2025 (4) TMI 1439 - AT - Income Tax

Addition on issue other than the issue mentioned in the notice u/s 143(2) where the case of the assessee has been selected for limited scrutiny - HELD THAT - During the hearing the Bench had requested the DR to submit the copy of the reasons for selection of the case for scrutiny under CASS. DR has submitted a copy of CASS Selection Reason and Issue from which it is seen that the case was selected for scrutiny with Reason Code EI02.02 and DM01.15A on issue of Agricultural income and Cash deposit during demonetization period . It is clear from the above that the AO has passed the order as per the mandate given to him by the CBDT for limited scrutiny under CASS. He has not exceeded the jurisdiction as contended by the ld. AR. Accordingly the ground No.1 is dismissed. Unexplained cash credit being cash deposits in bank account - HELD THAT - The amounts of withdrawal are substantial. The appellant has not filed confirmation or affidavit from Shri Vijay J. Ramani that he withdrew the impugned amounts in cash and gave it to the appellant. He has not confirmed that the amount was not utilized by him for personal purposes or investment. Copy of the bank account of Shri Vijay J. Ramani has not been submitted to prove that the above withdrawals were not credited to his account. The copies of PAN Aadhar and Passport of Shri Vijay J. Ramani mentioned the name of his father as Jashubhai Manjibhai Ramani and not Jashubhai Manjibhai Patel the appellant herein. The name of the assessee in the PAN is Jashubhai Manjibhai Patel and not Jashubhai Manjibhai Ramani. Since no supporting and corroborative evidence has been filed by the appellant to support the claim that the cash withdrawal by Shri Vijay J. Ramani was part of cash available with the appellant we do not find any infirmity in the order of AO. The order of AO has been rightly upheld by the CIT(A). Accordingly the ground No.2 is dismissed. Taxing the addition by taking the rate @77.25% by attracting Sec 115BBE instead of taxing as per normal tax slab - HELD THAT - The provisions of section 115BBE of the Act was enacted on 15.12.2016 and hence cannot be applied for the year under consideration. As relying on Punjab Retail Pvt. Ltd. 2021 (11) TMI 405 - ITAT INDORE and Sandesh Kumar Jain 2022 (11) TMI 126 - ITAT JABALPUR held that applicability of amended provision of Section 115BBE of the Act is not retrospective. There is no reason not to follow above decisions. Thus the AO is directed to tax the addition at normal rate of tax and applicable surcharges and cess if any. The assessee is accordingly allowed relief against taxing the addition at higher rate u/s 115BE of the Act.

The core legal questions considered in this appeal include:

1. Whether the Assessing Officer (AO) exceeded jurisdiction by making additions on issues not specified in the limited scrutiny notice under section 143(2) of the Income-tax Act, 1961.

2. Whether the addition of Rs. 10,00,000/- under section 68 of the Act on account of unexplained cash deposits during the demonetization period was justified.

3. Whether the addition made under section 68 should be taxed under the special provisions of section 115BBE at a higher rate or under the normal tax slab.

4. Whether the retrospective application of the amended section 115BBE, which attracts a higher tax rate, is valid for the Assessment Year (AY) 2017-18.

5. Whether the delay in filing the appeal before the Tribunal should be condoned.

Issue 1: Jurisdiction of the Assessing Officer in Limited Scrutiny

The legal framework governing limited scrutiny under section 143(2) of the Act and the Central Board of Direct Taxes (CBDT) Instruction No. 5/2016 was examined. The appellant contended that the AO erred by making additions on issues (cash deposits) beyond the scope of the scrutiny notice, which was confined to verification of large agricultural income.

The Court reviewed the reasons for selection of the case under the Computer Aided Scrutiny Selection (CASS) system, which included Reason Codes EI02.02 and DM01.15A, corresponding to agricultural income and cash deposits during demonetization, respectively. The Tribunal found that both issues were legitimately within the AO's mandate for scrutiny.

The Court held that the AO did not exceed jurisdiction and acted within the scope of the limited scrutiny notice. The contention that the AO acted beyond authority was rejected, and the ground was dismissed.

Issue 2: Addition of Rs. 10,00,000/- under Section 68 for Unexplained Cash Deposit

Section 68 of the Income-tax Act deals with unexplained cash credits. The AO observed that during the demonetization period, the assessee deposited Rs. 10,00,000/- in cash, which was unexplained satisfactorily. The assessee claimed the source of the cash deposit was cash on hand, withdrawals from bank accounts, agricultural income, and income from JCB job work.

The AO rejected the explanation primarily because the cash withdrawals claimed as source were actually payments made to Shri Vijay J. Ramani, the son of the assessee, as per bank records. The assessee argued that bearer cheques issued in the son's name were merely a mode of withdrawal and the cash was ultimately available with the assessee. However, no corroborative evidence such as confirmation from the son, affidavits, or bank statements of the son were submitted to substantiate this claim.

The Tribunal noted discrepancies such as differences in names on official documents (PAN, Aadhar, Passport) of the son and the assessee, lack of evidence that the cash withdrawn by the son was handed over to the assessee, and absence of proof that the amounts were not used by the son for personal purposes. Given these facts, the Tribunal upheld the addition under section 68, agreeing with the AO and CIT(A) that the explanation was unsatisfactory.

Issue 3 and 4: Applicability and Retrospective Effect of Section 115BBE

Section 115BBE provides for taxation of unexplained income at a special higher rate. The AO applied the amended provisions of section 115BBE to tax the addition at 77.25%, which was challenged by the assessee on grounds that:

The receipts were explained and hence section 115BBE should not apply.
The amended section 115BBE was inserted retrospectively and cannot be applied to AY 2017-18.

The Tribunal referred to binding precedents from various benches of the Income Tax Appellate Tribunal (ITAT) and High Courts, which held that the amended provisions of section 115BBE are not retrospective and cannot be applied to assessment years prior to their enactment.

Accordingly, the Tribunal directed the AO to tax the addition under the normal tax slab rates applicable for AY 2017-18, allowing the assessee relief from the higher tax rate under section 115BBE. The grounds on this issue were allowed.

Issue 5: Delay in Filing Appeal and Condonation

The appeal was filed 171 days beyond the prescribed limitation period under section 253(3) of the Act. The assessee attributed the delay to non-receipt of the CIT(A) order due to the tax consultant's failure to open emails sent to an outdated email ID, and subsequent personal difficulties in engaging a new authorized representative.

The Tribunal considered the reasons but found them to be general and unsupported by documentary evidence, hence not constituting 'sufficient cause' under section 253(5). However, in the interest of justice and given the non-intentional nature of the delay, the Tribunal condoned the delay subject to the payment of costs of Rs. 5,000/- to the Tribunal Bar Association.

Significant Holdings and Core Principles Established

"It is clear from the above that the AO has passed the order as per the mandate given to him by the CBDT for limited scrutiny under CASS. He has not exceeded the jurisdiction as contended by the ld. AR."

This affirms that the scope of limited scrutiny is defined by the reasons for case selection under CASS, and AO must act within those parameters.

"In view of these facts and since no supporting and corroborative evidence has been filed by the appellant to support the claim that the cash withdrawal by Shri Vijay J. Ramani, was part of cash available with the appellant, we do not find any infirmity in the order of AO."

Establishes the principle that unexplained cash credits require satisfactory evidence to negate additions under section 68.

"The provisions of section 115BBE of the Act was enacted on 15.12.2016 and hence cannot be applied for the year under consideration... Thus, the AO is directed to tax the addition at normal rate of tax and applicable surcharges and cess, if any."

Confirms that retrospective application of amended tax provisions is impermissible unless expressly provided, and normal tax rates apply for prior years.

"Considering the facts of the case and the submissions of the appellant, we condone the delay subject to payment of cost..."

Illustrates the Tribunal's discretion to condone delay in filing appeals where delay is not deliberate and is accompanied by reasonable cause, subject to costs.

In conclusion, the Tribunal upheld the addition of Rs. 10,00,000/- under section 68 due to failure to satisfactorily explain cash deposits, dismissed the challenge to the AO's jurisdiction in limited scrutiny, but granted relief on the issue of taxation under section 115BBE by directing taxation at normal slab rates. The delay in filing the appeal was condoned with costs. The appeal was partly allowed accordingly.

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