RAMBABU BAMMIDI,VISAKHAPATNAM vs. INCOME TAX OFFICER, WARD-3(1), VISAKHAPATNAM
Facts
The assessee, engaged in the ceramic tiles business, filed his return declaring income under Section 44AD. His case was selected for limited scrutiny due to large cash deposits. The Ld. AO found total cash deposits of Rs. 1,30,04,133/- and added Rs. 59,80,000/- as unexplained under Section 69A read with Section 115BBE.
Held
The Ld. CIT(A) upheld the AO's addition of Rs. 59,80,000/- for unexplained cash deposits, which the Tribunal also confirmed due to lack of evidence from the assessee. However, regarding the additional ground, the Tribunal held that the revised tax rate of 60% under Section 115BBE applies only from 01.04.2017, meaning the earlier 30% rate is applicable for the transactions in question, relying on Madras High Court and Ahmedabad Tribunal decisions.
Key Issues
1. Whether cash deposits of Rs. 59,80,000/- were unexplained and taxable under Section 69A read with Section 115BBE. 2. Whether the enhanced tax rate of 60% under Section 115BBE is applicable retrospectively or only from 01.04.2017.
Sections Cited
143(3), 44AD, 143(2), 142(1), 133(6), 69A, 115BBE, 250, 270A, 271AAC, 271AAB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, VISAKHAPATNAM “DIVISION” BENCH, VISAKHAPATNAM
Before: SHRI K. NARASIMHA CHARY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
आदेश /O R D E R
PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER: 1. This appeal is Filed by the assessee against order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal centre, Delhi [hereinafter in short “Ld.CIT(A)”] vide DIN & Order
I.T.A.No.145/VIZ/2024 Rambabu Bammidi No.ITBA/NFAC/S/250/2023-24/1060158529(1) dated 27.01.2024 for the A.Y.2017-18 arising out of the order passed under section 143(3) of the Income Tax Act, 1961 (in short „Act‟) dated 30.12.2019.
Brief facts of the case are that, assessee is an individual filed his return of income on 29.03.2018 admitting a total income of Rs. 5,35,390/-. Assessee is engaged in the business of trading in ceramic tiles in the name of proprietorship concern namely Mahalaxmi Enterprises and declared business income of Rs.8,85,392/- being 10% of the gross turnover of Rs.88,83,920/- under the provisions of section 44AD of the Act. The case was selected for limited scrutiny under CASS for the reason “large cash deposits in the bank accounts during the year”. Accordingly, notice under section 143(2) dated 30.08.2018 was issued. Thereafter notice under section 142(1) of the Act was issued on 19.02.2019 and 31.10.2019 calling for details. Since assessee failed to comply with the notice, show-cause notice dated 26.11.2019 was issued and served on the assessee. Meanwhile notice under section 133(6) of the Act was issued to the respective banks for bank account statements and on perusal of the same Ld.Assessing Officer [hereinafter in short “Ld. AO"] observed that assessee has deposited cash of Rs. 1,30,04,133/- during the year. Another show-cause notice dated 20.12.2019 was issued to explain the source of cash deposits. Assessee in response to the notice filed its submissions. After considering the submissions,
Page No. 2
I.T.A.No.145/VIZ/2024 Rambabu Bammidi Ld. AO held that the amount of Rs. 59,80,000/- was remained unexplained and brought to tax under section 69A r.w.s. 115BBE of the Act.
On being aggrieved by the order of the Ld. AO, assessee filed an appeal before Ld. CIT(A). Before Ld. CIT(A), assessee finally responded to the notice of hearing dated 28.12.2023 by filing the reply on 05.01.2024. Considering the submissions of the assessee Ld. CIT(A) confirmed the addition made by the Ld.AO on the ground that no evidences has been produced for the cash deposits from miscellaneous receipts.
On being aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising following grounds of appeal : -
“1. That under the facts and circumstance of the case the order passed u/s 143(3) dt.30.12.2019 by ITO ward-3(1) Visakhapatnam, and that was upheld by the Ld.CIT (A) NFAC (in short Ld. CIT(A)) u/s 250 of the IT Act is contrary to the facts of the case and provisions of law. 2. The Ld. CIT(A) failed to appreciate the submissions of the assessee in the right perspective and summer the concluded upheld the decision of the AO stating that cash deposits of Rs.59,80,000/- have not been explained properly. 3. The Id. CIT(A) is not correct in disregarding the sources explained for the amount of Rs.59,80,000/- from out of: i)repayment of loans ii) Realization from debtors iii) loans borrowed iv) amounts received towards works. 4. The Ld. CIT(A) failed to take note that the evidences filed justifying the cash deposits have not been considered in the right manner therefore the consequential decision rejecting the claim of the assessee is against the provisions of law. 4. For these and other reasons that are to be urged at the time of hearing of the case the appellant submits that the additions made by the AO and sustained by Ld. CIT(A) are liable to be dismissed.”
Page No. 3
I.T.A.No.145/VIZ/2024 Rambabu Bammidi 5. Assessee also raised an additional legal ground as follows: -
“1. 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.”
The core issue of the original ground is with respect to addition of Rs.59,80,000/-. On this issue Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that the cash was received partly from repayment of loan given to various persons during the earlier years and loan from relatives, realization from opening debtors and Rs.16,00,000/- collected in cash for payment to masons.
Neither before us, no evidences have been produced by the Ld.AR substantiating the cash receipts.
Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] relied on the order of the Revenue Authorities.
We have heard both the sides and perused the material available on record. It is an undisputed fact that assessee has made total cash deposits of Rs.1,30,,04,133/- into the various bank accounts during the impugned assessment year. However, the assessee could not substantiate the cash deposits by any documentary evidences before the Revenue Authorities. Assessee has simply stated that he has given interest free hand loans amounting to
Page No. 4
I.T.A.No.145/VIZ/2024 Rambabu Bammidi Rs.25,50,000/- during the previous years and which was realised during the impugned assessment year. Further we also find that the assessee has stated that he has received Rs. 8,60,000/- from the opening debtors and has also accepted loans amounting to Rs. 9,70,000/- and has collected Rs.16,00,000/- which is to be paid for masons for labour works. The assessee never stated it is out of the business receipts. No documentary evidences were produced even before us substantiating the cash receipts from various sources as stated by the assessee. Ld. CIT(A) in Para No. 5.4 and 5.5 observed as follows: -
“5.4 Submissions of the appellant are carefully considered. It appears that the appellant has completely misunderstood the reasons on which the A.O. has made the addition. A perusal of the extracts of the assessment order, as reproduced in para 5.2 above, clearly show that no addition was made by the A.O. on the turnover part of cash deposits; the addition was made in respect of the other kind of receipts, as admitted by the appellant himself in the assessment proceedings: (i) An amount of Rs. 25,50,000/- received by him in cash as repayment of loan lent in earlier years; (ii) Amount of Rs. 8,60,000/- was realised from opening debtors; (iii) An amount of Rs. 9,70,000/- received as loan in cash from relatives; and (iv) An amount of Rs. 16,00,000/- collected in cash for payment to masons etc. No evidence in support of all these transactions was brought on record. In fact, details provided are also only sketchy; for example, in respect of repayment of loans in cash, from whom these repayments have been received and when the loan was extended has not been explained. Similarly, no details in respect of claimed transactions mentioned in (ii), (iii), (iv) above have been furnished. 5.5 It is also noted that during the year, the appellant had total turnover of only Rs.88,83,920/- while total cash deposits he made in F.Y.2016-17 were of Rs. 130,04,133/-. Further, during the assessment
Page No. 5
I.T.A.No.145/VIZ/2024 Rambabu Bammidi proceedings, the appellant himself claimed that out of the above cash deposited, only an amount of Rs. 13,01,500/- was through cash sales (which was not added by the A.O); rest of the amount he sought to explain through the manner as mentioned in point (i) to (iv) in para 5.4 above. Under such circumstances, the appellant's submissions which are almost entirely on the issue of cash deposited by a tax payer covered u/s 44AD are irrelevant, and do not help his case in any way. The case laws relied up on by the appellant are all on the issue where an assessee, covered u/s.44AD, deposits cash less than his declared turnover, in bank account and seeks to explain the source of the same as part of business turnover. In no way, these case laws are applicable to the facts of the present case where the appellant has himself admitted that the source of the impugned cash was not out of his business turnover but from miscellaneous receipts mentioned in para 5.4 above.” 10. Given these facts and circumstances the case, we find that Ld. CIT(A) has rightly confirmed the additions made by the Ld. AO amounting to Rs.59,80,000/- and hence we do not find any infirmity in the order of the Ld.CIT(A).
With respect to the additional ground raised by the assessee, assessee placed reliance on the order of the Co-ordinate Bench of the Ahmadabad Tribunal in the case of Naranbhai Samatbhai Bharwad v. ITO in ITA No.272/AHD/2024 dated 03.01.2025. The contention of the assessee is section 115BBE of the Act was amended with respect to the tax imposing from 30% to 60% w.e.f 01.04.2017 onwards. The Ld.AR contended that therefore the imposing of tax @60% was applicable only to the transactions from 01.04.2017 onwards and cannot be applied retrospectively.
Per contra, Ld. DR relied on the orders of the Revenue Authorities.
Page No. 6
I.T.A.No.145/VIZ/2024 Rambabu Bammidi 13. We have heard both the sides and perused the material available on record regarding the additional ground. In the case of Naranbhai Samatbhai Bharwad v. ITO (supra) relied on by the assessee, we find that the Co-ordinate Bench of Tribunal in Para No. 12 held as follows: -
“12. We find that the issue stands settled by the order of the Hon‟ble High Court of Madras in the case of SMILE Microfinance Limited Vs. the Assistant Commissioner of Income Tax. The relevant extract of the order is reproduced 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 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.
Page No. 7
I.T.A.No.145/VIZ/2024 Rambabu Bammidi 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 sothat 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 PROPOSED PROVISIONS EXISTING PROVISIONS General Provision For PENALTY (Section270A) No changes proposed penalty Under-reporting - @f0°S of tax Misreporting-@50% of tax (Under- reporting/ Misreporting income is normally difference between returned income and assessed income) Provisions for & of TAX (section 115BBE) TAX (Section115BBE) taxation penalty Flat rate of tax @30% surcharge + cess unexplained cre.dit, + Flat rate of tax @60% investment, cash surcharge @25%]‟tax (i.e (No expense, deductions, set-off is allowed) and other assets 15% of such income). So total incidence of tax is 75% approx. (No expense, deductions, set- off is allowed).
Page No. 8
I.T.A.No.145/VIZ/2024 Rambabu Bammidi PARTICULARS PROPOSED PROVISIONS EXISTING PROVISIONS PENALTY (Section271AAC) If Assessing Officer determines income referred to in section 1I5BBE, penalty @l0% of tax payable in addition to tax ("including surcharge) of 75%. Penalty for search Penalty (271AAB) Penalty (27IAAB) Seizure cases. (i) 30% of income ,if admitted, (i) 10% of income, if admitted, returned and returned and taxes are paid taxes are paid (ii) 20% of income, if not admitted but Not (ii)60% of income in any returned and taxes are paid other (iii) 60%ofincomeinanyothercase Undisclosed income in the form New Taxation and Investment Regime Taxation Investment of cash & bank deposit can be Regime and for declared Pradhan Mantri Garib Kalyan Yojana,2016‟ (A) Tax, Surcharge, (PMGKY) Penalty Payable tax @ 30% of income declared Surcharge @33% of 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.
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, respectfully following he above decision of Hon‟ble High Court of Madras, the ground of appeal of the assessee on the issue of section 115BBE of the Act is hereby allowed.”
Respectfully following the decision of the Hon‟ble Madras High Court
relied on by the Co-ordinate Bench of Ahmadabad Tribunal, we allow this
Page No. 9
I.T.A.No.145/VIZ/2024 Rambabu Bammidi ground of appeal raised by the assessee on the issue of section 115BBE of the Act.
In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 07th March, 2025.
Sd/- Sd/- (के.नरधिम्हाचारी) (एि बालाकृष्णन) (K.NARASIMHA CHARY) (S. BALAKRISHNAN) न्याधयक िदस्य/JUDICIAL MEMBER लेखा िदस्य/ACCOUNTANT MEMBER Dated: 07.03.2025 Giridhar, Sr.PS
आदेश की प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to :- 1. निर्धाऩरती/ The Assessee : Rambabu Bammidi Plot No. 30, Sector - 6 MVP Colony Visakhapatnam – 530017 Andhra Pradesh 2. रधजस्व/ The Revenue : Income Tax officer – Ward – 3(1) Income Tax Office Infinity Towers, Sankaramatam Road Visakhapatnam – 530016 Andhra Pradesh 3. The Principal Commissioner of Income Tax 4. नवभधगीयप्रनतनिनर्, आयकरअपीलीयअनर्करण, नवशधखधपटणम /DR,ITAT, Visakhapatnam 5. The Commissioner of Income Tax गधर्ाफ़धईल / Guard file 6. //True Copy// आदेशधिुसधर / BY ORDER
Sr. Private Secretary ITAT, Visakhapatnam
Page No. 10
