The brief facts of the case are: The assessee is a company which is engaged in the business of liquor trading and also operates 3-star resorts. For the year under consideration, the assessee filed its return of income on 15/10/2016, declaring a total income of Rs. Nil. The return filed by the assessee was selected for scrutiny under CASS to examine the large value of cash deposited during the demonetization period. Accordingly, statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. From the data available on AIMS, it was noticed that the assessee deposited a total cash of Rs. 7,26,83,086 in its bank account during the demonetization period from 09/11/2016 to 30/12/2016. Accordingly, during the assessment proceedings, the assessee was asked to explain the source of such deposit. In response, the assessee submitted that it is engaged in the liquor trading business and also operates resorts. The assessee further submitted that it operates its business in Haryana. The assessee submitted that the customer pays cash across the counters and takeaway the liquor, and there is no culture of using credit cards like in Metro city. It was submitted that almost the entire sales at retail shops are in cash, and the cash collected through cash sales is periodically deposited in bank accounts after keeping aside cash required for operational expenses. The assessee submitted that the cash deposited is mainly utilised for payment to suppliers. The assessee further submitted that the purchaser and cash sales are duly accounted for in the business, and every rupee collected is ultimately brought into the banking channel through cash deposits in banks. Thus, the assessee submitted that the cash sales and collection from customers in cash is an established practice over the years and it is not an unusual event or transaction of the current year.
The Assessing Officer (“AO”), vide order dated 26/12/2019 passed under section 143(3) of the Act, notice that the total cash sales during the demonetization period, i.e. 08/11/2016 to 30/12/2016, was Rs. 4,72,26,475, which is substantially high as compared to the cash deposits for the financial year 2015-16 was Rs. 6,22,28,913. Thus, the AO noted that the substantial increase in cash deposits during the demonetization period is 64.27%, i.e. Rs. 4,00,00,949 when compared with the previous period. Accordingly, the AO held that during the demonetization period, the assessee had made huge cash deposits which are not made in the earlier years. Further, the AO noted that the assessee, despite sufficient opportunity, failed to file month-wise details of deposits made during the demonetization period. Accordingly, the AO treated the abnormal rise in cash deposits of Rs. 4,00,00,949 as unaccounted cash of Specified Bank Notes and added the same under section 68 of the Act. Further, the AO taxed the total income under section 115-BBE of the Act at the rate of 60%.
The learned CIT(A), vide impugned order, upheld the addition made by the AO under section 68 of the Act in the absence of any material being brought on record by the assessee, contrary to the findings in the assessment order. However, the learned CIT(A) held that the amended provisions of section 115-BBE are applicable from the assessment year 2018-19, and therefore, the rate of tax at 60% is not applicable to the year under consideration. Accordingly, the learned CIT(A) directed the AO to recompute the tax as per the applicable provision of law prevailing during the year under consideration. Being aggrieved with the aforesaid direction, the Revenue is in appeal before us.
We have considered the submissions of the learned DR and perused the material available on record. The sole grievance of the Revenue in the present appeal is against the findings of the learned CIT(A) that the amended provisions of section 115-BBE of the Act, levying tax at a rate of 60%, do not apply to the year under consideration. During the hearing, the learned DR, by placing reliance upon the decision of the Hon’ble Kerala High Court in Maruthi Babu Rao Jadav v/s ACIT, reported in [2025] 171 taxmann.com 463 (Kerala), submitted that the provisions of section 115-BBE, as amended by the Taxation Laws (Second Amendment) Act, 2016, with effect from 01/04/2017, increasing the rate of tax in respect of the income, inter-alia, referred to in section 68 of the Act to 60% is applicable from the assessment year 2017-18.
We find that this issue is no longer res integra and has been decided in favour of the Revenue by various decisions of the coordinate bench of the Tribunal following the aforementioned decision of the Hon’ble Kerala High Court in Maruthi Babu Rao Jadav (supra). We find that the coordinate bench of the Tribunal in Spectra Equipment (P.) Ltd. v/s ITO, reported in [2025] 211 ITD 61 (Hyderabad - Trib.), following the decision of the Hon’ble Kerala High Court cited supra and the decision of the coordinate bench of the Tribunal in Chandan Garments (P.) Ltd. v. Pr. CIT [IT Appeal No. 125 (Ind.) of 2022], held that the higher rate of tax prescribed in section 115-BBE of the Act is applicable to the assessment year 2017-18. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as follows: – “8. Per contra, ld. DR submitted that the issue is covered in favour of the Revenue by the decision of Hon'ble Kerala and Karnataka High Courts and also by the decision of Indore Bench of ITAT in the case of Chandan Garments Private Limited v. Pr. CIT [IT Appeal No. 125 (Ind.) of 2022, dated 2-12-2022] wherein identical issue was examined. The Tribunals / High Court after examining the issue, has come to a conclusion that higher rate of tax is required to be applied for A.Y. 2017-18 (Previous year 201617). It was further submitted that Section 115BBE is not a charging provision but merely provides the rate of tax at which the income earned by the assessee during the year 2016-17 is required to be taxed. The relevant portion of the order of ITAT, Indore in the case of Chandan Garments Private Limited (supra) is to the following effect : "12. Ld. AR has placed reliance on certain decisions including the decision of Hon'ble Co-ordinate Bench of ITAT, Indore in Rakesh Khandelwal v. PCIT, dated 29.01.2020 to canvas that (i) where the AO has adopted one of the permissible view, the assessment-order cannot be said to be erroneous; or (ii) where the AO has conducted enquiry during assessment proceeding but not discussed the outcome in assessment-order, the PCIT cannot make revision u/s 263 to substitute his own view. We certainly agree with such views but the facts of present appeal are different and do not warrant application of those decisions for the very reason that the Ld. DR carried us to the assessment-order wherein the Ld. AO has made following reporting on the impugned issue: "Survey u/s 133A had been carried out in the case on 19.09.2016. Unaccounted income of Rs. 10,89,490/- was disclosed during the survey on account of excess cash found of Rs. 9,21,460/- and excess stock found Chandan Garment of Rs. 1,68,030/- has been incorporated as taxable income by the assessee in the ITR filed besides its regular income for the year under consideration." We are in agreement with Ld. DR that the Ld. AO has simply stated that the assessee has incorporated the excess-cash and excess-stock in the ITR. Needless to mention that the function of assessing authority is not only of adjudicator but also of investigator. In the present case, it is quite apparent from assessment-order that the Ld. AO has not made requisite enquiry to ascertain the nature and tax implications of the impugned incomes, he has simply shut the point by saying that the assessee has incorporated incomes in ITR. Therefore, the decisions relied upon by Ld. AR do not support the assessee's stand.
13. Having said so, we now turn to Ground No. 7 wherein the assessee raises an alternative claim that the present case of Assessment-Year 2017-18 relates to the Previous-Year 2016-17 and the rate of tax u/s 115BBE was 30%+3% Cess as on first day of the Previous-Year i.e. 01.04.2016, therefore the tax- rate of 30%+3% Cess shall apply to the present case and not the higher rate, hence the assessment-order does not cause prejudice to the interest of revenue. The reason of projecting such a claim by assessee is that the higher rate of tax was prescribed in section 115BBE through an amendment made vide Taxation Laws (Second Amendment) Act, 2016 and the said amendment received assent of the President of India on 15.12.2016 and therefore the amendment shall apply prospectively w.e.f.
15.12.2016 and not retrospectively. The assessee claims that survey in assessee's case was conducted on 19.09.2016 which is prior to 15.12.2016 and therefore the higher rate of tax is not applicable to it, the tax-rate of 30%+3% Cess as existing in section 115BBE as on 01.04.2016 shall apply. To resolve this controversy, a lengthy discussion on the scheme of Income-tax Act, 1961; particularly the framework of previous year, assessment year, the parliamentary system of prescribing tax-rates, etc. is required; but we have the benefit of a direct decision rendered by Hon'ble Kerala High Court in WA No. 984 of 2019 - Maruthi Babu Rao Jadav v. The Assistant Commissioner of Income-tax, Central, Circle, Kozhikode, dated 23.09.2020 in which the Hon'ble High Court has already analysed such framework at length and was pleased to decide that the higher rate of tax would apply to whole Previous-Year 2016- 17 related to Assessment-Year 2017- 18. The relevant paragraphs of the decision are reproduced below: "The writ petition sought for a declaration that the amendments made by the Taxation Laws (Second Amendment) Act, 2016, to Section 115BBE of the Income Tax Act, 1961 enhancing the rate of income tax, for specified incomes which are unexplained, to 60% and the surcharge provided in the Finance Act, 2016 to 25% for income covered under Section 69A, to be prospective. The above referred enactments are herein after referred to as the '2nd Amendment Act', 'IT Act' and the 'Finance Act'. The 2nd Amendment Act was dated 15.12.2016 and the amendment to Section 115BBE was specified to be effective from 01.04.2017. The amendment enhancing the rate of tax was incorporated in the I T Act and that of surcharge in the Finance Act. On declaration, consequential relief is sought against Ext.P2 assessment order levying tax at the enhanced rate of 60% and surcharge @25% on the 'advance tax'. The learned Single Judge rejected the writ petition by a cryptic judgment relying on Commissioner of Income Tax v. S.A.Wahab. (1990) 48 Taxman 362/182 ITR 464 (KER).
The learned Counsel Sri.Vishnu S Arikkattil appearing for the appellant would contend that even going by the decision in Karimtharuvi Tea Estate ltd. v. State of Kerala (AIR (1966) SC 1385) an amendment made on the 1st day of April of any financial year would apply to the assessments of that year. That is, if an amendment is brought into force on 01.04.2017, as is the case here, it can only apply to the assessment made in 2018-2019 (Assessment Year) of the income accrued for the previous financial year; which is 2017-2018. The learned Counsel would seek to draw a distinction insofar as a modification of the rate as brought out in the Finance Act and a substantive provision altering accrued rights or creating new liabilities, on the 1st of April of an year. In the former, it could apply to the assessments of the previous year, made in that financial year, but a substantive amendment not relating to the rates, could only be applied to the assessments of that financial year and not of the previous year. Reliance is placed on the Constitution Bench decision of the Hon'ble Supreme Court in C.I.T v. Vatika Township Private Ltd. (2015) 1 SCC 1. The learned Counsel would also place before us a number of decisions of the Hon'ble Supreme Court in Kesoram Industries v. Commissioner of Wealth Tax, [AIR 1966 SC 1385], Guffic Chem P. Ltd v. C.I.T [2011(4) SCC 245], C.I.T v. Sarkar Builders [(2015) 375 ITR 392 (SC)], Shiv Raj Gupta v. C.I.T [(2020) 425 ITR 420 (SC)] and State of Kerala v. Alex George [(2004) 271 ITR 290(SC), to further buttress his arguments. Reliance is Chandan Garments P. Ltd. ITANo.125/Ind/2022 Assessment Year 2017-18 Page 12 of 16 also placed on the Full Bench decision of the Patna High Court in Loknath Goenka v. C.I.T [2019 417 ITR 521 (Patna)].
11. Before we look at the amendments carried out, on facts, there were two seizures of cash made on 02.08.2016 and 03.11.2016 respectively of Rs.1,05,03,500/- and Rs.1,24,68,750/- both in the F.Y 2016-2017. The persons from whom the cash was seized as also the appellant herein admitted that it belonged to the appellant who carries on trading in gold bullion. The appellant not having produced any books of accounts or cash flow statements failed to establish the source of the money seized; which was included in the total income under Section 69A of the IT Act. The writ petition or the appeal does not challenge such inclusion. On the said amounts tax was imposed @60% under Section 115BBE and surcharge @25%. The amendments to the Finance Act were by the 2nd Amendment Act dated 15.12.2016. The enhancement of tax under Section 115BBE was made effective only from 01.04.2017; the commencement of the assessment year 2017-2018, in which the assessments of the previous year are carried out.
12. The assessee contends that the seizures were made prior to the amendment. The affidavits admitting the ownership of amounts seized were also submitted prior to the amendment. The assessee was not aware of the enhanced tax liability when the admissions were made before the authorities. The assessee has also made an attempt to relate the amendments to the demonetization of the specified currencies announced on 08.11.2016 which contention we reject at the outset. The subject amendments which are relevant for our consideration have no direct link with the demonetization introduced or the taxation and investment regime of Pradhaan Mantri Garib Kalyan Yojana 2016 brought in under Chapter IX A of the 2nd amendment Act. The 2nd amendment Act as is clear from the Statements of Objects and Reasons, was to curb, evasion of tax and black money as also plug loopholes in the IT Act and to ensure that defaulting assessees are subjected to higher tax and stringent penalty provision. Both the measures spoken of herein were to further the said objects and there cannot be any nexus assumed nor is it discernible.
Section 115BBE was inserted by Finance Act 2012 w.e.f 01.04.2013. As on 01.04.2016 the financial year in which the subject seizures occurred Section 155BBE provided for 30% tax on income referred to in Sections 68, 69, 69A, 69B, 69C and 69D. The same was amended by the 2nd Amendment Act; w.e.f. 01.04.2017, enhancing the rate to 60%. Hence there was no new liability created and the rate of tax merely stood enhanced which is applicable to the assessments carried on in that year. The enhanced rate applies from the commencement of the assessment year, which relates to the previous financial year.
Likewise it was by Chapter II with heading 'Rates of Income Tax', as provided in the Finance Act 2016, that a surcharge was introduced by way of the 3rd proviso of Section 2(9) of that Finance Act. This comes into effect from the Financial Year 2016- 2017; which is the year in which the subject seizures were occasioned. The proviso refers to various provisions where the advanced tax computed under the first proviso stands increased by a surcharge for the purpose of the Union. Section 115BBE is one of the provisions referred to in the 3rd proviso and in the case of individuals the surcharge was @15% where the total income exceeds one crore, as on 01.04.2016. By the 2nd Amendment Act Section 2 of the Finance Act, 2016 stood amended by which 115BBE was omitted from the 3rd proviso. After the 6th proviso yet another proviso was inserted which provided for the 'advance tax' computed under the first proviso, in respect of any income chargeable to tax under Section 115BBE(1)(i), to be increased by a surcharge for the purposes of the Union, calculated @25%. Hence there is no new liability of surcharge created and it is a mere enhancement of the rate of surcharge.
15. In the financial year 2016-17 itself the tax as provided under section 115BBE and the surcharge on advance tax was available as discernible from the IT Act and Finance Act, 2016 as it stood on 1.4.2016 itself. A major misdemeanor leading to assessment of income as accrued under Section 69A invites the consequences of Section 115BBE and surcharge provided under Section 2(9) of the Finance Act, 2016. When it stands enhanced from 01.04.2017, for every assessment carried out in that year, related to the previous year, the rates as applicable on 01.04.2017 has to be applied. There being no new liability created or obligation imposed, the arguments raised by the appellant's counsel fails. The appellant cannot have a contention that he committed the misconduct on the expectation that if he were caught he would have to shell out only lesser amounts as tax and surcharge. There is no right accrued on the assessee to commit an offence on the expectation of a lesser penalty.
It was also argued that Income Tax at the rate or rates specified, as prescribed in any Central Act to be charged for any assessment year, shall be so charged in respect of the total income of the previous year as per Section 4 of the IT Act. However, there is no such provision to enable a surcharge to be so taxed, on the Finance Act prescribing an enhanced rate at the commencement of an year. The said contention however, cannot be sustained especially looking at the decision of the Hon'ble Supreme Court in CIT Kerala v. K Srinivas. [(1972) 4 SCC 526]. The facts are not relevant to the issue raised here and we need only look at the declaration as to the nature of a surcharge imposed in the Finance Act. The legislative history with respect to the concept of surcharge was traced by the Court, which, for the first time was found to have been recommended, in the report of the Committee on Indian Constitutional Reforms Volume I Part I. The word surcharge was used compendiously for the special addition to taxes on income imposed in September 1931. It was held so in paragraph 7 and 8 7. The above legislative history of the Finance Acts, as also the practice, would appear to indicate that the term "Income tax" as employed in Section 2 includes surcharge as also the special and the additional surcharge whenever provided which are also surcharges within the meaning of Article 271 of the Constitution. The phraseology employed in the Finance Acts of 1940 and 1941 showed that only the rates of income tax and super tax were to be increased by a surcharge for the purpose of the Central Government. In the Finance Act of 1958 the language used showed that income tax which was to be charged was to be increased by a surcharge for the purpose of the Union. The word "surcharge" has thus been used to either increase the rates of income tax and super tax or to increase these taxes. The scheme of the Finance Act of 1971 appears to leave no room for doubt that the term "Income Tax" as used in section 2 includes surcharge. 8. According to Article 271 notwithstanding anything in Article 269 and 270 Parliament may at any time increase any of the duties or taxes referred to in those Articles by a surcharge for the purpose of the Union and the whole proceeds of any such surcharge shall form part of the consolidated Fund of India. Article 270 provides for taxes levied and collected by the Union and distributed between the union and these states. Caluse (1) says that tax on income other than agricultural income shall be levied and collected by the Government of India and distributed between the Union and the states in the manner provided in clause (2). Article 269 deals with taxes levied and collected by the Union but assigned to the States. The provisions of Articles 268 which is the First one under the heading distribution of revenue between the union and the states relate to duties levied by the Union but collected and appropriated by the states. Thus these Articles deal with the levy, collection and distribution of the proceeds of the taxes and duties mentioned therein between the Union and the state. The Legislative power of Parliament to levy taxes and duties is contained in Articles 245 and 246(1) read with the relevant entries in list I of the Seventh Schedule.
In the instant case surcharge was imposed by Finance Act, 2016 and the rate stood enhances by Finance Act 2017. The Income Tax even as per the Finance Act has to be at the rate specified in Part I of the 1st Schedule which shall be increased by surcharge for purposes of the Union. Surcharge hence partakes the character of Income tax and Article 271 itself empowers the Parliament, at any time to increase any of the duties or taxes by a surcharge for the purpose of the Union and it forms part of the consolidate fund. So when a surcharge is imposed it is in effect an enhancement of the tax or duty. The provisions in the Finance Act also employs the words 'the income tax computed... shall be increased by a surcharge. Section 4 of the IT Act squarely applied to the surcharge imposed. The judgement of the Learned Single judge is affirmed for the reasoning herein above and the writ appeal would stand dismissed without any order as to costs." 14. We are consciously aware of the judicial hierarchy and discipline according to which the Hon'ble High Court of Kerala, though non jurisdictional, is higher than ITAT. Hence, respectfully following the aforesaid decision of Hon'ble Kerala High Court, we are inclined to hold that the higher rate of tax prescribed in section 115BBE is applicable to the whole previous year 2016-17 relevant to assessment-year 2017-18 and there is no merit in the contention raised by assessee.
In view of above discussions and for the reasons stated above, we are of the view that the Ld. PCIT has rightly termed the assessment-order as erroneous-cum- prejudicial to the interest of revenue and therefore the revision order passed by Ld. PCIT is a valid order in terms of section 263. We are thus inclined to dismiss all grounds raised
by assessee in present appeal. We order accordingly.
16. In the result, this appeal of assessee is dismissed."
9. We have heard the rival submissions and perused the material on record. We find that the co-ordinate Bench of the Tribunal of Indore, while adjudicating a similar issue, has followed the decision of Hon'ble Kerala High Court in the case of Maruthi Babu Rao Jadav v. Asstt. CIT [WA No. 984 of 2019, dated 23-9-2020] which was referred in its order. Even otherwise, if we look into the provisions of Income Tax Act, the rate of taxes as per the Schedule of the Income Tax Act, are applicable for A.Y. 2017-18 and undoubtedly, the present year under consideration falls within A.Y. 2017-18. The provisions of the Act are required to be read in light of various decisions considered by the co-ordinate Bench of the Tribunal, and it will be repetitive, if we reproduce the same. However, for the purpose of completeness, it is essential to mention here the definition of "rate or rates in force" in relation to F.Y. has been defined under Section 2(37A) of the Act, which provides as under : Section 2(37A) in The Income Tax Act, 1961 (37A) "rate or rates in force" or "rates in force", in relation to an assessment year or financial year, means— (i) for the purposes of calculating income-tax under the first proviso to subsection (5) of section 132, or computing the income-tax chargeable under sub-section (4) of section 172 or sub-section (2) of section 174 or section 175 or sub-section (2) of section 176 or deducting income-tax under section 192 from income chargeable under the head "Salaries" or computation of the "advance tax" payable under Chapter XVII-C in a case not falling under section 115A or section 115B or section 115BB or section 115BBB or section 115E or section 164 or section 164A or section 167B, the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year, and for the purposes of computation of the "advance tax" payable under Chapter XVII-C in a case falling under section 115A or section 115B or section 115BB or section 115BBB or section 115E or section 164 or section 164A or section 167B, the rate or rates specified in section 115A or section 115B or section 115BB or section 115BBB or section 115E or section 164 or section 164A or section 167B, as the case may be, or the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year, whichever is applicable ; (ii) for the purposes of deduction of tax under sections 193, 194, 194A, 194B, 194BB and 194D, the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year ; (iii) for the purposes of deduction of tax under section 194LBA or section 194LBB or section 194LBC or section 195, the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year or the rate or rates of income-tax specified in an agreement entered into by the Central Government under section 90, or an agreement notified by the Central Government under section 90A, whichever is applicable by virtue of the provisions of section 90, or section 90A, as the case may be;
If the above said definition is applied in the context of the assessment made by the Assessing Officer for the A.Y. 2017-18, then it is abundantly clear that the rate of taxes as applied by the Assessing Officer is in accordance with the tax provisions of the Act, and therefore, we do not find any error in the orders passed by the Assessing Officer or the LD.CIT(A).
11. Even in the absence of decision of Hon'ble High Court of Kerala in the case of Maruthi Babu Rao Jadav (supra), the bare provision of the Act - 2(37A) read with other provisions of the Act i.e., Section 68 and Section 115BBE of the Act, make it clear that the rate of taxes at which the deemed income of the assessee is required to be taxed, would be taxed, as notified by the Parliament in the Schedule of Income Tax Act for A.Y. 2017-18. In view of the above, the objection of the ld.AR is devoid of any merit. Furthermore, we may point out that the co-ordinate Bench of the Tribunal, Indore, has already been held that Section 115BBE is only a machinery provision and it does not lay down any new law. The liability, if any, has been examined by the Assessing Officer / LD.CIT(A) by a reference to the bunch of sections 68, 69, 69A, 69B, 69C and 69D and Section 4 of the Income Tax Act and whereas Section 115BBE is merely a computation and machinery provision providing the rate of taxes to be applied on the income / deemed income declared by the assessee or assessed by the Assessing Officer. It is also settled proposition that the charging provision cannot be applied retrospectively, whereas the machinery / applicability of the rate of tax is charged in accordance with the Schedule of Income Taxes as declared by the Parliament on a year-to-year basis. In view of the above and respectfully, following the decision of ITAT, Indore Bench in the case of Chandan Garments Private Limited (supra), we do not find any merit in the appeal of the assessee and we are inclined to hold that the higher rate of tax prescribed in Section 115BBE of the Act is applicable to the whole previous year 2016-17 relevant to A.Y. 2017-18. Accordingly, the appeal of the assessee is dismissed.
In the result, the appeal of the assessee is dismissed.”
10. Therefore, respectfully following the decisions cited supra, we are of the considered view that the learned CIT(A) erred in holding that the higher rate of tax, i.e., 60%, as provided under the amended provisions of section 115- BBE of the Act is not applicable to the year under consideration. Accordingly, to this extent, the impugned order is set aside, and the assessment order levying the tax at the rate of 60% under section 115-BBE on the income added under section 68 of the Act is upheld. Accordingly, the grounds raised by the Revenue are allowed.
In the result, the appeal by the Revenue is allowed. Order pronounced in the open Court on 16/04/2025