NIMMAGADDA GOPICHAND,VIJAYAWADA vs. DCIT, CIRCLE-1(1), VIJAYAWADA

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I.T.A.No.743/VIZ/2025 Nimmagadda Gopichand 4. Aggrieved, the assessee assailed the order passed by the A.O under section 143(3) of the Act, dated 17.12.2019 before the CIT(A), who vide his order dated 21.06.2024 dismissed the appeal and confirmed the addition made by the A.O.

I.T.A.No.743/VIZ/2025 Nimmagadda Gopichand aforesaid omission to adjudicate the Ground No. 2(i) and Ground No. 3 that was raised by the assessee, had held that the addition made by the A.O under section 69A of the Act for the subject A.Y. 2017-18 was to be subjected to tax @30% instead of 60%. The observations of the Tribunal are culled out as under: -

“4. We have heard both the parties and perused the orders of the Ld. Revenue Authorities as well as the order of the Tribunal. Considering the submissions of the assessee that since the grounds of appeal raised by the assessee before the Ld. CIT(A) are wrongly attached to Form-36 instead of the grounds of appeal raised before the Tribunal, therefore, while adjudicating the assessee’s appeal, inadvertently the Hon’ble ITAT did not address the Ground No. 2(i) and Ground No.3 raised by the assessee before the Tribunal with respect to the applicability of section 115BBE of the Act for the impugned Assessment Year 2017-18 in the case of the assessee, we hereby recall the order of the Tribunal (supra) to that extent and the same is adjudicated in the following paras of this order.

5. With respect to the applicability of the provisions of section 115BBE of the Act for the impugned AY 2017-18 in the case of the assessee, we find that the identical issue was adjudicated by the Coordinate Bench of this Tribunal in the case of Manju Vani Chigurupati vs. ACIT in AY 2017-18, dated 07/03/2025 (supra) by following the decision of the Hon’ble Madras High Court in the case of SMILE Microfinance Limited Vs. the Assistant Commissioner of Income Tax (supra). For the sake of brevity and ready reference the relevant paragraphs from the decision of the Tribunal are extracted herein under: “12. 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

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I.T.A.No.743/VIZ/2025 Nimmagadda Gopichand 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. 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

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I.T.A.No.743/VIZ/2025 Nimmagadda Gopichand 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 EXISTING PROVISIONS PROPOSED 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 15% (No expense, deductions, set-off is allowed) and other assets of such income). So total incidence of tax is 75% approx. (No expense, deductions, set- off is allowed). 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 New Taxation and Investment Regime Undisclosed income in the form 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.

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I.T.A.No.743/VIZ/2025 Nimmagadda Gopichand In the aforesaid objects and reasons nowhere it is stated that due to 17. “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.”

13. Respectively following the decision of the Hon’ble Madras High Court relied on by the Co-ordinate Bench of Ahmadabad Tribunal, we allow this ground of appeal

raised by the assessee on the issue of section 115BBE of the Act.

6. Respectfully following the decision of the Hon’ble Madras High Court (supra) and the decision of the Visakhapatnam Bench of the Tribunal in the case of Manju Vani Chigurupati vs. ACIT (supra), as well as following the principle of consistency, we hereby allow the relevant Ground No.2(i) and Ground No.3 raised by the assessee only to the extent of applicability of the provisions section 115BBE of the Act and the Ld. AO is directed to tax the disputed cash deposits at normal rate ie., @ 30% instead of 60%. It is ordered accordingly.

7. In the result, Miscellaneous Application filed by the assessee is allowed and the appeal filed by the assessee is partly allowed.”

10. The assessee, aggrieved with the order by the CIT(A) dated 02.09.2025, wherein he had upheld the penalty imposed by the A.O under section 271AAC(1) of the Act, has carried the matter in appeal before us.

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I.T.A.No.743/VIZ/2025 Nimmagadda Gopichand 11. Shri M.V. Prasad, Learned Authorised Representative (for short “Ld.AR”) for the assessee, at the threshold of hearing of appeal, submitted that he is only pressing the “Ground of Appeal No. 4” raised before us. Elaborating on his contention, the Ld. AR submitted that as the Tribunal vide its order passed in MA No. 04/VIZ/2025, dated 08.08.2025 had allowed the assessee’s ground that the impugned addition made by the A.O under section 69A of the Act for the subject year i.e., A.Y. 2017-18 was liable to be taxed @30% instead of 60%, therefore, as the consequence thereto the penalty thereafter imposed by the A.O under section 271AAC(1) was also liable to be restricted based on the said revised tax liability. It was, thus, the Ld. AR’s claim, that as the tax liability pursuant to the aforesaid order of the Tribunal had been scaled down to Rs. 14,67,750/-, i.e, @30% (of the addition made u/s 69A), therefore, the consequential penalty imposed under section 271AAC(1) of the Act @10% was also liable to be restricted to Rs.1,46,775/-.

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I.T.A.No.743/VIZ/2025 Nimmagadda Gopichand 17.12.2019. However, the Tribunal had, thereafter, on a miscellaneous application filed by the assessee, vide its order passed in MA No. 04/VIZ/2025, dated 08.08.2025 had recalled its order for adjudicating the “Ground No. 2(i)” and “Ground No. 3”, which had inadvertently remained omitted to be adjudicated while disposing of the appeal. Ostensibly, the Tribunal vide its aforesaid order had directed the AO to restrict the tax liability on the impugned addition made by him under section 69A of the Act at the normal rate, i.e, @30% instead of 60%.

Order pronounced in the open court on 18th February, 2026.