KANDASAMY KUPPUSAMY,ERODE V. ITO WARD 2(1), ERODE

ITA 2874/CHNY/2024

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The case involves Kandasamy Kuppusamy, a retired BSNL employee, who appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Center, Delhi, which confirmed the addition of Rs. 20 lakhs as unexplained cash deposits for the assessment year 2017-18. The Income Tax Officer had initially added this amount after finding discrepancies in the cash deposits and withdrawals reported by Kuppusamy during the demonetization period. The Tribunal found some errors in the calculation of the addition and provided further relief to the assessee. Additionally, the Tribunal addressed the applicability of section 115BBE, which was contested by the assessee based on a precedent set by the Madras High Court, stating that the higher tax rate under this section applies only to transactions post-April 1, 2017.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312854 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Other Referred Cases: S.M.I.L.E Microfinance Ltd vs. Unknown
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMANTHA MULLAMUDI
• Assessee Lawyers: S. SRIDHAR; ERODE
• Keywords: Set aside; Capital Gains

Judgement Text

" आयकर अपीलीय अधिकरण, ‘ए’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI माननीय श्री मनु क ुमार धिरर ,न्याधयक सदस्य एवं माननीय श्री अमिताभ शुक्ला, लेखा सदस्य क े सिक्ष BEFORE HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND HON’BLE SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.2874/Chny/2024 Assessment Years: 2017-18 Kandasamy Kuppusamy, No.11/193, Porayankadu, Chennimalai, Tamil Nadu-638051 [PAN: AGGPK3046E] Income Tax Officer, Ward-2(1) Erode (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Shri S.Sridhar, Advocate(Erode) प्रत्यर्थी की ओर से /Revenue by : Smt.Samantha Mullamudi, Addl.CIT सुनवाई की तारीख/Date of Hearing : 27.03.2025 घोषणा की तारीख /Date of Pronouncement : 30.04.2025 आदेश / O R D E R PER AMITABH SHUKLA, A.M : This appeal is filed by the Assessee against the order bearing DIN & Order No.ITBA / NFAC / S / 250 / 2024-25 / 1068687150(1) dated 13.09.2024 of the Learned Commissioner of Income Tax [herein after “CIT(A), National Faceless Appeal Center[NFAC], Delhi, for the assessment years 2017-18. 2.0 The first issue contested by the assessee through its grounds of appeal no.1 to 5 is regarding the addition of Rs.20 lakhs made by the Ld.AO as unexplained cash deposits. The Ld. Counsel submitted that its case was selected under limited scrutiny category for examining the cash ITA No.2874 /Chny/2024 Page - 2 - of 6 deposits and withdrawal made during the year. Before the Ld.AO the assessee submitted that the assessee had withdrawn of Rs.19,51,000/- and redeposited part of it amounting to Rs.13 lakhs during the demonetization period. The assessee is a retired BSNL employee having earned pension income, capital gains and income from other sources during AY-2017-18. Explaining cash deposits made during the entire financial year 2016-17 the assessee submitted that the same was on account of redeposit of withdrawals, sale of agricultural land made in FY-2010-11, pensionary benefits received in the past etc, etc. The Ld.AO noted that 100% collation of amounts withdrawn and redeposited was not available. The Ld.AO further noted that amounts like of Rs.21 lakhs received on sale of agricultural land in FY-2010-11 cannot be justifiably linked with the deposits made during the year. Based upon his overall estimations, the Ld. AO arrived at the figure of Rs.33,20,000/- for which no satisfactory justification was available. Consequently, giving assessee further relief for personal needs etc, the Ld. AO made the impugned addition of Rs.20 lakhs. While doing so, provisions of section 115BBE were also invoked. The Ld. Counsel submitted that the Ld.First Appellate Authority erroneously concurred with the findings of the Ld.AO. 3.0 The Ld. DR relied upon the order of lower authorities. ITA No.2874 /Chny/2024 Page - 3 - of 6 4.0 We have heard rival submissions in the light of material available on records. It is an undisputed fact of the case that the assessee was required to explain the sources of cash deposits made during the year amounting to Rs. 33,20,000/-. As per the assessment and appellate orders, the assessee was given a further benefit of Rs.10, 20,000/- and an addition of Rs.20 lakhs was made. At the outset we have noted that there is some mistake in the figures of addition. Admittedly, Rs. 33,20,000/- was found as unexplained and the assessee was given a further benefit of Rs.10, 20,000/-. If that be so, the addition ought to hve been of Rs.23 lakhs and not Rs.20 lakhs. However, with the present figures, in reality the assessee has been given a relief of Rs.13,20,000/- and not Rs.10, 20,000/- as projected. We have also noted that the assessee is trying to justify its cash deposits with amounts and withdrawals made in earlier years without being able to link the same with any cogent demonstrative evidence. Be that as it may be, we are of the view that ends of justice would be met if the assessee is given another relief of Rs.5 lakhs. The Ld. AO is accordingly directed to restrict the addition to Rs.15 lakhs. The grounds of appeal raised by the assessee are therefore partly allowed. 5.0 The next issue raised by the assessee through grounds of appeal no.6 is regarding invocation of section 115BBE in its case. The Ld. Counsel for the assessee argued that in terms of a decision of ITA No.2874 /Chny/2024 Page - 4 - of 6 Hon’ble Madras High Court in the case of S.M.I.L.E Microfinance Ltd, provisions of section 115BBE would not be applicable in this case. 6.0 The Ld. DR argued in favour of the order of lower authorities. 7.0 We have heard rival submissions in the light of material available on records. We are of the considered opinion that provisions of section 115BBE would not be applicable in this case. In this regard respectful reliance is placed upon the decision of Hon’ble madras High Court from its judgement dated 19/11/2024 qua W.P (MD) NO. 2078 Of 2020 & W.M.P (MD) NO. 1742 Of 2020 I n the case of S.M.I.L.E Microfinance Ltd . , holding that:- “………16. The next contention raised by the Learned Senior Counsel is that the under section 115BBE the rate of tax imposed is increased from 30% to 60% and the same is applicable with effect from 01.04.2017 onwards as per the amendment. Therefore, the same is applicable to any transaction from 01.04.2017 onwards and nor prior to any transactions prior to 01.04.2017. Since in the present case all alleged transactions are for the period from 08.11.2016 to 30.12.2016, hence the erstwhile rate of tax 30% only is applicable. But the contention of the revenue is that the amendment was with effect from 01.04.2017 and hence the same is applicable for the financial year 2016-2017 and the assessment year 2017-2018. Further the amendment to section 115BBE is directly 15 of 26 https://www.mhc.tn.gov.in/judis related to demonetization which would be evident from objects and reasons for such amendment. In order to consider the same, the objects and reasons of Taxation Laws (Second Amendment) Bill 2016 is extracted hereunder: Press Information Bureau Government of India Ministry of Finance 28-November- 2016 15:56 IST Taxation Laws (Second Amendment) Bill, 2016 introduced in Lok Sabha; A scheme namely, ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) proposed in the Bill. Evasion of taxes deprives the nation of critical resources which could enable the Government to undertake anti-poverty and development programmes. It also puts a disproportionate burden on the honest taxpayers who have to bear the brunt of ITA No.2874 /Chny/2024 Page - 5 - of 6 higher taxes to make up for the revenue leakage. As a step forward to curb black money, bank notes of existing series of denomination of the value of Rs.500 and Rs. 1000 [Specified Bank Notes(SBN)] have been recently withdrawn the Reserve Bank of India. Concerns have been raised that some of the existing provisions of the Income- tax Act, 1961 (the Act) can possibly be used for concealing black money. The Taxation Laws (Second Amendment) Bill, 2016 (‘the Bill’) has been introduced in the Parliament to amend the provisions of the Act to ensure that defaulting assessees are subjected to tax at a higher rate and stringent penalty provision. Further, in the wake of declaring specified bank notes “as not legal tender”, there have been suggestions from experts that instead of allowing people to find illegal ways of converting their black money into black again, the Government should give them an opportunity to pay taxes with heavy penalty and allow them to come clean so 16 of 26 https://www.mhc.tn.gov.in/judis that not only the Government gets additional revenue for undertaking activities for the welfare of the poor but also the remaining part of the declared income legitimately comes into the formal economy. In this backdrop, an alternative Scheme namely, ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) has been proposed in the Bill. The declarant under this regime shall be required to pay tax @ 30% of the undisclosed income, and penalty @10% of the undisclosed income. Further, a surcharge to be called ‘Pradhan Mantri Garib Kalyan Cess’ @33% of tax is also proposed to be levied. In addition to tax, surcharge and penalty (totaling to approximately 50%), the declarant shall have to deposit 25% of undisclosed income in a Deposit Scheme to be notified by the RBI under the ‘Pradhan Mantri Garib Kalyan Deposit Scheme, 2016’. This amount is proposed to be utilised for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc., so that there is justice and equality………………………………………………………………………………………… …………………………………………………………………………………………………… ……. 17. In the aforesaid objects and reasons nowhere it is stated that due to “demonetization” the unaccounted money ought to be charged 60% rate of tax. It only states that step had been taken to curb black money by withdrawing Specified Bank Notes of denomination of Rs.500 and Rs.1000. And also states the people may find illegal ways of converting their black money into black again, hence as per experts advice heavy penalty ought to be levied. From the language of the object “that instead of allowing people to find illegal ways of converting their black money into black again”, it is evident that the government is intended to impose the same for future transactions. Especially the use of word “again” in the object would clearly indicate it is for future transactions i.e. from 01.04.2017. Therefore this Court is of the considered opinion that the revenue is empowered to impose 60% rate of tax for the transactions from 01.04.2017 onwards and not prior to the said ITA No.2874 /Chny/2024 Page - 6 - of 6 cut-off date. And for prior transaction the revenue is empowered to impose only 30% rate of tax….”. 7.1 Thus, Hon’ble high court has held that section115BBE would be applicable for transactions undertaken w.e.f. 1/4/2017 and not of earlier period. In the present case undisputedly transaction were undertaken in FY 2016-17 and hence section115BBE could not have been invoked in this case. The orders of lower authorities on the issue is therefore set aside and the Ld.AO is directed to recompute the income without applying provisions of section 115BBE. Accordingly, the ground of appeal raised by the assessee are allowed. 8.0 In the result, the appeal of the assessee is partly allowed. Order pronounced on 30th , April-2025 at Chennai. Sd/- (मनु क ुमार धिरर) (MANU KUMAR GIRI) न्याधयक सदस्य / Judicial Member Sd/- (अधमताभ शुक्ला) (AMITABH SHUKLA) लेखा सदस्य /Accountant Member चेन्नई/Chennai, धदनांक/Dated: 30th , April-2025. KB/- आदेश की प्रतितिति अग्रेतिि/Copy to: 1. अिीिार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT - Coimbatore 4. तिभागीय प्रतितिति/DR 5. गार्ड फाईि/GF "