Tribunal allows appeal for Rs. 5,00,000 addition under Income Tax Act but rejects retrospective higher tax rate

The Tribunal partly allowed the appeal by upholding the addition of Rs. 5,00,000 under Section 69A of the Income Tax Act. However, the higher tax rate specified in Section 115BBE was not applied retrospectively, directing the Assessing Officer to tax the addition at the normal rate applicable before the amendment.

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Issues Involved:
1. Sustaining the addition of Rs. 5,00,000 out of Rs. 16,60,000 made under Section 69A of the Income Tax Act.
2. Retrospective application of the higher tax rate specified in Section 115BBE.

Issue 1: Sustaining the addition of Rs. 5,00,000 under Section 69A of the Act

The assessee, a retired employee, filed his return of income for AY 2017-18. The case was selected for scrutiny due to large cash deposits during the demonetization period. The Assessing Officer (AO) noted cash deposits of Rs. 16.60 lakhs and asked the assessee to explain the source. The assessee claimed part of the deposits were from past savings and a loan withdrawal. However, the AO found inconsistencies and added Rs. 16.60 lakhs to the income under Section 115BBE.

On appeal, the NFAC/Ld. CIT(A) granted partial relief, deleting Rs. 11.60 lakhs but upholding Rs. 5.00 lakhs, citing lack of evidence for agricultural income and past savings. The Tribunal upheld this decision, noting no additional evidence was provided by the assessee.

Issue 2: Retrospective application of Section 115BBE

The assessee contested the application of the higher tax rate under the Second Amendment Act 2016, arguing it should not apply retrospectively. The Tribunal referenced the case of DCIT Vs Punjab Retails Pvt Limited, which established that amendments to Section 115BBE effective from 01.04.2017 should not apply to periods before this date. The Tribunal directed the AO to tax the addition at the normal rate applicable before the amendment.

Conclusion:

The appeal was partly allowed. The addition of Rs. 5,00,000 under Section 69A was upheld, while the higher tax rate under Section 115BBE was not applied retrospectively, directing the AO to apply the normal tax rate.

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