2023 (4) TMI 226 - AT - Income Tax

Appeal dismissed, unexplained income confirmed, 60% tax rate upheld for 2017-18

M/s. Quasar Developers Pvt. Ltd Versus The ITO Ward- 6 (2) Jaipur

The appeal was dismissed, confirming the addition of Rs. 33,98,989/- under Section 69A of the Income Tax Act as unexplained income and upholding the ... Addition u/s 69A - treating the cash deposit as unexplained income of the assessee - Addition u/s 115BBE - Assessee is stated to have started its own Jewellery business and claimed to have made regular purchases of jewellery - whether CIT(A) has erred taxing the above amount @ 60% by not accepting the contention of assessee that section 115BBE substituted by Taxation Laws (Second Amendment Act), 2016 which received the assent of President on 17-12-2016 and made applicable from 01-04-2017 is not applicable to A.Y. 2017-18? - HELD THAT:- Admittedly, the Photostat copy of Franchisee Agreement allegedly entered between the assessee with M/s. Nakshatra Brands Ltd., Mumbai was neither before the AO at the time of assessment nor before the ld. CIT(A) at the time of appellate proceedings. Even before the Bench, no application for additional evidence as prescribed under Rule 29 of Income Tax (Appellate Tribunal) Rules, 1931 has been moved. In this situation, the Bench cannot accept the unverifiable Photostat copy of alleged agreement. It is also noted that even before the Bench no documents in the shape of bills etc. containing complete details of the alleged purchases who allegedly purchased jewellery in cash has been placed on record. Bench has also considered the citations referred by the assessee but the same are not found applicable in the case of the assessee on factual aspect. Bench does not find merit in the submissions of the assessee and find no infirmity in the order of the ld. CIT(A) which is sustained. Thus the appeal of the assessee is dismissed. Issues Involved:1. Addition of Rs. 33,98,989/- under Section 69A of the Income Tax Act.2. Applicability of Section 115BBE for the Assessment Year 2017-18.Issue-Wise Detailed Analysis:1. Addition of Rs. 33,98,989/- under Section 69A of the Income Tax ActThe primary issue revolves around the addition of Rs. 33,98,989/- under Section 69A of the Income Tax Act, which was treated as unexplained income by the Assessing Officer (AO). The AO invoked Section 145(3) due to defects and anomalies in the submissions by the assessee and concluded that the cash deposit of Rs. 33,98,989/- during the demonetization period was unexplained. The AO noted that the assessee deposited Rs. 36,92,500/- in Specified Bank Notes (SBN) during the demonetization period but had no cash deposits in the previous financial year or before the demonetization period in the current year. The AO found the claim of cash sales of Rs. 33,98,989/- on the night of 08-11-2016 to be 'farfetched from ground reality' and unsupported by bills or vouchers. The AO concluded that the cash sales were a concocted story.The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, noting that the assessee's claim of sudden high sales was improbable given the average daily sales and the presence of other reputed dealers in Jaipur. The CIT(A) found the cash sales claim to be a 'concocted story' and rejected the assessee's arguments, including the submission of books of accounts and VAT returns, as insufficient proof of actual transactions.The assessee argued that the cash sales were genuine and supported by books of accounts, VAT returns, and sales bills. They cited various case laws to support that cash sales duly recorded in the books of accounts cannot be added under Section 69A. However, the Tribunal found that the Photostat copy of the Franchisee Agreement and other supporting documents were not presented during the assessment or appellate proceedings, and no application for additional evidence was moved. Consequently, the Tribunal upheld the CIT(A)'s order, dismissing the appeal and confirming the addition under Section 69A.2. Applicability of Section 115BBE for the Assessment Year 2017-18The second issue concerns the applicability of Section 115BBE, which was amended by the Taxation Laws (Second Amendment Act), 2016, and received the President's assent on 17-12-2016. The assessee argued that the amended section, which increased the tax rate to 60%, should not apply to the Assessment Year (AY) 2017-18 as it was made effective from 01-04-2017. The CIT(A) rejected this argument, stating that the amendment applies from 01-04-2017, making it applicable to AY 2017-18 unless adjudged unconstitutional by a higher court.The assessee cited the Supreme Court's decision in Karimtharuvi Tea Estate Ltd. vs. State Of Kerala, which held that amendments effective after the first day of April of a financial year do not apply to assessments for that year. They also referred to the Full Bench of Patna High Court in Loknath Goenka Vs. CIT, which emphasized that new tax liabilities introduced after the start of a financial year cannot be applied retrospectively. The assessee argued that the amended Section 115BBE should apply from AY 2018-19, and thus the tax rate for AY 2017-18 should be 30%, not 60%.The Tribunal, however, found no merit in the assessee's submissions. It noted that the assessee failed to provide verifiable documents and additional evidence during the proceedings. The Tribunal upheld the CIT(A)'s order, confirming the application of the 60% tax rate under the amended Section 115BBE for AY 2017-18.ConclusionThe appeal was dismissed, confirming the addition of Rs. 33,98,989/- under Section 69A and the applicability of the 60% tax rate under the amended Section 115BBE for AY 2017-18. The Tribunal found no infirmity in the CIT(A)'s order and sustained it, rejecting the assessee's arguments and submissions.