Tribunal upholds Rs. 26,42,500 addition under Sec 68 of Income Tax Act, applies old tax rate

The Tribunal partly allowed the appeal, upholding the addition of Rs. 26,42,500 under Section 68 of the Income Tax Act. However, the Tribunal directed the taxation rate to be applied as per the old provisions of Section 115BBE, before the retrospective amendment effective from 15/12/2016.

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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.

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