Taxpayer gets partial relief on unexplained cash deposits during demonetization under Section 69A

ITAT Surat partially allowed the appeal in a case involving unexplained cash deposits during demonetization under Section 69A. The assessee deposited cash in bank account during demonetization period. AO found assessee showed zero cash balance in AY 2015-16 but made substantial deposits. ITAT accepted AO's finding that assessee had legitimate cash balance of Rs. 6 lacs and allowed additional Rs. 2 lacs benefit. Addition of Rs. 8 lacs was deleted, while Rs. 2.90 lacs addition was upheld. Following precedents, ITAT held amended Section 115BBE provisions are not retrospective, directing taxation at 30% instead of higher rates.

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Issues Involved:
1. Addition of Rs. 10,90,000 as unexplained cash deposit under Section 69A read with Section 115BBE of the Income Tax Act, 1961.
2. Application of amended Section 115BBE retrospectively.

Summary:

Issue 1: Addition of Rs. 10,90,000 as unexplained cash deposit
The assessee filed her return of income for AY 2017-18 declaring an income of Rs. 9,95,440. During scrutiny, the Assessing Officer (AO) noted a cash deposit of Rs. 10.90 lakhs during the demonetization period. The assessee provided a cash flow statement showing cash in hand of Rs. 13,84,872 as of 01/04/2016. However, the AO found discrepancies in the cash balance reported in previous years and rejected the explanation, treating Rs. 10,90,000 as unexplained cash deposit under Section 69A read with Section 115BBE of the Act.

On appeal, the CIT(A) upheld the AO's decision, noting that the assessee's income showed a sudden increase post-demonetization and that the cash book and cash flow statements were not sufficient to substantiate the source of cash deposits. The CIT(A) found the case laws cited by the assessee inapplicable.

Before the Tribunal, the assessee argued that the cash deposits were from the opening cash balance and business income. The Tribunal found that the AO had accepted a cash balance of Rs. 6 lakhs and disbelieved the remaining amount. Given the assessee's consistent business income, the Tribunal allowed a further benefit of Rs. 2 lakhs, thereby deleting Rs. 8 lakhs from the addition and upholding the remaining Rs. 2.90 lakhs.

Issue 2: Application of amended Section 115BBE retrospectively
The Tribunal examined the applicability of the amended Section 115BBE, which imposes a higher tax rate on unexplained income. Citing precedents, the Tribunal held that the amended provisions are not retrospective. Therefore, the AO was directed to tax the remaining addition of Rs. 2.90 lakhs at the standard rate of 30% plus applicable surcharges.

Conclusion:
The appeal was partly allowed. The Tribunal deleted Rs. 8 lakhs from the addition of Rs. 10.90 lakhs and upheld the remaining Rs. 2.90 lakhs. The AO was directed to tax the remaining addition at the standard rate under the unamended provisions of Section 115BBE.

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