Farmer fails to explain Rs. 6,73,939 cash deposits, addition sustained but section 115BBE inapplicable for pre-2017 assessment year

The ITAT Surat held that the assessee, a farmer, could only explain Rs. 6,06,061/- of claimed opening cash balance of Rs. 12,80,000/- after considering reasonable monthly expenses of Rs. 50,000/- instead of claimed Rs. 25,000/-. Addition of Rs. 6,73,939/- was sustained for unexplained cash deposits. However, section 115BBE provisions were held inapplicable as they came into force on 01.04.2017 while the assessment year preceded this date. The appeal was partly allowed in favor of the assessee.

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Issues:
1. Whether cash deposits made by the assessee during the demonetization period can be considered as unexplained cash deposits.
2. Whether the provision of Section 115BBE can be applied to the case.

Analysis:

Issue 1:
The appellant, a farmer, deposited cash during demonetization in her individual and joint bank accounts. The Assessing Officer added the cash deposit to the total income, applying Section 115BBE at a tax rate of 60%. The appellant failed to provide a satisfactory explanation for frequent cash withdrawals despite having substantial cash in hand. The Assessing Officer initiated penalty proceedings under Section 271AAC. The CIT(A) considered the bank accounts and allowed relief for certain cash withdrawals but upheld the addition of the balance amount. The appellant argued that the opening cash balance was not considered, explaining the cash receipts, deposits, agricultural expenses, and living expenses to justify the available cash. The Tribunal sustained part of the addition, considering the appellant's expenses and reducing the opening balance claim.

Issue 2:
The appellant contended that Section 115BBE, enacted on 15.12.2016, should not be applied to the year under consideration. Citing relevant case laws, the appellant argued that the provision cannot be retroactively applied. Referring to a Co-ordinate Bench decision, the Tribunal held that since the search was conducted before the amendment, the addition made under Section 115BBE was not sustainable. Following the precedent, the Tribunal ruled that Section 115BBE was not applicable to the case, thereby allowing the appellant's appeal on this ground.

In conclusion, the Tribunal partly allowed the appellant's appeal, sustaining a portion of the addition related to unexplained cash deposits while rejecting the application of Section 115BBE to the case.

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