NIDESH JAIN,HYDERABAD vs. ACIT, CIRCLE-12(1), HYDERABAD

The brief facts of the case are that the assessee is an individual, employed as a Chartered Accountant. The assessee filed his return of income for the Assessment Year 2017–18 on 17.06.2017, declaring a total income of Rs.18,75,420/-. The case of the assessee was selected for scrutiny under CASS and accordingly a notice under section 143(2) of the Income Tax Act, 1961 (“the Act”) was issued by the Learned Assessing Officer (“Ld. AO”). During the course of assessment proceedings, the Ld. AO observed that the assessee had deposited cash of Rs.20,65,000/- in his ICICI Bank account during the year under consideration. When called upon to explain the source of the said cash deposits, the assessee submitted that the same represented past savings accumulated over a period of several years out of regular withdrawals from his bank account. The Ld. AO, not being

Aggrieved with the order of the Ld. AO the assessee filed appeal before the Ld. CIT (A). The Ld. CIT(A) dismissed the appeal of the assessee, confirming the addition made by the Ld. AO.

Aggrieved with the order of the Ld. CIT (A), the assessee is in appeal before this Tribunal. The Ld. AR submitted that the assessee had filed a petition under Rule 29 of the ITAT Rules, 1963 seeking admission of additional evidence. It was submitted that the additional evidence does not introduce any new facts but merely explains and summarizes the material already available on record. It was submitted that the additional evidence is crucial for proper adjudication of the issue and deserves to be admitted in the interest of justice.

The Ld. AR submitted that the only issue arises out of the grounds of appeal filed by the assessee is the addition of Rs.20,65,000/- made by the Ld. AO under section 68 r.w.s. 115BBE of the Act. The Ld. AR further submitted that the assessee is a salaried professional, consistently assessed to tax for more than ten years. The Ld. AR submitted that the assessee was in the habit of expending more without making any savings for future. Therefore, to develop a habit of saving, the assessee’s father used to instruct the assessee to withdraw cash periodically

The Ld. AR further submitted that the issue arises out of the additional ground of the assessee is the alternate submission of the assessee regarding applicability of the rate of tax under section 115BBE of the Act. The Ld. AR submitted that the case of the assessee is related to A.Y 2017-18 for which tax rate of 30% is applicable under section 115BBE of the Act. However, the Ld. AO has levied the tax rate @ 60%. The Ld. AR relied upon the decision of the Hon’ble Madras High Court in the case of S.M. I. L. E Microfinance Ltd. vs. ACIT W.P. (MD) No.2078 of 2020 and W.M.P. (MD) No.1742 of 2020 dated 19th November 2024 and submitted that for Assessment Year 2017–18, tax could be levied only at 30% and not at 60%.

Per contra, the Ld. DR strongly opposed the admission of additional evidence and submitted that the assessee failed to Page 5 of 10 produce the same before the lower authorities without any reasonable cause. On merits, the Ld. DR submitted that most of the cash withdrawals were in small denominations and were normally meant for household expenditure. Therefore, the explanation that such cash was accumulated over several years is not believable. He accordingly relied on the orders of the lower authorities.

We have heard the rival submissions and perused the material available on record including the case law relied upon. At the outset, we find that the additional evidence sought to be admitted consists of summaries and reconciliations prepared from bank statements which were already on record before the lower authorities, along with an affidavit of the assessee’s father explaining the custody of cash. We further find that these documents do not bring on record any new source of income or fresh factual matrix but merely seek to explain the assessee’s spending pattern and cash management in a more coherent manner. Considering that the issue before us relates to appreciation of factual explanation and human probabilities, and that the additional evidence is necessary for proper adjudication of the appeal, we are inclined to admit the same in the interest of justice. Accordingly, the additional evidence filed by the assessee is admitted.

As regards the first issue of the assessee regarding the addition of Rs. 20,65,000/- under section 68 r.w.s. 115BBE of the Act, we have gone through the cash-flow summaries, withdrawal statements, and the affidavit of the assessee’s father filed as additional evidence. As submitted by the Ld. AR, in order to Page 6 of 10 develop a habit of saving, the assessee’s father used to instruct the assessee to deposit some cash every year with him. If this explanation is accepted in entirety, there ought to be a broadly consistent and identifiable pattern of cash withdrawals over the years. In this regard, we have gone through summary of cash withdrawals filed by the assessee as additional evidence which is to the following effect:

On perusal of the above, we find that for Financial Year 2010–11, the assessee had withdrawn cash of Rs.10,50,700/-, which is significantly higher and not in consonance with the withdrawal pattern in other years. This abnormal spike weakens the assessee’s claim of uniform and systematic cash accumulation over the years. Further, the explanation that cash was retained either by the assessee or with his father for several years does not fully align with normal human conduct. At the same time, it is also undisputed that the assessee is a regularly employed professional, consistently assessed to tax, and it would be unrealistic to hold that he had no cash in hand at all. Taking into account the totality of circumstances, including the admitted additional evidence, the professional background of the assessee,

As regards the rate of tax applicable under section 115BBE of the Act, we find merit in the contention of the Ld. AR. In this regard we have gone through para nos.16 and 17 of the order of the Hon’ble Madras High Court in the case of S.M.I.L.E Microfinance Ltd. vs. ACIT (Supra), which is to the following effect:

On perusal of the above, we find that the Hon’ble High Court has categorically held that the amendment enhancing the rate of tax from 30% to 60% is applicable for the transactions entered w.e.f. 1st April 2017 and not prior to the said cutoff date.

In the result, the appeal filed by the assessee is partly allowed.