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Facts
The assessee deposited Rs. 24,95,000/- in her bank account during the demonetization period. The Assessing Officer (AO) treated this as unexplained cash credit under Section 68 and taxed it at 60% under Section 115BBE, determining total income at Rs. 26,54,140/-. The assessee argued that the cash was from regular books of accounts and earlier withdrawals. The Commissioner of Income-tax (Appeals) partially allowed the appeal, deleting Rs. 8,63,000/-.
Held
The Tribunal held that the enhanced rate under Section 115BBE is not applicable for AY 2017-18 for transactions prior to 01.04.2017. It allowed a further sum of Rs. 4,00,000/- from the withdrawal of Rs. 8,75,000/- made on 09.02.2016, in addition to the Rs. 8,63,000/- allowed by the CIT(A), directing the AO to delete Rs. 12,63,000/-.
Key Issues
Whether cash deposits made during demonetization period are unexplained and taxable under Section 115BBE? Whether Section 115BBE is applicable retrospectively for AY 2017-18?
Sections Cited
Section 68, Section 115BBE, Section 143(3), Section 44AB
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Before: SHRI SANJAY GARG & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), dated 27.09.2024, by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘CIT(A)’] for the Assessment Year (AY) 2017-18, which in turn arises out of assessment order passed by Assessing Officer (AO for short) u/s 143(3) of the Act on 15.12.2019.
Grounds of appeal
raised by the assessee are as under: “1. The learned CIT(A) has erred by just partly allowing the appeal filed by the assessee. The Learned CIT(A) has deleted the addition of Rs.8.63,000/- only against Rs.24,95,000/- as claimed by the assessee, on account of cash deposited in bank during the period of demonetization.
2. The learned CIT(A) has failed to appreciate the fact that Section 68 r.w.s. 115BBE is not applicable in this case as cash deposits in the bank are from regular books of accounts maintained by the assessee, then such transactions /AY.2017-18 Hemlata Babubhai Patel cannot be said to be unexplained particularly when the AO has not disputed the cash book submitted or failed to reject the books of accounts and cash book before denying the opening balance of cash on Hand as on 01/04/2016.
3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”
3. The appellant has raised an additional ground before the Tribunal, which is as under: “On the facts and circumstances of the case as well as law on the subject, the assessing officer has erred in taxing the income u/s 115BBE @ 77.25% by applying the newly substituted S.115BBE retrospectively instead of taxing it at 35.54 % as per the old provisions of S.115BBE.”
The appellant submitted that omission of above ground in the main grounds of appeal
was purely unintentional. It is a legal issue which may be admitted in view of the decisions of Hon’ble Supreme Court in cases of National Thermal Power Co. Ltd. vs. CIT, (1998) 229 ITR 383 (SC) and Jute Corporation of India Ltd. vs. CIT 187 ITR 688 (SC). We find that the AO has levied tax at the enhanced rate of 60% u/s 115BBE of the Act, in the assessment order passed u/s 143(3) dated 15.12.2019. The appellant had also raised a ground contesting application of the provisions of Section 115BBE of the Act before the CIT(A). Hence, the additional ground raised by the appellant arises from the facts which are on record in the assessment proceedings. The Hon’ble Supreme Court in case of National Thermal Power Co. Ltd.(supra) has held that where the Tribunal is only required to consider the question of law arising from the facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the /AY.2017
18. Hemlata Babubhai Patel tax liability of the assessee. Since the facts are on record, respectfully following the decision of the Hon’ble Supreme Court cited supra, the additional ground raised by the appellant is admitted.
5. Brief facts of the case are that the assessee filed her return of income for AY.2017-18 on 08.02.2018, declaring total income of Rs.1,59,141/-. The case was selected for scrutiny under CASS. Various notices and show cause notice were issued through speed post and e-mail. In response to the notices, the assessee filed details, which are discussed by AO at page 3 of the assessment order. The assessee had deposited Rs.24,95,000/- in her bank account No.02730100004039 maintained with Bank of Baroda during the demonetization period. The AO asked assessee to explain source of cash deposit along with documentary evidence. The assessee furnished copy of cash book and bank statement. The AO noticed that the assessee had shown opening cash balance of Rs.16,72,523/- as on 01.04.2016 and has shown household withdrawal of Rs.66,500/-. Further, the assessee had not furnished any details/documents in support of opening cash balance. The AO asked assessee as to why cash of Rs.24,95,000/- deposited during 09.11.2016 to 30.12.2016 should not be added to the total income. The assessee submitted that opening balance of Rs.8,50,000/- was out of cash withdrawal on 09.02.2016 from her past savings. The AO observed that the assessee had shown opening cash of Rs.5,21,213/- as on 01.04.2012 and household withdrawal of Rs.98,238/-. Rs.85,721/-, Rs.85,721/- and Rs.65,000/- for various /AY.2017-18 Hemlata Babubhai Patel financial years. The AO further observed that the assessee had not furnished any justification as to why cash of Rs.8,50,000/- was withdrawn from the bank account and kept unused for a long time. The AO also observed that assessee was filing her return of income for AY 2016-17 in ITR-1 declaring salary income and rent income belatedly after the period of demonetization to justify the theory of cash deposit out of past savings but details of cash-in-hand was not intimated to the Department. Further, assessee filed return of income in ITR-3 for AY 2017-18 though she had similar nature of income. Hence, the cash deposited during demonetization period was undisclosed income of assessee. Therefore, the AO made addition of Rs.24,95,000/-, which was treated as unexplained cash credit u/s 68 of the Act and taxed the same @ 60% u/s 115BBE of the Act. The AO determined the total income of Rs.26,54,140/- against the returned income of Rs.1,59,141/-.
6. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The CIT(A) reproduced the submissions of the appellant, which are at pages 4 to 26 of the appellate order. The appellant furnished cash flow statement from 01/04/2012 to 08/11/2010, showing the cash in hand and cash withdrawals from the bank accounts. The opening cash in hand was of Rs.16,67,523 on 01/04/2016 and after showing cash withdrawals of Rs.3,63,000/-, Rs.5,00,000 on 27/10/2016 and 07/11/2016, prior to the demonetization, the cash-in-hand was Rs.25,69,023/-, which was explained as the source of cash deposit of Rs.24,95,000/-. The CIT(A) noticed that the /AY.2017-18 Hemlata Babubhai Patel appellant’s gross salary was Rs.3,00,000/- from M/s PAC Bio Fungbact Pvt. Ltd. and she declared total income of Rs.1,59,141/-. The appellant had not maintained any regular books of account and she was not liable for tax audit u/s 44AB of the Act. The claim of opening cash of Rs.5,21,213/- as on 01/04/2012 was not supported with any documents evidence. Further, the CIT(A) observed that there was no evidence in respect of the opening cash of Rs.5,21,213/- declared as on 01/04/2012, almost 4 years before the current previous year. Normally, cash is withdrawn from the bank account to meet day-to-day expenses in the absence of sufficient cash available in hand. Such cash is used to meet various expenses and are not available for redeposit in the bank account. Hence, the CIT(A) endorsed observation of the AO that the cash flow statement furnished by the assessee is not acceptable. However, the considering the proximity of the withdrawals of Rs.3,63,000/- on 27/10/2016 and Rs.5,00,000/- on 07/11/2016 prior to the demonetization, he allowed benefit of these two withdrawals from the addition of Rs.24,95,000/-, being total cash deposited demonetization period. The remaining addition was confirmed. He also upheld levy of tax at enhanced rate of 60% u/s 115BBE of the Act.
7. Further aggrieved by the order of CIT(A), the assessee has filed present appeal before the Tribunal. The ld. Authorized Representative (ld. AR) of the assessee submitted that the assessee maintains books of account and the cash-flow statement has been prepared and submitted before the lower /AY.2017-18 Hemlata Babubhai Patel authorities to explain the source of cash deposit of Rs.24,95,000/- during demonetization period. He submitted that assessee had declared income of Rs.15,97,834/- in her ITRs for AYs 2011-12 to 2017-18. The assessee is aged 67 years with medical problems, due to which she used to keep cash-in-hand for medical emergency. The AO was not sure under which section the assessment was to be made. Though, he has mentioned that total income is assessed u/s 144, he has passed the order u/s 143(3) of the Act. The assessee has shown household withdrawals of Rs.98,238/-, Rs.85,721/-, Rs.71,510/- and Rs.60,000/- for AYs 2013-14 to 2016-17 respectively. She had also withdrawn Rs.38,500/- upto 08.11.2016. The cash withdrawal is sufficient considering the other cash withdrawals of other family members including her husband, son, daughter-in-law and HUF of her son. The total withdrawals by these family members including the appellant were Rs.16,75,180/-, Rs.25,23,078/-, Rs.18,27,172/- and Rs.22,60,727/- for AYs 2013-14 to 2016-17 respectively. He submitted that the withdrawals from the bank in earlier years was kept as cash-in-hand. The Ld. AR submitted that the Revenue has not brought any material to suggest that the withdrawals made by the assessee was utilized for making some other payments. Hence, he requested to delete the addition sustained by the CIT(A).
8. On the other hand, learned Senior Departmental Representative (ld. Sr. DR) of the revenue supported the order of CIT(A). She submitted that the /AY.2017-18 Hemlata Babubhai Patel CIT(A) has fairly allowed relief on account of the withdrawals made before the demonetization period.
We have heard both the parties and perused the material available on record. We have also deliberated on the decisions relied upon by the Ld.AR. There is no dispute that assessee had deposited cash of Rs.1,95,000/- on 10.11.2016 and Rs.10,00,000/- and Rs.13,00,000/- on 21.11.2016. The appellant had prepared the cash-flow statement from 01.04.2012 to 08.11.2016, wherein she has shown cash withdrawals of Rs.23,29,799/- including Rs.8,63,000/- in the subject AY 2017-18. The CIT(A) has allowed benefit of cash withdrawal of Rs.8,63,000/- before demonetization period in the impugned assessment year 2017-18. He has, however, rightly observed that there was no evidence regarding opening cash of Rs.5,21,000/- as on 01.04.2012. The appellant has not furnished any fresh material to counter the finding of AO and CIT(A). We also find that appellant had withdrawn of Rs.2,50,000/- each on 26.08.2014 and 02.09.2014 and another sum of Rs.8,75,000/- on 09.02.2016. It is difficult to accept the claim of the appellant that money withdrawn in F.Y 2014 were available for redeposit during demonetization period. Such explanation runs counter to the theory of “preponderance of probability” which has been well recogniozed by the Hon’ble Supreme Court in case of CIT vs. Durga Prasad More (1971) 82 ITR 540 SC, Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC) and NIR Iron and Steels Pvt. Ltd. vs. PCIT (TS-5030-SC-2019-O). However, we also find that the assessee /AY.2017-18 Hemlata Babubhai Patel had withdrawn Rs.8,75,000/- on 09.02.2016, 9 months prior to demonetization period. The appellant has claimed that the said amount was available as cash- in-hand for redeposit in her bank account during demonetization period. Such explanation cannot be accepted in toto. The CIT(A) has already allowed relief of Rs.8,63,000/- withdrawn by the assessee on 27.10.2016 and 07.11.2016. In our considered view, it would be reasonable if a further sum of Rs.4,00,000/- out of withdrawal of Rs.8,75,000/- on 09.02.2016 is also allowed, in addition to the benefit of Rs.8,63,000/- allowed by the CIT(A). Accordingly, we direct the AO to delete Rs.12,63,000/- (Rs.8,63,000/- + Rs.4,00,000/-). The ground of assessee’s appeal is partly allowed.
The next ground pertains to levy of tax at the enhanced rate u/s 115BBE of the Act. The Ld. AR has submitted that the co-ordinate Bench of Surat in a series of decisions has held that provisions of Section 115BBE of the Act cannot be applied retrospectively for AY 2017-18. He also relied on the decision of Hon’ble Madras High Court in case of S.M.I.L.E. Microfinance Ltd. vs. ACIT in W.P.(MD) No.2078 of 2020 and W.M.P.(MD) No.1742 of 2020 dated 19.11.2024.
We have duly considered rival submission and also gone through the decisions relied upon. So far as taxing the addition at the enhanced rate of tax u/s 115BBE is concerned, we find that Divisions Bench as well as SMC Bench of this Tribunal in a series of case has held that enhanced rate prescribed u/s /AY.2017-18 Hemlata Babubhai Patel 115BBE is not applicable for AY 2017-18. Useful reference may be made to the cases of Samir Shantilal Mehta Vs ACIT (Surat Trib), Arjunsinh Harisinh Thakor vs ITO in and Jitendra Nemichand Gupta Vs ITO ITA No. 211/Srt/2021 and Indore Bench in DCIT vs Punjab Retail Pvt. Ltd 677/Ind/2019 (Indore Trib) and Jabalpur Bench in ACIT vs Sandesh Kumar Jain in ITA No. 41/Jab/2020. The Hon’ble Madras High Court in case of S.M.I.L.E. Microfinance Ltd. (supra) has held that revenue is empowered to impose 60% rate of tax for transactions from 01.04.2017 onwards and not prior to the said cut-off date. In the instant case, the deposits were made prior to 01.04.2017. Hence, this ground raised
by the assessee is allowed.
12. In the result, appeal of the assessee is partly allowed. Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 30/06/2025.