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Facts
The assessee appealed against the assessment order framed on a best judgment basis. The Assessing Officer added Rs.3.19 Lacs as unexplained income under Section 115BBE, which was confirmed by the CIT(A). The assessee could not substantiate the source of these funds.
Held
The Tribunal held that the higher rate of tax under Section 115BBE would apply only from 01.04.2017 onwards. For transactions prior to this date, the erstwhile rate of 30% would apply. Therefore, the Assessing Officer was directed to apply the normal rate of tax on the addition of Rs.3.19 Lacs.
Key Issues
Whether the enhanced tax rate under Section 115BBE is applicable to transactions prior to 01.04.2017, or only to those from that date onwards.
Sections Cited
144, 69, 115BBE, 143(3)
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Income Tax Appellate Tribunal, “SMC” BENCH, CHANDIGARH
(िनधा�रण वष� / Assessment Year: 2017-18) Shri Dilbag Singh ITO Ward-1 Kaithal Vill. Bhunna, PO Guhla बनाम/ Vs. Haryana 136043 Kaithal, Haryana – 136043 �थायीलेखासं./जीआइआरसं./PAN/GIR No. FYIPS-8978-G (अपीलाथ�/Appellant) : (��थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : None ��थ�कीओरसे/Respondent by : Sh. Vivek Vardhan (Addl. CIT) – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 01-12-2025 घोषणाकीतारीख /Date of Pronouncement 01-12-2025 : आदेश / O R D E R
Aforesaid appeal by assessee for Assessment Year (AY) 2018- 19 arises out of an order of learned Addl. / Joint Commissioner of Income Tax (Appeals), Coimbatore [CIT(A)] dated 04-03-2025 in the matter of an assessment framed by Ld. Assessing Officer [AO] on best judgment basis u/s 144 of the Act on 11-12-2019. The registry has noted small delay of 71 days, the condonation of which has been sought by the assessee on the strength of condonation petition and affidavit. Considering the contents of the same as well as the period of delay, the delay is condoned.
At the time of hearing, none appeared for assessee. The Ld. Sr. DR pleaded for dismissal of the appeal. Upon perusal of assessment order, it could be seen that the assessee deposited cash of Rs.14.19 Lacs during demonetization period. The Ld. AO, after granting benefit of agricultural income as established by the assessee, added remaining unexplained amount of Rs.3.19 Lacs u/s 69 r.w.s. 115BBE of the Act. The Ld. CIT(A) confirmed the assessment since the assessee could not substantiate the source of Rs.3.19 Lacs. Aggrieved, the assessee is in further appeal before Tribunal.
It is clear from assessee’s replies before lower authorities that out of cash deposits of Rs.14.19 Lacs, the assessee could not establish the sources of Rs.3.19 Lacs. Even before me, no new material has been placed to differ with the view of lower authorities. However, the higher rate of tax as prescribed u/s 115BBE would not apply in this year as per the decision of Hon’ble High Court of Madras (Madura Bench) in S.M.I.L.E. Microfinance Ltd. vs. ACIT (WP (MD) No.2078 of 2020 dated 19-11-2024) holding as under: - 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 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 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; xxxxx xxxxx 17. 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. The Hon’ble Court held 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. Respectfully following the same, I direct Ld. AO to apply normal rate of tax on addition of Rs.3.19 Lacs.
The appeal stand partly allowed accordingly. Order pronounced on 01st December, 2025.