Loading judgment…
Facts
The assessee, an agriculturist, appealed an ex-parte order by the Ld. CIT(A) which upheld an AO's addition of Rs. 10,19,500/- for unexplained cash deposits during the demonetization period, taxed at 60% under section 115BBE. The assessee claimed the deposits were from agricultural income, but the appeal to CIT(A) was dismissed due to non-compliance caused by his Income Tax Practitioner's personal issues and non-receipt of notices. The current appeal before the tribunal was delayed by 367 days.
Held
The tribunal condoned the 367-day delay. It admitted an additional ground challenging the applicability of the 60% tax rate under the amended Section 115BBE for AY 2017-18. Following a prior Co-ordinate Bench decision and the Madras High Court's favorable view, the tribunal directed the AO to re-determine the tax liability on the addition under Section 69A at 30% as per the pre-amended Section 115BBE. Other grounds were dismissed as not pressed or academic.
Key Issues
1. Condonation of delay in filing the appeal. 2. Applicability of the amended Section 115BBE (60% tax rate) for Assessment Year 2017-18 versus the pre-amended rate (30%) on unexplained cash deposits under Section 69A.
Sections Cited
Section 250, Income Tax Act, 1961, Section 147, Section 144, Section 250(6), Section 143, Section 115BBE, Section 69A, Section 271AAC, Section 142, Section 142(1), Section 68, Section 69, Section 69B, Section 69C, Section 69D, Section 139
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, VISAKHAPATNAM “SMC” BENCH, VISAKHAPATNAM
Before: SHRI S BALAKRISHNAN, HONBLE & SHRI SANDEEP SINGH KARHAIL, HONBLE
आदेश /O R D E R
PER SANDEEP SINGH KARHAIL, JUDICIAL MEMBER:
The assessee has filed the present appeal against the impugned order dated 28.03.2024, passed under section 250 of the Income Tax Act, 1961 (in short ‘Act’) by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal centre, Delhi [hereinafter in short “Ld.CIT(A)”], for the A.Y. 2017-18.
Vallabhai Patel Kottapalli 2. The present appeal is delayed by 367 days. Along with the appeal, the assessee has filed an application seeking condonation of delay, which is duly supported by his affidavit. In the aforesaid application, the assessee submitted that he is an agriculturist by profession and derives income solely from agricultural operations. It is further submitted that since he is unaware of the provisions of the Income Tax Act, he assigned the task of filing the return of income and attending to the assessment proceedings to an Income Tax Practitioner. It is further submitted that even against the assessment order making an addition of Rs. 10,19,500/-, he requested his Income Tax Practitioner to take the necessary steps, and accordingly, an appeal was filed before the Ld. CIT(A) on 28.12.2019. The assessee further submitted that his Income Tax Practitioner provided his email ID and the assessee’s postal address in Form No. 35 for communication. The assessee further submitted that he neither received a hearing notice nor received the ex parte order passed by the Ld. CIT(A) due to non-compliance with the hearing notices. It is further submitted that only in the second week of May, 2025, through a phone call from the Income Tax Department asking him to pay the outstanding demand dues, he became aware of the impugned order passed by the Ld. CIT(A). Thereafter, he requested his Income Tax Practitioner, who, after an enquiry, came to know that the appeal had been dismissed more than a year ago. It is further submitted that due to personal and matrimonial disturbances, his Income Tax Practitioner could not respond to the notice and failed to track the appeal before the Ld. CIT(A). In this regard, the Page No. 2 Vallabhai Patel Kottapalli assessee has also placed on record the affidavit of his Income Tax Practitioner. Accordingly, the assessee prayed that the delay in filing the present appeal is neither wilful nor deliberate but has occurred due to his tax practitioner.
Having considered the submissions of the assessee in his application seeking condonation of delay and perusal of the affidavit of the assessee’s Income Tax Practitioner, we are of the considered view that there was sufficient cause which prevented the assessee from filing the present appeal within the prescribed limitation period. Accordingly, we condone the delay and proceed to decide the present appeal on merits.
In this appeal, the assessee has raised following grounds of appeal: -
1. That on the facts and circumstances of the case and in law, the orders passed u/s 147 r.w.s.144 02-12-2019 of the IT Act, 1961, dt. 02-12- 2019, that was confirmed by the Ld. CIT(A), NFAC vide orders passed u/s 250 of the IT Act, dt. 28-03-2024, are contrary to the facts of the case and the provisions of law, and therefore, deserve to be set aside.
2. That the impugned appellate order has been passed in violation of the provisions of section 250(6) of the IT Act, 1961, as the Ld. CIT(A) failed to dispose of the appeal on merits and did not address the specific contentions. Hence, the order is bad in law and deserves to be quashed.
3. That the Ld. CIT(A) failed to grant reasonable and adequate opportunity of being heard to the appellant, thereby violating the principles of natural justice.
4. That the Ld. CIT(A) has erred in law and on facts in confirming the impugned order passed u/s 143 r.w.s 144 of the IT Act, 1961, wherein, the issue relates to cash deposits of Rs. 11,69,500/- alleged to be unexplained, without properly appreciating or considering the material available on record.
Page No. 3 Vallabhai Patel Kottapalli 5. For these and other reasons that may be urged at the time of hearing, the appellant prays that the orders passed u/s 250 of the IT Act be set aside.”
The assessee has also raised the following additional ground of appeal: -
“The Finance Act 2017 introduced an amendment to Section 115BBE of the IT Act, which set a higher tax rate of 60% through the Taxation (Second Amendment) Act, 2016. This amended rate is applicable only for assessments conducted from 01.04.2017 onward. Therefore, it is not permissible to apply the revised rate to the assessment year in question.”
Since the issue raised by way of additional ground is a legal issue which can be decided on the basis of the material available on record, therefore the same is admitted, in view of the ratio laid down by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (19988) 229 ITR 383 (SC).
7. During the hearing, Ld. Authorised Representative [hereinafter “Ld.AR”], at the outset, submitted that he is not pressing the grounds raised on merits and only wishes to press the additional ground raised by the assessee. Ld.AR submitted that the amendment to section 115BBE of the Act by the Taxation Laws (Second Amendment) Act, 2016, w.e.f. 01.04.2017, levying tax @60% is not applicable to the year under consideration. In this regard, the Ld.AR placed reliance upon the decision of the Hon’ble Madras High Court in the case of S.M.I.L.E Microfinance Limited v. The Assistant Commissioner of Income-tax, WP (MD) No. 2078 of 2020, dated 19.11.2024.
Page No. 4 Vallabhai Patel Kottapalli 8. On the contrary, Ld. Departmental Representative [hereinafter in short “Ld. DR”] placed reliance upon the decision of the Hon’ble Kerala High Court in the case of Maruthi Babu Rao Jadav v. ACIT [2025] 171 taxmann.com 463 (Kerala) and submitted that provisions of section 115BBE of the Act have been amended w.e.f. 01.04.2017, increasing the rate of tax is applicable from the A.Y.2017-18.
We have considered the submissions of both sides and perused the material available on record. In the present case, as the assessee did not file his return of income for the year under consideration, following the Standard operating Procedure contained in CBDT Instruction, notice under section 142 of the Act was issued to the assessee calling for return of income for the year under consideration, as it was found that the assessee has made cash deposits in its bank account during the demonetization period. However, the assessee did not file his return till the end of the assessment year. Subsequently, a statutory notice under section 142(1) of the Act was issued asking the assessee to furnish the sources of cash deposits made during the demonetization period and also to substantiate the same with evidence. However, the assessee also failed to comply of such notices. Accordingly, a notice was issued to the assessee to show cause as to why the total deposits made by him during the Financial Year 2016-17 should not be assessed to tax, and the assessment was completed ex parte under section 144 of the Act, in the absence of any information from the assessee. In response, the assessee
Page No. 5 Vallabhai Patel Kottapalli submitted that he is an agriculturist and is carrying on agriculture on leasehold lands and also on his own land. The assessee submitted that the cash deposits are made out of the agricultural income, and he has no other sources of income. Thereafter, another notice under section 142(1) of the Act was issued to the assessee to furnish the details of crops grown, income yield, details of persons to whom the crop was sold, etc. In response thereto, the assessee submitted copies of Pattadar Pass Book and explained that the main crop grown is Paddy, besides Banana, and the crop yields come in a periodical manner in a year. The assessee further submitted that he received gross income of Rs. 26,31,520/- for the two crops and after meeting the expenses, the net income was Rs.11,00,220/- and from Banana crop the net income would be Rs.3,23,040/-.
Ld. AO vide order dated 02.12.2019 passed under section 144 of the Act, disagreed with the submissions of the assessee and made an addition of R.10,19,500/- treating the deposits made during the demonetization period as unexplained under section 69A of the Act, by observing as follows: -
“6. The explanation furnished by the assessee has been verified with reference to the copies of pattadar pass books and copies of bank accounts. As verified from the Bank statements, it is observed that during the demonitisation period, the assessee has made cash deposits to the tune of Rs. 11,69,500/- in his three bank accounts as mentioned above. In his reply, the assessee submitted that his net agricultural income from 32.16 acres was Rs. 14,23,260/-. As mentioned by the assessee the sale proceeds of paddy sales were directly credited to his bank account No. 10260010100161 to the tune of Rs.17,72,980/- on three different dates, ie., Rs.8,70,000/- on 17-05-2016, Rs.4,68,100/- on 17-12-2016 & Rs.4,34,850/- on 11-01-2017 by the A P Civil Supplies Department. 'However, in his letter, the assessee stated that the net income received from paddy sales was Rs.11,00,220/-. On a perusal of the same, it is clear that the entire paddy
Page No. 6 Vallabhai Patel Kottapalli was sold to AP Civil Supplies and the assessee has received money directly to his bank account. Further on verification of the Bank account, it is observed that the cash withdrawals made by the assessee for the last three months are very meager and sufficient only to meet the day-to-day needs of the assessee.
Considering the above, it is felt that the cash deposits made by the assessee during the demonetization period are not out of the sale of agricultural produce as the same were directly credited to his Bank account by the AP Civil Supplies Department and no withdrawals were made by the assessee immediately within the three preceding months. The claim of the assessee that some of the paddy was sold to the local vendors and amount received in cash is far from the reality as the amount credited to the bank account of the assessee by the AP Civil supplies Department is more than the income said to have been derived by the assessee. However, the assessee claimed that bananas were sold to the local vendors and the income received by the assessee is Rs.3,23,040/-. However, as verified from the information gathered from the website, the farmers who are cultivating banana crop get net return of Rs.40,000/- to Rs.50,000/- per acre by taking an average of 25 KG per fruit bunch and ten tons yield per acre. Consideration, it is felt that an amount of Rs. 1,50,000/- for the 2.92 acres is the reasonable amount as sale consideration. Hence, it is felt that the sources for the cash deposits to the extent of Rs. 1,50,000/- can be treated as explained and the balance of Rs.10,19,500/- is treated as deposited through unexplained sources and to be brought to tax u/s 69A of the I T Act, 1961. Since the assessee has not reported these transactions and concealed the income, penalty proceedings u/s 271AAC are attracted and initiated separately.”
Accordingly, the Ld. AO taxed the total income of the assessee under section 115BBE of the Act @60%.
The Ld. CIT(A), vide impugned order, dismissed the appeal filed by the assessee due to non-appearance of/on behalf of the assessee, as the assessee failed to comply with the hearing notices.
Being aggrieved, the assessee is in appeal before us and has only challenged the levy of tax @60% under section 115BBE of the Act, as amended w.e.f. 01.04.2017.
Page No. 7 Vallabhai Patel Kottapalli 14. We find that a similar issue came up for consideration before the Co- ordinate Bench of the Tribunal in the case of Sathi Mangayamma v. ITO in vide order dated 30.06.2025, the Co-ordinate Bench, after considering the decisions, as relied upon before us by both sides, observed as follows:
“16. We shall now deal with the Ld. AR's claim that the A.O. had erred in levying tax as per the special rates contemplated u/s 115BBE of the Act i.e. @60%. The Ld.AR submitted that as the amended provisions of Section 115BBE had been made applicable only from A.Y. 2018-19 and onwards, therefore, there was no justification for the A.O. to have applied the same to the addition made in the hands of the assessee for the year under consideration i.e. A.Y. 2017-18. The Ld. AR to support his aforesaid contention relied on the judgment of the Hon’ble High Court of Madras in the case of S.M.I.L.E Microfinance Limited Vs. The Assistant Commissioner of Income-tax, WP (MD) No. 2078 of 2020, dated 19.11.2024 and the order of the Tribunal in the case of Manju Vani Chigurupati Vs. ACIT, Circle 2(1), Vijaywada, dated 07.03.2025.
We have thoughtfully considered the aforesaid claim of the Ld. AR in the backdrop of the judicial pronouncements relied upon by him. Before proceeding any further, we may herein observe that Section 115BBE of the Act was substituted by the Taxation Laws (Second Amendment) Act, 2016 w.e.f. 01.04.2017. Prior to the substitution, subsection (1) of Section 115BBE read as under: “(1) Where the total income of an assessee— (a) includes any income referred to in section 68, 69, 69A, 69B, 69C or 69D and reflected in the return of income furnished under section 139; or (b) determined by the assessing officer includes any income referred to in section 68, 69, 69A, 69B, 69C or 69D, if such income is not covered under clause (a), the income-tax payable shall be the aggregate of— (i) the amount of income-tax calculated on the income referred to in clause (a) and (b), at the rate of thirty per cent.; and (ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).”
Page No. 8 Vallabhai Patel Kottapalli Thereafter, the legislature in all its wisdom had vide the Taxation Laws (Second Amendment) Act, 2016 w.e.f. 01.04.2017 substituted the earlier provision which thereafter read as under: “(1) Where the total income of an assessee— (a) includes any income referred to in section 68, 69, 69A, 69B, 69C or 69D and reflected in the return of income furnished under section 139; or (b) determined by the Assessing Officer includes any income referred to in section 68, 69, 69A, 69B, 69C or 69D, if such income is not covered under clause (a), the income-tax payable shall be the aggregate of— (i) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and (ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).”
We find that on the issue of the year of applicability of the postamended Section 115BBE(1) of the Act, i.e. as had been made available on the statute vide the Taxation Laws (Second Amendment) Act, 2016 w.e.f. 01.04.2017 there are conflicting views of the non-jurisdictional High Courts. On the one hand the Hon’ble High Court of Kerala in the case of Maruthi Babu Rao Jadav Vs. The Assistant Commissioner of Income-tax, Central Circle 1, Kozhikode, WA No. 984 of 2019, dated 23.09.2020 while dealing with the issue as to whether or not the enhanced rate of tax liability contemplated in the post-amended Section 115BBE of the Act as made available on the statute vide the Taxation Laws (Second Amendment) Act, 2016, dated 15.12.2016 w.e.f. 01.04.2017 will apply to Assessment Year 2017-18, has answered in the affirmative; but on the other hand the Hon’ble High Court of Madras in the case of S.M.I.L.E Microfinance Limited Vs. The Assistant Commissioner of Income-tax, WP (MD) No. 2078 of 2020, dated 19.11.2024, has after referring to the Taxation Laws (Second Amendment) Bill, 2016, inter alia, concluded 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. It was further observed by the High Court that for the prior transactions the revenue is empowered to impose only 30% rate of tax.
Considering the aforesaid conflicting views of the non-jurisdictional High Courts, we are guided by the judgment of the Hon’ble High Court of Bombay in the case of K. Subramanian & Ors. Vs. Siemens India Ltd. & Anr. (1985) 156 ITR 11 (Bombay) that in case of conflicting views of the non-jurisdictional High Courts the view that was favorable to the assessee and not against him is to be adopted. We thus, based on the aforesaid
Page No. 9 Vallabhai Patel Kottapalli position of law respectfully follow the view taken by the Hon’ble High Court of Madras in the case of S.M.I.L.E Microfinance Limited Vs. The Assistant Commissioner of Income-tax (supra), and direct the AO to determine the tax liability on the addition of Rs. 20 lac (supra) made in the hands of the assessee u/s 69A of the Act by applying the tax rate of 30% as was contemplated in the preamended Section 115BBE of the Act. The additional ground of appeal is allowed in terms of our aforesaid observations.”
15. Therefore, respectfully following the decision of the Co-ordinate Bench of the Tribunal cited (supra), we direct the Ld. AO to determine the tax liability on the addition made under section 69A of the Act by applying the tax rate @30% as per the pre-amended provisions of section 115BBE of the Act. Accordingly, the additional ground raised by the assessee is allowed, while the grounds raised in the appeal on merits are dismissed as not pressed. In view of the aforesaid findings, the other grounds raised in the appeal are rendered academic, and therefore, are dismissed.
In the result, the appeal by the assessee is partly allowed.
Order pronounced in the open court on 19th September, 2025.