Unexplained cash deposits upheld, but retrospective application of the enhanced tax rate under section 115BBE was rejected.

ITAT Visakhapatnam upheld the addition of cash deposits as unexplained under section 69A because the assessee produced no credible documentary support for the stated sources, and the deposits were not accepted as business turnover. However, it accepted the assessee's challenge to the enhanced tax rate under section 115BBE, holding that the amended 60% rate operated prospectively from 01.04.2017 and could not be applied to prior assessment years. The assessee therefore obtained partial relief, but the substantive addition was sustained.

---

---

Issues: (i) Whether the addition of Rs. 59,80,000 as unexplained cash deposits under section 69A was sustainable in the absence of documentary evidence; (ii) Whether the enhanced tax rate under section 115BBE at 60% could be applied to the assessment year in question.

Issue (i): Whether the addition of Rs. 59,80,000 as unexplained cash deposits under section 69A was sustainable in the absence of documentary evidence.

Analysis: The assessee claimed that the cash deposits represented loan repayments, realisation from debtors, loans from relatives and cash collected for mason payments, but no supporting evidence was produced before the revenue authorities or before the Tribunal. The deposits were found to be much higher than the declared turnover, and the explanation was not treated as business turnover. In the absence of corroboration, the explanation for the source of cash was not accepted.

Conclusion: The addition was upheld and the assessee was held not entitled to relief on this issue.

Issue (ii): Whether the enhanced tax rate under section 115BBE at 60% could be applied to the assessment year in question.

Analysis: The additional ground concerned the effective date of the amended rate under section 115BBE. Following the view that the legislative change was intended to operate prospectively from 01.04.2017, the Tribunal held that the higher rate could not be applied to prior transactions and accepted the assessee's challenge on this point.

Conclusion: The assessee succeeded on the issue of applicability of the enhanced rate under section 115BBE.

Final Conclusion: The assessment addition was sustained, but the challenge to application of the enhanced tax rate under section 115BBE was accepted, resulting in partial relief to the assessee.

Ratio Decidendi: An unexplained cash deposit addition is sustainable when the assessee fails to produce credible supporting evidence for the stated sources, and an amended higher tax rate cannot be applied retrospectively where the amendment is held to operate prospectively.

---