Taxpayer gets 50% relief on unexplained cash deposits under Section 68, remaining taxed at 30% rate

ITAT Surat partly allowed the appeal regarding unexplained cash deposits under Section 68 during demonetization period. The tribunal deleted 50% of the addition due to benefit of doubt, as no adverse material was produced by AO despite assessee's explanation being inadequate. For remaining addition, ITAT directed taxation at 30% instead of Section 115BBE provisions, following precedents that held amended Section 115BBE is not retrospective. The appeal was partly allowed with modified tax treatment.

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Issues Involved:
1. Addition of Rs. 15,35,000/- on account of unexplained cash deposits under Section 68 of the Income Tax Act.
2. Levying tax on the addition amount by invoking provisions of Section 115BBE.
3. Application of the newly substituted Section 115BBE retrospectively.

Summary:

Issue 1: Addition of Rs. 15,35,000/- on account of unexplained cash deposits under Section 68 of the Income Tax Act:
The assessee, an HUF, filed its return for AY 2017-18, declaring an income of Rs. 11,82,250/-. The case was selected for scrutiny due to large cash deposits during the demonetization period. The Assessing Officer (AO) noted cash deposits of Rs. 2.00 lacs in HDFC Bank and Rs. 13,35,000/- in Bank of Baroda. The AO found the source of cash deposits mainly from withdrawals in October 2012 and monthly withdrawals for household expenses. The AO did not accept the explanation that the cash was kept for emergencies, treating it as unexplained cash credit under Section 68 and adding it to the total income. The CIT(A) upheld the AO's decision. The Tribunal found that while the explanation of the assessee was not entirely plausible, there was no material evidence from the AO to prove the cash was spent elsewhere. Therefore, 50% of the addition was deleted, and the rest was confirmed.

Issue 2: Levying tax on the addition amount by invoking provisions of Section 115BBE:
The AO taxed the unexplained cash credit under the amended provisions of Section 115BBE at 60%. The assessee argued that the amended provisions should not apply retrospectively. The Tribunal agreed, citing various case laws, and directed the AO to tax the remaining addition at 30% plus applicable surcharges.

Issue 3: Application of the newly substituted Section 115BBE retrospectively:
The Tribunal held that the amended provisions of Section 115BBE are not retrospective, aligning with decisions from other benches, including Samir Shantilal Mehta Vs ACIT and others.

Conclusion:
The appeal was partly allowed. The addition of Rs. 15,35,000/- was reduced by 50%, and the remaining addition was to be taxed at 30% under the unamended Section 115BBE. The judgment was announced on 30th November 2023.

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