2024 (6) TMI 1290 - AT - Income Tax

Unexplained cash deposits - applicability of section 115BBE - assessee and her husband deposited during demonetization in assessee s individual account and in their joint accounts - as stated assessee and her husband are farmers and they had only agricultural income during the year under consideration - HELD THAT - We find that the Ld. CIT(A) has not considered the opening cash balance as on 01.01.2016. AR has stated that the cash receipt from October, 2013 to December, 2015 was of Rs. 38,18,461/-. From the above, the assessee has reduced the cash deposits of Rs. 4,50,000/-; agricultural expenditure, being 40% of the agricultural income, for the period October, 2013 to December, 2015; and household expenses of Rs. 6,75,000/- @ Rs. 25,000/- per month for 27 months. The assessee has given details of the total cash withdrawal and cash agricultural income. We find that apart from living expense of Rs. 25,000/- per month, the assessee has not shown any expense such as medical expenses, expenses for various social and family functions, educational expenses, travelling expenses and other miscellaneous expenses. Therefore, the expenses shown by the assessee at Rs. 25,000/- per month is on the lower side and in our view Rs. 50,000/- would be the reasonable monthly expense. Therefore, the personal expenses for the 27 months would be Rs. 13,50,000/- instead of Rs. 6,75,000/- claimed by the assessee. If such expenses are considered, the cash available as on 01.01.2016 would be Rs. 6,06,061/-. Therefore, the assessee has been able to explain only Rs. 6,06,061/- as against the claim of opening balance of Rs. 12,80,000/-. Therefore, addition to the extent of Rs. 6,73,939/- is sustained and balance is deleted. Hence, ground no.1 is raised by the assesse is partly allowed. Application of provisions of section 115BBE of the Act on the impugned addition - As provisions of section 115BBE of the Act was enacted on 15.12.2016 and hence cannot be applied for the year under consideration - As decided in Samir Shantilal Mehta 2023 (5) TMI 1279 - ITAT SURAT since the search in the case of the assessee was carried out before the amendment the addition ought to have been made in terms of the prevailing provision and therefore, the addition made by the assessing officer invoking section 115BBE, provision of which came into force only on 01.04.2017, is not sustainable - Thus, provisions of section 115BBE are not applicable to the present case - Decided in favour of assessee.

Summary

Issues:
1. Whether cash deposits made by the assessee during the demonetization period can be considered as unexplained cash deposits.
2. Whether the provision of Section 115BBE can be applied to the case.

Analysis:

Issue 1:
The appellant, a farmer, deposited cash during demonetization in her individual and joint bank accounts. The Assessing Officer added the cash deposit to the total income, applying Section 115BBE at a tax rate of 60%. The appellant failed to provide a satisfactory explanation for frequent cash withdrawals despite having substantial cash in hand. The Assessing Officer initiated penalty proceedings under Section 271AAC. The CIT(A) considered the bank accounts and allowed relief for certain cash withdrawals but upheld the addition of the balance amount. The appellant argued that the opening cash balance was not considered, explaining the cash receipts, deposits, agricultural expenses, and living expenses to justify the available cash. The Tribunal sustained part of the addition, considering the appellant's expenses and reducing the opening balance claim.

Issue 2:
The appellant contended that Section 115BBE, enacted on 15.12.2016, should not be applied to the year under consideration. Citing relevant case laws, the appellant argued that the provision cannot be retroactively applied. Referring to a Co-ordinate Bench decision, the Tribunal held that since the search was conducted before the amendment, the addition made under Section 115BBE was not sustainable. Following the precedent, the Tribunal ruled that Section 115BBE was not applicable to the case, thereby allowing the appellant's appeal on this ground.

In conclusion, the Tribunal partly allowed the appellant's appeal, sustaining a portion of the addition related to unexplained cash deposits while rejecting the application of Section 115BBE to the case.