MR GAURAV AJMERA,RATLAM vs. DCIT CENTRAL CIRCLE -2, INDORE

आदेश / O R D E R

Per B.M. Biyani, A.M.:

“1. That the whole order of assessment is null and void as approval given by Ld. JCIT u/s 153D is without application of mind. 2. The Ld. CIT(A) has erred in confirming addition of Rs. 2,40,000/- being the amount of savings of wife of assessee, which is usually permitted as a normal saving.

Mr. Gaurav Ajmera, Ratlam AY 2017-18 3. The Ld. CIT(A) has erred in confirming levying tax at the rate of 60% u/s 115BBE which was inserted in the statute book after the relevant date when the amount seized was found taxable. 4. The Ld. CIT(A) erred in not cancelling interest u/s 234A, 234B and 234C. 5. The Ld. CIT(A) has erred in confirming initiation of penalty u/s 271AAB. 6. The appellant reserves the right to add, amend or alter any grounds of appeal as above.”

5. At the time of hearing, Ld. AR for assessee did not press/plead Ground No. 1, 5 and 6. Therefore, those grounds are dismissed as non- pressed. We proceed to adjudicate remaining Ground No. 2 to 4 one by one in seriatim.

Ground No. 2:

7. Before CIT(A), it was submitted that Rs. 2,40,000/- was the amount of normal household savings which was even allowed by CBDT Press Release/Instruction dated 18.11.2016 and 21.02.2017 to all households at the time of demonetization. It was further submitted that neither assessee nor any of his family members could make any deposit of demonetized notes in bank a/c and the entire cash had been seized. It was also submitted that looking to the financial status of assessee and his family, the small sum of Mr. Gaurav Ajmera, Ratlam AY 2017-18 Rs. 2,40,000/- should be accepted as savings. Reliance was also placed on the decision of ITAT, Agra in Smt. Uma Agarwal (2021) 127 Taxmann.com 735 where a deposit upto Rs. 2.50 lakh was held to be acceptable for homemakers. However, the CIT(A) was not satisfied with the submission of assessee who held that the cash was found with assessee in Jaipur though the assessee belonged to Ratlam. He also held that the CBDT Press Release/Instruction as well as the decision in Smt. Uma Agarwal (supra) was applicable only for depositing demonetized currency in bank a/c but not for carrying such currency from one location to another for unknown purposes. The CIT(A) upheld addition.

8. Before us, both sides put forward their respective contentions for and against the addition, such contentions being on the same line as were made before the lower-authorities.

Statement recorded u/s 131: Mr. Gaurav Ajmera, Ratlam AY 2017-18 Statement recorded u/s 132(4) Mr. Gaurav Ajmera, Ratlam AY 2017-18 Mr. Gaurav Ajmera, Ratlam AY 2017-18

11. Now, we refer the relevant portion of Press Release/Instruction issued by CBDT:

Mr. Gaurav Ajmera, Ratlam AY 2017-18

Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, 18th November, 2016.

PRESS RELEASE Sub: Demonetisation of Old High Denomination Currency & Cash Deposits in Bank Accounts

It was announced by the Government earlier that small deposits made in the banks by artisans, workers, housewives, etc. would not be questioned by the Income Tax Department in view of the fact that present exemption limit for Income Tax is Rs.2.5 lakh. Reports are being received of instances where people are using other persons’ bank accounts to convert their black money into new denomination notes for which reward is also being given to the account holders who agree to allow their accounts to be used. This activity has been reported in case of Jan-Dhan Accounts also.

It is hereby clarified that such tax evasion activities can be made subject to Income Tax and penalty if it is established that the amount deposited in the account was not of the account holder but of somebody else. Also the person who allows his or her account to be misused for this purpose can be prosecuted for abetment under Income Tax Act.

However, genuine persons depositing their own household savings in cash into their bank accounts would not be questioned.

The people are requested not to get lured by black money converters and be a partner in this crime of converting black money into white through this method. Unless all citizens of the country help the Government in curbing black money, this mission of black money will not succeed. Also the people who are against the black money should give information of such illegal activities going on to the Income Tax department so that immediate action can be taken and such illegal transfer of cash can be stopped and seized.

Black money is a crime against humanity. We urge every conscientious citizen to help join the Government in eradicating it.

(Meenakshi J. Goswami) Commissioner of Income Tax (Media and Technical Policy) Official Spokesperson, CBDT.

Mr. Gaurav Ajmera, Ratlam AY 2017-18

Mr. Gaurav Ajmera, Ratlam AY 2017-18

Mr. Gaurav Ajmera, Ratlam AY 2017-18 Ground No. 3:

13. This ground challenges the levy of tax by AO u/s 115BBE at a higher rate of 60% on the undisclosed income of Rs. 49,99,000/- (Rs. 47,59,000/- declared by assessee + Rs. 2,40,000/- added by AO).

14. Ld. AR for assessee raised multiple contentions to impress upon us that the impugned income cannot be taxed at a higher rate of 60% u/s 115BBE. We have given a peaceful hearing. The contentions raised by Ld. AR are summed up thus:

(i) The first contention raised by Ld. AR is such that the section 69A itself is not applicable to the impugned income. To show this, Ld. AR contended that the impugned income was not “income from other source” or “Income from undisclosed sources”, it was income from business. Ld. AR submitted that in order to understand how the impugned income was business income, one has to draw a proper inference from the facts/ documents of assessee. Then, Ld. AR submitted that the assessee started property business in current year and this was the first year of business, hence the books of account were not maintained. But, referring to Page No. 68 of Paper-Book-1, Ld. AR submitted that the assessee was holding lands purchased in earlier years. Referring to Page No. 69-70 of Paper-Book-1 where a letter dated 20.11.2018 alongwith affidavit dated 17.11.2018 deposed by assessee and filed to AO are placed, Ld. AR tried to demonstrate that the assessee was intending to do property business about 4 years ago and for that purpose met one Shri Aashish Das of JSM Devon Limited,

Mr. Gaurav Ajmera, Ratlam AY 2017-18 Indore for the purpose of making a bulk booking of flats to earn profits by re-selling them and the discussions relating to intended bulk-deal were found in assessee’s mobile at the time of search but, however, the deal could not be materialized and therefore there was no movement of funds for above deal nor any document was written. Ld. AR submitted that the messages exchanged from assessee’ mobiles relating to intended bulk deal of flats are got printed and print version is filed at Page No. 72 to 81 of Paper-Book-1.

Our attention is also drawn to another letter (undated) filed to AO apprising the very same facts, copy of the letter placed at Page No. 30-31 of Paper- Book-2. Ld. AR also drew our attention to Page No. 82 of Paper-Book-1 where a copy of letter dated 17.01.2017 filed by assessee to AO is placed in which the assessee requested AO to adjust the seized cash against advance- tax/income-tax on undisclosed income. Ld. AR submitted that in the said letter dated 17.01.2017, the assessee has clearly mentioned that the seized amount was earned during current year itself and the assessee did not have any other money to pay tax. Ld. AR submitted these facts/documents are enough evidences to infer that the impugned cash seized during search represented or sourced from assessee’s business income. Therefore, the AO is not justified in treating the impugned cash as deemed income u/s 69A.

(ii) The second contention raised by Ld. AR is such that the AO has imposed penalty u/s 271AAB qua the impugned income through Penalty- order dated 26.06.2019, copy of order is re-produced below for an immediate reference:

Mr. Gaurav Ajmera, Ratlam AY 2017-18 Mr. Gaurav Ajmera, Ratlam AY 2017-18 Mr. Gaurav Ajmera, Ratlam AY 2017-18 Mr. Gaurav Ajmera, Ratlam AY 2017-18

Mr. Gaurav Ajmera, Ratlam AY 2017-18 Referring to Para 5, Ld. AR pointed out that the AO has imposed penalty in two parts, namely 10% of the income of Rs. 47,59,000/- admitted by assessee u/s 132(4) and declared in the return of income (+) 60% of the income of Rs. 2,40,000/- not disclosed by assessee but added by AO during assessment-proceeding. Ld. AR instantly carried us to the provision of section 271AAB which prescribes thus:

Penalty where search has been initiated 271AAB. (1) The Assessing Officer or the Commissioner (Appeals) may, not- withstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of July, 2012 but before the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,— (a) a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year, if such assessee— (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) on or before the specified date— (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee— (i) in the course of the search, in a statement under sub-section (4) of section 132, does not admit the undisclosed income; and (ii) on or before the specified date— (A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in respect of the undisclosed income; (c) a sum computed at the rate of sixty per cent of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b).

[Emphasis supplied] Ld. AR co-related the quantum of penalty computed by AO in Para No. 5 of penalty-order vis-à-vis the provisions of section 271AAB and submitted that the AO has imposed penalty @ 10% qua the income of Rs. 47,59,000/- u/s 271AAB(1)(a) and not @ 60% u/s 271AAB(1)(c). That means, Ld. AR

Mr. Gaurav Ajmera, Ratlam AY 2017-18 contended, the AO is very much satisfied that the assessee fulfilled the conditions prescribed in section 271AAB(1)(a), namely the assessee has specified the manner in which such income had been derived and the assessee has substantiated the manner in which the undisclosed income was derived. Ld. AR submitted that the AO has passed penalty-order with the approval of JCIT. Therefore, according to Ld. AR, it must be a considered view of authorities that the manner/source of income of at least Rs. 47,59,000/- is proved, if not of addition of Rs. 2,40,000/- made by AO for which penalty @ 60% has been imposed. Ld. AR contended that when the AO has accepted the manner/source of income in penalty-proceeding, there is no reason to sustain the applicability of section 69A and for that matter the higher rate of tax u/s 115BBE. To support this submission, Ld. AR relied upon the decision in Basir Ahmed Sisodia Vs. ITO (2020) 116 taxmann.com 375 (SC), para No. 14 to 16, which reads as under:

“13. Reverting to the findings and conclusions recorded by the Officer and which commended to the appellate authority, as well as, the High Court, it must follow that the appellant/assessee despite being given sufficient opportunity, failed to prove the correctness and genuineness of his claim in respect of purchases of marbles from unregistered dealers to the extent of Rs.2,26,000/ (Rupees two lakhs twenty six thousand only). Resultantly, the said transactions were assumed as bogus entries (standing to the credit of named dealers who were none existent creditors of the assessee).

14. However, it has now come on record that the appellant/assessee in penalty proceedings offered explanation and caused to produce affidavits and record statements of the concerned unregistered dealers and establish their credentials. That explanation has been accepted by the CIT(A) vide order dated 13.1.2011. In paragraph 17 of the said decision reproduced hitherto, it has been noted that the Officer recorded statements of 12 unregistered dealers out of 13 and their identity was also duly established. After analysing the evidence so produced by the appellant/assessee, the appellate authority [(CIT(A)] noted that the Officer had neither doubted the identity of those dealers nor any adverse comments were offered in reference to their version regarding sale of marble slabs by them to the appellant/assessee in the financial year relevant to assessment year 1998-1999 and receipt of payments after two to three years. Further, there was no denial of purchase of marbles worth Rs.4,78,900/ (Rupees four lakhs seventy eight thousand nine hundred only) by the assessee and sale thereof worth Rs.3,57,463/ (Rupees three lakhs fifty seven thousand four hundred sixty three only) with closing stock of Rs.2,92,490/ (Rupees two lakhs ninety two thousand four hundred ninety only), as disclosed in the trading account for the year ended on Mr. Gaurav Ajmera, Ratlam AY 2017-18 31.3.1998. The appellate authority thus found that without purchases of marbles, there could be no sale and disclosure of closing stock in the trading account. In other words, the materials on record would clearly suggest that the concerned unregistered dealers had sold marble slabs on credit to the appellant/ assessee, as claimed. As a consequence of this finding, the appellate authority concluded that there was neither any concealment of income nor furnishing of inaccurate particulars of income by the assessee. We are conscious of the fact that these observations are made by the competent forum (appellate authority) in penalty proceedings under Section 271 of the 1961 Act in favour of the assessee. However, what needs to be noted is that the stated penalty proceedings were the outcome of the assessment order in question concerning assessment year 1998-1999. Indeed, at the time of assessment, the appellant/assessee had failed to produce any explanation or evidence in support of the entries regarding purchases made from unregistered dealers. In the penalty proceedings, however, the appellant/assessee produced affidavits of 13 unregistered dealers out of whom 12 were examined by the Officer. The Officer recorded their statements and did not find any infirmity therein including about their credentials. The dealers stood by the assertion made by the appellant/assessee about the purchases on credit from them; and which explanation has been accepted by the appellate authority in paragraphs 17 and 19 of the order dated 13.1.2011.

15. To put it differently, the factual basis on which the Officer formed his opinion in the assessment order dated 30.11.2000 (for assessment year 1998- 1999), in regard to addition of Rs.2,26,000/ (Rupees two lakhs twenty six thousand only), stands dispelled by the affidavits and statements of the concerned unregistered dealers in penalty proceedings. That evidence fully supports the claim of the appellant/assessee. The appellate authority vide order dated 13.1.2011, had not only accepted the explanation offered by the appellant/assessee but also recorded a clear finding of fact that there was no concealment of income or furnishing of any inaccurate particulars of income by the appellant/assessee for the assessment year 1998-1999. That now being the indisputable position, it must necessarily follow that the addition of amount of Rs.2,26,000/ (Rupees two lakhs twenty six thousand only) cannot be justified, much less, maintained.

16. Accordingly, this appeal ought to succeed on this count alone and it would be unnecessary for us to dilate on other questions/contentions urged by the parties as referred to in the earlier part of this judgment.”

Ld. AR submitted that in this decision, the Hon’ble Supreme Court has deleted the addition made in assessment-order on the basis of favourable finding made by authorities in penalty-order. Therefore, the decision of Hon’ble Supreme Court is a clear pointer that the conclusion derived in penalty proceeding is very much relevant to assessment-order. Ld. AR prayed that having regard to this decision, it must be accepted that in the present case of assessee, the AO has, by levying penalty @ 10%, clearly

Mr. Gaurav Ajmera, Ratlam AY 2017-18 admitted that the assessee has explained the manner/source of cash of Rs. 47,59,000/-; therefore there is no justification on the part of AO to invoke section 69A read with section 115BBE to that extent.

(iii) The third and last contention raised by Ld. AR is somewhat different. Ld. AR submits that even if section 115BBE is applicable, the amendment in that section prescribing a higher rate of tax @ 60% [plus surcharge and cess] was brought by an amendment brought in statute through “Taxation Laws (Second Amendment) Act, 2016”, copy of gazette publication is filed in Paper-Book-1, Page No. 62 to 67. Ld. AR submitted that the said amendment came into effect from 15.12.2016 whereas the requisition in assessee’s case was made on 14.11.2016. Ld. AR submitted prior to 15.12.2016, the tax rate was 30% in section 115BBE. He submitted that the higher rate of 60% was applicable prospectively from 15.12.2016 and this view is also held by (i) ITAT, Indore in DCIT Vs. M/s Punjab Retail Pvt. Ltd, order dated 08.10.2021 and (ii) ITAT, Jabalpur ACIT Vs. Sandesh Kumar Jain, ITA No. 41/JAB/2020 order dated 31.10.2022. Further reliance is also placed on Govind das Vs. ITO (1976) 103 ITR 123 (SC), CIT Vs. Hindustan Electro Graphites Ltd. (2000) 243 ITR 48 (SC) and Piu Ghosh Vs. DCIT (2016) 73 taxmann.com 226 (Calcutta HC) to support the proposition that any amendment made in statute shall apply prospectively and not retrospectively. At that juncture, the Bench questioned Ld. AR on the later and recent decision of ITAT, Indore in Narendra Kumar Shantilal Jain HUF Vs. PCIT, ITA No. 124/Ind/2022, order dated 23.12.2022, wherein the Co-ordinate Bench, following the decision of Hon’ble Kerala High Court in WA No. 984 of 2019, Maruthi Babu Rao Jadav Vs. The Assistant Commissioner of Income-tax, Central, Circle, Kozhikode, dated 23.09.2020, has held that the amendment though made on 15.12.2016, would apply to the whole previous year 2016-17, AY 2017-18. In reply, Ld. AR only gained support from following decision of CIT Vs. Thana Electricity Company (1994) 206

Mr. Gaurav Ajmera, Ratlam AY 2017-18 ITR 727 (Bombay HC) and argued that the said decision of Hon’ble Kerala High Court is not binding upon ITAT, Indore Bench:

“21. From the foregoing discussion, the following propositions emerge:

(a) to (c) XXX

(d) The decision of one High Court is neither binding precedent for another High Court nor for courts or Tribunals outside its own territorial jurisdiction. It is well settled that the decision of a High Court will have the force of binding precedent only in the State or territories on which the court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect. By no amount of stretching of the doctrine of stare decisis, can judgments of one High Court be given the status of a binding precedent so far as other High Courts or Tribunal within their territorial jurisdiction are concerned. Any such attempt will go counter to the very doctrine of stare decisis and also the various decisions of the Supreme Court which have interpreted the scope and ambit thereof. The fact that there is only one decision of any one High Court on a particular point or that a number of different High Courts have taken identical views in that regard is not at all relevant for that purpose. Whatever may be the conclusion, the decisions cannot have the force of binding precedent on other High Courts or on any subordinate courts or Tribunals within their jurisdiction. That status is reserved only for the decisions of the Supreme Court which are binding on all courts in the country by virtue of article 141 of the Constitution.”

15. Per contra, Ld. DR for revenue strongly opposed all three contentions of Ld. AR one by one as under:

(i) Regarding first contention, Ld. DR submitted that it is not an ordinary case of assessee, it is a peculiar case of transportation of demonetized currency in bags to defeat the demonetization declared by Govt. of India for a pious objective which was seized by ATS team of Govt. He submitted that when the assessee was questioned by authorities u/s 131 as well as 132(4), the assessee clearly admitted that he was unable to explain the source and that the impugned cash was his income from undisclosed sources. Thereafter, the assessee himself declared the impugned income as undisclosed money u/s 69A in the return of income filed to department, this fact is clearly mentioned by AO in Para No. 5.2 of assessment-order. Ld. DR contended that the argument of Ld. AR that an inference has to be drawn for ascertaining source is only an effort to get out of section 69A and that too

Mr. Gaurav Ajmera, Ratlam AY 2017-18 without any basis. He submitted that it is quite illogical for assessee to submit that he was in the process of starting business of property by entering into certain deal of property which could not be made and that is why the source of cash must be treated as explained from business income. Ld. DR submitted that the mobile messages exchanged by assessee mention only flat Nos. and not amounts. In any case, those messages as claimed by assessee himself were for a proposed source of income and not a real source of income, then by no stretch of imagination they can be taken as something proving the source of impugned cash.

(ii) Regarding second contention, Ld. DR submitted that it is true that in Para No. 5 of penalty-order, the AO has imposed penalty in two parts, partly @ 10% and partly @60%. But on going through Para No. 4, immediately preceding Para No. 5, it is very much clear that the AO has made break-up of 10% and 60% on simpliciter reasoning that the assessee had offered undisclosed income of Rs. 47,59,000/- in the return of income but not disclosed the income of Rs. 2,40,000/- in the return of income. But, however, neither in Para No. 4 nor anywhere else in penalty-order, the AO has whispered that the assessee has specified the manner in which such income was derived and the assessee has substantiated the manner in which the undisclosed income was derived. Therefore, Ld. DR contended, the decision in Basir Ahmed Sisodia (supra) is not applicable to assessee.

(iii) Regarding third contention, Ld. DR strongly relied upon the decision of Hon’ble Kerala High Court in Maruthi Babu Rao Jadav (supra). He submitted that the said decision is given by Hon’ble High Court which must be followed by ITAT, Indore bench. He submitted that there is no opposite decision of either jurisdictional High Court or even any non-jurisdictional High Court in his knowledge. He submitted that the ITAT, Indore has already followed the decision of Hon’ble Kerala High Court in recent order dated 23.12.2022 in Narendra Kumar Shantilal Jain HUF (supra). Therefore, this Bench must follow the same.

Mr. Gaurav Ajmera, Ratlam AY 2017-18

(i) The first contention projected by Ld. AR for assessee is such that the section 69A itself is not applicable to assessee’s case. To test this contention we look into the material facts. It is an undisputed fact that the assessee was found transporting/transferring cash from one place to another during demonetization period, packed in two bags and in train, which was intercepted by ATS authorities. It is further clear that when the authorities interogeted assessee in the proceeding of section 131 and section 132(4), the assessee categorically accepted that he was unable to explain the source of cash; that the impugned cash was not recorded in his books; that he had no objection in seizure of cash by department; that the cash was earned from “undisclosed sources”; that it was his “undisclosed income”; and it was undisclosed income of current financial year 2016-17. That was the first- stage of proceeding. Then came the 2nd stage of filing return where also the assessee himself disclosed income u/s 69A, this fact is clearly noted by AO in assessment-order and also emphasized by Ld. DR for revenue and cannot be rebutted or controverted by Ld. AR. Thus, the assessee has not only made admission of having earned “income from undisclosed sources” in statement but also declared the income u/s 69A in return of income. Therefore, the pleading made by Ld. AR that the ‘source should be inferred’, does not deserve any merit in the first instance. Still for the sake of justice, even if we go into the said pleading, then also there is hardly any material to demonstrate that the source of said cash is explained. Ld. AR is simply relying upon land holdings of assessee and certain messages found in the Mr. Gaurav Ajmera, Ratlam AY 2017-18 mobile of assessee, thereby trying to impress upon us that the assessee was in the process of starting business of real estate and therefore the source of impugned cash can be inferred as business income. We hardly find any substance in such pleading. When section 69A talks of source of cash, the source has to be proved and not inferred the way Ld. AR is trying to argue. Even if we assume that the assessee was in the process of starting a business of real estate, we fail to understand how it substantiates the source of impugned cash. We are not in agreement with Ld. AR that the source of cash is explained by assessee. Therefore, the first contention is not acceptable.

(ii) Regarding second contention of Ld. AR, we have perused the decision of Hon’ble Supreme Court in Basir Ahmed Sisodia (supra) and find that the ratio taken by Hon’ble Court is such that if the assessee has, by adducing evidences, satisfied authorities even in penalty-proceeding that certain addition was wrongly made, it will assail the addition made in assessment- order itself. There is no quarrel with this proposition. But in the present case, Ld. DR has carried us to penalty-order (also re-produced earlier) and successfully demonstrated that the AO has charged 10% penalty on the simple reasoning that the assessee had offered undisclosed income of Rs. 47,59,000/- in the return of income but nowhere the AO has whispered that the assessee has specified the manner in which such income was derived and the assessee has substantiated the manner in which the undisclosed income was derived. Therefore, without commenting on charging of 10% penalty for the reason that we are not concerned with the penalty-order in this appeal, we suffice only to say the case of assessee is not at parity with the decision Basir Ahmed Sisodia (supra). Consequently, we are constrained to rejected second contention.

(iii) Now, comes the last contention made by Ld. AR that the higher rate of 60% tax was brought in section 115BBE by way of amendment effective from 15.12.2016 and since assessee’s case was made on 14.11.2016, prior

Mr. Gaurav Ajmera, Ratlam AY 2017-18 to 15.12.2016, the higher rate is not applicable to assessee. In this regard, we need not trouble ourselves much because the Hon’ble Kerala High Court has already anlaysed this issue in Maruthi Babu Rao Jadav (supra) and came to a conclusion that the said amendment was applicable to entire previous year 2016-17, relevant to AY 2017-18. Moreover, ITAT Indore has already followed this decision in Narendra Kumar Shantilal Jain HUF (supra) order dated 23.12.2022. We reproduce below the relevant paras of ITAT, Indore which also includes the aforesaid decision of Hon’ble Kerala High Court:

“13. Having said so, we now turn to Ground No. 7 wherein the assessee raises an alternative claim that the present case of Assessment-Year 2017-18 relates to the Previous-Year 2016-17 and the rate of tax u/s 115BBE was 30%+3% Cess as on first day of the Previous-Year i.e. 01.04.2016, therefore the tax-rate of 30%+3% Cess shall apply to the present case and not the higher rate, hence the assessment-order does not cause prejudice to the interest of revenue. The reason of projecting such a claim by assessee is that the higher rate of tax was prescribed in section 115BBE through an amendment made vide Taxation Laws (Second Amendment) Act, 2016 and the said amendment received assent of the President of India on 15.12.2016 and therefore the amendment shall apply prospectively w.e.f. 15.12.2016 and not retrospectively. The assessee claims that survey in assessee’s case was conducted on 19.09.2016 which is prior to 15.12.2016 and therefore the higher rate of tax is not applicable to it, the tax-rate of 30%+3% Cess as existing in section 115BBE as on 01.04.2016 shall apply. To resolve this controversy, a lengthy discussion on the scheme of Income-tax Act, 1961; particularly the framework of previous year, assessment-year, the parliamentary system of prescribing tax-rates, etc. is required; but we have the benefit of a direct decision rendered by Hon’ble Kerala High Court in WA No. 984 of 2019 – Maruthi Babu Rao Jadav Vs. The Assistant Commissioner of Income-tax, Central, Circle, Kozhikode, dated 23.09.2020 in which the Hon’ble High Court has already analysed such framework at length and was pleased to decide that the higher rate of tax would apply to whole Previous-Year 2016-17 related to Assessment-Year 2017-18. The relevant paragraphs of the decision are reproduced below: “The writ petition sought for a declaration that the amendments made by the Taxation Laws (Second Amendment) Act, 2016, to Section 115BBE of the Income Tax Act, 1961 enhancing the rate of income tax, for specified incomes which are unexplained, to 60% and the surcharge provided in the Finance Act, 2016 to 25% for income covered under Section 69A, to be prospective. The above referred enactments are herein after referred to as the '2nd Amendment Act', 'IT Act' and the 'Finance Act'. The 2nd Amendment Act was dated 15.12.2016 and the amendment to Section 115BBE was specified to be effective from 01.04.2017. The amendment enhancing the rate of tax was incorporated in the I T Act and that of Mr. Gaurav Ajmera, Ratlam AY 2017-18 surcharge in the Finance Act. On declaration, consequential relief is sought against Ext.P2 assessment order levying tax at the enhanced rate of 60% and surcharge @25% on the 'advance tax'. The learned Single Judge rejected the writ petition by a cryptic judgment relying on Commissioner of Income Tax v. S.A.Wahab.((1990) 182 ITR 464 (KER)).

2. The learned Counsel Sri.Vishnu S Arikkattil appearing for the appellant would contend that even going by the decision in Karimtharuvi Tea Estate ltd. v. State of Kerala (AIR (1966) SC 1385) an amendment made on the 1st day of April of any financial year would apply to the assessments of that year. That is, if an amendment is brought into force on 01.04.2017, as is the case here, it can only apply to the assessment made in 2018-2019 (Assessment Year) of the income accrued for the previous financial year; which is 2017-2018. The learned Counsel would seek to draw a distinction in so far as a modification of the rate as brought out in the Finance Act and a substantive provision altering accrued rights or creating new liabilities, on the 1st of April of an year. In the former, it could apply to the assessments of the previous year, made in that financial year, but a substantive amendment not relating to the rates, could only be applied to the assessments of that financial year and not of the previous year. Reliance is placed on the Constitution Bench decision of the Hon'ble Supreme Court in C.I.T Vs. Vatika Township Private Ltd. (2015) 1 SCC 1. The learned Counsel would also place before us a number of decisions of the Hon'ble Supreme Court in Kesoram Industries v. Commissioner of Wealth Tax, [AIR 1966 SC 1385], Guffic Chem P. Ltd v. C.I.T [2011(4) SCC 245], C.I.T v. Sarkar Builders [(2015) 375 ITR 392 (SC)], Shiv Raj Gupta v. C.I.T [(2020) 425 ITR 420(SC)] and State of Kerala v. Alex George [(2004) 271 ITR 290(SC), to further buttress his arguments. Reliance is also placed on the Full Bench decision of the Patna High Court in Loknath Goenka v. C.I.T [2019 417 ITR 521(Patna)].

12. The assessee contends that the seizures were made prior to the amendment. The affidavits admitting the ownership of amounts seized

Mr. Gaurav Ajmera, Ratlam AY 2017-18 were also submitted prior to the amendment. The assessee was not aware of the enhanced tax liability when the admissions were made before the authorities. The assessee has also made an attempt to relate the amendments to the demonetization of the specified currencies announced on 08.11.2016 which contention we reject at the outset. The subject amendments which are relevant for our consideration have no direct link with the demonetization introduced or the taxation and investment regime of Pradhaan Mantri Garib Kalyan Yojana 2016 brought in under Chapter IX A of the 2nd amendment Act. The 2nd amendment Act as is clear from the Statements of Objects and Reasons, was to curb, evasion of tax and black money as also plug loopholes in the IT Act and to ensure that defaulting assessees are subjected to higher tax and stringent penalty provision. Both the measures spoken of herein were to further the said objects and there cannot be any nexus assumed nor is it discernible.

14. Likewise it was by Chapter II with heading 'Rates of Income Tax', as provided in the Finance Act 2016, that a surcharge was introduced by way of the 3rd proviso of Section 2(9) of that Finance Act. This comes into effect from the Financial Year 2016-2017; which is the year in which the subject seizures were occasioned. The proviso refers to various provisions where the advanced tax computed under the first proviso stands increased by a surcharge for the purpose of the Union. Section 115BBE is one of the provisions referred to in the 3rd proviso and in the case of individuals the surcharge was @15% where the total income exceeds one crore, as on 01.04.2016. By the 2nd Amendment Act Section 2 of the Finance Act, 2016 stood amended by which 115BBE was omitted from the 3rd proviso. After the 6th proviso yet another proviso was inserted which provided for the 'advance tax' computed under the first proviso, in respect of any income chargeable to tax under Section 115BBE(1)(i), to be increased by a surcharge for the purposes of the Union, calculated @25%. Hence there is no new liability of surcharge created and it is a mere enhancement of the rate of surcharge.

Mr. Gaurav Ajmera, Ratlam AY 2017-18 enhanced from 01.04.2017, for every assessment carried out in that year, related to the previous year, the rates as applicable on 01.04.2017 has to be applied. There being no new liability created or obligation imposed, the arguments raised by the appellant's counsel fails. The appellant cannot have a contention that he committed the misconduct on the expectation that if he were caught he would have to shell out only lesser amounts as tax and surcharge. There is no right accrued on the assessee to commit an offence on the expectation of a lesser penalty.

16. It was also argued that Income Tax at the rate or rates specified, as prescribed in any Central Act to be charged for any assessment year, shall be so charged in respect of the total income of the previous year as per Section 4 of the IT Act. However, there is no such provision to enable a surcharge to be so taxed, on the Finance Act prescribing an enhanced rate at the commencement of an year. The said contention however, cannot be sustained especially looking at the decision of the Hon'ble Supreme Court in CIT Kerala v. K Srinivas. [(1972) 4 SCC 526]. The facts are not relevant to the issue raised here and we need only look at the declaration as to the nature of a surcharge imposed in the Finance Act. The legislative history with respect to the concept of surcharge was traced by the Court, which, for the first time was found to have been recommended, in the report of the Committee on Indian Constitutional Reforms Volume I Part I. The word surcharge was used compendiously for the special addition to taxes on income imposed in September 1931. It was held so in paragraph 7 and 8.

Mr. Gaurav Ajmera, Ratlam AY 2017-18 says that tax on income other than agricultural income shall be levied and collected by the Government of India and distributed between the Union and the states in the manner provided in clause (2). Article 269 deals with taxes levied and collected by the Union but assigned to the States. The provisions of Articles 268 which is the First one under the heading distribution of revenue between the union and the states relate to duties levied by the Union but collected and appropriated by the states. Thus these Articles deal with the levy, collection and distribution of the proceeds of the taxes and duties mentioned therein between the Union and the state. The Legislative power of Parliament to levy taxes and duties is contained in Articles 245 and 246(1) read with the relevant entries in list I of the Seventh Schedule.

The judgement of the Learned Single judge is affirmed for the reasoning herein above and the writ appeal would stand dismissed without any order as to costs.”

Mr. Gaurav Ajmera, Ratlam AY 2017-18 AR has submitted that in Thana Electricity Company (supra), the Hon’ble Mumbai High Court has held that the decision of a high court is binding in its over territory and not upon the higher courts or even lower courts working outside territory. While arguing this, Ld. AR seems to have missed the point that the Hon’ble Mumbai High Court has also held that “In other States or outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect.” Therefore, the decision of Hon’ble Kerala High Court is certainly having a persuasive effect, if not binding nature. On perusal of decision of Hon’ble Kerala High Court, we find that the Hon’ble High Court has extensively dealt the scheme of Income-tax Act, 1961, Finance Act, Amendment Act, Section 115BBE and the previous decisions of Hon’ble Supreme Court and thereafter came to a conclusion that the amendment in section 115BBE, made on15.12.2016 via Amendment Act, would apply to entire previous year 2016-17. As already stated, the ITAT, Indore has already taken a decision in Narendra Kumar Shantilal Jain HUF (supra) order dated 23.12.2022 to follow the decision of Kerala High Court and this Bench must observe the consistency. At this stage, we would also like to take cognizance of the two decisions quoted by Ld. AR in favour of assessee for the proposition that the amendment was applicable from 15.12.2016 and not prior to that, namely (i) ITAT, Indore in DCIT Vs. M/s Punjab Retail Pvt. Ltd, order dated 08.10.2021 and (ii) ITAT, Jabalpur ACIT Vs. Sandesh Kumar Jain, ITA No. 41/JAB/2020 order dated 31.10.2022. We have carefully gone through orders of those decisions and find that in none of them, the decision of Hon’ble Kerala High Court was brought to the notice of ITAT by either side. Therefore, those

Mr. Gaurav Ajmera, Ratlam AY 2017-18 decisions are not acceptable/applicable. With this discussion, the third contention of Ld. AR is also rejected.

17. In view of above discussions and for the reasons stated therein, all contentions raised by Ld. AR are hereby rejected. Consequently, we hold that the AO has rightly assessed the income u/s 69A alongwith higher rate of tax u/s 115BBE. This ground of assessee is dismissed.

Ground No. 4:

Mr. Gaurav Ajmera, Ratlam AY 2017-18 “Explanation 2.- For the removal of doubts, it is hereby declared that the “existing liability” does not include advance-tax payable in accordance with the provisions of Part C of Chapter XVII”. It was further pointed out to Ld. AR that the decision in Ashok Kumar (supra) was prior to introduction of this Explanation in section 132B and therefore not applicable. Hence, the adjustment of seized-cash is not allowable against advance-tax liability. Still the Ld. AR prayed to allow the benefit of adjustment on the ground of ‘equity’ in view of the fact that the assessee was not having any money except the seized cash and the assessee made a specific request to AO to adjust the seized cash against advance-tax liability. Thereafter, some more discussion took place wherein it emerged that the assessee deserves some relief in the matter of calculation of interest u/s 234B for the reason that the newly inserted Explanation does not restrict adjustment against ‘self-assessment liability’.

“7. Undisputedly, the cash seized was in the possession of the department from the date of search itself, i.e., 01.12.2018. It is a fact that the assessee has also requested the Assessing Officer to adjust the self assessment tax liability on the income declared of Rs.1,07,00,000/- from the seized amount. However, assessee’s request was never accepted. On a reading of section 132B of the Act, though it transpires that the assets seized can be adjusted against any existing liability under the Act and advance tax may not be an existing liability, however, in our view, self assessment tax is certainly an existing liability created on 1st April once the financial year ends. Therefore, the Assessing Officer should have adjusted the tax liability relating to the undisclosed income declared by the assessee by way of self assessment tax on 1st April, 2019. In that eventuality, there could not have been levy of interest u/s. 234B of the Act, as interest u/s. 234B of the Act has to be computed from first day of April following the financial year, for which, advance tax was required to be paid. At this stage, we must observe, in a dispute of identical nature arising in case of assessee’s brother, the Tribunal while deciding the issue in & 2748/Del/2022 dated 11.01.2023 has deleted levy of interest u/s. 234B of the Act by observing that the cash seized should have been adjusted against self assessment tax payable with the return of income. Thus, considering the totality of facts and circumstances of the case, we hold that interest charged u/s. 234B of the Act in the peculiar

Mr. Gaurav Ajmera, Ratlam AY 2017-18 facts and circumstances of the present case, deserves to be deleted. We, accordingly, delete the addition.” This decision, although not brought to our knowledge by either side during hearing, is exactly on the same line of discussion as made during hearing of present-appeal noted by us in preceding paragraph. Therefore, we remit this ground back to AO with a direction that the AO shall give benefit of the decision to assessee in calculation of interest and re-compute interest accordingly. Thus, this ground is allowed partly for statistical purpose.

Order pronounced in the open court on 01.09.2023.