2023 (6) TMI 770 - AT - Income Tax

Unexplained cash credit u/s 68 - cash deposits during the demonetization period - additions under amended provisions of Section 115BBE - assessee is a senior citizen - HELD THAT - As the pattern in bank account about the debit and credit also does not matches with the huge cash available with the assessee as on 01/04/2016. Thus, no justifiable reason to interfere with the additions made by Assessing Officer and confirmed by ld. CIT(A). However, as find that the Central Board of Direct Taxes (CBDT) vide its Circular No. 3 of 2017 dated 21.02.2017 have clarified that a relaxation of Rs. 2.50 lacs in a case of an ordinary deposit and Rs. 5.00 lacs in case of Senior Citizen. It was further clarified that the sources of such amount may be either of household savings or past income or the amount may have been received from any of the source mentioned in para 2 to 6 of that Circular. Thus, the assessee is given benefit of Rs. 5.00 lacs in terms of Circular of CBDT, thereby remaining amount of Rs. 31,42,500 5,00,000 26,42,500/- is upheld. In the result, ground No. 1 of the appeal is partly allowed. Taxability of addition under amended provisions of Section 115BBE of the Act at the higher rate - Division Bench of Jabalpur Tribunal in ACIT Vs Sandesh Kumar Jain 2022 (11) TMI 126 - ITAT JABALPUR held that the amended provisions to take effect from 15/12/2016 itself so impliedly effective from 01/04/2017 i.e. for A.Y. 2018-19. Direct AO to tax the additions at the old rate of tax prescribed u/s 115BBE i.e. prior to amendment applicable w.e.f. 15/12/2016. Grounds No. 2 and 3 of the appeal are allowed.

Summary

Issues Involved:
1. Addition on account of unexplained cash credit under Section 68 of the Income Tax Act.
2. Taxation rate applied under Section 115BBE for the addition.
3. Retrospective application of the amended Section 115BBE.

Issue 1: Addition on account of unexplained cash credit under Section 68 of the Income Tax Act:
The assessee filed a return for AY 2017-18 declaring an income of Rs. 8,48,840/-. During scrutiny, the Assessing Officer found cash deposits of Rs. 31.42 lacs during the demonetization period and questioned the source. The assessee claimed the deposits were from cash withdrawals for medical purposes. However, the Assessing Officer noted repeated withdrawals despite sufficient cash balance and no business activities, deeming the explanation as an afterthought and added Rs. 31,42,500/- under Section 68.

On appeal, the CIT(A) upheld the addition, stating the assessee used "creative and imaginative accounting" and failed to substantiate the cash entries with sufficient evidence. The Tribunal found no justifiable reason to interfere with the addition but allowed a benefit of Rs. 5.00 lacs in terms of CBDT Circular No. 3 of 2017, thereby upholding the remaining amount of Rs. 26,42,500/-.

Issue 2: Taxation rate applied under Section 115BBE for the addition:
The assessee contended that the addition should not be taxed at the higher rate of 77.25% under the amended Section 115BBE, arguing the amendment was retrospective and should not apply. The CIT(A) dismissed this argument, stating the amendment was to curb black money and penalize tax evaders, and once it received the President's assent, it became applicable to all.

Issue 3: Retrospective application of the amended Section 115BBE:
The Tribunal referred to the Division Bench of Jabalpur Tribunal in ACIT Vs Sandesh Kumar Jain, which held that the amended provisions of Section 115BBE should take effect from 15/12/2016, implying they are applicable from AY 2018-19. Hence, the Tribunal directed the Assessing Officer to tax the additions at the old rate prescribed under Section 115BBE prior to the amendment effective from 15/12/2016.

Conclusion:
The appeal was partly allowed. The addition of Rs. 26,42,500/- was upheld, but the taxation rate was directed to be applied as per the old provisions of Section 115BBE, i.e., prior to the amendment effective from 15/12/2016.