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Facts
The assessee deposited Rs. 2,70,00,500/- and Rs. 1,32,53,000/- in bank accounts during the demonetization period but failed to respond to statutory notices, leading to an ex-parte assessment and an addition of Rs. 3,32,00,000/- by the Ld. AO. The Ld. CIT(A) further enhanced this addition by Rs. 70,53,500/- due to errors in calculating deposits.
Held
The Tribunal held that Section 292BB is applicable for transactions from 01.04.2017 onwards, not for earlier periods, as supported by a Madras High Court judgment. It set aside the orders of the lower authorities and remanded the case back to the Ld. AO for re-adjudication, directing him to consider the additional evidences submitted by the assessee and provide a fresh opportunity of being heard.
Key Issues
The key issues were the validity of cash deposit additions and enhancements by lower authorities, the applicability of Section 292BB for transactions during the demonetization period (FY 2016-17), and the consideration of additional evidences due to the assessee's non-compliance.
Sections Cited
292BB, 115BBE, 270A, 271AAC, 271AAB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘F’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA
PER BENCH This appeal filed by the assessee is directed against the order dated 01.01.2024 passed by NFAC, Delhi is directed against the order dated 23.09.2022 passed by Assessing Officer for A.Y. 2017-18.
The only issue arising in the present appeal is action of Ld AO to make an addition of Rs 3,32,00,000/- and its affirmation by the Ld CIT(A) as also the further enhancement of Rs 70,53,500/- by the Ld CIT(A). Brief factual matrix of the case is that the assessee was found to deposited in cash, amount of Rs 2,70,00,500/- and Rs 1,32,53,000/- in its bank accounts with kotakmahindra bank& Federal Bank , during the demonetization period. The assesee, did not respond to statutory notices of Ld AO to explain the cash deposits leading to passing of exparte by him .As per para 4 of order of Ld CIT(A) assessee did not respond to his notices as well. Noting mistakes in amount of addition qua deposits in bank accounts, Ld CIT(A) made further enhancement of Rs 70,53,500/-.
At the outset Ld council for the assessee submitted that it had admittedly made non compliance before lower authorities which are attributable to business losses, change of address etc stated and that it wishes to file additional evidences for consideration of the matter . It was also submitted that action of ld AO in invoking provisions of section 292BB in its case is also incorrect as law had changed wef 1/4/2017 . It was requested that matter may be considered for remitting back and re-adjudication by the LdAO . It was assured that full compliance would now be made. The Ld DR contested the proposal in view of non- compliance before lower authorities.
We have heard rival submissions on the matter in the light of material on records. As far as issue of invocation of section 292BB is concerned , we are of the considered opinion that provisions of section 292BB would not be applicable in this case. In this regard we draw strength from decision of Hon’ble madras High Court from its judgement dated 19/11/2024 qua W.P (MD) NO. 2078 Of 2020 & W.M.P (MD) NO. 1742 Of 2020 I n the case of S.M.I.L.E Microfinance Ltd . , holding that “………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 15 of 26 https://www.mhc.tn.gov.in/judis 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 Ministry of Finance 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 16 of 26 https://www.mhc.tn.gov.in/judis 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 utilised for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc., so that there is justice and equality.
An overview of the amendments proposed in the Bill are placed below; Overview of Amendments Proposed PARTICULARS EXISTING PROVISIONS PROPOSED PROVISIONS General PENALTY (Section 270A) No changes proposed provision for Under-reporting - @50% of tax penalty Misreporting - @200% of tax (Under-reporting/ Misreporting income is normally difference between returned income and assessed income)
17 of 26 https://www.mhc.tn.gov.in/judis Provisions for TAX (Section 115BBE) TAX (Section 115BBE) taxation & Flat rate of tax @30% + Flat rate of tax @60% penalty of surcharge + cess + surcharge @25% of tax (i.e. unexplained (No expense, deductions, set-off 15% of such income). So total credit, is allowed) incidence of tax is 75% approx. investment, cash (No expense, deductions, set-off and other assets is allowed)
PENALTY (Section 271AAC) If Assessing Officer determines income referred to in section 115BBE, penalty @10% of tax payable in addition to tax (including surcharge) of 75%. Penalty for Penalty (271AAB) Penalty (271AAB) search seizure (i) 10% of income, if admitted, (i) 30% of income, if admitted, cases returned and taxes are paid returned and taxes are paid (ii) 20% of income, if not (ii) 60% of income in any other admitted but returned and taxes case are paid (iii) 60% of income in any other case Taxation and New Taxation and Undisclosed income in the form Investment InvestmentRegime of cash & bank deposit can be Regime for declared:
Pradhan Mantri (A) Tax, Surcharge, Penalty Garib Kalyan payable Yojana, Tax @30% of 2016’ (PMGKY) income declared Surcharge @33% of tax Penalty @10% of income declared Total @50% of income (approx.) (B) Deposit 25% of declared income to be deposited in interest free Deposit Scheme for four years.
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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….”.
Thus, Hon’ble high court has held that section 292BB would be applicable for transactions undertaken wef 1/4/2017 and not of earlier period. In the present case undisputedly transaction were undertaken in FY 2016-17 and hence revenue’s case is hit by the amendment. As regards the issue of unexplained cash deposit and the relation with additional evidences now filed, admitting the same, we are of the considered view that the additional evidences filed by the assessee must by examined by the Ld AO. Accordingly, we set aside the order of lower authorities and direct the Ld AO to re-adjudicate the matter, in the light of impugned additional evidences, by way of speaking order, De Novo, after allowing due opportunity of being heard to the assessee. The assessee shall comply with all statutory notices of the Ld AO and any deviation shall be adversely viewed. The grounds of appeal raised by the assessee are therefore allowed for statistical purposes.
In the result appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 21.03.2025